Legislative Abuses in California

Exactly who do our “public servants” serve, when they abuse legislative rules not once, but three times, to defend something designed to benefit unions at the expense of other Californians?  The answer is not Californians.

The “how a bill becomes law” abuses involve three “gut and amend” (GANDA) bills.  As legislators raced to pass bills before adjournment, legislative kingpins added “new and improved” legislative changes to bills or took unrelated bills and replaced them with completely different bills. Then they rushed them through the last steps, leaving no time for effective scrutiny. 

SB 922 is Exhibit A. Senate President Pro-Tem Darrell Steinberg and Assembly Speaker John Perez morphed it from a measure to add tuberculosis to information that can be disclosed under California’s immunization system to one barring local governments from banning project labor agreements (to checkmate a campaign by non-union contractors to ban PLAs that was showing results in multiple local areas). Supplementary GANDAs include AB 436 and SB 790, which Ben Boychuck reported would “benefit PLAs by exempting local governments from some fees if they require contractors to adopt a project labor agreement and by requiring public utilities to pay into a union-controlled fund actively promoting such agreements.”

What is abusive about PLAs? They give taxpayers much less for their money to pay off unions for political support.

PLAs are agreements negotiated between a government entity and unions (excluding nonunion workers and contractors) prior to accepting bids on a public construction project, which establish the terms and conditions of employment that will be mandated for all workers on the project, regardless of who wins the bid.

PLAs are justified by unions and their wholly- owned Sacramento pets as buying labor peace, “leveling the playing field” for competitors, guaranteeing projects are completed on time, and holding down costs. But they do none of those things. They restrict competition, raise costs, and pick taxpayers’ pockets.

As Wharton Professor Herbert Northrup wrote in the Journal of Labor Research, “restraints imposed by government-directed PLAs are political decisions which have little or no economic rationale, nor can they be defended on the grounds of labor peace, enhanced safety, or other reasonable criteria.” Or as Diana Furchtgott-Roth wrote last year, a PLA “drives out small businesses from competing for these projects; raises their cost to the taxpayers; and funnels a larger stream of union dues from taxpayers’ pockets to union treasuries.”

PLAs are supposed to buy labor peace because they require unions to promise not to engage in disruptive activities. But that promise need not be kept, as shown by recent PLAs in New York and earlier, by the San Francisco International Airport expansion project.

Unions leverage the threat to strike unless a PLA is adopted (supplemented by using environmental laws to halt projects unless PLAs are imposed) into a better deal for themselves. Of course, no-strike pledges would not be necessary for non-union contractors, who comprise the vast majority of the construction industry.  In fact, PLAs punish non-union workers and contractors who would never strike, in order to buy labor peace from unions who threaten strikes–penalizing the innocent (including taxpayers) while rewarding guilty. As the New York Supreme Court held in the Albany Specialties case, adopting PLAs to buy such labor peace “smacks of capitulation to extortion” by unions, not leveling the playing field.

PLA backers assert that they just impose equal labor terms on all project bidders, allowing equal competition. But those “equal” terms involve anything but equal competition between union and non-union workers. For instance, the terms of the San Francisco International Airport PLA included the requirement that even non-union workers had to join the union and pay substantial dues and fees for the project’s duration, as well as contributing to union health and pension funds, although they would get no benefits in return. Even apprentices had to be union members, and new workers had to come through union hiring halls. In addition, union wages, work rules, job classifications, and hiring and grievance procedures were required, raising costs.

Such PLA terms are so onerous to non-union contractors that most will not even bid on PLA projects. And with fewer bidders, particularly non-union contractors who may have lower costs, the reduced competition leads to higher bids.

In 2009, John McGowan estimated that employees of non-union contractors faced take home pay reductions of 20 percent from PLAs, while also increasing non-union employers’ cost by about 25 percent.  This year, a National University System Institute for Policy Research study of public school construction in California, found costs 13 to 15 percent higher with PLAs, consistent with research elsewhere by the Beacon Hill Institute at Suffolk University.

The primary defenses of PLAs stand up so poorly to investigation— including a General Accountability Office investigation that was unable to document any cost efficiencies from PLAs–that unions have invented other equally bogus “benefits” from them.

Unions claim that PLAs benefit minorities.  Some do include special minority employment programs. However, since unions have a far smaller fraction of minority members than nonunion employers, PLAs actually discriminate against minorities. This is reinforced by requirements that apprentices be union apprentices, and restrictions on lower-skilled “helper” employees, because they might undermine union jobs, even though such jobs are the primary means by which many low-income and minority workers learn their way to higher paying jobs. This is why The National Black Chamber of Commerce called PLAs “a license to discriminate against black workers.”

Unions also claim that PLAs increase quality and safety. But a 2001 Ernst and Young study concluded that “There is no quantitative evidence that suggests a difference in the quality of work performed by union or open shop contractors.”  Similarly, no statistical evidence supports claims that PLAs improve worker safety.

Given the support unions have provided for the Democrats that dominate the California legislature (backed by electoral threats against those who deviate from the union line), Sacramento’s support for unions “sweetheart deals” on public construction is hardly surprising.  But doing so harms California taxpayers and the vast majority of our workers. And when legislative leaders blatantly abuse legislative rules to generate “hide and sneak” reinforcements for PLAs, while also claiming to spend every state government dollar as wisely as possible, they simply display their hypocrisy in multiple dimensions.

(Garry Galles is a professor of economics at Pepperdine University.)