The incoming speaker of the Arizona House of Representatives said Monday he is considering whether to file a lawsuit to block an increase to the minimum wage approved by voters last month.
Rep. J.D. Mesnard said the increase might run afoul of the state Constitution's requirement that initiatives contain a funding source if they require state outlays. He said he hasn't reached that conclusion and will have Arizona House attorneys analyze the measure before deciding whether to sue.
Companies that provide services to the developmentally disabled under state contracts say they may have to pull back or cease operations if the wage increase isn't blocked. The firms run on tight margins and have faced cutbacks in state reimbursements in recent years.
The attorney representing backers of Proposition 206 said the initiative exempts the state itself from having to pay the higher wages, so there's no legal issue for contract workers because that's not mandatory state spending that would violate the requirement to identify a funding source.
"Politically the right answer is to just restore the funding, but legally, the legal question is it's just not a mandatory expenditure," attorney Jim Barton said.
There isn't a firm estimate on the cost of boosting pay for contract aids for the developmentally disabled, but it could easily eat up the estimated $24 million in new funding available in the state's budget projections.
"I really don't know if there's going to be a lawsuit," said Mesnard, R-Chandler. "I do know that people are talking about it because of the impact. I do know that regardless people are freaking out about it."
Proposition 206 will raise the minimum wage from $8.25 to $10 an hour in January and to $12 per hour in 2020. Voters approved the measure by a margin of 58 percent to 42 percent.
The impact will reach far beyond the developmentally disabled, Mesnard said. As an example, he said he's had to raise wages for House pages, which had been above the minimum at $9 an hour, to compete with the new $10 minimum wage and attract talent.
"That will have an impact on the House budget," he said. "That's just one iota of an example, and you're going to see that all over the place."
Republican Rep. Kate Brophy McGee said she's hearing from not only the developmentally disabled service community but also small business people that are upset about the increase. She said she's all for the measure if it produces more harm than good, but that's not what she's hearing.
"I would argue that there are going to be any number of cities, towns, and counties and schools districts, and maybe even universities, saying we need more money to set aside the demands of this initiative," Brophy McGee said. "I just don't think anybody wants to come out and complain about this because then you sound like the Grinch that stole Christmas."
"But that's not the point," she said. "The point is that there are some unintended consequences, and I think the ramifications of this on both the public sector and the private sector have not been talked out or thought through."
Arizona State University research professor Lee McPheters said that an increase in the minimum wage isn't likely to stifle economic growth, despite concerns among the business community that the increase will harm employment levels and profits. That's because the law will cut turnover in low wage jobs and offset higher costs for most businesses, boosting profits, and higher wages will increase overall economic activity.
He pointed to reports on Seattle's 2015 minimum wage boost as evidence that boosting pay won't crimp growth and actually boost employment.