Suit filed to block minimum wage hike as Medicaid payments increased

December 15, 2016
AZ Daily Sun
Howard Fischer

PHOENIX -- Unable to defeat it at the ballot, business interests are now trying to get a judge to void the voter-approved hike in the state minimum wage.

The lawsuit led Thursday in Maricopa County Superior Court contends Proposition 206 violates a constitutional provision which requires all measures that increase state funding to also have a specic dedicated funding source. The initiative does not spell out where the state will come up with the additional dollars it will need to cover the higher costs incurred by those who have contracts with the state to provide various services like health care.

Attorney Brett Johnson, hired by the Arizona Chamber of Commerce and Industry, points out that the Arizona Health Care Cost Containment System already has posted a notice that it intends to increase what it pays to providers to compensate for the fact the minimum wage will go fro $8.05 an hour now to $10.

AHCCCS ocials have estimated the additional cost for the next six months at close to $48 million, with $11 million of that to be borne by the state.

More to the point, Johnson said those additional dollars will come out of general tax dollars, leaving less money for other priorities. And he said that is exactly what the constitutional provision about an identied funding source is designed to prevent.

But James Barton, attorney for Proposition 206 supporters, said there is no basis for the claim. He said nothing in the ballot measure actually requires the state to increase its reimbursement rate to providers.

In fact, Barton noted, the constitutional provision that is the basis for the Johnson's challenge specically says if a state agency believes an initiative increases its expenses but fails to provide the funds, the legal remedy is to simply refuse to spend the money. He said the fact that the state, on its own, may choose to increase reimbursement rates to compensate providers for their higher costs does not mean the initiative is illegal.

A hearing is set for today before Judge Daniel Kiley.
The legal questions challengers are raising is not limited to the eect of higher wages on state agencies.

Johnson also contends that the measure violates a separate constitutional provision which requires that ballot measures be limited to a single subject. He contends Proposition 206 runs afoul of that because it not only mandates higher wages but also requires employers to provide workers with at least three days a year of paid personal leave.

"These topics should have been addressed in two separate ballot measures, rather than combined to encourage voters for one proposal to accept changes in the other,'' the lawsuit states.

But Barton points out that the requirement for separate ballot measures applies only to constitutional amendment. Proposition 206 only amended state statute. Johnson, in his legal lings, concedes the point but nevertheless urges the court to apply the requirement in this situation.

It's not just the state chamber hoping to stop the law from taking eect. Also signing on the lawsuit were the Phoenix, Flagsta and Hispanic chambers, along with the Arizona Licensed Beverage Association, which represent beer and liquor retailers, and the owners of Valle Luna Inc., which runs several restaurants in the Phoenix area.

Tomas Robles, who chaired the pro-206 campaign, reacted angrily to the bid to kill the measure, which was approved on a margin of 58-42 percent.

"This lawsuit is just another example of the chamber and, frankly, Arizona Republicans trying to ignore the will of the voters,'' he said.

Technically, the Arizona Republican Party is not involved in the litigation. But it opposed the initiative and Republican lawmakers attempted earlier this year to undermine the eort by crafting their own alternative which could have confused voters. That proposal was approved by the Senate but died in the House.

The successful initiative is built on a 2006 ballot measure which established Arizona's rst minimum wage at $6.75 an hour. Until then, employers were subject only to the federal $5.15 minimum.

With mandated ination increases, the wage is now $8.05 an hour.
Proposition 206 sets the new oor at $10 an hour in January, rising to $12 by 2020, with future increases linked to ination.

As with the original measure, there is a $3-an-hour "tip credit,'' meaning employers whose workers get tips can pay as little as $9 an hour in 2020. But the statute also requires proof that the workers actually get that much in tips.

The new measure also has something not in the 2006 measure: the mandate for paid time o. Johnson has one other legal theory in his bid to void the initiative.

He points out that the Industrial Commission of Arizona must prepare notices that employers are required to post at worksites about things like minimum wage requirements. Johnson contends that the cost to this agency is another example of an unfunded mandate.

Barton scoed at the argument that will mean increased expenses, saying the commission produces all sorts of notices all of the time. And even if there were a cost, the relief for the agency is to refuse to spend the money, not to void the entire law.

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