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Arizona Gov. Hobbs strikes $17.8 billion budget deal with top legislative Republicans

The $17.8 billion Arizona budget deal Democratic Gov. Katie Hobbs negotiated with Republican lawmakers even includes a tax cut, albeit a temporary one.

Hobbs had proposed a new — and permanent — child tax credit that would give low-income parents $100 per year for each child and cost $50 million per year.

Instead, the proposed package includes a one-time rebate for families, though apparently without income eligibility. They would get a $250 tax credit for each child younger than 17, though that is capped at $750 per family. The price tag on that is $260 million.

One of the biggest victories for the governor is she got the full $150 million she sought for the Housing Trust Fund, a pot of money that with federal funds is used to build affordable housing. The money also can be used to fund homeless shelters, eviction prevention programs and other services.

With Arizona facing a huge homeless crisis and a shortage of affordable housing, Democrats have long championed the Housing Trust Fund as a way to provide homes that low-income residents can afford.

The fund has mainly been neglected since most funding was stripped out at the height of the Great Recession in 2009 and its reserves taken back by the state. But former Gov. Doug Ducey and the Legislature did make two large deposits in the past several years, $15 million in the fiscal year 2020 budget and $60 million in the current budget year.

But the $150 million is the largest ever for the Housing Trust Fund.

To directly address the homeless crisis, the budget has an additional $60 million earmarked specifically for services for people living on the street. That was a priority not only for many Democrats but also Republicans like Rep. David Livingston of Peoria, who at a hearing earlier this year said he would not vote for any more money into the Housing Trust Fund unless there was spending to directly address the homeless crisis.

"The governor did not propose addressing short term homelessness,'' he said at a Feb. 20 Appropriations Committee hearing he was chairing. "So I was thinking right now that I'm not for any money going into the housing trust fund, unless we address short-term emergency shelters.''

Hobbs also won the elimination of so-called results-based funding that steers extra cash into high-performing K-12 schools.

Democrats have long criticized the program because the money mainly goes to schools in wealthy school districts that don’t need the extra cash. She wanted to $69 million used instead along with other new funding to boost per-pupil funding across the board.

All public schools will get $300 million in one-time funding as a supplement to their basic aid payments.

Because it is one-time money, however, the dollars cannot be used to boost teacher pay or other ongoing spending commitments. A proposal by Rep. Matt Gress, R-Phoenix, for a $10,000 pay hike remains stalled amid questions of how that would be funded in future years.

Republicans won a lot of small budget victories, including a host of new money for road improvements in communities across the state. Among those is $89 million for the widening of Interstate 10 between the southern Phoenix suburbs and Casa Grande.

That project was a top priority of Sen. T.J. Shope, R-Coolidge, who was pushing for $400 million to complete the project. He said the $89 million isn’t enough to finish the project but could help the state secure federal grant funding needed to complete the project.

The budget also includes a laundry list of earmarks for projects within the districts of many lawmakers. These range from road improvements and traffic circles and new substations for police and sheriff's departments to $15.3 million tagged for capital costs at the Prescott Frontier Days Rodeo.

Republicans did beat back other Hobbs proposals, including the only tax cut she proposed: elimination of sales taxes on diapers and feminine hygiene products.

That proposal did not make it into the budget, meaning women and families with young children or elderly people with incontinence issues will continue to pay those taxes — and the state will collect an estimated $40 million a year in sales taxes.

As an apparent consolation, the budget contains $1 million to help low-income Arizonans buy adult diapers and $2 million for the education department to pay for feminine hygiene products in schools.

GOP lawmakers did have their own tax cut priorities, including eliminating the sales tax on residential rentals and grocery store purchases. Both wound up being vetoed by the governor earlier in the session.

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