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**Testimony offered to House Committee on Education and Labor**

**Jim Waters, Director of Policy and Communications**

**Bluegrass Institute for Public Policy Solutions**

**400 E. Main Ave, Suite 306**

**P.O. Box 51147**

**Bowling Green, KY 42103**

Good morning ladies and gentlemen.

Greetings from Kentucky, where celebrations got underway earlier this
week, commemorating the 200^th^ birthday of the nation's 16^th^
president.

My name is Jim Waters. I am director of policy and communications at the
Bluegrass Institute for Public Policy Solutions, Kentucky's free-market
think tank. We offer free-market ideas to Kentucky's most pressing
problems in light of the ideals of our founders, who believed in:
individual liberty, economic prosperity, personal responsibility and a
respect for the lives and property of others.

The "prevailing wage" law provides an example of a well-intentioned
policy gone awry. Originally modeled after the federal Davis-Bacon Act,
Kentucky lawmakers wanted to ensure contractors working on state
projects paid workers a fair, but not rock-bottom, wage.

However, during the past 20 years, Kentucky's prevailing-wage policy has
become a huge boondoggle.

The law prevents state government from receiving the most value for
every dollar spent on public projects. Forcing government to pay
union-like wages drives up the cost of roads, school buildings and
infrastructure systems by 10 to 15 percent.

In recent weeks, a bid was accepted for \$61 million to the new Joseph
Warren middle and high schools in Bowling Green, Kentucky.

Research commissioned by the Bluegrass Institute and conducted by
experts like respected labor analyst Paul Kersey, has concluded that the
negative, trickle-down effect of Davis-Bacon drives up the cost of
public projects by as much as \$100 million each year.

Even Kentucky Department of Education officials, which aren't exactly
known for endorsing fiscally sound policies, recognize -- and despise --
the state's prevailing-wage policy. The department claims
prevailing-wage requirements adds 11 percent to the cost of building
schools -- \$6.7 million on the Warren County schools project alone.
That would be enough to build another new elementary school, even at
prevailing-wage rates!

Schools are crumbling. The state's proverbial budget checkbook is
overdrawn. Yet plumbers and pipe fitters for the new Warren middle and
high schools are going to get \$41.35 an hour. I checked with an
experienced contractor in the region, who said these workers would
receive a rate of about \$18 an hour on a similar job in the private
sector.

But the gap in wages \-- the \$100-million estimate -- does not even
include the cost of the labor bureaucracy charged with overseeing
Kentucky's prevailing-wage policy. What is the cost for inspections,
hearings and paperwork? Who knows? We see how easy it is for government
to spend someone else's money -- taxpayer -- with little accountability
for how that money is spent.

On Page 4 of the state Labor Cabinet's prevailing-wage categories for
Warren County, it states that "water boys" get \$18.07 an hour and
\$8.79 in benefits. So "water boys" working on the Warren schools get
paid more than the usual rate earned by experienced, professional
plumbers working on homes, office buildings and churches.

Just to put this in perspective, this weekend, the Holiday Inn
University Plaza -- the premier convention-center hotel in Bowling
Green, Kentucky -- will host 1,200 people who will use four of its
luxury-laden ballrooms in a classroom-style setting at a cost of
\$1,600.

The school district could rent those rooms at that rate for 200 days,
which includes instructional days plus personal preparatory days for
teachers for \$320,000. Even if those rooms were rented every single day
of the year -- 365 days -- at that rate, the district would still spend
only \$584,000. Allow another half-million for salaries, supplies,
transportation and so forth, and you still are a far cry from the Taj
Mahal-like prices being charged by taxpayers.

A favored defense of maintaining this labor policy, borne out of the
desperate days of The Great Depression, is that simply requiring
prevailing-wage rates result in safer, higher-quality work. But this
thinking is outmoded and antiquated -- just like the Davis-Bacon Act
itself.

According to the Kentucky Legislative Research Commission, 96 percent of
Kentucky's 176 school superintendents answered "no" when asked if the
increased costs incurred by prevailing wage resulted in discernible
higher quality.

Besides, how is it that contractors build quality office complexes,
large custom homes, investment properties and corporate facilities
without being coerced by some kind of forced wage policy? These
contractors don't even have to be told the quantity and quality of
people to hire to accomplish a task!

But many contractors don't even participate in public projects.
Prevailing-wage rates are so complicated, vary widely from place to
place, are established according to federal rates in some areas, state
rates in other areas and can be at the whims of even local unions that
it's too daunting for many private contractors.

Kentucky is not only known for Lincoln. It's also known for Corvettes.
All Corvettes are now made at the GM plant in Bowling Green plant.
Across the street from the plant is the National Corvette Museum, which
contains many of the past relics of the great Corvette.

While the museum is a great place -- car and history buffs love it --
it's at the plant across the street where the new models are coming out,
which build and improve on past models.

In order to free up badly needed money to build new schools and repair
existing ones, its' time for Davis-Bacon to be relegated to the history
of public policies that have long outlived their usefulness, either to
schools or taxpayers.

Thank you very much.

**Jim Waters Bluegrass Institute for Public Policy Solutions Bowling
Green, Kentucky [www.bipps.org](http://www.bipps.org/)**