Phoenix: Governor Hobbs Says Arizona Budget Deal Is Within Reach as July 1 Deadline Looms

Governor Katie Hobbs said Thursday that a state budget agreement is nearly finished, with only "very minor sticking points" separating her office from Republican legislative leaders. The new fiscal year begins July 1.

The governor’s remarks came after Senate President Warren Petersen told KTAR News a day earlier that the two sides were "pretty much 99% of the way there."

"The last 1% can be the hardest," Petersen said.

What remains in dispute

Hobbs declined to specify what issues remain unresolved. She acknowledged that compromise would be necessary to close the deal.

"I put out my budget in January. That is my vision, my plan," Hobbs said. "I know that there's going to be compromise."

Petersen did confirm that a resolution had been reached on Proposition 123, a measure the governor wanted included in the budget package. Voters would approve or reject it in November.

The tax cut at the center of the deal

Hobbs emphasized that she remains committed to a $600 million middle-class tax cut she has championed since the start of the legislative session. The proposal would provide a higher standard deduction, a tax credit for seniors, and eliminate state income tax on tips and overtime pay.

"I think we're going to get to agreement on that," Hobbs said.

Republicans passed a plan. Hobbs vetoed it.

Republican lawmakers passed a $17.9 billion spending plan earlier this month. Hobbs vetoed the measure, calling it "unbalanced and reckless."

The governor and legislative leaders have been meeting regularly, sometimes twice a day, according to Hobbs.

SNAP cuts dominate the political fight

Hobbs used the interview to deliver a sharp critique of federal cuts to the Supplemental Nutrition Assistance Program. Arizona's SNAP enrollment has dropped from roughly 900,000 recipients in 2025 to approximately 500,000 this year. That represents a 55% decline, the deepest drop of any state.

Hobbs blamed Republican members of Arizona's congressional delegation for the cuts.

"This is a direct result of Washington's chaos and the cuts that politicians in Washington, D.C., including Andy Biggs and David Schweikert, voted for to cut half a million Arizonans off of their nutrition assistance," Hobbs said.

When asked whether the congressmen understood the scope of the impact, Hobbs was direct.

"I 100% think they knew that," she said. "My office, from the second that bill was introduced, was sharing with our entire congressional delegation the numbers of people in Arizona that would be impacted, including specific to each congressional district."

The state is adding funds to support food banks and address application backlogs. But Hobbs said state resources cannot replace the lost federal money.

"We can't backfill this," she said. "We don't have the resources."

Campaign politics enter the budget fight

Hobbs is seeking re-election in 2026. She will learn her Republican challenger after the July 21 primary. The two GOP candidates in that race are Andy Biggs and David Schweikert.

The governor released a campaign ad this week that highlighted her own financial history. She said she and her husband lost a home to foreclosure and that she worked second and third jobs, including driving for Uber, to support her family.

"This is what I'm hearing most from Arizonans, is that they are feeling the struggle of rising costs," Hobbs said.

She pushed back against criticism from Rep. David Schweikert, who told KTAR News the previous day that Arizona ranked 45th in affordability and that the governor "sets much of the tone and policy."

"It is Washington's cost-hiking, job-killing agenda that is hurting Arizonans," Hobbs said. "It is the tariffs that David Schweikert partially owns and that Andy Biggs owns."

---

KTAR News 92.3 FM's Kylie Werner contributed to the original reporting.