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Dept of Industrial Relations Nears Implementing Labor Compliance Program To Eliminate Independent 3rd Party Compliance BY: Phil Vermeulen, Legislative Advocate

Also In This Update • Governor's Budget Proposal Borrows from Transportation Accounts, but Spares Projects DIR establishes task force to monitor and safeguard California’s public works projects The Department of Industrial Relations (DIR) this week filed proposed regulations with the Office of Administrative Law to establish the Compliance Monitoring Unit (CMU) which will be responsible for ensuring compliance with the State’s prevailing wage laws on public works projects in California. The CMU will review certified payroll records, verify that workers on the projects are paid the correct rate of pay for the work performed, and will enforce compliance with pay, overtime, recordkeeping and hours limitation requirements. The CMU is expected to begin operation in August following the approval of proposed regulations. “Awarding agencies have a great obligation to the state’s taxpayers to be the guardian of the public dollar. The continuing mission must be to see that public funds are spent wisely and invested in infrastructure that will last for generations,” said DIR Director John C. Duncan. “The new CMU will provide a greater level of monitoring over the use of public dollars on projects such as school construction, water projects and roadways.” The public works projects are funded, in part, by State construction bond monies authorized by the voters for public school construction and water projects. Other projects undertaken by local governments using special procurement processes are also subject to monitoring. The Department will be conducting informational seminars throughout the State to ensure that the cities, counties, special districts and State agencies affected understand their responsibilities under the new Unit. The CMU staff will also present training seminars for construction contractors to provide information for submitting certified payroll records and how to comply with the State’s labor laws. The implementation of CMU began last year following the enactment of SBX2-9 signed by the Governor on February 20, 2009. Staff began developing the draft regulations which went before the public stakeholders and interested parties for development. The rulemaking process began in November 2009 and resulted in the incorporation of additional comments and ideas received from the public during that process. In preparation of the implementation of the new CMU program, DIR conducted a pilot project with the City of Los Angeles and the Los Angeles Unified School District to determine some of the best practices that could be incorporated into the monitoring program.

“Public works projects will have an enormous impact on California's economy and long-term competitiveness,” added Duncan. “We must ensure that corners are not being cut that jeopardize the well being of California’s businesses and workers.” For more information about the Compliance Monitoring Unit and SBX2-9 visit their web site at To learn more about the functions of the California Labor Commissioner, visit their web site at Governor's Budget Proposal Borrows from Transportation Accounts, but Spares Projects In the face of an almost $20 billion shortfall for 2010-11, Governor Schwarzenegger has released a draconian revised Budget proposal that calls for significant cuts in education, human services and other State programs and once again borrows from State Transportation accounts to help fill the gap. Specifically, with regard to transportation, the Governor's Budget proposal would: •

Lend $650 million from the Highway Users Tax Account to the General Fund, to be repaid by June 30, 2013. These funds had not yet been earmarked for specific transportation projects or programs and were available on a one-time basis as a result of earlier legislation to transition from the sales tax on gasoline to an increased excise tax on gasoline. • Extend the date for repayment of loans from the State Highway Account to the General Fund from June 2011 to June 2012. This will have no impact on projects planned for 2010. • Re-direct $42 million from Caltrans capital support staffing costs to highway maintenance activities. These capital outlay expense savings would be made possible by staffing reductions, increased use of contract services and project delivery efficiencies. • Provide an increase of $100 million in High Speed Rail funding to meet federal matching requirements. The bad news is that some transportation funds would be delayed under this proposal, however, the good news is that projects on the books will not be impacted and the dollars would be repaid into transportation accounts within the next few years. Remember, though, this budget process has a long way to go and it remains to be seen what the final product will look like. In April, a major shift in transportation funding was enacted that effectively replaced the sales tax on gasoline with a 17.3 cent-per-gallon gasoline tax increment. This "gas tax swap" effectively removed transportation from the General Fund and put future funding on a basis that will not be subject to General Fund shortfalls and diversions. The April legislation also includes an annual adjustment to assure that the gas tax covers the full amount that would have been generated by the sales tax on gasoline under Proposition 42. All gas tax monies must be dedicated to transportation under Article XIX of the State Constitution.

The new tax structure will generate over $400 million in new road and highway funding in 2011-12 and more than $3 billion over the next decade. Debt service on transportation bonds will be paid through these new excise tax revenues, relieving the General Fund by $1.1 billion over the next two years. After payment of debt service, new excise tax funds will be split 44% for the State Transportation Improvement Program (STIP), 12% for State Highway Operations and Protection Program (SHOPP) and 44% for local streets and roads. The sales tax on diesel was retained and increased to provide an ongoing funding source for transit and will be increased from 5% to 6.75% in 2011-12. The fuel tax on diesel will be reduced from 18 cents per gallon to 13.6 cents per gallon. The package also designated an additional $400 million for transit operations and fully funded intercity rail. Fortunately, the April revamping of transportation funding provided a sounder foundation for transportation funding and took a great stride in removing transportation from the General Fund's fiscal morass. Not to be underestimated, the new package will result in increased funding for streets and highways over the next several years. The Legislature and the Governor deserve credit for working out this complex and creative restructuring. As I have reported in the past, while we now have a more straightforward funding mechanism in place for transportation, we are still short billions of dollars each year in terms of what is needed to maintain and update our transportation system. This is a step in the right direction, but we will only make real strides by establishing a significant, permanent increase in the transportation revenue stream that will allow us to meet the needs of the people of California. I will provide updates on legislative activities in future reports.




The Department will be conducting informational seminars throughout the State to ensure that the cities, counties, special districts and Sta...