State budget negotiations are progressing slowly at the Arizona Capitol as the Republicans who control the Legislature have yet to engage in formal talks with Democratic Gov. Katie Hobbs’ office.
Lawmakers in the Arizona House and Senate have been mostly absent at the Capitol in recent weeks after both chambers sent rank-and-file members home to give legislative leaders space to negotiate a budget with Hobbs.
But a spokesman for the governor confirmed those talks haven’t made much progress since the legislative break started earlier this month.
“Some conversations are beginning this week,” spokesman Christian Slater said. “I wouldn’t say that they’re formal conversations.”
It appears the Republicans in the Arizona House and Senate are still trying to get on the same page.
Rep. Matt Gress (R-Phoenix), vice chair of the House Appropriations Committee, said he doesn’t expect a budget to pass until sometime in June. Lawmakers and Hobbs must agree to a spending package by June 30 to avoid a state government shutdown.
“House and Senate Republicans are continuing to find areas of agreement where we can,” Gress said. “We have some larger issues that we need to resolve, and once we can resolve them, I think that will help us move to the next stage in the budget process.”
Gress said one of those issues is how much spending should be included in next year’s state budget.
In a May 20 report, legislative budget analysts provided better-than-expected state revenue estimates for this year. According to the report, the state is expected to bring in $207 million above what was projected in a baseline budget prepared in January.
However, analysts noted this increase was largely attributed to higher-than-expected individual income tax revenues in April.
“As a result, we suggest that the April gain should only be considered as one-time if it is factored into the ongoing budget discussion,” the Joint Legislative Budget Committee wrote, warning that those higher-than-expected revenues should only be used to fund one-time expenses.
Both Republicans and Hobbs’ office agree that uncertainty at the federal level is complicating budget negotiations.
“Certainly, the tariff chaos and confusion in Washington, D.C., is causing some problems with Arizona’s economy,” said Slater, Hobbs’ spokesman. “I wouldn’t want to characterize any ongoing conversations, but we’re certainly looking for a budget that’s responsible, bipartisan and makes sure that we’re well-prepared for uncertain economic conditions moving forward.”
Gress said lawmakers must consider how to grapple with proposals included in the tax bill backed by President Donald Trump that could shift some federal expenses onto the states.
“The other thing that we’re all trying to work through is the uncertainty on the federal level with a number of different policies and state programs, federal programs being implicated,” Gress said. “We’re talking about, perhaps, Medicaid cost shifts, SNAP [food assistance] cost shifts.”
Slater, echoing earlier comments from Hobbs, said Arizona cannot afford to backfill federal cuts to Medicaid to keep some of the Arizonans who rely on the program from losing their health care.
“It’s going to cost billions and billions of dollars,” he said. “The state does not have the money to afford that, and that goes the same for a lot of the other federal cuts that we’re seeing.”
Gress noted that the full impact of those federal actions may not be known until after Arizona passes its state budget.
“So we shouldn’t spend all the money,” he said. “We should conserve a good deal of cash as we figure out what comes next.”
