Republican lawmakers immediately shut down Gov. Katie Hobbs’ proposalto cut expenditures on the state’s school voucher program to address a massive statewide budget shortfall. But they didn’t rule out other cuts proposed by the governor as the state faces a projected $1.7 billion deficit.
Hobbs’ roughly $16 billion budget proposal included various cuts in addition to the reforms to the private school voucher program, including delaying or canceling various transportation, capital and IT projects.
Rep. David Livingston (R-Peoria), chair of the House Appropriations Committee, said he could support Hobbs' plan to save over $400 million by rolling back road improvements included in last year’s budget that haven’t started yet or can find funding elsewhere.
Those include many of the so-called “pork projects” championed by individual legislators that were packed into the budget last year to bring both Democrats and Republicans on board, including over $100 million for improvements to Interstate 10 near State Route 85.
Even though he supports those cuts in theory, Livingston said he is concerned the governor’s office played politics when choosing which programs to remove.
“Some of the transportation cuts I’m also OK with, because the projects haven’t started yet,” he said. “I just want to make sure we’re doing this fairly. Like I said, I did not see a Democrat project cut.”
Marge Zylla with the governor’s office said Hobbs’ budget staff took an “agnostic” approach to the cuts.
And Rep. Marcelino Quiñonez (D-Phoenix) argued Republicans were disproportionately affected because they championed more individual transportation projects during last year’s budget negotiation. Democrats instead pooled their resources into larger allocations, like a $150 million deposit into the state’s Housing Trust Fund.
Livingston acknowledged those cuts haven’t sat well with all of his colleagues.
“I have some of my Republicans who are very upset with some of the cuts, and I have some of my Republicans that are totally OK with the cuts,” he said.
Livingston also said he supports Hobbs’ decision to reduce a planned deposit into the Water Infrastructure Authority’s Long Term Augmentation fund by $300 million.
That fund, which invests in projects that will bring new water into Arizona, was central to plans to build a desalination plant in Mexico backed by former Republican Gov. Doug Ducey. In 2022, Ducey’s last year in office, lawmakers agreed to deposit a total of $1 billion into the fund over the course of the next three years — a move that transformed the once obscure Water Infrastructure Authority.
But staff in the governor’s office, citing the budget deficit, said it was not possible to keep that $333 million commitment this year. They said the remaining $33 million Hobbs’ budget would deposit into the WIFA fund indicates it still prioritizes the types of water projects it supports.
But WIFA, which includes members appointed by the governor and both Republican and Democratic leaders at the Legislature, criticized the proposal.
“We urge legislative leadership to reject the spending proposals outlined by the governor by appropriating more resources for conservation grants and fully funding the long-term augmentation fund,” the agency said in a post on X.
Even with those cuts in place, Hobbs and lawmakers must cut hundreds of millions more in spending to address a budget shortfall that budget analysts at the Legislature project will reach $1.7 billion next year.
The governor’s office put out more optimistic projections, forecasting an $890 million shortfall if no action is taken. And Hobbs’ staff believes the state would enjoy a $580.3 million surplus if the Legislature adopts all of the cuts she has proposed.
But that won’t happen.
Livingston said the Republicans who control the Legislature will block her plan to save a projected $244 million every year by changing the eligibility requirements for the state’s school voucher program.
“Republicans would literally, instead of ESA cuts, we’d shut the government down,” Livingston said.
Livingston said Republicans have their own budget proposals to deal with the deficit but declined to specify where they would like to cut spending. But Rep. Matt Gress (R-Phoenix), who was budget director under former Gov. Ducey, pitched another idea to address the deficit.
“I think all eyes are going to point back to the Ninth Floor because Governor Hobbs is sitting on — at the time of the writing last fall, according to the executive budget — over $2 billion in unspent ARPA funds,” he said.
The American Rescue Plan Act, or ARPA, awarded billions in federal dollars to states to deal with the fallout from the COVID-19 pandemic and gave governor’s broad authority to spend those dollars. Many of those funds are already designated for specific projects, but Gress said that Hobbs has canceled projects with ARPA funding in the past and can do so now to free up that money.
It could be used to fund her projects and avoid unpopular cuts, he said.
Hobbs’ budget also includes new spending on projects like a mortgage assistance program, a child care assistance program and funding for medical schools at Arizona’s state universities.
Gress said he doesn’t see how those new projects will make headway this year.
“In terms of brand new initiatives, I have a hard time seeing initiatives on either side — either legislative or from the executive branch — coming forward in this budget environment,” Gress said.
Gress, Livingston and other Republicans also criticized several of the governor’s spending proposals for lacking specificity. That includes a plan to hire an additional 202 employees at the state’s Medicaid agency to prevent widespread fraud and abuse that state officials said has cost Arizona taxpayers millions of dollars.
“Budgets don’t work on talking points,” Livingston said.
Democrats largely defended Hobbs’ budget and criticized Republicans’ response to the proposal.
“Our caucus is pleased to see that the Executive Budget proposal invests in some of our most pressing needs. I find it unconscionable that my Republican colleagues have flippantly written off this good start to help the people of Arizona,” Senate Minority Leader Mitzi Epstein (D-Tempe) said in a press release following the presentation.
