DIR to suspend labor compliance fee

The state Department of Industrial Relations announced Friday its intent to suspend a labor compliance program of school construction projects over concerns that a related fee might not be legal.

John C. Duncan, department director, issued the notice saying the program would be suspended as they sorted out the legal question - an action needed to remove a potential threat the fee has created to the state's ability to sell bonds.

Unfortunately, these questions threaten the state's ability to issue and sell bonds to fund public works construction, including a very short window of opportunity to sell bonds during the month of November," Duncan said in a memo to school administrators.

Expectations are that the department will file emergency regulations suspending the program with the Office of Administrative Law on October 26 and that once adopted the labor compliance oversight program will be suspended along with the requirements for school and community college districts to pay the related mandatory fee to the DIR from their state bond apportionments.

At issue is a law that took effect earlier this year that relieves schools of running local labor compliance programs. As proposed the monitoring would be conducted by the DIR with fees coming out of school bond money set to pay for the program.

But in public notice paperwork released last week, the DIR said bond counsel for the State Public Works Board "is unwilling to write an unqualified opinion letter for the bond sale due to the possibility that someone may question the legality of using bond funds to pay the fees in the manner prescribed."

Without the qualification letter, the department said, "the bonds will be unmarketable, leaving the state unable to pay for the projects in question, resulting in a loss of employment and economic stimulus.

The development is the latest involving the controversial labor compliance fees, which had been the subject of a state hearing earlier this month where school advocates asked members of the State Allocation Board not to impose the requirement.

SB2x 9, which became law earlier this year, shifted labor compliance oversight to the DIR. Since August 1, the allocation board has been required to increase construction grants for schools drawing from voter-approved bond funds.

Duncan noted that if his plan to suspend the labor compliance program is approved, labor compliance requirements would be restored to status prior to August 1. He said the department will also refund or reimburse any fees that have been paid for recently-awarded projects.

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