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Federal budget cuts, more project labor agreements could influence local firms

By: Reed Jackson//November 15, 2012//

Federal budget cuts, more project labor agreements could influence local firms

Reed Jackson//November 15, 2012//

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President and Congress may soon make some decisions that would significantly affect multiple sectors – including the construction industry. Actions concerning sequestration and could influence operations of Oregon firms.

Jimmy Christianson

“In some cases, we’re assuming cuts across the board,” said Jimmy Christianson, congressional director of the Associated General Contractors of America. “On the state level, (those cuts) could have some influence.”

The most pressing issue is the looming fiscal cliff expected to emerge at the end of this year, when terms of the Budget Control Act of 2011 are scheduled to take effect.

The act calls for $109 billion in budget cuts to federal programs. Based on a report compiled by the U.S. Office of Management and Budget, nearly $6 billion in federal construction funding could be cut.

Some construction projects would be affected more than others, Christianson said. Highway and bridge projects, such as the $3.5 billion Columbia River Crossing, would not be greatly affected, because the Highway Trust Fund is relatively protected from sequestration, he said.

Because of reduced gas consumption, the government has transferred money from the country’s general fund to the Highway Trust Fund in three of the past five years. Sequestration would reduce a $6.2 billion transfer that was planned for 2013 by 8.2 percent. However, that would equate to only $471 million.

“The real problem is there is still not enough revenue being generated for the Highway Trust Fund,” Christianson said. “That battle is not over. But if you’re looking at highway and bridge funding specifically, (the fiscal cliff) will probably not have an effect.”

What sequestration would affect is military and water infrastructure spending. Defense would lose $2 billion that would have gone toward things like infrastructure construction. So, projects like The Dalles Readiness Center, a $17 million effort to replace an armory, could be in jeopardy.

Nearly $196 million in cuts would affect a pot of federal money used to improve water and wastewater infrastructure. Between new water tanks and a $123 million endeavor to rehab its sewer system, the city of Portland is devoting huge sums of money to this type of infrastructure, and some of it is coming from federal grants.

The water-related cuts would be more damaging than the highway-related ones because the money pot is nearly $38 billion smaller.

“It’s all relative,” Christianson said. “It’s a large percentage cut.”

Also, the president’s decision to continue to push for more project labor agreements, a pre-hire collective bargaining agreement with labor unions, on government projects could affect local contractors. No new policies are expected, but federal agencies, such as the Bureau of Land Management or the U.S. Forest Service, which often operate in Oregon, may be encouraged to use PLAs more often.

But open-shop employers could be forced to pay for employees’ benefits twice on a PLA project, according to Brian Turmail, executive director of public affairs for the of America. And PLAs can undermine firms’ pre-existing agreements with unions, he said.

“Why do we need a PLA to avoid a work stoppage that you’ve already agreed not to have?” Turmail said. “We don’t think the government should butt its head into the situation and propose them.”

In addition, potential environmental legislation could impact some firms. The U.S. Environmental Protection Agency is weighing whether to propose a rule that would designate fly ash, a material often used by concrete companies, as hazardous waste. The rule would potentially discourage customers from buying concrete made with it.

The EPA also is continuing to scrutinize stormwater runoff. In 2010, the agency set numeric limits on how much stormwater could be discharged from construction sites. Now it’s looking into possibly building on that.

All of these decisions will have a big impact on the industry as a whole, Turmail said.

“Hopefully they make the right choices,” he said.



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