UPDATE: Senate panel approves repeal of construction wage law

Indiana's practice of having local boards set wages for public construction projects would be repealed under a GOP-led push that Senate committee members approved Tuesday, a move opponents say could have a negative impact on the industry's workforce.

Senate Tax and Fiscal Policy Committee members voted 8-5 in favor of eliminating the five-member boards that set what's known as the common construction wage, which contractors must pay workers on a state or local government building project that costs more than $350,000.

Supporters of the repeal say the boards, made up of people appointed by labor unions and an association of non-union contractors, set wages that are artificially high and prevent lower, more competitive bid prices that would save taxpayers money on public projects.

Committee Chairman Brandt Hershman, R-Lafayette, said hours of testimony last week proved to him that the current wage system is broken, with boards setting varying wage rates that appeared to be driven by political considerations rather than actual wages within the communities.

"We created the system and it's not working to its optimum efficiency, not only for the businesses involved but for the taxpayers as well," Hershman said.

Republican House Speaker Brian Bosma has said that studies from other states found that repealing such a law could save an estimated 10 percent to 20 percent on state construction projects by allowing more contractors to pay less than union-scale wages. Opponents say those numbers are not necessarily reflective of how much Indiana taxpayers will save.

"I thought the testimony on the savings was very sketchy," said Sen. John Broden, D-South Bend, who voted against the bill. "That number has been a moving target throughout this session."

Critics argue that repealing the decades-old law would hurt many Indiana-based companies by opening the door for low-paying, out-of-state contractors to underbid. It could also negatively impact worker safety, the ability for Indiana workers to find local employment and salaries of skilled construction professionals.

Hershman said an amendment adopted Tuesday addresses some of those concerns and creates "a robust framework to ensure fair competition" for all businesses.

Changes would include establishing a mandatory E-Verify program to ensure that all workers are U.S. citizens, prohibiting businesses from paying workers in cash and requiring contractors to have an employee training program. Contractors would have to be qualified by the state Department of Administration or the state Department of Transportation as well.

Contractors who violate these rules would face harsh punishments, such as criminal charges or temporary suspension from bidding on future government projects.

House members in February voted 55-41 to advance the proposal, which now goes to the full Senate for consideration.

Some Republicans have expressed concerns about passing the measure this session and believe a special committee should review the construction wages law. Hershman said he would support further study if elements of the measure required more discussion, but he doesn't believe that's the case.

"There is no perfect time to discuss a controversial issue," he said. "But I don't think that there's anything … that remains unexplored in terms of the pros and cons of reform."