Responding to Hobbs' speech, House Speaker Montenegro outlines GOP tax cuts priorities

And now let’s turn to Speaker of the House Steve Montenegro. The Show spoke with him about the governor’s speech, what he makes of some of her proposals and the GOP’s priorities for the upcoming session. He began with tax cuts — and where he and the governor disagree.

Full conversation

STEVE MONTENEGRO: Well, look, we've been working on making sure that we get every benefit possible on this conformity, on the Big, Beautiful Bill for Arizonans. But here's where, here's where the disagreement is. Last session, we sent up many bills that would give money back to Arizonans, that would cut taxes, lower the tax burden, and bring relief to Arizonans. She vetoed all of them. And over the last three years, we've been sending bills that would also cut government spending, both of these approaches.

The Big, Beautiful Bill actually placed all of those bills, all those measures that we had in it, it enacted them into law. And so now at the state level, we have the opportunity to do both, where the difference is that the governor doesn't want to do that fully. And I think that Arizonans deserve someone and deserve their representatives to fight for as much relief as they can get possible. And so I think that's where the bigger difference is.

LAUREN GILGER: Right. So the governor says here that adopting all of those tax cuts from the Big Beautiful Bill will benefit the wealthiest Arizonans. You kind of say the same thing about the tax cuts she wants to implement. Is that right?

MONTENEGRO: Well, yeah. I mean, if you take a look at the bill we just introduced, if you take a look at that, you'll see that we removed some of those tax cuts that would not benefit middle-class or everyday Arizonans — to focus on affordability, to focus on the cost of living. So we are actually excited to, we have a game plan, we have that bill ready to go. You'll see fast action this week in it, and hopefully she agrees to sign it. It's exactly what we've been talking about.

GILGER: So a lot of this is gonna come down to what gets cut in terms of spending, right? Like if you and the governor want to implement tax cuts, that means less spending on state programs, safety net programs included. How do you plan to pay for your tax cut package? Like what will get cut?

MONTENEGRO: Well, number one, we here in Arizona, we pass responsible budgets. The Constitution of Arizona says we have to have a balanced budget every year. So the hyperinflation that we're seeing and the hit that everyday Arizonans are feeling. is because of that overspending. And I call it dramatic overspending that the Biden administration did over the last four years.

So here in Arizona, what we want to continue to do is we want to make sure we continue to avoid that disaster. We have steady revenues coming in. It could be better, but this year has to be a little bit lean. And I'll give you an example. Over the last five years, if you look at where the budget was five years ago to today, our revenues in the state have increased by $3.5 billion. We believe that some of that should go back to the citizens of Arizona.

GILGER: Right, but where will these cuts come from? Especially, as you say, we're looking at a pretty lean year. We know we're facing a pretty significant budget deficit, and the cause of that is up for debate, whether it's, you know, the income tax program that was put into place or whether it's other factors, we're kind of looking at a softening economy, a softening job market.

What's going to get cut? Are you targeting or looking at specific programs?

MONTENEGRO: Well, like, for example, if you take a look at some of the waste that's in the process, we have to take a look at all government programs, where the waste, where the fraud is, where the abuse. I'll give you an example. In AHCCS, since 2020, it's gone up by $10 billion, the spending there. In our Medicaid —

GILGER: This is Arizona's Medicaid program.

MONTENEGRO: Arizona alone, it went from $13 billion in 2020 to $23 billion today. And so we have to make sure that the spending is actually going to people that need it. We wanna make sure that it's actually reaching folks. We have the vulnerable population, we have our elderly, we have children with needs. We wanna make sure that it's going there.

But if you're an able-bodied citizen, we have to make sure that we have policies that get you back to work so you can be the one that's producing for our society.

GILGER: Yeah, so are you looking at cuts to Medicaid to AHCCCS here?

MONTENEGRO: No, no, no. What we're looking at is where there is fraud, where there's waste, where there's abuse in the system.

GILGER: Let me ask you about something else, speaker. The governor proposed getting rid of a tax incentive for data centers. Data centers have become kind of a hot topic, a controversial point here in the state. Our data center industry is really massive, and some metrics even show it's like the second-most robust data center market in the world.

But they use a whole lot of water at a time when we do not have it, and people are starting to notice that and protest these new data centers when they come in. The governor also proposed a new fee on data centers to aid Colorado River cuts that are, you know, pretty likely coming here.

I wonder what you make of that proposal. Is that something you might be able to support?

MONTENEGRO: Well, we have to look at what proposals actually get introduced. I'll tell you that a lot of the technologies that are coming in from these data centers don't use water. They use their own systems of technology to produce energy. So the details, we have to take a look at it as well.

But we also have to look at what is causing or bringing economic growth to the state, what's bringing jobs. And that's something that we have to balance out because we can't just target certain industries or certain sectors. And that ends up hurting the economy. That ends up hurting jobs. And so we have to be very mindful of that.

GILGER: Sounds like not something you're immediately on board with.

MONTENEGRO: I want to make sure we're looking at the actual proposals introduced before we have those conversations.

GILGER: OK. Let me ask you about Prop. 123, which needs to be extended and sent back to voters. It funds education via the State Land Trust. There's talk that some Republican lawmakers might want to include a provision in it that would enshrine the ESA, the school voucher program in the state constitution as part of that extension. Would you support something like that?

MONTENEGRO: Well, look, when I talk about one, two, three, we have to remember that it was a Republican-led effort that was designed to address a specific challenge, financial challenge, when it was implemented. And it maintained a conservative framework so that we can keep taxes low.

I think that any measure that we're going to be looking at that should maintain that same spirit. I'll tell you also that what it's turning into, what we have to be careful is that we don't use or that 1-2-3 doesn't turn into some election year theatrics.

Because the truth of the matter is that last year we ended up backfilling the $300 million that went to education. We ended up backfilling it from the general fund. So that was taken care of. And we're going to do the same this year.

GILGER: OK.

MONTENEGRO: Education's going to be taken care of. The other thing that's really important when we have the one, two, three discussion is today, this administration, any administration, can actually increase dollars for education. Today, all they have to do is start selling more public lands. And that's something that they're not doing.

So if we're gonna do any measure that has to do with one, two, three, we have to be good stewards of the people's lands, and we have to be effective as to what we're doing, not just try and play election year theatrics.

GILGER: Do you anticipate the ESA program being a part of that conversation, though?

MONTENEGRO: We are having those conversations absolutely as a whole.

GILGER: OK. Let me ask you lastly, speaker, where do you anticipate or do you anticipate any areas in which you might be able to find common ground with the governor or Democrats in the upcoming session?

As you mentioned, the governor has vetoed a whole lot of proposals that have come from your side of the aisle. Are there places where you think you might be able to work together?

MONTENEGRO: Of course, there's always room. And I'll tell you, one of the areas that we're united is we're going to continue to fight, at least Republicans on our end, and we've heard similar from the governor, we're going to continue to fight for Arizona's water.

You know, the interests of Arizona, whether it's rural, whether it's growth, we want to make sure that Arizona has its fair share. Arizona has been a great steward of water. And so it's time for the Upper Basin to do their part. We're going to stand strong to make sure Arizona's its benefits are looking after.