A budget package that lawmakers negotiated to address a $1.8 billion deficit over the next two years almost failed to get through the Senate Appropriations Committee after one Republican senator broke party ranks and voted against the proposal.
Sen. Anthony Kern, R-Glendale, voted with Democrat lawmakers on the Senate Appropriations committee to kill the main budget bill, which he called “rushed,” but Sen. Sonny Borrelli was sent to join the committee to cancel Kern's vote against the bill.
“I don’t want to vote for something that I don’t know thoroughly what the deal is,” Kern said. “I’m hearing two different stories and we just got this basically yesterday or two days ago and so I don’t want to vote on something that's being rushed.”
Hours before Kern briefly halted the budget in the Senate Thursday, the House Appropriations committee passed the proposal with no support from Democrats.
The deal contains many cuts to state agencies and planned road construction projects, resulting in a $16.1 billion budget for fiscal year 2025 down from a $17.2 billion budget in fiscal year 2024.
The House Appropriations Committee moved each budget bill in a single mass motion. The committee’s chairman, Rep. David Livingston, R-Peoria, allowed short testimony on each budget reconciliation bill and asked members of the public to send their budget suggestions to the committee.
“We’re actively taking notes throughout the day of possible (Committee of the Whole) amendments. I’m not promising anything,” Livingston said.
Budget analysts on the Joint Legislative Budget Committee are estimating the state has a $729 million shortfall in fiscal year 2024 and an additional $690 million shortfall in fiscal year 2025. To recover funds, a slew of cuts and fund transfers are proposed in the budget.
The largest transfer to the state’s general fund is $333 million from the Water Infrastructure Finance Authority, which lawmakers originally allotted $1 billion to fund water infrastructure projects under former Gov. Doug Ducey. The transfer would eliminate third-year funding for projects that were previously approved including a multi-billion-dollar desalination plant.
An additional $97 million from the Long Term Water Augmentation Fund and $60 million from the Water Development Revolving Fund is also proposed to be transferred.
Democrats on the committee voted against the budget package, although it passed 9-7-1, with Rep. Barbara Parker, R-Mesa, also voting against it. Rep. Joe Chaplik, R-Scottsdale, voted “present.”
Parker said during a Wednesday Senate Transportation, Technology and Missing Children committee on Wednesday that she would vote against the budget unless the Department of Child Safety is dismantled. Parker has raised issues with DCS over what she has said is a lack of oversight with the agency.
House Minority Whip Nancy Gutierrez, D-Tucson, said she was concerned with education spending in the future, particularly with $66 million moving from low-income weight and additional assistance program funding to districts and schools to one-time spending in fiscal year 2026 and fiscal year 2027.
Arizona’s public universities would also see cuts including $11 million from Arizona State University, $8.7 million from Northern Arizona University, $6.6 million from the University of Arizona.
Lauren Armour, director of government relations for Maricopa Community College, said Thursday the budget would cut almost $54 million to all community colleges statewide and Maricopa Community College is subject to receive a 40% cut in fiscal year 2025.
“These cuts will decimate critical workforce programs that Maricopa has developed specifically to respond to the state’s calls for more nurses, adults with high school diplomas and dual enrollment learners,” Armour said.
Gutierrez also said she took issue with Livingston suggesting that he would only work with members who helped pass the budget out of committee.
“My no vote does not mean I am ready to be done with this,” Gutierrez said. “I am ready to move to the next step.”
While Livingston allowed some public testimony on the budget bills, he limited speakers to one minute and no member was allowed to explain their vote because the bills were moved as one mass motion, which he said was intended to streamline the legislative process.
“I think that taking away the ability for our members to explain our votes is wrong,” Gutierrez said. “Each of us here represents communities and our voices were not heard.”
Gov. Katie Hobbs’ proposed budget in January initially included reigning in the state’s empowerment scholarship account program by implementing a cap on the number of students who could participate.
No such cap exists in the legislative budget proposal as Republicans called any attempt to cap the program a nonstarter. It does include some provisions that are meant to act as guardrails to the program, including requiring the Arizona Department of Education to review a random sample of ESAs to determine whether the parent or qualified student is in compliance with the program.
Another provision would require that scholarship money can only be used at schools that complete fingerprint background checks on their staff. While the proposal does not put a cap on enrollment numbers, it would block enrollment of new students between March 31 and July 1 of each year.
“I think what we’re seeing here is a choice made again to not really reign in the voucher program that is responsible for half of the budget deficit,” Sen. Priya Sundareshan, D-Tucson, said.
Livingston said Republicans weren’t concerned about any of the additional provisions with the ESA program and said they were “commonsense” reforms.
Overall, lawmakers and the governor are proposing to claw back or “sweep” close to $700 million from agency funds and $500 million in one-time spending projects that were previously budgeted.
Larger sweeps include $70 million from the Arizona Department of Administration’s Risk Management Fund. Another $56 million would be swept from the Arizona Commerce Authority’s Arizona Competes Fund and $40 million is proposed to be swept from Arizona Health Care Cost Containment System prescription drug rebate program.
Some one-time spending projects would be delayed under the current budget proposal including a $108 million project under the Arizona Department of Transportation to widen Interstate-10 would be moved from fiscal year 2024 to fiscal year 2026. Another $41 million allocated in the fiscal year 2024 budget to pave roads would be cut.
During public testimony of the budget package in House Appropriations, former Republican Rep. Regina Cobb, who now is a lobbyist for the Arizona Dental Association, informed the committee that some sweeps would result in boards like a proposed $2 million sweep from the Arizona State Board of Dental Examiners would result in the board operating in a deficit.
Livingston said a floor amendment to the budget package on Friday would address any situations of state boards or agencies operating under a deficit.
“We did not attempt to zero anybody out,” Livingston said. “There are over 100 sweeps in this budget and getting over 100 separate answers was not as easy as we expected it to be.”
Legislators are also proposing to reduce about an additional $300 million in ongoing spending.
Most state agencies are facing a near 3.5% reduction in funding totaling $44 million, but some are exempt including the Department of Child Safety, the Department of Public Safety and the Department of Corrections.
Legislative leaders plan to vote on the budget Friday, vote on any remaining bills including state agency continuations and sine die, Livingston said.
“Best case scenario is we go to COW and third read tomorrow, the worst case scenario we shut the government down,” Sen. John Kavanagh, R-Fountain Hills, said.
It’s unclear if either chamber has enough votes to get the budget to the governor.
Gutierez said the complete opposition from Democrats to the budget in House Appropriations reflect how Democrats who want to renegotiate feel about the budget and several Freedom Caucus Republicans including Parker and Kern have also expressed concerns.
Livingston said he expects the votes to be there since Hobbs agreed to a deal with House Speaker Ben Toma, R-Peoria, and Senate President Warren Petersen, R-Gilbert.
“The Republican majority needs to deliver a majority and the Democrat minority needs to deliver a majority in each body. That’s the expectation from all three sides,” Livingston said.
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