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Ducey administration, AG at odds over minimum wage lawsuit

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Business interests are using arguments supplied by the Ducey administration in their bid to quash the minimum wage hike approved last month by voters.

But the governor’s press aide said his boss, who opposed Proposition 206, is not trying to kill in court the wage hike for hundreds of thousands of Arizona workers that he could not defeat at the ballot.

In legal arguments Tuesday, attorney Brett Johnson representing the Arizona Chamber of Commerce and Industry cited claims by officials of state’s Medicaid program that it has a legal obligation under federal law to pay its private contractors more once the minimum wage goes up on Jan. 1 to $10 an hour. Johnson said without the state increasing what it pays contractors, they will default because they can’t afford to pay their workers more than the current $8.05 an hour now required.

What that means, he told Maricopa County Superior Court Judge Daniel Kiley on Tuesday, is the state will be in default of its obligations to the federal government which picks up much of the cost.

He said that proves his claim that Proposition 206 violates a provision of the Arizona Constitution which says voter-approved measures that require increased state spending must have a dedicated funding source, like a new tax or fee. There is no such source of dollars in the initiative.

It isn’t just the claims of the Arizona Health Care Cost Containment System, whose director reports to Gov. Doug Ducey, that Johnson is using to convince Kiley to void the voter-approved law. He also had the benefit of arguments of the state Department of Administration and the state Industrial Commission, both agencies run by Ducey appointees, who claimed through their own legal filings that they, too, would incur additional costs.

But Daniel Scarpinato, press aide to Gov. Doug Ducey, said there’s nothing political about the claims.

“They are providing objective facts about the operation of Medicaid and Prop 206’s effect on the existing law,” he said.

But no one from AHCCCS or the governor’s office immediately responded to questions of when the agency had reason to know that the initiative, whose signatures were submitted in July, would have a financial impact. What is clear is that argument was never made by foes to voters.

Tuesday’s legal arguments put the Ducey administration at odds with Attorney General Mark Brnovich whose agency is defending the constitutionality of the law.

Assistant Attorney General Charles Grube did not dispute that AHCCCS may be moving to increase what it pays its contractors to keep them on board. But he told Kiley that the constitutional provision being cited by foes as a reason to overturn the initiative only makes it illegal if it “proposes a mandatory expenditure of state revenues for any purpose.”

He said that language was designed to ensure that voters did not enact new or expanded programs without coming up with a way to pay for it. Grube said while AHCCCS may believe it needs to pay its contractors more, nothing in the initiative itself actually mandates it.

Ditto, he said, of claims by the Industrial Commission that a new requirement in Proposition 206 for companies to provide workers with at least three days of paid personal leave will force that agency to hire people to enforce that.

Hanging in the immediate balance is whether Kiley issues an order blocking the wage hike from taking effect as scheduled Jan. 1 while foes prepare legal arguments to quash it permanently.

Of note is that it’s not just state agencies that Johnson wants protected from having to spend more. He is asking Kiley to rule that even private companies unaffected by state contracts should be excused from hiking the pay of their workers or providing them paid leave.

That would affect hundreds of thousands.

Campaign chairman Tomas Robles said figures from the Bureau of Labor Statistics show about 770,000 Arizonans — close to a quarter of the labor force — are making less than $10 an hour and would get an immediate pay boost on Jan. 1 if the measure is allowed to take effect. He also estimated about 934,000 Arizonans are in jobs where employers provide no paid sick leave.

Kiley did not say when he will rule. But the judge is working not only against the Jan. 1 effective date of the new law but the certainty that whoever he rules against will seek immediate Supreme Court review.

On paper, the initiative is simple enough. It says employers must pay workers at least $10 an hour beginning next year, rising to $12 by 2020. Companies whose workers earn tips can pay $3 an hour less, but only if they prove their employees take in at least that much.

There also is the new mandate for paid leave.

Voters approved it on a 58-42 margin.

Last week AHCCCS announced it would have to increase what it pays companies that provide in-home and nursing care for the needy and those with disabilities.

Grube said that’s a decision of the agency, not anything mandated by the initiative. And he cited several Arizona laws which say that the state cannot be forced to spend money it does not have.

But AHCCCS attorney Logan Johnston, in his court filing, said federal law requires AHCCCS “to establish payment rates (for contractors) that are sufficient to ensure that eligible persons have adequate access to care.”

“It is also AHCCCS’ position that the net effect of Proposition 206 on payment rates is to impose a requirement of the expenditure of state revenues that would not be necessary but for Proposition 206,” Johnston wrote.

Johnson seized on that statement to argue to Kiley that the initiative does, in fact, mandate the state spend more money.

He conceded AHCCCS currently has the money to cover its estimated $11 million share for the next six months but that, at some point, lawmakers will have to find new cash. And that, he told Kiley, could mean less money for other services, including education — and the courts.

One comment

  1. What about the effect on all government agencies that do not have the money budgeted for the increase? In a medium-sized school district, the effect will be an increase in pay of $1.3 million dollars. Coming mid-year, the only way to pay for this will be to jack up school lunch costs and release employees. Ducey needs to quit playing politics and get an injunction that allows school districts, courts, prisons, and police to create a new budget and either raise taxes or cut employees in a planned fashion.

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