Wednesday, August 2, 2017

READ, ANALYSIS: Arizona's Minimum Wage Increase Initiative Legit Because Costs To State Are "Indirect", Supreme Court Unanimously Rules

The Arizona Supreme Court issue its unanimous opinion today, explaining why it permitted the minimum wage increase to go into effect in January. The challenge to the voter-passed initiative was brought by several Chambers of Commerce in Arizona, the Arizona Restaurant Association and others.

Written by Justice Ann Timmer, the opinion (below) spends most of its 11 pages analyzing the claims that the Fair Wages and Healthy Families initiative violated the state's constitutional Revenue Source Rule. That 33-year old rule (passed by voters) requires initiatives to provide for a revenue source if it mandates that the state spend money.

The petitioners claimed that the initiative - which passed easily in November - violated the Revenue Source Rule in at least two ways: that contracted providers (especially for the AHCCCS program) will have to pay their employees more and will pass those costs on to the state, and that the Industrial Commission will spend money to create rules and educate employers about the paid sick time provisions.

The Supreme Court feels strongly that the language of the Revenue Source Rule applies only if an initiative EXPLICITLY requires expenditures "or state actions that themselves inherently require expenditure of state revenues." However, Timmer writes, even if the wording of the rule was ambiguous, the Court would be concerned that invoking the rule "whenever an initiative or referendum indirectly causes an expenditure of state revenues would severely hamper the initiative process." (emphasis added) She continued:
It is implausible that qualified electors who seek to propose  an initiative measure could successfully scour the state’s innumerable dealings to anticipate and provide a funding source for any conceivable expenditures of state revenues that a ballot measure might indirectly cause. For example, electors would have to account for the costs to train affected employees, contract for goods and services, or even to publish the new law itself. Our construction of § 23(A) avoids this cumbersome consequence and preserves an initiative and referendum practice that has been a tool of direct democracy for more than a century.
She did warn, however, that proponents of future initiatives cannot blatantly avoid the rule:
We reject, however, the real–parties–in–interest’s assertion that the Revenue Source Rule, § 23(A) applies only when an initiative or referendum explicitly directs an expenditure of state revenues and not when it directs state action that itself inherently requires such an expenditure. If we were to adopt this construction, the Rule could be easily circumvented. For example, rather than directing the legislature to spend one million dollars to establish a new agency, an initiative could simply direct the legislature to establish the agency. This would result in the type of unfunded mandate the Revenue Source Rule sought to remedy....Thus, fairly read, the Revenue Source Rule also applies whenever an initiative or referendum expressly requires state action that inherently requires a non–discretionary expenditure of state revenues.
Nevertheless, the initiative at hand did not run afoul of the Revenue Source Rule because the ICA could control its costs to promulgate and educate until fines and penalties included in the initiative cover such costs. And, the state is not mandated to increase its payments to contractor simply because those contractors' costs have increased as a result of the higher minimum wage.

The Court quickly swatted away the other issues that the Chambers raised, saying that the Arizona Constitution's Separate Amendment Rule and Single Subject Rule were not relevant because the former applies to proposed constitutional amendments and that the latter does not apply to initiatives (only to acts from the Legislature).

In December, the Supreme Court denied a request for an emergency stay to keep the $10/hour minimum wage from going into effect on New Year's, then unanimously rejected the Chambers' action entirely in March, promising an opinion at a later date. That opinion is now here.

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