Flagstaff will still have to reimburse the state for the increased costs it will incur because of its high minimum wage, but the recently passed state budget softened the blow through a cost-sharing agreement that will draw down on federal funds.
Voters in Flagstaff approved a $15 minimum wage in 2016 and reaffirmed that decision last year. The city’s wage is currently $12, and will rise to $15.50 in 2022. The minimum wage in the rest of the state is $11, and it will rise to $12 next year due to a law passed by voters in 2016. That is costing the state in the form of wages to employees whose organizations contract with the state to provide services for adults with developmental disabilities.
The budget for fiscal year 2020, which received final approval from lawmakers on Monday, requires Flagstaff to cover the cost of the extra wages the state will have to pay due to the city’s higher minimum wage. But the city won’t have to shoulder the burden alone, thanks to an amendment pushed by Sen. Sylvia Allen, a Snowflake Republican whose district includes Flagstaff.
Flagstaff can make a voluntary payment to the state of $150,000, which the Department of Economic Security would use to draw down $350,000 in federal Medicare funding. DES would use the full $500,000 to pay wages for developmental disabilities services providers in Flagstaff.
It’s unclear whether that half-million will cover the full amount of the state’s increased costs from Flagstaff’s minimum wage. The budget calls for all state agencies to determine what additional costs they’ll incur due to minimum wages imposed by cities or counties that are higher than the state’s wage.
Flagstaff is the only government entity in Arizona with such a minimum wage. State agencies must submit those reports to the Arizona Department of Administration by Sept. 1.