Prop. 206: Impact on Developmental Disability Providers

March 7, 2017

Prop. 206: Impact on Developmental Disability  Providers

Dave Wells, Research Director


Executive Summary


    Prop. 206 has directly and indirectly impacted developmental disability providers.  Part of the increase cost brings some workers up to the minimum wage as they were paid less than $10 an hour before (direct impact), and an additional amount will be provided to workers so they maintain a wage premium above the minimum wage (indirect impact).  Governor Ducey’s FY2018 budget set aside $15.6 million to cover added wage costs.  The Joint Legislative Budget Committee (JLBC) estimates the costs at $22.5 million once sick leave and the $10.50 minimum wage on January 1, 2018 is considered.  In sharp contrast the Arizona Association of Providers for People with Disabilities (AAPPD) estimate their costs for FY2018 at $58 million, plus a need for a $15 million additional supplemental allocation for FY2017.

The Grand Canyon Institute finds errors in the AAPPD calculation that when corrected requires no likely adjustment to the $7.7 million supplemental appropriation already provided for FY2017.  The FY2018 appropriation should be between $18.5 and $21.1 million for FY2018, which is nestled between what the Executive Budget proposes and the JLBC estimate.  The range of estimates is due to questions regarding what the average wage of direct caregivers was before January 1, 2017.  The AAPPD argues that average wages were $9.54 an hour before Prop. 206 was implemented.  By contrast, a survey of Arizona providers for the developmentally disabled by the National Association of State Directors of Developmental Disabilities Services and Human Services Research Institute found an average wage of $10.05 direct caregivers.  The AAPPD number may have come from a survey of only 28 providers, while the national survey results included responses from 51 Arizona providers out of 322 identified in the state.  Consequently, both average wage levels may be inaccurate, though the $10.05 level seems more in line with data found from other states, as the average wage was $11.11 across the 16 states and the District of Columbia in the national survey.  The $10.05 figure is also more consistent with wage distribution of home healthcare aids for Arizona from the Bureau of Labor Statistics.  Thus, $18.5 million is likely more accurate.

While the AAPPD calculations may be faulty, they have faced years of funding shortfalls due to a failure of the legislature to maintain benchmark funding since the recession.  Rates rose just before the recession and then were cut sharply.  Current provider rates adjusted for inflation are 12% below what they were in FY2007 and 21% below what they were in FY2009.  An increase in rates of 8% to 9% related to Prop. 206 falls well short of that prior funding level.


The impact of Prop. 206 on wage levels and costs for disability providers is summarized below for the two average wage levels.  The $18.5 million is likely more accurate.


GCIfrom $9.54 avg. wage GCIfrom $10.05 avg. wage
July-Dec. 2017 Jan.-June 2018 July-Dec. 2017 Jan.-June 2018
New Avg. Wage $11.04 $11.39 $11.42 $11.77
Avg. Wage Increase $1.60 $0.35 $1.37 $0.35
% Increase from Dec. 31 2016 15.8% 19.4% 13.6% 17.1%
Adjustments Sick Pay +1.7%Turnover Savings -1.2% Sick Pay +1.7%Turnover Savings -1.2%
Total Increase 16.3% 20% 14.1% 17.6%
Low Wage +ERE as % of Total Costs 50% 50%
Net Increase 8.2% 10% 7.1% 8.8%
Service Dollars Impacted $379 M $379M $379 M $379M
State Share 0.3076 0.3076
Added Cost $9.5 M $11.6 M $8.2M $10.3 M
Total FY2018 $21.1 M $18.5 M