Arizona’s state government will not shut down next week after Democratic Gov. Katie Hobbs signed a bipartisan state budget approved by the Arizona House and Senate.
The $17.6 billion budget was the product of negotiations between Hobbs, Democratic lawmakers and Senate Republican leaders.
“We showed Arizonans what is possible when we are willing to reach across the aisle and deliver common sense solutions for the people of our state. I look forward to signing this budget into law and delivering these big wins for the people of Arizona,” Hobbs said in a statement.
She praised the plan for including several of her priorities, including pay raises for state troopers and $45 million in child care assistance that will unlock even more federal funds.
The Senate originally passed the spending package last week, but House Republicans opposed the deal. And leaders in the chamber initially refused to bring it up for a vote.
That changed late this week, when House Speaker Steve Montenegro (R-Goodyear) finally allowed the bipartisan plan to go up for a vote — but only after lawmakers in the Senate sent two proposals crafted by House Republicans to Hobbs.
The governor promptly vetoed those House Republican budgets, leaving the bipartisan Senate plan as the only remaining option.
The House passed that plan, with minor tweaks, last night. And Hobbs signed it Friday shortly after the Senate gave the plan final approval.
“For those of you that missed the sleight of hand, this budget is nearly the same as the original budget that we introduced, that was introduced by the Senate,” Senate President Warren Petersen (R-Gilbert) said.
What’s in the budget?
As far as what’s in that budget — like the one the Senate passed two weeks ago — it contains about $17.6 billion in spending.
That’s a more than $1 billion increase over the budget the governor signed last summer.
It includes full funding for the agency that pays for Medicaid services for Arizonans living with developmental disabilities, which was at risk earlier this year.
There is also about $90 million worth of public safety items, including 15% pay raises for state firefighters, 5% pay bumps for state law enforcement officers and a one-time 4% bonus for correctional officers.
The budget also includes nearly $120 million for transportation and infrastructure projects, including widening Interstate 10 in the West Valley and various improvements along State Route 347 in the area around Maricopa.
The budget does not include any restrictions to the state’s private school voucher program, although Hobbs has advocated for such restrictions since entering office. And that lack of restrictions was a major complaint of many Democrats who voted against the spending package.
But, as part of the budget deal, lawmakers agreed to override Arizona’s aggregate expenditure limit, or AEL, for K-12 schools for two years. That limit, established by voters in 1980, prevents schools from spending all the money allocated to them by the Legislature if that allocation goes above the cap — which has happened virtually every year in recent memory.
According to the Arizona Association of School Business Officials, schools would have had to cut a total of $5.1 billion if lawmakers did not override the limit between 2022 and 2025.
In recent years, lawmakers have chosen to exempt the limit on an annual basis, sometimes waiting until the last minute to do so. Oscar De Los Santos, the House Democratic leader, called the decision to override the cap for two straight years a win that gives school districts certainty over their funding.
“This was a huge accomplishment. I mean, year after year after year, public schools are on the brink of financial calamity because of the inaction of politicians on this very floor,” he said.
The budget also included around $280 million in new education funding, mostly for school building repairs and other costs like textbooks and transportation.
Points of contention
The budget passed with bipartisan support in both the House and Senate, but a number of Democrats and Republicans also criticized the spending package.
Rep. Alexander Kolodin (R-Scottsdale) said the budget is not “even remotely conservative.”
Kolodin and other lawmakers aligned with the right-wing Arizona Freedom Caucus argued the budget was bloated and didn’t include sufficient restrictions on the other branches of government.
They backed failed amendments to do everything from restricting Attorney General Kris Mayes’ ability to bring election-related lawsuits to cutting Medicaid spending.
Rep. Justin Olson (R-Mesa) backed efforts to include new restrictions on Medicaid and other social programs, like federal food assistance. He said those measures were necessary as congressional Republicans move to shift more of the costs to run Medicaid and other social programs onto states.
Olson said Medicaid spending was growing too fast and was “not sustainable.”
Many Democrats were also frustrated with the spending plan, because it did nothing to rein in school voucher spending that is nearing $1 billion per year.
And some Democrats opposed funding for the Gang and Immigration Intelligence Team Enforcement Mission, a multi-agency task force, because language in the budget allows that money to be used for “strictly enforcing all federal laws relating to illegal aliens and arresting illegal aliens,” and enforcing SB 1070, Arizona’s controversial 2010 immigration law that was partially blocked by the state Supreme Court.
They said they couldn’t support that funding as federal immigration agents enforce President Donald Trump’s deportation effort in Arizona and other states.
“So while yes, there are great things in the budget and no budget is perfect, and I have said that every year since I've been here, my morals and my values cannot allow me to support the terrorizing of my community,” Rep. Alma Hernandez (D-Tucson) said.
However, the budget’s backers pointed out that the same language has been included in budgets for years, including spending plans those very same critics voted for.
And De Los Santos said the Hobbs administration has vowed not to use the money to target immigrant communities.
“You also had the governor's spokesperson and the director of DPS, the agency that administers that funding, clearly and unambiguously clarify that that funding is used strictly for gang enforcement, and not $1 of it goes to anything like that, what was being referred to,” he said.
Lawmakers from Arizona’s tribal nations also opposed the budget, including Sen. Theresa Hatathlie (D-Coal Mine Mesa) and Rep. Myron Tsosie (D-Chinle), saying it did not include sufficient investments in their communities.
Tsosie, a member of the Navajo Nation, said he wasn’t included in budget talks.
“Twenty-two tribal nations in the state of Arizona, and no investment,” he said. “If you've ever visited a tribal nation, if you've truly been to one, you'd know that we need roads. We need water lines, power lines, broadband.”
The budget did add “traditional healing services” to the state’s Medicaid program, a longtime goal for many Indigenous advocates, which could unlock tens of millions in federal matching funds to cover that care.
Arizona's Medicaid program already received federal approval to cover traditional healing services for Native American members through the Indian Health Service and tribally run health centers, but it needed legislative approval to finalize that change.
What changed?
Backers of the bipartisan Senate plan said the new state budget largely mirrors what Hobbs' office negotiated with Democrats and Senate Republicans weeks ago.
“Frankly, now the House Republicans have thrown not one but two tantrums, gotten it out of their system and seen that they don’t run this place individually and that they have to work in a bipartisan manner. That’s the difference,” De Los Santos said.
Both budgets total around $17.6 billion, hundreds of millions of dollars more than both the House budgets would have included.
But House Republican leaders said they do not regret how budget negotiations played out.
“It is not the best that we would like, but to us as Republicans, we are holding the line on spending. We are reducing spending,” Montenegro said. “We are reducing the capacity for government to spend, and we're putting safeguards to make sure that we are holding government accountable and making government a government that works for the people.”
Montenegro said House Republicans received some concessions, including more funding for the Arizona Auditor General’s Office to provide increased oversight over government spending and a property tax exemption for disabled veterans.
He said the House Republicans were also able to cut around $100 million in spending over the next three years, including about $30 million this year — a relatively small sum in a budget nearing $20 billion.
“Every penny counts for the people of Arizona,” Montenegro said.
