Although countless questions remain about how the state’s budget provision may affect the City of Flagstaff’s budget, it now appears that state and city officials will have a year to work out the details.
The legislature included budget language that redirected state-shared revenues from the city to state contractors operating in Flagstaff who have felt the effects of the higher Flagstaff minimum wage.
The language was meant to discourage other cities from raising local minimum wages and to support Flagstaff providers serving the developmentally disabled struggling with higher wages.
Every year, the state will calculate the difference in how much higher costs are for contractors and state agencies in Flagstaff due to the higher minimum wage compared to the state’s wage and take the money out of the portion of state sales tax provided to the city of Flagstaff.
That would also reduce the amount of money in the city’s budget.
But while it first appeared this would begin in upcoming fiscal year 2020, the state will not begin charging the city for this until fiscal year 2021, according to governor’s office spokesperson Tamara Skinner.
And according to city manager Barbara Goodrich, the extra time should allow the city to work with the state and solve some issues that had put the city’s own budget “at risk,” as had been a concern of city officials voiced in a statement released last month.
City officials were originally concerned because the state may have only told Flagstaff the amount the city owed after the city council approved the budget. If that occurred, it could leave the city relying on money set aside for contingency to pay the state.
But by delaying a year, that may no longer be the case, Goodrich said, as the state can determine what the additional cost of the contractors are this year and inform Flagstaff before the passage of the next budget.
The delay also may allow for more time for state officials to answer other questions about how the provision will be implemented.
For example, how the state calculates the difference of costs between the state and the local minimum wage could drastically change how much the city is liable to pay.
The provision came out of an issue regarding local providers serving the developmentally disabled, but these organizations are not the only groups the state has contracts with in Flagstaff.
For example, other state contractors in Flagstaff may pay more than the local minimum wage requires, but it is not known if such organizations could be included in the calculation.
“We would like to know how big the iceberg is,” deputy city manager Shane Dille said.
Skinner did write in an email that the state budget office is still developing guidance on how those costs will be calculated, but should know by August.
She added the state does not yet know what other contractors could claim an impact from the minimum wage or how this will affect new businesses the state may sign contracts with in the future.
City spokesperson Jessica Drum agreed and added that the city is working as closely with the state government and the Arizona League of Cities and towns as possible in order to answer the remaining questions.
“The city is actively involved in trying to ensure that we have as much of a voice in this as possible,” Drum said. “At the end of the day we don’t get that final say, but we are advocating and utilizing every available opportunity to impact the process and that final outcome as best as we can.”