A new bill that would make contractors pay union-level wages on state public works projects would cost Colorado millions of dollars and threaten fragile business-labor relations, opponents said Monday.

House Bill 1208, by Rep. John Soper, D-Thornton, would require contractors to pay "prevailing wages," set by the U.S. Department of Labor.

Prevailing wages are routinely paid by union shops but not by independent contractors.

Opponents say the bill would greatly increase the cost of projects.

But union backers argue that the state needs to step in and demand that employees get paid decent salaries and have health care covered by their employers.

With Colorado expecting hundreds of millions of dollars for public-works projects as part of a federal stimulus package, the proposal is likely to kick up a huge debate.

"It very much creates a federal stimulus earmark here in Colorado for union shops only," Rep. Cory Gardner, R-Yuma, said of the bill.

Gardner and other opponents argue that establishing a floor on wages would hike the cost of projects.

If the state has to pay more to contractors to cover salaries, that is less money for actual construction and fewer highways that can be fixed, they said.

Also, if companies can't bid on jobs because they don't pay enough, that would narrow the pool of competing firms and put fewer people to work at a time when job creation is critical, they said.

"You're basically taking out players from government who would lessen the cost of public- works projects," Gardner said.

But union backers say that with so much work at stake, the state has a responsibility to see that workers are fairly compensated.

They say they support the bill because it would stop companies from bringing in out-of-state laborers who earn less than the median pay in Colorado to try to win public-works contracts by under-bidding local firms.

"Anytime it's not a level playing field, somebody is disadvantaged — and it's usually the worker," said Ed Knox, president of International Brotherhood of Electrical Workers Local 68. "There's no way in the world you can stimulate the economy by low-balling the work."

Tensions between labor and business flared in early 2007, when Democrats passed a bill that would have made it easier for private companies to unionize, only to see Gov. Bill Ritter veto it. Ritter came back later that year and issued an executive order allowing state employees to organize.

Business interests put what were considered to be three anti-union amendments on the 2008 ballot, and labor leaders responded with four initiatives considered anti-business.

Ritter brokered a deal for the labor groups to pull their proposals if business groups would contribute money to the campaigns against the three anti-union measures, two of which failed.

Soper insisted that House Bill 1208 is not a union bill but a measure to get pay to Colorado workers rather than watch them lose jobs to cheaper labor from out of state. Nonunion shops would not be disadvantaged as long as they pay wages that are high enough to fit under the law, he said.

Sen. Bill Cadman, R-Colorado Springs, countered that the increased costs would limit competition offered by companies operating within the state.

And Chuck Berry, Colorado Association of Commerce and Industry president, said less work could be done if more money goes to wages.

No date has been set yet for a hearing.