OPINION – Why Arizona chamber is challenging Proposition 206

The Arizona Chamber of Commerce and Industry and several representatives from across Arizona’s business community, including the Tucson Hispanic Chamber of Commerce, the Greater Phoenix Chamber of Commerce, the Greater Flagstaff Chamber of Commerce and the Yuma County Chamber of Commerce, are challenging the constitutionality of Proposition 206, a ballot measure adopted in November that will raise the statewide minimum wage by nearly 50 percent by 2020 and burden employers with an expensive paid leave mandate.

Why are we challenging the law, and why are we seeking to take our appeal of a recent lower court decision to the state Supreme Court?

Arizona voters over a decade ago approved Proposition 101, a constitutional amendment that requires any ballot initiative to identify a dedicated revenue source if the initiative is going to cost the state’s general fund. In other words, if proponents want the state to fund some new idea, it is up to those same proponents to figure out how to pay for it.

Voters understood that ballot box budgeting could be dangerous. They elected to ensure that some new initiative won’t prevent the Legislature and governor from meeting their responsibilities to fund core government functions.

It’s the responsibility of the party pursuing an idea not to go to voters without a revenue source if one will be required.

The recently passed Proposition 206 blatantly violates this requirement.

The out-of-state union funders were too cute by half in their drafting of the initiative. While the measure does say that state employees are exempt from the wage hike, that does not mean state spending is unaffected.

Why? Arizona has all sorts of federal and state requirements to pay for indigent health care and services to the disabled. These services are often delivered by private sector vendors acting as contractors to the state. The contracts of these providers were inked before passage (or even consideration) of the dramatic wage and benefit hike, yet the contractors’ employees are still subject to Proposition 206’s provisions.

But the employers are locked into contracts with the state; they can’t raise their prices like some other private sector business in order to meet the new higher labor costs. What this means is that a number of these service providers, honorably providing services to our most vulnerable Arizonans, will go out of business without additional state funding.

As reported in media outlets, many have said they need extra funds now. There are requests to provide a supplemental budget infusion for this fiscal year. The state’s Medicaid program, Arizona Health Care Cost Containment System, will spend millions of extra dollars in the first six months of calendar year 2017.

We also know that additional expenditures will require additional spending for the industrial commission.

And that projected budget surplus for next fiscal year? The extra funding for a full year of general-fund spending required by Proposition 206 will wipe this out. Bye-bye balanced budget.

This is the exact type of negative consequence that the revenue source requirement put in place by Arizona voters was designed to prevent.

Now, let’s keep in mind that Arizona’s Constitution also requires a balanced budget. And for those who say that the Legislature should simply raise taxes, voters have spoken here as well, passing a constitutional amendment decades ago requiring a super majority in each chamber of the Legislature to pass a tax increase.

Some have criticized us for not suing earlier. Under Arizona law we are only able to challenge on substance after passage of the initiative.

Others have questioned why we didn’t make this argument during the election. We did. But understanding that labor-affiliated interests, including the state and national teachers unions, flooded the campaign with over $4 million (probably assuming their candidate had the presidential race in the bag and that a Democratic U.S. Senate majority was in the cards – whoops), we had to make tough decisions to focus the bulk of our limited resources on defeating Proposition 205’s legalized marijuana scheme, and helping to elect pro-job-creation legislators, while waiting to regroup and mount a legitimate legal challenge to the unconstitutional wage and benefit measure.

We made our strong policy case against Proposition 206 during the campaign. Unfortunately, our predictions of reduced employee hours, layoffs, higher prices, accelerated investments in automation or even business closures, will begin to materialize if the initiative takes effect.

But now the legal case against the proposition’s constitutionality is the correct path to pursue. There are worthwhile legislative responses to prevent out-of-state unions from turning our state into California 2.0.

But in the near-term, let’s hope the courts prevent the unconstitutional Proposition 206 from taking effect and save thousands of Arizona jobs in the process.

Glenn Hamer
President and CEO
Arizona Chamber of Commerce and Industry

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