Viewpoints: Prop. 206 is a double-edged sword for non- profits

November 19, 2016
AZ I See It
Kirsten Merrifield

Many nonprofits supported Arizona's minimum­wage increase but now are grappling with how to implement it.

When voters cast their ballots this election season, they may not have realized they would significantly impact Arizona's non­profit sector – the state's fifth­largest non­government employer that accounts for more than 165,000 jobs and more than $7.7 billion in wages.

With the passage of Proposition 206 (/story/news/politics/elections/2016/11/08/arizona­minimum­wage­ proposition­206­election­results/92970650/), many non­profits must quickly modify their organization to meet the rise of the minimum wage to $10 an hour starting Jan. 1, 2017, followed by an increase to $12 an hour by 2020.

In Flagstaff, the transition is even faster. Voters there passed Proposition 414, which increases the minimum wage to $12 an hour starting in 2017, with additional increases to $15 an hour into 2021.

It goes beyond higher pay

Prop. 206 also gives employees the right to earn between 24 to 40 hours of paid sick leave each year.

In addition to these changes, the U.S. Labor Department announced earlier this year that new overtime regulations that go into effect Dec. 1 will require many employers, including non­profits, to provide employees earning less than $913 per week ($47,476 annually) with overtime compensation. This rule impacts employees regardless of whether they are classified as executive, administrative or professional (white­collar) workers.

KWOK: Non­profits are panicking over wage increases (/story/opinion/op­ed/abekwok/2016/11/15/arizona­minimum­wage­social­services/93884636/)

As champions for our strong and vital non­profit sector, the Alliance of Arizona Nonprofits and its members believe every individual deserves to make a living wage. In fact, if more individuals could survive or thrive on their own, there might not be as much demand on some of the thousands of non­profits serving individuals, families and children throughout the state.

Stuck between support and a hard place

In a recent survey of our non­profit members, fewer than 20 percent of respondents said they currently paid less than the soon­to­be implemented minimum wage.

Most agreed that a wage increase would positively impact the vulnerable populations they served. However, these new changes will require an increase to administrative time and possibly new infrastructure required to track overtime and PTO. This means more administrative costs.

With these changes taking effect within 30 days of each other, there is little to no time to effectively plan. Budgets are set and funding targets are defined. In non­profits, there are simply no costs of goods and services that can be increased.

RELATED: Prop. 206 would hit schools' bottom line (/story/news/politics/elections/2016/10/31/prop­206­minimum­wage­hike­would­hit­schools­bottom­ line/92898906/)

On top of that, the proverbial “operational” costs are not often funded by foundations or individual donors. Our sector has a great deal of work to do – now more than ever – on educating the general public on what “overhead” actually means. Just as a restaurant can’t serve a meal without the chef or the server (or even the dishwasher), a non­profit cannot deliver programs or services, save land, put on a theater performance, save a child, or house a homeless veteran without the people behind the effort to make it possible.

One Phoenix­based social services organization shared that while they personally supported the increase in minimum wage, they would have to be operationally in opposition because it could mean shutting down a 400­employee program serving thousands of elderly Arizonans. This is now their new reality.

Another group’s leader said the compounded effect of the minimum wage increase and the overtime rule changes come at the worst time of the year. The organization pays significant overtime for its shelter programs, and the overtime of $12 an hour would not allow them to continue the program. This could mean more people on the streets this holiday season.

In a nutshell: We have moral support, but operational anxiety for the Prop 206 impact. It crosses over our desire to do the right thing for our communities, while doing the right thing to sustain our ability to do our critical work on behalf of our communities.

The choice: more funding or less service

Without an influx of investments and donations, some nonprofits will have no choice but to decrease services. (Photo: Getty Images/iStockphoto)

How we make up the funding stream is another question. Non­profits simply can’t increase their service fees and pass them on to the public. Without an influx of investments and donations, some non­profits will have no choice but to decrease services.

The non­profit alliance believes there are three key opportunities to focus on:

Continue to help the 22,000 strong non­profit sector advocate for and communicate their need for increased resources.
Continue to educate elected officials, leaders, foundations and individual donors on the economic imperative of the work of these organizations.
Make sure we have a seat at the table to shape policy and visions for Arizona's future.

The Alliance’s Nonprofit Policy Council, our board of directors and other leaders are actively building our advocacy and outreach efforts. We are meeting with elected officials, hosting a day at the Legislature and rallying the employees, volunteers and supporters of the far­reaching mission­driven sector. And we are gearing up for our fifth annual Arizona Gives Day on April 4, 2017, which raised more than $2 million last year.

We invite everyone to download the non­profit economic impact report at ( to learn what this robust and often overlooked sector is doing for the state.

How to help non-profits meet new wage laws

Charitably minded Arizonans have many ways to make their donations count — and the tax code provides valuable incentives. (Photo: Getty Images/iStockphoto)

Arizona’s non­profit sector generates more than 8 percent of the state’s Gross State Product and approximately $28 billion in revenue. More than 72 percent of that revenue is generated by earned revenue, fees for services and government contracts.

A slight change in this will have consequences on our economy. So we invite our government partners and elected officials to allow non­profits to re­open or re­negotiate the fees paid for their services when changes such as the overtime rule and Prop. 206 impact what it costs to provide the services called for in an existing grant.

EDITORIAL: Prop. 206 sounds good but has heavy costs (/story/opinion/editorial/2016/10/25/prop­206­endorsement/92520850/)
And we invite you to dig a bit deeper for information on the “overhead myth” and consider how the dollars you invest with a mission­driven organization

makes a difference – not only in direct services, but in helping individuals make a living wage that will recirculate more dollars into the local economy.

For non­profits needing to navigate through all the changes, visit ( The deadlines on the new laws are fast approaching.

Collectively, we can help make this vital sector remain a source of pride in our community.

Your knowledge about and support of non­profits allows families to get back on their feet, land to be preserved, schools to nurture our students, art to expand our minds, veterans to be cared for, children to be cured of illness or puppies to be adopted.

Kristen Merrifield is CEO for Alliance of Arizona Nonprofits.

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