FOR MORE INFORMATION: CONTACT: LUTHER OLSEN (800) 991-5541

August 7, 2009

BUDGET CHANGES PREVAILING WAGE LAW

Prevailing wage law in Wisconsin became a bit more complex when the budget was signed earlier this summer.  Effectively, there are now four separate prevailing wage laws depending on the project or entity paying for the work.  The concept of prevailing wage is that workers employed on a certain project are paid the same rate as the majority of workers in that trade in a specified area, usually a county, are paid.  Under state law, the Department of Workforce Development determines the prevailing wage for public projects, and now, for private projects funded with public money as well.

With changes made in the budget, different types of projects must follow different laws.  These four types of projects are: (1) projects bid or negotiated by a local government, (2) state agency projects, except highway and bridge projects, (3) publicly funded private construction projects, and (4) state highway and bridge projects.  This article will briefly explain some of the changes brought about by the budget.  For those who are interested, more detailed information can be found in a recently published Legislative Fiscal Bureau memo on the topic: http://www.legis.state.wi.us/lfb/Misc/2009_07_27WI%20Leg_prevailing%20wage.pdf .

Under prior law there was no prevailing wage requirement for private construction projects that were publicly funded.  The state budget changes that, meaning that many projects that receive direct financial assistance from a unit of government must follow the prevailing wage law.  Direct financial assistance may come in the form of money from something like a grant, or assistance provided through a tax incremental financing district or a business improvement district.  There are a few projects that are exempt from this requirement, though.  For instance, residential property that receives funding through housing grants, residential property that has four dwelling units or less and residential property that includes retail, office or commercial areas and is intended to increase the stock of affordable housing are not subject to this law.

The prevailing wage law was based on the number of skilled trades working on a project.  Generally, for a project with multiple trades involved, like highway or school construction, the prevailing wage law applied to a project that costs more than $234,000.  With the passage of the budget, the threshold is lowered, meaning that it applies to any public works projects that cost more than $25,000 to complete.  The threshold for publicly funded private construction projects is $1 million, so the law does not apply to private projects which receive less than $1 million in direct financial assistance from a local unit of government.   The law also does not apply for public works or private construction projects for which the labor is provided by un-paid volunteers. 

Prevailing wage rates in many instances mirror union labor rates.  Under this law, contractors may end up hiring more union workers or paying non-union workers higher rates.  A concern in some smaller communities in the state is that the change to the prevailing wage law will make it more difficult for small, local contractors to submit winning bids.

The prevailing wage provision is a public policy item that was included in the budget.  It does not directly impact the state’s biennial budget but may have a long-lasting impact on local government projects causing them significant financial distress.  While this provision received a fair amount of media attention while the budget was in the Joint Finance Committee, members did not have a real opportunity to hear from local government officials, constituents and those in the construction industry to hear their prospective on the issue before votes were taken.  I fought to have this item removed from the budget because of its impact on local government finances and, I believe, if this proposal had been a stand-alone bill, it might not have been approved.  It is yet another example of why the budget process should be reformed. 

If you have any questions about any of the information I have included or if you have suggestions on other topics or issues you would like learn more about, you may call my office toll-free at (800) 991-5541; write me at P.O. Box 7882, Madison, WI  53708; or e-mail me at: Sen.Olsen@legis.state.wi.us . You can also sign up for our newsletter at our website: http://www.senatorolsen.com .