PHOENIX โ A judge questioned attorneys for the state Monday on their claim that lawmakers have the authority to financially penalize local governments that impose their own minimum wages.
The issue of whether the state Legislatureโs decision to charge Flagstaff $1.1 million this year because its voters raised the minimum wage could become an issue for Tucson, where voters are about to decide on a similar effort to boost to the minimum wage in the city.
Maricopa County Superior Court Judge James Smith told Assistant Attorney General Kara Karlson he was not buying her argument that the state is entitled to recoup what it claims are its higher costs when cities enact a wage structure higher than the rest of the state.
Smith pointed out that the laws approved by voters in 2006 and again in 2016 approving a state minimum wage specifically authorize local governments to go higher. And he said that would appear to make the $1.1 million assessment lawmakers approved against the city of Flagstaff for exercising that right improper.
More than just the cash for Flagstaff is at issue.
What Smith rules will determine whether legislators can impose similar financial sanctions on other cities that follow suit. And that got the attention of attorneys for the city of Tucson. Voters in the Old Pueblo go to the polls next month to decide whether they, too, believe workers deserve more than the current $12.15 state minimum wage.
In her own legal brief, Regina Nassen, the principal assistant city attorney, is urging Smith to void any past or future legislative action. She said the judge should see it as โa punitive sanction aimed at preventing Arizona cities from exercising their authority,โ an authority even attorneys for the state concede belongs to local government.
The Flagstaff ordinance at issue sets the current minimum wage at $15. And it will rise to $15.50 in January; the state minimum, tied to inflation, will go only to $12.80.
Earlier this year, state lawmakers put a provision in the budget to impose a $1.1 million assessment, what state agencies claim the higher local minimum wage will cost state taxpayers. Flagstaff responded by filing suit.
Attorney Roopali Desai pointed out to Smith that the state statute setting out a minimum wage specifically allows cities to adopt an even higher figure.
Desai said that state law is subject to the Voter Protection Act, a constitutional provision which bars state lawmakers from tinkering with what has been approved at the ballot. She contends that the more than $1.1 million assessment against Flagstaff โ she calls it a penalty โ is an illegal violation of the state law, just the same as if legislators were to directly try to repeal the permission for local minimum wages.
But Assistant Attorney General Kara Karlson wants Smith to view the Voter Protection Act through a much more narrow lens.
โThe fact that 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 doesnโt directly implicate the Voter Protection Act,โ she argued.
Smith, however, said itโs not that simple. He told Karlson that what she is arguing is that cities can, in fact, have a higher minimum wage โbut only if youโre willing to forego your share of distributed tax revenue.โ
And Smith said itโs even more restrictive than that. He said that cities that want to exercise their right to have a higher minimum wage have to agree to accept what state agencies tell them is their higher cost โwithout any impact from you, the cities, and only if you accept a methodology that is not economically sound from Smithโs perspective.โ
Karlson, however, argued this isnโt about penalizing cities that have a higher minimum wage.
โItโs really the state taxpayers trying to recoup the cost of programs that are going to be impacted by the city,โ she said. โThe city isnโt entitled to subsidized increased minimum wage.โ
Smith said he sees a flaw in that argument.
โYouโre saying that itโs designed to protect the taxpayer,โ the judge told Karlson.
โBut those are the same taxpayers who passed the initiative that quite plainly says that cities can have a minimum wage higher than the state minimum wage,โ Smith said. โDoes that tell me what the taxpayers want?โ
Karlson said it would be a leap to conclude that the folks who approved the statewide measures also wanted to bear the costs of what happens when cities go above and beyond. She pointed out that the 41-word description of the measure crafted by the secretary of state focused on the higher minimum wage, with no mention there of the local option.
โThey didnโt include anything about municipalities may create a higher minimum wage,โ saying they could have done that given that ballot descriptions can be up to 50 words.
Karlson said she is not disputing that the actual text of the initiative does allow a higher local minimum wage.
โDid most voters know that?โ she asked.
โI certainly donโt know the answer to that,โ Karlson continued. โIt certainly wasnโt a sticking point for the ballot proposition proponents.โ
That apparently did not convince Smith.
โThatโs a difficult argument for me to accept,โ the judge said, saying it would amount to him โnullifying the actual initiative language directing that municipalities can have higher minimum wagesโ based only on what is in the 41-word ballot description.
โThatโs difficult for me to hang my hat on,โ he said.
All this comes as Tucsonans vote next month on a plan to boost the minimum wage to $13 an hour this coming April, with periodic increases until it reaches $15 by 2025. Future adjustments would be based on inflation.
Nassen, in her own arguments that Smith should void the law allowing assessments, argued that any levy against cities made by the state may be little more than a guess of what costs are โattributable toโ a cityโs minimum wage. She noted even the state contends that phrase gives lawmakers โbroad discretion ... in calculating the assessment.โ
โThe state even baldly asserts that the assessment is โnot intended or required to be accurateโ and that, even though โthe stated purpose of the statutes is to reimburse the state for the higher cost of the minimum wage,โ the assessment can include costs for which the increased minimum wage is โnot the sole cause,โ Nassen told Smith. And she pointed out that legislators crafted the assessment in a way that forbids an affected city from challenging the amount.
Smith most immediately needs to rule on Desaiโs request for an injunction stopping the state from taking the money from Flagstaff. The law says if the city doesnโt pay up by the end of this year, the state treasurer withholds that from the cityโs share of state sales tax revenues.
Karlson is arguing there is no immediate harm to the city; it is predicted to have a $23 million cash balance by the end of the fiscal year.
The reverse, however, is that the $1.1 million at issue is just a tiny fraction of the $12.8 billion state budget.
Smith said Monday he hopes to rule at least on the initial issue within a month.
