“Fund swapping” allows local and state governments to bypass important provisions.
Earlier this week, Rep. Abby Finkenauer (D-Iowa) introduced legislation to prevent state and local governments from “fund-swapping,” an accounting maneuver that allows them to get around Buy America and fair wage standards on federally funded infrastructure projects.
The legislation is especially timely, as House Democrats introduced a major infrastructure investment package on Wednesday that would fund roughly $500 billion in projects. That bill includes Buy America, which ensures taxpayer money spent on efforts like rebuilding bridges, roads, and transit systems is reinvested into local economy rather than sent overseas. Buy America encourages the hiring of local businesses and American manufacturers, creating jobs.
Finkenauer’s bill, titled the Stop Swaps, Protect Local Jobs Act, aims to close loopholes that allow state and local governments to avoid Buy America and other project requirements that ensure fair wages.
It happens more often than you might think.
For example, Finkenauer cited a more than $6 million project in Davenport, Iowa — the reconstruction and widening of 53rd Street. Due to a law signed by Gov. Terry Branstad in 2017, state transportation officials were able to maneuver money around to avoid Buy America.
Officials kept federal road and bridge money they received for the project, but swapped it out it with state dollars for the actual project work, which technically allowed them to avoid federal requirements.
The city of Davenport claims that it saved more than $400,000 compared to a bid that would have met federal provisions. But the approach is one we have referred to with the old adage “pennywise and pound foolish.”
What the city of Davenport neglected to factor into the cost calculation is the money that would circulated throughout the United States supporting domestic manufacturing jobs all along the supply chain had Buy America provisions been adhered to. Finkenauer pointed out the cost to the local economy was higher than the city realizes.
“What they ended up losing out on, because their fair wage standards were not attached, when they decided to use the fund swapping was over $800,000 in local wages that could have been put back onto the community and could have been supporting local jobs,” she said.
Finkenauer’s bill, which also has been attached to the bigger infrastructure packaged introduced this week, seeks to end this practice.
And for Finkenauer, this issue hits home.
"I remember my dad, as a union pipefitter, being gone for months at a time to work jobs with wages that could support our family,” Finkenauer said. “He missed a lot and so did we. Lawmakers should be making it easier, not harder, for Iowans to find good jobs in their own communities, but fund swaps create another barrier for families and local businesses. We need to end this practice to create more opportunities, ensure our tax dollars are spent on American-made products, and, along the way, maybe turn more of those goodnight phone calls, into goodnight hugs.”
Alliance for American Manufacturing President Scott Paul is among those who have voiced support for the measure, noting that it will “close a glaring loophole that hurts American workers and manufacturers.”