August 2011 Vol. 14 No. 8

Legal Commentary

The Stimulus - useful, but could be better

Nina Fendel, Attorney, Weinberg, Roger, & Rosenfeld

The American Recovery and Reinvestment Act of 2009, otherwise known as "The Stimulus Act," is a distant cousin of the Depression-era New Deal, which created jobs and American treasures in the form of buildings, roads, bridges, parks and even murals. But the differences are stark.

Both programs were started to help head off economic downturns. In the 1930s, when President Franklin Roosevelt started the New Deal, unemployment hovered around 25 percent, banks were failing, and many property owners were facing foreclosure. In 2009, unemployment was around 10 percent, businesses and banks were failing, and homes were also being foreclosed. During both eras, the American dream seemed increasingly unattainable.

Although it pales in comparison to the accomplishments of the New Deal, the Stimulus Act has had a meaningful impact.

As of March 2011, California had received slightly over $30 billion for approximately 23,000 projects. This money has been spent to keep public employees working in education, public safety, and community services. It has also funded a substantial number of construction projects. For instance, more than $1.4 billion has been allocated to California for bridge repair.

However, the differences between the Recovery Act and the New Deal are hard to miss. The New Deal was responsible for an enormous building boom. But the vast majority of Recovery Act projects are repairs around the edges of existing projects. The third bore of the Caldecott Tunnel, connecting Alameda and Contra Costa County, is an exception.

One piece of good news is that the vast majority of construction carried out using Recovery Act funds requires that construction workers be paid federal Davis-Bacon prevailing wages. That allows union contractors to compete on a level playing field for work funded—or partially funded—with stimulus money. If non-union contractors win contracts for work funded in whole or part by Recovery Act dollars, they must pay prevailing wages, and either provide workers with fringe benefits, or pay them for the value of the benefits that are part of the federal prevailing wage determination. If workers are not paid the correct federal prevailing wage, they can file a complaint with the U.S. Department of Labor to collect wages owed.

When stimulus funds are used on a project that also requires state prevailing wages, construction workers must be paid the higher rate. The Department of Labor has also prohibited splitting jobs into smaller contracts for the purposes of evading prevailing wage requirements.This prevailing wage requirement has resulted in most stimulus construction projects paying fair wages, and has minimized the ability of non-union contractors to undercut union contractors by paying substandard wages.

Despite the modest nature and scope of the Recovery Act, Republicans have railed against it from the very beginning. The Act passed along party lines with only three Republican lawmakers voting for it. Nevertheless, Republican lawmakers have criticized the program, at the same time showing up for the photo ops, bragging about the jobs they have brought to the community.

For more information on the wage requirements of the Recovery Act, see http://www.dol.gov/whd/recovery

To see a map of New Deal projects in California, go to: http://livingnewdeal.berkeley.edu/map/

This informational column is prepared by the law firm of Weinberg, Roger, and Rosenfeld, A Professional Corporation, legal counsel to the NCCRC. It is not legal advice.

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