New law would make Arizona cities pay for raising the minimum wage

Arizona lawmakers could make cities pay for raising the minimum wage.

A new law that takes effect Aug. 27 requires the state to calculate the cost to Arizona's government when cities and counties raise the minimum wage above the statewide rate. If the state has to pay more for services in those communities because of a higher minimum wage, legislators could force local governments to cover the additional costs.

Proponents of the measure argue it is only fair after Flagstaff voters elected in 2016 to raise the minimum wage above the state's rate, in turn requiring government contractors to increase pay for some low-wage workers.

But others view it as an effort by the Republican-controlled Legislature to curtail the power of local governments. Critics argue this provision nestled in House Bill 2756 creates a financial cudgel with which the state can hit cities that raise the minimum wage and discourage other communities from doing the same.

"The message is: Other cities, you do this at your own peril," says state Rep. Randall Friese, a Democrat from Tucson who opposed the measure when it was up for a vote in the House Appropriations Committee, describing it later as governing with a vindictive tone.

Appropriations Committee Chairwoman Regina Cobb, R-Kingman, said the idea followed a request for the state to increase funding for organizations that provide services to people with developmental disabilities.

The state covers the costs of those services, but the employees who care for people with disabilities often are paid low wages. So, the cost of those services increased in Flagstaff when voters there elected to raise the minimum wage.

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Flagstaff's minimum wage rules

Arizona voters in 2016 opted to raise the minimum wage to $11 an hour this year and $12 an hour in 2020, with adjustments for inflation after that. But Flagstaff voters went further, requiring a minimum wage of $12 this year.

The city's minimum wage will go up to $15.50 in 2022 and must be $2 above the state minimum wage in the future if Arizona raises its rate again.

Flagstaff has stuck by the move. Residents voted down a separate ballot measure last year that would have rolled back the city's minimum wage increase.

"We don't feel the taxpayers around the state should be forced to bear the burden of the additional cost," Cobb said.

It is unclear to what extent Flagstaff's higher minimum wage will increase costs for government contractors, like organizations that provide services for people with developmental disabilities. The higher minimum wage does not apply to state workers.

The new law, passed as part of a multifaceted bill during the last week of this year's session, says agencies do not have to provide the Governor's Office with an estimate of any additional costs until at least next month.

It will be up to the next Legislature to decide whether to collect that money from revenue the state splits with cities.

A spokeswoman for Flagstaff said the city is working with the state comptroller and Arizona League of Cities and Towns but does not expect any material information about the potential cost until the spring, when lawmakers are back in session.

Even then, there may be debate over the state's calculations, warns Friese, who raised concerns that cities do not have any clear way to appeal the Arizona government's charges under the new law.

Was 'chilling effect' the purpose?

The measure also signals that the fight over Arizona's minimum wage is hardly over.

Though there are no prominent campaigns at the moment to raise the minimum wage at the local level as Flagstaff did, some see this as part of a series of efforts — from lawsuits to rival ballot measures — meant to undermine the outcome of the 2016 statewide vote.

The bigger question may be whether the policy discourages other cities from raising the minimum wage in the future.

Tom Belshe, deputy director of the League of Arizona Cities and Towns, describes the measure as a form of preemption.

The Legislature has taken several steps in recent years to preempt the power of local governments to make rules at the city or county level about everything from plastic bags to guns.

"I do believe it was meant to have a chilling effect," says Belshe.

Andrew Oxford can be reached at andrew.oxford@arizonarepublic.com or on Twitter @andrewboxford.