- Associated Press - Thursday, December 15, 2016

PHOENIX (AP) - The Arizona Chamber of Commerce and Industry, other business groups and the owners of three Phoenix-area Mexican restaurants on Thursday sued to block a new voter-approved measure that increases the state’s minimum wage to $12 by 2020.

The lawsuit challenges the law that takes effect next month because it fails to identify a funding source for increased state costs. Proposition 206 exempts the state of Arizona, but the lawsuit argues the state remains on the hook for increased costs of its contractors.

The law takes effect Jan. 1, and a hearing on the lawsuit was scheduled for Friday.

The business groups brought the legal action despite the measure winning overwhelming support in the election, passing with 58 percent of the vote. The measure raises the minimum wage from $8.05 to $10 an hour in January and to $12 per hour in 2020.

Glenn Hamer, president of the state Chamber, called the initiative “sloppily constructed” because it didn’t identify money to pay contractors. The lawsuit also says a separate paid sick time provision is unconstitutional

The lawsuit came as Arizona’s Medicaid program announced late Wednesday that it was increasing the rates paid to many providers to cover increased costs due to the minimum wage increase at a cost of about $48 million for the first six months of 2017. About $11 million on that money is from the state.

Programs that provide services and care for the elderly and disabled rely on low-wage workers and are running short on cash to begin with, making increased state help necessary to cover the costs of higher wages. Such programs currently provide services for nearly 59,000 Arizonans.

“This failure is poised to a blow a giant hole in the state budget,” Hamer said in a statement.

Tomas Robles, chairman of the group that backed the initiative, called the lawsuit a desperate effort. The lawyer representing the group backing the initiative said there’s no legal merit to the lawsuit.

“They’ve used every trick in the book,” Robles said. “What I think what it really is is sour grapes. And the hypocrisy of these Chambers, and frankly the state representatives who talk about democracy and the will of voters, but when the voters actually vote for an initiative that is beneficial for our families they decide to sue.”

A spokeswoman for Attorney General Mark Brnovich said he will also back the voter-approved law, even though many fellow Republicans oppose it. “As attorney general, Brnovich swore to uphold all state laws and defend them,” spokeswoman Mia Garcia said.

The higher payments announced by the state Medicaid agency will cover increased wage costs of providing long-term care for the elderly and disabled and services for the developmentally disabled. More than $11 million will come from the state, $3 million from counties and the rest the federal government.

Beth Kohler, deputy director of the state’s Medicaid program, said Thursday that the state share will come from existing reserves but will need Legislative approval. “The bottom line is, ultimately this is a new state cost that the state will have to cover,” Kohler said.

Providers and many Republican lawmakers have been concerned that January’s increase to $10 an hour will push some providers out of business.

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