O’Scanlon: Minimum Wage Increase Has Created Budget Challenge. What to Watch For In Proposed Budget

Direct Support Professionals Asking for $16.5 Million to Cover Minimum Wage Increase

When the Democrats in Trenton passed legislation in 2019 to increase the state minimum wage incrementally until it reaches $15 per hour in 2024, Senator Declan O’Scanlon and Republicans in both houses warned of the consequences for New Jersey taxpayers, those providing essential services and those that depend on those services.

Two months after the implementation of the second annual increase raising the state hourly minimum from $10 to $11, O’Scanlon’s cautions are being proven.

“There isn’t any level of government or a single taxpayer that will be spared from paying in one way or another for higher wage costs fueled by the Democrats’ minimum wage increase,” said O’Scanlon (R-13). “I raised this issue early on in the debate and it was ignored. The Governor stunningly ignored the increases in costs inflicted on government-dependent entities, on which our most vulnerable depend, in last year’s budget. Now we see the next dead canary in the coal mine with this notice from DSP services.

“If the budget presented tomorrow doesn’t preemptively include additional funds, to pay for the impact of the policy the Governor himself advocated for, it will be a shocking display of short-sightedness, and a devastating blow to these dedicated third party providers of basic, life altering/saving services to our most vulnerable.  This has to be a priority and the funds must be found within the budget. The vital need to provide these funds can’t simply be used to justify a tax increase. We already have gross unfunded debt obligations with the public employee pension and health benefits systems,” O’Scanlon added.

Recently, it was revealed that pay increases for non-skilled private sector jobs has created a crisis among Direct Support Professionals (DSP) who provide crucial assistance to people with intellectual and developmental disabilities.

As salaries for retail employees have eclipsed the $12 per hour rate for DSP workers, the turnover rate has reached 40 percent and almost one third of the job slots are unfilled.

“It’s a textbook lesson of the ripple effects of minimum wage hikes on the economy,” O’Scanlon said in a Sept. 13 press release after Murphy increased appropriations for childcare by $54 million to compensate for higher cost of providing services due to a law the he enacted beginning the process of raising the minimum hourly wage to $15.

The hourly rate for any industry that receives Medicaid reimbursements is set by the federal minimum wage of $7.25. If a state sets a minimum wage exceeding $7.25, the state must either absorb the costs or abandon those services.

“Each year as the minimum wage rises and costs escalate, you can be certain these providers of essential services will rightly claim we are strangling their ability to function,” O’Scanlon said. “The Governor will try to demand higher taxes and more government spending to compensate for the very policy he advocated. Quite frankly, it’s a mess, for the providers, for those they care for and for taxpayers. It’s outrageous that this seems to be an afterthought.  The administration needs to step up, meet with those entities impacted, assess the added costs that are looming, be totally transparent and project these impacts across the board and throughout the next several years,” said O’Scanlon.

Now advocacy groups supporting the DSPs are calling for $33 million over two years in state funding, plus $33 million in matching federal money, to accommodate January’s increase, plus an increase to $12 per hour scheduled for Jan. 1, 2021.

“This is yet another example of how the Governor’s minimum wage increase is exerting pressure on the state budget and the taxpayers,” said O’Scanlon. “The higher cost of labor is driving up expenses across the board and challenging these essential service providers’, and those that depend on them, ability to survive.“

A member of the Senate Budget and Appropriations Committee, O’Scanlon said the DSP staffing challenges is a serious issue, but it is just one of many minimum-wage-connected dilemmas facing the state.

“Higher labor costs are an inevitability following the minimum wage increase, and if there’s no more money for labor in the budget, it will mean laying people off and cutting work hours,” O’Scanlon said. “This crisis must be handled within the context of the larger state budget.”