State estimators figure minimum wage hike will cost state $540 million in 2027

Voters will decide on the minimum wage hike proposal.

A proposed hike in Florida’s minimum wage could cost the state about $540 million in 2027, according to official estimates. And it will cost millions more in the five prior years.

The Financial Impact Estimating Conference submitted calculations Monday of financial ramifications from a ballot proposal seeking a $15 minimum wage.

Florida For A Fair Wage, chaired by Orlando lawyer John Morgan, wants the question in front of voters in 2020. A proposed constitutional amendment would raise Florida’s minimum wage to $10 an hour in September 2020.

The measure then calls for $1 per hour annual increases until the wage reaches $15 per hour in September 2026.

The group has already gathered more than 96,034 petitions to get the measure on the ballot out of a required 766,200. That’s enough to trigger a state financial impact review by the state.

The financial estimates, due to the Secretary of State’s Office on Monday, forecast significant impacts, especially to Florida’s schools.

An estimating conference figured in the first year alone, the amendment would deliver about a $15.7 million impact to the state. By the time the measure gets fully implemented in 2027, that number leaps to $537.6 million.

The state’s minimum wage as of now sits at $8.46 an hour but is expected to rise to $9.10 an hour by 2022 regardless.

If the measure makes it to the 2020 ballot, the state estimate will appear alongside a ballot summary for voters to read before voting.

Most of the direct costs from impacts hit public schools. In the first year, about $8.8 million of that $15.7-million impact will be felt by school districts. Local governments would also feel a $3.8-million blow, and the Florida College System would take a $1.9-million impact.

A financial summary produced in conference suggests state and local governments will have few options for addressing costs.

“Nearly all of them involve some reduction in the number of affected employees or the number of hours they work,” reads an estimating report.

Amy Baker, coordinator of the Legislative Office of Economic and Demographic Research, said that’s based on modern studies that show impacts of raising wages.

Economic studies cited by estimators show employers must accommodate hikes in the minimum  wage through layoffs or hours reductions, by cutting profits or by raising prices.

Government, however, can’t reasonably raise prices for services, and public entities don’t make a profit.

The impact grows substantially by each year as more jobs are impacted by the increase in wages.

For the 2027 fiscal year, school districts alone would feel a $267.4 million impact and local governments would see a $109.1 million impact. In total, the measure could deliver the state an estimated $537.6 million impact that year

Baker explained that the impact magnifies each year rates go up because many employees who won’t necessarily benefit from an early jump may later. For example, an employee making $13 an hour in 2022 won’t see their wages increase because of the amendment. But three years later, the measure will affect that employee’s pay.

Costs are still expected to increase each year afterward even after wage hikes required by the amendment stop.

While salary costs make up the bulk of financial impact to the state, estimators calculated other costs. Those include employer contributions for Medicare and Social Security.