A judge in Phoenix on Monday was weighing whether the Legislature's decision to charge the city of Flagstaff $1.1 million this year because city voters raised its minimum wage is legal.
The city wants Maricopa County Judge James Smith to declare that the new law violates the Voter Protection Act, which blocks lawmakers from making substantial changes to voter-approved laws.
If Smith does not make that determination, Flagstaff wants him to declare the law illegal for one of three reasons: The assessment isn't based in its actual costs, the state missed a deadline for setting the $1.1 million assessment or that since the state itself is exempt, any higher costs it faces through using contractors are its own choice.
Attorneys for the state say the Legislature did not effectively "repeal, amend, or supersede" the law allowing cities to raise their minimum wages and this did nothing that violates the Voter Protection Act. And they called the $1.1 million charge a “focused effort to quantify the precise costs ‘attributable to’ the state as a result of the higher minimum wage."
The city sued after the Republican-controlled Legislature passed a law in 2019 requiring state agencies to determine their costs for city minimum pay that is above the state’s minimum wages. The state budget that passed in June is the first time the state has actually issued an assessment.
Voters first passed a state minimum wage law in 2006 and raised rates again in 2016. In the 2006 initiative voters allowed cities to set higher rates.
The state minimum wage reached $12 an hour in 2020 with inflation adjustments after that. Flagstaff voters in 2016 phased in higher city minimum wages, which hit $15 per hour this year with annual increases thereafter.
Although the state itself is exempt from having to pay its workers the higher wage, the costs to provide many services through contractors increased. The majority of those costs are for home health aides who help the developmentally disabled or those who provide services in nursing homes and are paid through the state social services agency, the Department of Economic Security.
Since voters allowed cities to raise their wages, it is unfair and unconstitutional to allow the state to hit them with an assessment to pay for higher costs of providing services, Flagstaff's lawyer told Smith at Monday's hearing.
Lawmakers have twice before sought to limit cities' ability to set wage rates higher than the state level, and in both cases courts have declared them unconstitutional. This effort doesn't ban higher wages but has similar effect by penalizing cities for doing so, said Roopali Desai, an attorney representing Flagstaff.
Desai pointed to a state Supreme Court ruling found that “the Legislature is not able to do indirectly what it can’t do directly,” Desai said.
“The state has said multiple times ... that the Legislature did not directly prohibit or stop the city from raising its minimum wage,” Desai told the judge. “That's right — they tried that twice before and failed. In this third case they're trying to do it indirectly."
Kara Karlson, an assistant attorney general representing the state, told Smith he should reject that argument based on another court ruling dealing with the Voter Protection Act. That case found changes to how the state's Clean Elections Commission enforces campaign finance laws were mainly legal, and she said the situation now is the same.
“We have the state trying to recoup the costs that are the result of Flagstaff raising its minimum wage,” Karlson said. “But again ... they were able to raise the minimum wage. The fact that Tucson has a vote coming up to raise its minimum wage shows that it does not implicate the VPA.”
Smith seemed to be particularly focused on how the state came up with the $1.1 million price tag for this year's assessment.
“In looking at what the various agencies did, candidly, it’s a pretty simplistic approach,” Smith said. “Any economist would not accept that approach to trying to determine what a cost is.”
Smith noted there's no effort to try to get to measure the increased state revenue from higher tax collections or other factors that could affect the assessment.
“It's like you're doing one half of the balance sheet,” Smith said.
Smith said he'll take the time to review more than 2,000 pages of depositions and other evidence the parties filed before deciding how to rule. He is weighing whether to issue a preliminary injunction blocking collection of the new assessment for one of the reasons the city laid out or finding the entire law is unconstitutional.