MINUTES OF THE SENATE COMMITTEE ON GOVERNMENT AFFAIRS Eightieth Session May 6, 2019 The Senate Committee on Government Affairs was called to order by Chair David R. Parks at 1:30 p.m. on Monday, May 6, 2019, in Room 2149 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to Room 4404B of the Grant Sawyer State Office Building, 555 East Washington Avenue, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file in the Research Library of the Legislative Counsel Bureau. COMMITTEE MEMBERS PRESENT: Senator David R. Parks, Chair Senator Melanie Scheible, Vice Chair Senator James Ohrenschall Senator Ben Kieckhefer Senator Pete Goicoechea GUEST LEGISLATORS PRESENT: Assemblyman Richard Daly, Assembly District No. 31 Assemblyman Jason Frierson, Assembly District No. 8 STAFF MEMBERS PRESENT: Jennifer Ruedy, Committee Policy Analyst Heidi Chlarson, Committee Counsel Suzanne Efford, Committee Secretary OTHERS PRESENT: William Stanley, Southern Nevada Building Trades Union Jeffery Waddoups, Ph.D. Paul McKenzie, Building & Construction Trades Council of Northern Nevada, AFL-CIO Danny Thompson, Operating Engineers Local 3 and Local 12 Ruben Murillo, Nevada State Education Association Senate Committee on Government Affairs May 6, 2019 Page 2 Warren Hardy, Nevada League of Cities and Municipalities; Associated Builders and Contractors Nevada Chapter Craig Madole, Associated General Contractors, Nevada Chapter Daniel Honchariw, Nevada Policy Research Institute Brian Reeder, Nevada Contractors Association Michael Pelham, Nevada Taxpayers Association David Dazlich, Las Vegas Metro Chamber of Commerce Dylan Shaver, City of Reno CHAIR PARKS: We will open the hearing on Assembly Bill (A.B.) 136. ASSEMBLY BILL 136: Makes various changes relating to public construction. (BDR 28-145) ASSEMBLYMAN JASON FRIERSON (Assembly District No. 8): Assembly Bill 136 deals with prevailing wage. During the 2015 Legislative Session, the Legislature passed various measures regarding public construction and the application of prevailing wages. Those bills sought to weaken the law in an attempt to realize short-term financial benefits. However, in doing so the change in the law did more harm than good by undermining Nevada's workforce and potentially raising long-term costs by lowering the quality of public construction projects. This bill reverses those law changes and returns public construction and prevailing wage laws to what existed prior to 2015. If these laws are strengthened, the State will benefit in a number of ways and provide assurances regarding the construction of public buildings. By requiring the payment of prevailing wages on public projects, we not only support our local labor force by providing competitive wages, we also attract the most qualified workers. When it comes to public work construction projects, especially schools, we want safe, long-lasting buildings that will require minimal maintenance and repairs. To do this, the most highly qualified workers must be hired. Public work projects paying prevailing wage attract local, experienced construction workers who deliver high-quality work on time and on budget. Senate Committee on Government Affairs May 6, 2019 Page 3 Prevailing wage laws allow for more competition among contractors for public construction projects which ensures these projects will end up with more highly skilled workers and, ultimately, a better product. The bill removes the requirement for school districts and the Nevada System of Higher Education (NSHE) to pay wages at 90 percent of the rate. It lowers the public construction cost threshold at which prevailing wage law applies from $250,000 to $100,000. It eliminates language prescribing the manner in which the Labor Commissioner must determine the prevailing wage, and it subjects charter schools to the same prevailing wage requirements as all other public construction projects. I want to be clear on some of the fiscal notes I have seen throughout the development of this bill. This bill does not go into effect until July 1. It does not affect any public work or other public construction being built, including any contracts for construction awarded between now and July 1. I want to highlight one point about the impact of the 2015 Legislative Session on apprenticeships. Prior to 2015, apprenticeship programs were doing okay. In 2017, a commitment was made to address the apprenticeship issue at some point. This is not a surprise. The decrease in the diversity both in race and gender of those who were able to participate in apprenticeship programs is startling. Apprenticeships have long-term benefits in the quality of construction projects and in having a healthy apprenticeship community which makes this bill well worth the effort. WILLIAM STANLEY (Southern Nevada Building Trades Union): The Southern Nevada Building Trades Union supports this bill and the provisions it sets out. Prior to this Session, the Unified Construction Industry Council funded a study that we asked Jeffery Waddoups, Ph.D., to help put together. I have submitted the executive summary of the study, The Impact of Nevada's Ninety-Percent Prevailing Wage Policy on School Construction Costs, Bid Competition, and Apprenticeship Training (Exhibit C). JEFFERY WADDOUPS, PH.D.: I am a professor of economics at the University of Nevada, Las Vegas, and the chair of the Economics Department. However, I am here as an independent researcher. One of my areas of expertise is labor economics, and I have done some work on the construction industry. Senate Committee on Government Affairs May 6, 2019 Page 4 My coauthor of the study is Kevin Duncan, Ph.D., a professor at Colorado State University, Pueblo. He is also an expert in the labor market in the construction sector. We estimated the impact of A.B. No. 172 of the 78th Session, which became law in 2015, in reducing prevailing wage rates for school construction by 90 percent of the standard rate and increasing the public construction cost threshold from $100,000 to $250,000 at which prevailing wage applies. The study is a data-driven analysis of school construction costs, bid competition and apprenticeship training given the impact of A.B. No. 172 of the 78th Session on those items. The major finding of our study, using data on school construction costs from 2013 to 2017, showed there was no statistically significant impact of prevailing wage laws on construction costs. It is not surprising there is no impact of prevailing wage laws on construction costs because many studies have been done, and the literature supports our findings. If that is the case, the 90 percent policy could not have lowered construction costs. We found that A.B. No. 172 of the 78th Session did not deliver on its promise to lower construction costs on schools. Our findings are consistent with many peer-reviewed studies—roughly 85 percent of the peer-reviewed studies. Our findings are also consistent with the assertion that reducing the threshold from $250,000 to $100,000 will not raise costs. An unintended consequence of A.B. No. 172 of the 78th Session was to undermine apprenticeship training. It turns out that signatory contractors were substantially less likely to pursue construction on schools after the passage of A.B. No. 172 of the 78th Session. For example, in our data on roofing and asphalt, the signatory market share went down from 69 percent of the contractors being signatory to 41 percent. When the signatory contractors lost market share, the community lost a greater incidence of training that goes along with that market share. Joint apprenticeship programs are operated through cooperative agreements between a group of contractors and a trade union. There are also unilateral programs operated generally by a trade association. However, these two programs differ greatly. Joint programs train workers in a full range of trades, while unilateral programs only train workers in electrical, plumbing and Senate Committee on Government Affairs May 6, 2019 Page 5 pipe fitting work. We found that joint programs registered 91.5 percent of apprentices over the period between 2000 and 2017. That is 26,476 apprentices. Joint programs have higher rates of completion, 47 percent to 55 percent. Over the period between 2000 and 2017, joint programs contributed to diversity by training 2,604 Hispanic workers versus unilateral programs which trained 117 Hispanic workers. Joint programs trained 517 African-American workers versus 36 trained in unilateral programs. That is a big difference. In joint apprenticeship programs, 317 women were trained in the construction sector and only 12 in unilateral programs. According to our evidence, A.B. No. 172 of the 78th Session did not reduce construction costs. The unintended consequence due to the decrease of signatory contractors building schools was to undermine apprenticeship programs. We need to take serious steps to train the next generation of skilled construction workers. PAUL MCKENZIE (Building & Construction Trades Council of Northern Nevada, AFL-CIO): In the interest of time, rather than have everyone come up and speak, I ask the supporters of this legislation to stand so the Committee can see them. CHAIR PARKS: We can do a "me too" for them. MR. MCKENZIE: To go along with that study, in 2013, the Building & Construction Trades Council of Northern Nevada and the University of Nevada, Reno, conducted a study on prevailing wage and its economic impact. Some of the issues addressed in that study were that living wages created an environment in which construction workers were safer on the job because they did not have home concerns. One of the problems we have in northern Nevada that southern Nevada is starting to suffer from is people are working two and three jobs to make ends meet because they cannot afford housing. Prevailing wage helps bring construction workers into the market where they can do a good job, return home and relax because they are making a living wage.