Governor Hobbs Releases $17.7B Budget Plan
Posted by [email protected] on Jan. 21, 2025 / Subscribe 0
Late Friday afternoon, Arizona Governor Katie Hobbs released her $17.7 billion budget, which represents an approximately $1.6 billion year-over-year spending increase from last session. The Governor’s FY 2026 proposal restores a host of programs cut during budget negotiations last year and includes significant funding hikes for K-12 education, pay raises for state employees, and child care assistance. Additionally, Hobbs’ budget sets up a clash with GOP lawmakers over her plan to cut $150 million from the ESA school vouchers program by reducing or eliminating vouchers from high-earning Arizona families.
The Joint Legislative Budget Committee predicts the state will see a $560 million surplus in the next fiscal year, which starts in July. Governor Hobbs spending plan asks lawmakers to put surplus funds into a broad range of initiatives, ranging from financial relief for Arizonans to investments in border security and public safety.
Below is a summary of some of the Governor’s key proposals; however, to read her full plan, please click here.
Child Care
Governor Hobbs’ budget includes $7 million to fund a new initiative to reduce child care costs. Her plan includes $3 million to fund grants for summer and afterschool programs for working class families, and another $3 million to jumpstart a partnership with the private sector that will ask employers to cover one-third of an employees’ child care costs. Under the Governor’s proposal, the state would then match that expense, up to $400 per month.
Hobbs’ budget also includes $1 million for a new tax rebate for businesses that provide child care for their employees. Participating businesses would be able to qualify for a rebate up to $100,000, according to the Governor’s Office.
Housing and Homelessness
Hobbs’ budget would also add another $10 million into the state’s Low Income House Tax Credit program, which incentivizes developers to set aside units for low-income tenants; however, that proposal appears to be dead on arrival with strong opposition from the Senate President, Senator Warren Petersen.
The Governor also wants to establish a new program for homeless veterans called Homes for Heroes; however, it only allocates the startup costs of $5 million.
Governor Hobbs also wants to put $15 million into the Housing Trust Fund, a program that invests in and funds a myriad of housing and homelessness initiatives.
Public Safety & Border Security
The Governor is seeking $23 million to support local efforts related to border security which includes $10 million for grants that go to local agencies working to disrupt the cross-border drug trade and stop human trafficking. Additionally, she is asking for $2 million to expand treatment services (equip first responders with naloxone) to rural areas and underserved communities.
The Governor is seeking a total of $12 million to bring the state in line with a federal court ruling that found that the Arizona Department of Corrections, Rehabilitation and Reentry violated prisoners’ constitutional rights when it came to health care and housing.
She is also asking for $335,000 to create two new positions at the Attorney General’s Office in the Internet Crimes Against Children Task Force.
Hobbs is proposing $20.7 million in federal funds to provide services to victims of crimes.
Hobbs is also asking the Legislature to approve $35 million to give a 5 percent pay increase to all frontline law enforcement officers in the Department of Public Safety (DPS) and other state agencies like the Department of Corrections. Last year, there were 500 DPS positions that were unfilled, leaving some counties without round the clock coverage. This 5 percent pay increase would raise the average DPS officer salary from about $81,000 to $91,000 a year.
The Governor’s budget would also provide a 2 percent raise to all state employees; however, certain employees would receive higher pay raises, including state firefighters (15 percent), nurses at the state veterans’ home (10%), and customer service jobs (10%).
Water & Environmental Initiatives
Hobbs’ proposal is essentially devoid of any new funding for water projects. However, her budget does create a new litigation fund to defend the state’s interest in the Colorado River rights negotiations. Arizona is one of seven basin states jockeying for river water and negotiating to avoid steep cuts. The Governor’s budget provides $3 million to this new litigation fund.
The Governor’s budget also includes $30 million into wildfire suppression, funding intended to aid local officials for two years.
K-12 Education
Proposition 123 was first approved by the voters in 2016. The measure increased the amount of money public K-12 schools receive from the state land trust fund. While Hobbs remains hopeful that lawmakers will agree to a deal that will send a Prop. 123 renewal to the voters in May, before the education funding measure expires in July, her budget does includes a $286 million infusion from the state general fund to replace Prop. 123 funding, if there is no agreement.
Like in years past, the Governor is asking GOP lawmakers to rein in the state’s ESA universal school voucher program, which allows families to use tax money to pay for homeschool or private school tuition. That includes a scaled income cap that would reduce the voucher amount awarded to families with higher income. Under Hobbs’ proposal, only households earning below $100,000 per year would be eligible for the full voucher amount. Families earning more would receive incrementally less state support, and households with incomes above $200,000 would be eliminated from the program altogether.
GOP leadership has already signaled that these proposed restricts on the ESA program are a non-starter.
Healthcare/Arizona Health Care Cost Containment System (AHCCS – Medicaid)
The Governor’s budget is proposing $344,000 in state funds and $3.9 million in federal funds to expand eligibility for family planning services. Additionally, she is proposing more than $1 million in combined funds to permanently extend postpartum coverage from 60 days to a year. She is asking for an increase of $334 million to AHCCCS for an expected increase in caseload.
The Governor’s budget earmarks an additional $15.8 million in ongoing funding to help manage the rising costs of highway maintenance materials, which have seen a significant increase of 63.7% between fiscal years 2021 and 2023. Within the maintenance budget, there is also $797,000 designated to maintain 38 new lane miles across the state, plus a $13 million one-time deposit into the State Match Advantage for Rural Transportation (SMART) Fund.
The Executive Budget also propels a study with a $200,000 boost on potential passenger rail service between Phoenix and Tucson. The Governor is proposing $850,000 for a terminal expansion at Grand Canyon National Park Airport, contingent on receiving an Airport Terminal Program grant from the FAA. Moreover, $6.9 million is planned to replace aging maintenance facilities, enhancing the state's response to extreme winter weather, an issue that has, in recent years, become all too familiar, as detailed by the Arizona Department of Transportation.
Tourism
The Governor is proposing $5 million for major events “to support Arizona’s ability to manage major events that attract economic activity to the State.”
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