Arizona GOP Budget Proposal Passes Legislature as Governor Hobbs Maintains Moratorium on Bill Signings

Republican Budget Plan Advances Despite Democratic Opposition

Republican lawmakers in Arizona passed a state budget proposal on Monday that Democratic Governor Katie Hobbs is expected to veto. The budget plan moved through the House and Senate on party lines without Democratic support, centering on sweeping tax cuts paid for with cuts to various government programs and state agencies.

Senate Minority Leader Priya Sundareshan expressed concern about the budget's impact on essential services.

That entire category of cuts is where I would like us to move into a space where we're just reminding all of us that corporate tax breaks are not really necessary but supporting people is, Sundareshan said.

The Republican budget includes a handful of provisions that Governor Hobbs had previously supported. Hobbs and her staff have not engaged in budget conversations with Republican leaders since the governor walked away from negotiations several weeks ago over disagreements on education funding.

Petersen said Hobbs' decision was unprecedented and noted the budget includes a handful of things she said she wanted.

We're at the table. So if she vetoes it and comes to the table, then we'll be ready to negotiate with her, Petersen said.

Hobbs' spokesperson declined to say when she would take action on the GOP budget plan. Legislative Democrats, as the minority party, have not been part of the negotiations.

Somebody should pick up the phone and include us, Sundareshan said.

Tax Cuts and Agency Cuts

The budget passed by Republican lawmakers includes sweeping tax cuts that would align Arizona's tax code with federal tax cuts signed into law as part of President Donald Trump's One Big Beautiful Bill Act. The plan would eliminate state taxes on tips and overtime pay, expand tax relief for parents with dependents, create a new childcare expense deduction and boost tax breaks for retirees.

The Republican plan delivers about $1.45 billion in tax relief according to Senate President Warren Petersen and House Speaker Steve Montenegro. The proposal also spends about $800 million less than Hobbs' proposal.

Arizona Republicans are delivering one of the largest tax cuts in state history, and our proposal has the votes to pass both chambers, Petersen said.

The budget would cut $99 million in across-the-board cuts of 5 percent for most state agencies. State universities would be among the hardest hit.

Governor's Critique

Governor Hobbs on Tuesday delivered a critique of the Republican budget proposal, calling it a copy of dysfunctional Washington policies while applauding several initiatives included in the plan.

There's some things I'm encouraged about in their proposal, Hobbs told reporters Tuesday. I think we need to make these cuts strategically and smartly, and not slash and burn with just across-the-board cuts like we're seeing come out of Washington, D.C.

Still, she remains frustrated by continued GOP resistance to a Proposition 123 renewal. This was a key factor in her decision to halt bill signings.

That is incredibly concerning and it was part of the reason that triggered the bill moratorium, Hobbs said. Quite honestly, we have a once-in-a-decade opportunity to direct a billion dollars into public education without raising taxes by a dime. This is something the public is incredibly supportive of.

Hobbs instituted her bill moratorium April 13, a move meant to pressure Republicans to reveal their state budget plan. The governor said she would keep the moratorium in place for now.

I will be closely monitoring the situation in the coming days to determine whether the legislative majority is willing to engage in good-faith, bipartisan negotiations and have the bill moratorium lifted, Hobbs said.

Where the Debate Stands

The Republican budget package passed the appropriations committee along party lines on Monday. GOP leaders signaled they intend to push it to the floor for a full vote in the coming days. Arizona's fiscal year ends June 30, giving lawmakers and the governor roughly two months to reach a deal before the new budget cycle begins.

I'm hopeful that we can get back to the table and start having real conversations about a budget that works for Arizona, Hobbs said.

Democrats and Republicans remain divided over what and who to tax. Republicans, unwilling to accept the tax hikes and other proposals by Hobbs to boost state revenues, are proposing major cuts. Hobbs has argued there is a simple way to save more than $38 million a year to use for other priorities: end the tax breaks now provided for new data centers.

The dispute continues as Arizona approaches its budget deadline without a negotiated agreement.