PHOENIX (CN) — Arizona businesses told the state Supreme Court on Thursday that the $4 minimum wage increase approved by voters in November is unconstitutional, as the state constitution’s revenue source rule requires new expenditures to have a funding source.
Proposition 206 raised the minimum wage from $8.05 to $10 an hour and will increase it by 50 cents a year up to $12 in 2020. It also requires most employers to give paid time off to employees.
Although state employees are exempt from the wage increases, petitioners told the Supreme Court it will add millions of dollars in indirect costs to the state budget in the first year alone, through private sector minimum wage jobs tied up in government contracts.
The Arizona Health Care Cost Containment System (AHCCCS), Arizona’s Medicaid agency, will need an estimated $55 million in 2017 and $21 million in 2018 to keep up with wage increases, said Brett Johnson, an attorney representing the Arizona Chamber of Commerce and nine other petitioners.
The Arizona Department of Administration and the State Procurement Office also estimate large budget increases to pay their contracted minimum wage workers.
However, Chief Justice Scott Bales said Proposition 206 could actually increase revenue and decrease spending in the long run.
“Do you think the constitution allows for the consideration of indirect benefits as well as indirect costs?” asked Bales, referring to an amicus brief. “If an increased minimum wage takes more people off of public assistance, the state’s going to increase its revenues.”
Johnson said the argument in the brief was hypothetical. “We have to deal with realities,” he said.
Bales countered: “Aren’t the increased costs [to the state] also based on hypotheticals, because it makes assumptions about what the state will or will not choose to fund?”
In response, Assistant Attorney General Charles Grube said Proposition 206 did not violate the state constitution’s revenue source rule, because it did not propose any mandatory expenditures.
But Justice Andrew Gould said costs associated with state-contracted minimum wage jobs, such as at-home AHCCCS care providers, are mandatory.
“Is it really an answer to say, ‘Well, if we don’t have the money, we don’t have to pay for those services?’” Gould asked. “In fact, there’s a federal statute that says we have to provide sufficient care and access to care for these people. How can you divorce the cost, in terms of the minimum wage, from the provision of these types of services that are involved?”
Jim Barton, representing Arizonans for Fair Wages and Healthy Families Supporting Prop. 206, said it’s unclear whether the minimum wage will increase spending. He agreed that Prop. 206 will ultimately bring in more revenue for the state.
Barton also spoke outside the courthouse, joining Living United for Change in Arizona (LUCHA) protesters chanting workers’ rights slogans and carrying signs in support of Prop. 206. Several protesters spoke about their experiences with the minimum wage.
Juana, who works in a Mexican restaurant, said Prop. 206 helped, but she still struggles to pay bills and put food on the table. When she moved to the United States, she earned $5.45 per hour.
But Johnson said the unfunded mandate should make all of Prop. 206 unconstitutional.
“The only choice here is to void and nullify this proposition,” Johnson said. “This is a Lincoln Logs situation. You remove one of those logs and the entire house falls.”