Chambers of commerce move to block minimum-wage increase while agencies that serve vulnerable populations wonder whether they can stay in business

December 22, 2016
Tucson Weekly
Jim Nintzel

A Maricopa County judge shot down efforts to block a hike in Arizona's minimum wage on Wednesday, Dec. 21.

Maricopa County Superior Court Judge Daniel Kiley declined to grant an injunction to prevent the increase in the minimum wage—approved by 58 percent of Arizona's voters in last month's election—from going into effect on Jan. 1.

The court action was brought by a coalition of chambers of commerce led by the Arizona Chamber of Commerce and Industry, which also led the opposition to Prop 206. The chambers' legal team argued that the increase in the minimum wage was unconstitutional because it didn't include a funding mechanism to pay for the increased costs to the state to pay for outside agencies that contract with the state to provide a variety of services, from aiding the developmentally disabled to providing healthcare assistance.

"We lost at the election," said Lea Marquez Peterson, president and CEO of Tucson Hispanic Chamber of Commerce, which also joined the lawsuit. "So we moved forward with the lawsuit because Proposition 206 is not constitutional. There are going to be additional costs to our state departments and there's not a revenue stream associated with it."

But supporters of the law noted that the state workers were specifically exempted from the increase and that state policymakers are under no obligation to increase funding for outside agencies that could suffer financial stress as a result of the new minimum wage, which will climb to $10 an hour on Jan. 1, 2017, and to $12 an hour by 2020.

"This is really just a last-minute attempt by these business organizations to thwart the will of the people," said Bill Scheel, one of the chief political strategists behind Prop 206. "There's no requirement for the state to appropriate any funds. The state government is exempted from the proposition. In terms of these contracts, the state chooses the terms of those contracts and the initiative does not require them to fund those contracts at any certain level, so there really isn't a real legal argument. Instead, there's very much a moral argument: These workers who are caring for our disabled residents, our elderly, our children, the most vulnerable among us—they deserve to make more money than fast-food workers, or at least as much money as fast-food workers. It's unconscionable that these chambers want these really important people in our economy and in our society to not even make a living wage."

The plight of nonprofits that have contracts with the state is serious. Robert Bennetti, who heads up the nonprofit Tucson Residence Foundation in Tucson, says agencies such as his have such low budgets that they can't afford to increase their wages for employees. In Bennetti's case, that means workers who oversee group homes where people with developmental disabilities live.

"I can't replace a person with a kiosk," Bennetti says. "I can't reduce hours. There's nothing I can do."

It's a similar situation for Mark Munson, the president and CEO of Community Provider of Enrichment Services, who runs a larger organization that provides housing and other services for people with developmental disabilities, physical disabilities and mental illness.

Since Munson's company is an employee-owned corporation instead of a nonprofit, Munson doesn't even have the option of going out into the community to seek private philanthropy dollars.

The financial crunch faced by nonprofits is partially driven by the state's ongoing neglect of agencies that serve the developmentally disabled and other vulnerable populations. State lawmakers and Gov. Jan Brewer reduced funding for those agencies by 15 percent after they took control of state government in 2009. Now, nearly eight years later, that funding has been increased by about 7 percent. When you factor in inflation, the cut is close to 21 percent, according to Munson.

"So we're paid 21 percent less now than we were paid in 2009, when you take inflation into account," Munson said. "It is incredibly difficult to find and retain staff. Our turnover rate is something like 51 percent."

Munson said working with the developmentally disabled "can be incredibly rewarding but we have individuals who also bite, kick, spit, put holes in walls. It's not their fault, it's just part of their presentation, and so these are very challenging people."

Both men were happy to see state officials agree to increase funding for agencies by nearly $50 million last week, with an estimated $25 million going to agencies that provide services for the developmentally disabled. But both men also said that the additional funding isn't likely to be enough for the different agencies across the state to cover their increased costs.

"There are almost 700 providers," Bennetti said. "So even if we were to get that $25 million, how that is going to be divvied is yet to be determined. In the meantime, we're still on the hook to start paying $10 an hour on Jan. 1."

Scheel says the real problem is not the voters' decision to increase the minimum wage but the state's ongoing neglect of vulnerable populations.

"These are really policy choices that the Legislature gets to make," Scheel said. "And for the last seven years, what the Legislature has prioritized are corporate tax cuts rather than services to these very vulnerable populations."

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