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After a day of budget negotiations in the state capitol Wednesday, City of Flagstaff officials are worried that their budget is in danger.

The problem arose from state legislators attempting to discourage communities from raising their minimum wage, citing the impact on state-funded providers who serve people with developmental disabilities. Legislators suggested redirecting money away from cities with a higher minimum wage than the state.

This money would be taken out of the city’s sales tax, which the state collects on behalf of the city. Each year, the state would redirect a portion of the sales tax to cover the increased costs of state-funded providers caused by the higher minimum wage.

But in redirecting this money, the state would be directly impacting the city’s annual revenue -- specifically, the money that goes into the general fund.

This money goes to fund everything from public safety positions to the public library and down payment assistance programs.

“Targeting these funds puts the entire city’s budget at risk,” read a statement from the city.

The problem of how Flagstaff providers will continue to serve those with developmental disabilities is not new. Since Flagstaff citizens voted to raise the city’s minimum wage in 2016 and reaffirmed the law in 2018, some have wondered how local agencies would continue to provide for people with developmental disabilities.

The full extent of what the proposal may mean for the city’s budget is not known, but according to the city manager's proposed budget, in fiscal year 2020 Flagstaff is expected to receive at least $7 million from state shared sales tax.

How much of that money would this proposal redirect from the city to providers each year? Again, that is not known, but the amount could range from less than $450,000 to as much as $1 million.

In a statement, Flagstaff Mayor Coral Evans called the proposal “entirely inappropriate,” adding that it circumvents the direct will of Flagstaff voters by punishing the city.

“By targeting our state shared revenues to address the needs of one vulnerable population, they are putting others at risk who rely on these funds,” Evans said.

If the proposal passes, there is a chance it may not affect Flagstaff this year.

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Sen. Sylvia Allen, R-Snowflake, is pushing an amendment that would provide $300,000 in funding from the state money to be matched by $150,000 that the Flagstaff City Council has already allocated to local service providers at the April budget retreat.

Allen said the combined $450,000 should be enough to draw down federal Medicare dollars and cover the increased expenses of Flagstaff service providers.   

Should the amendment pass, the language in the budget proposal may not affect the city this year, but would impact future budgets.

That said, the amendment’s success is no sure thing. Allen proposed a similar measure earlier this year that saw strong pushback from many Republicans in the state House and Senate.

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Allen added that despite her amendment, she fully supports the budget proposal. She said she does not believe taxpayers from other parts of the state should see their taxes going to pay for the higher cost of services in Flagstaff.

Rep. Bob Thorpe, R-Flagstaff, said he still had some mixed feelings about the proposal, but agreed with Allen that taxpayers state-wide should not be burdened with the increased costs.

Thorpe said this issue should have been addressed in the original voter initiative and felt city leadership had not done their due diligence in trying to work with the state proactively to address the issue.

Of Flagstaff’s state representatives, only Rep. Walt Blackman, R-Snowflake, said he opposed the state redirecting the shared sales tax revenues away from the city.

Despite the higher minimum wage being passed by voter initiative, in a statement to the Daily Sun, Blackman blamed the higher minimum wage on Mayor Evans, siting a lack of leadership.

“I don't think the people of Flagstaff should have to pay for this mistake,” Blackman wrote. “That is why I have been working with members through the budget process to look for ways to resolve it, so it doesn't negatively impact the people of Flagstaff.”

The legislature is expected to finalize and vote on the budget within the next week.

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Adrian Skabelund can be reached at the office at askabelund@azdailysun.com, by phone at (928) 556-2261 or on Twitter @AdrianSkabelund.

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