VTCA Advocacy: California Governor Vetoes Project Labor Agreements

One of America’s most progressive governors agrees:  PLA’s drive up construction costs, which diverts funding from other priorities. 

Advocates for fair and open competition on public construction projects have long argued, with the support of nearly all available academic research, that Project Labor Agreements (“PLAs”) increase the cost of public infrastructure.  

On September 29, 2024, California Governor Gavin Newsom (D), one of the most progressive Governors in the United States, vetoed Senate Bill 984, which would have mandated between 4-6 total PLAs across two different state agencies. His principal reason for vetoing the legislation was the costs imposed by the PLA mandate.  

In his veto letter, Governor Newsom expressed concern that the PLA cost inflation would divert funds away from essential government services. He noted that “the new requirements proposed in this bill could result in additional cost pressures that were not accounted for in this year’s budget.”   

The Governor’s concerns about cost increases are well founded. PLAs typically increase project costs by 12% to 20%, sometimes more. In fact, in Los Angeles, a study by the RAND Corporation found that the PLA requirement mandated by the Los Angeles City Council on Proposition HHH, a voter-approved plan to build 10,000 units of affordable housing, increased project costs by 14.5%.  

RAND’s detailed analysis concluded that the decision to place a PLA on Proposition HHH cost taxpayers an extra $141 million and prevented 800 units of affordable housing from being built.   

Think about that.  Over 800 families in Los Angeles were denied an affordable housing option because the L.A. City Council caved to politically active construction unions and mandated a PLA on the project.