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Senate Bill 1108

Tempe, Mesa legislators question effects on cities of proposed minimum wage credits

Posted 2/1/23

PHOENIX - State lawmakers are moving to penalize cities financially that have a minimum wage higher than the rest of the state.

And they are doing it in a way designed to get around restrictions …

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Senate Bill 1108

Tempe, Mesa legislators question effects on cities of proposed minimum wage credits


PHOENIX - State lawmakers are moving to penalize cities financially that have a minimum wage higher than the rest of the state.

And they are doing it in a way designed to get around restrictions that voters put on legislators in 2016 when they said cities can have their own base wages.

Two Democratic lawmakers have questions about the proposal with one calling it a  potential "windfall" for businesses and the other saying it "undermines" the will of voters

SB 1108, awaiting Senate floor action, would allow employers in any city with a wage above the state minimum to claim a 10% credit for what they compute as the difference of what they have to pay versus what they could pay at the lower state figure.

They would not have to prove that they are paying anyone that minimum. Instead, as crafted by Sen. Wendy Rogers, R-Flagstaff, the credit would occur right through the entire payroll, even to managers and executives.

But that's only half of the measure.

What SB 1108 also does is deduct what the local employers claim in credits from the community's state revenue sharing.

There also are no figures on how much the affected cities would forfeit. In fact, the measure is written in a way that, depending on how many companies take the credit, it could deplete a community's entire state funding.

SB 1108 is currently aimed at two communities where voters have decided that workers should earn more than the minimum approved statewide in 2016. That figure, which is adjusted annually to compensate for inflation, currently stands at $13.85.

That $13.85 happens to be the current minimum in Tucson. But it is set to rise to $14.25 after the end of the year.

In Flagstaff, however, the current minimum is $16.80. And the voter-approved ordinance there requires that the minimum in future years be at least $2 higher than whatever is the figure for the state.

But if it becomes law, SB 1180 also would become a financial deterrent to voters in other communities wanting to approve their own minimum wage.

Leading the charge at a hearing this week was Joe Galli, lobbyist for the Greater Flagstaff Chamber of Commerce. He said the local law has created a hardship for businesses operating in the city.

"If you have a restaurant or gas station that's in the county, and across the street there's a restaurant or gas station within the city limits, that county individual is paying $2.95 less in an hourly wage than in the city,'' Galli told members of the Republican-controlled Senate Finance Committee, which approved the measure on a 4-3 party-line vote.

What SB 1108 would do, he said, is enable those city employers to recoup some of that additional cost.

That drew questions from Sen. Mitzi Epstein, D-Tempe.

She said a company could claim that hourly difference for each of its workers, regardless of how much they were being paid before, calling that a "windfall.''

Then there's the question of the effect of high minimum wages on companies. Epstein disputed Galli's arguments that the higher costs will mean less business.

"How terrific that with that minimum wage, as workers have more money in their pocket, they can go to that bowling alley that maybe they never would have had the money to go to,'' she said.

"They could only afford groceries and food and shelter and that was it,'' Epstein continued. "And now they can go to the local bowling alley.''

Sen. J.D. Mesnard, R-Chandler, disagreed with Epstein.

"I suspect the thinking is the moment you have a floor that's the minimum wage, and then you need to give someone a promotion or pay them more than the floor because of whatever their job is, everything else shifts upward from the floor,'' he said.

Put another way, if the bottom wage goes up, then others who take on more responsibility will have to be paid that figure plus a differential.

What also is concerning, Epstein said, is that SB 1180 flies in the face of that 2016 ballot measure. It specifically says that cities are free to enact their own minimum wage as long as the figure is higher than the state base.

The Arizona Constitution prohibits lawmakers from altering what voters have approved unless they enact it with a three-fourths vote - a margin that Republicans do not have at the Legislature - and only if it "advances the purpose'' behind the original measure, something that would be difficult to prove.

Mesnard, however, said nothing in the proposal runs afoul of the 2016 voter-approved law. He said cities remain legally free to set the minimum at whatever they want - subject to losing some of their state revenue sharing when businesses start claiming that state tax credit for the higher costs.

Sen. Eva Burch, D-Mesa, said she's not buying the argument that SB 1108 - and its financial penalty - doesn't effectively impair what the 2016 law which voters approved allows cities to do.

"It alters the outcome of that decision,'' she said.

"I do think the people of Arizona did vote to empower their communities to enact a minimum wage that's right for them,'' Burch continued.

She said there was no way that voters who approved those higher local wages would have been able to anticipate that lawmakers would come back, years later, and impose a financial penalty on them for doing so.

"It undermines the will of the voters,'' Burch said.

Epstein said the state has had "a pretty good economy'' after the voter-approved state minimum wage that most businesses opposed.

"We did not lose a lot of jobs,'' Epstein said.

But Sen. David Gowan, R-Sierra Vista, had a different take.

"That bowling alley we're talking about, it won't be there anymore to go bowling,'' he said.