House GOP budget attacks road builder contracts

Jonathan Oosting
The Detroit News
Road construction equipment sets idle on Northbound I-75 at Exit 46 as traffic crosses the Livernois bridge over the interstate, Tuesday afternoon, September 4, 2018, after a contractors association made good on its word to lock out unionized road builders because of stalled labor negotiations.

Lansing — Michigan House Republicans are using the state budget to fight new road builder contracts that require subcontractors to pay into a union trust fund for fringe benefits even if they do not use union laborers.

GOP officials argue new five-year union deals could drive up the cost of critical repairs. But industry experts warn a provision quietly tucked into the House budget could effectively halt future road construction by barring many top road building firms from working with the state because of the labor contracts.

“The purpose is to save Michigan taxpayers money and to fix an issue that’s just not fair,” said Rep. Matt Maddock, a Milford Republican who chairs the House transportation budget subcommittee.

“We are under tremendous pressure from the taxpayers in this state to do everything we can to avert a gas tax increase,” he added, referencing Democratic Gov. Gretchen Whitmer’s plan to fix the state's crumbling roads by hiking fuel taxes by 45 cents per gallon over two years.

The House spending plan advanced last week would prohibit the state from awarding any contract to a road building firm that requires subcontractors to comply with fringe benefit contributions mandated under collective bargaining agreements.

But many of the state’s top contractors already agreed to the provisions as part of a five-year deal ratified in April by the Operating Engineers 324 union.

The House budget could disqualify 80 to 90 percent of the state’s largest road builders, said Mike Nystrom of the Michigan Infrastructure and Transportation Association, which represents both union and non-union contractors.

“I think we need to analyze this carefully,” Nystrom said. “We definitely don’t want to shut down the road building industry at a time when we need their work more than ever before.”

The Michigan Department of Transportation opposes the language in the House budget, which could be discarded by the Senate or Whitmer administration during high-stakes negotiations expected to continue in coming months.

“This would be detrimental,” said Department of Transportation spokesman Jeff Cranson. “I don’t know why anyone would want to limit the pool of vendors and available bidders. We should be encouraging competition and providing more opportunities.”

Nystrom said he understands concerns with the union contract language. Negotiations last year led to an unprecedented three-week road building standoff that stalled 164 construction and repair projects across the state.

Unions refused to continue negotiating with MITA because it also represents non-union contractors, and “those contractors who did sign it, signed it begrudgingly,” Nystrom said.

The new contract, agreed to by roughly 40 road building firms, includes a guarantee that subcontractors adhere to the same rates, terms, conditions and fringe benefit contributions as the general contractor.

The Operating Engineers fought for the provision and touted it as a way to protect “taxpayers and workers alike from substandard workmanship and compensation.”

Union spokesman Dan McKernan called the House budget a “blatant attempt to attack the wages of Michigan construction people who are trying to rebuild this state right now.”

The subcontractor rules will prevent road construction firms from hiring cheaper out-of-state subcontractors and pocketing the leftover taxpayer money, McKernan argued.

“To be wasting time and political capital … on a bill that would eliminate a large majority of Michigan road contractors is ridiculous,” he said.

But Maddock said he hopes the House budget language would encourage contractors to renegotiate union deals if they want to win Michigan road construction bids.

“You know what, I dare them to strike again,” Maddock said of union laborers, who were actually locked out by contractors during the 2018 dispute. “We are in the midst of a crisis right now.”

The Associated Builders and Contractors of Michigan, which represents non-union contractors and last year successfully pushed to repeal the state’s prevailing wage law for construction workers, praised the House budget.

It “ensures road funding will be spent on roads, and not used to bolster private fringe benefit funds by inflating the cost of construction,” said ABC state Director Jeff Wiggins. “Any attempt to force Michigan workers on taxpayer-funded projects to pay into a private fund from which they do not participate and receive no benefit is unconscionable.”

The union agreements require contractors to cover the costs of fringe benefits, including pensions, health care and training programs. Subcontractors must adhere to the same requirements even if they don’t have union workers.

Those trust fund payments could total nearly $29 per hour for each employee, according to ABC.

But McKernan disputed price escalation arguments, contending the new union contract will make “no difference on the actual price of the projects being done."

Rather, it will encourage road building firms that win state contracts to do the work themselves and discourage them from shipping in crews from a state like Texas, where there are weaker worker protection laws and lower wages, McKernan said.  

The latest budget controversy comes amid an ongoing debate over long-term road funding in Lansing. Republicans in the House and Senate have balked at Whitmer's 181% gas tax increase proposal and are instead attempting to squeeze any savings they can out of state government.

The House budget would shift sales taxes already collected on fuel purchases to road repair agencies. It also directs the state to solicit bids for the potential sale of the Blue Water Bridge connecting Port Huron to Canada, four state-owned airports, eight welcome centers and a rail line that runs between Grayling and Gaylord.

House Democrats voted against the GOP transportation budget, but it’s not clear if individual lawmakers were aware of the contractor collective bargaining language inserted by Republican lawmakers. They cited other objections last week.

But Democrats are now speaking out against what Rep. John Hoadley of Kalamazoo called an "attack on both collective bargaining and quality construction."

Majority Republicans are "going in and telling business owners how to run their own shops,” Hoadley said.

“This language is actually trying to reach deep into the way a contractor can complete their bids and take away their own freedom to choose who they’re hiring to actually get that work done.”

Republican former Gov. Rick Snyder helped resolve the three-week labor dispute that halted road repair projects in September 2018. Operating Engineers and contractors reached a short-term agreement to finish out the construction season and then resumed contract negotiations throughout the winter. 

Most Michigan road builders have agreed to the new union contract, but about 10 to 15 are still holding out because of concerns over the subcontractor fringe benefit language, Nystrom said. 

"This was the issue that was standing between a contract and continued labor strife," but most contractors agreed to the language to avoid another labor dispute, Nystrom said.

"I think there are a lot of folks in the industry who think the language is questionable," he added, suggesting it could be challenged in court. "But MITA is not going to be the one challenging it." 

State Sen. Curtis Hertel Jr, D-East Lansing, said he does not expect the House contract language will make it into the final budget that reaches Whitmer’s desk.

“I can’t believe anyone will be taking this seriously," Hertel said, adding he doubts that Senate Republicans "are planning on selling any bridges" either.