Hobbs signs $16.1 billion Arizona state budget

The Arizona State Capitol dome. Photo by Jerod MacDonald-Evoy | Arizona Mirror

Gov. Katie Hobbs signed into law a $16.1 billion state budget for the upcoming fiscal year on Tuesday, amid threats of a lawsuit from the state attorney general and disapproval from both sides of the political aisle.

The Democrat, who has spent months negotiating with GOP legislative leaders behind the scenes to resolve a nearly $2 billion budget deficit, characterized the fiscal plan as a bipartisan win.

“Despite facing a $1.8 billion budget deficit, we showed Arizonans that we can work across the aisle and compromise to balance the budget and deliver for everyday Arizonans,” she said, in a prepared statement accompanying the announcement of her signature.

The budget’s passage in the state legislature followed more than twelve hours of contentious voting and an unusual weekend meeting. And while it garnered bipartisan approval in the end, both Democrats and Republicans voiced criticism of it . It makes sizable cuts to resolve the budget shortfall, including by wiping out the entirety of funding for the Water Infrastructure Finance Authority of Arizona, axing Arizona State University’s funding by $10.9 million and delaying multiple road projects.

In her statement, Hobbs recognized that the budget elicited divided reactions, but said that, ultimately, it helped secure the state’s future.

“Nobody got everything they wanted, but this bipartisan, balanced budget puts our state on solid financial ground,” she said. “Moving forward, I’ll continue working to secure our water future and create good-paying jobs for working families.”

Hobbs also vowed to continue trying to rein in private school vouchers.

Known as Empowerment Scholarship Accounts, the vouchers have seen an explosion of growth since Republican lawmakers, who hold a legislative majority, oversaw a universal expansion that opened up the grant program to students who have never before stepped foot in a public school.

The cost to taxpayers is projected to be as high as $429 million next year , but putting financial guardrails on the program was a nonstarter with Republicans. Instead, the budget prevents public school students from using ESAs over the summer break and returning to public schools in the fall, which is expected to save just $2.5 million annually.

The most controversial part of the budget was its reallocation of $75 million in state opioid settlement funds to the Arizona Department of Corrections. The money, which was won from a lawsuit launched against the makers of opioids who were found partially at fault for the opioid crisis, is strictly destined for causes that combat the fentanyl crisis.

Attorney General Kris Mayes has vocally opposed the fund transfer, warning that violating the terms of the settlement could jeopardize the total $1.4 billion that Arizona is expected to receive. Mayes has repeatedly said she will sue the governor and the legislature to ensure the money isn’t moved.

“This is an egregious grab, and I will do everything in my power to protect these opioid settlement funds for all Arizonans,” she wrote, in a statement posted to social media site X , formerly Twitter.

Meanwhile, Hobbs’ office has disputed the claim that the move is illegal, and pointed to past statements Mayes has made saying that transferring the funds to the Department of Corrections is an appropriate use.

Shortly after the budget’s approval in the state legislature, Republicans celebrated the plan as a fiscally responsible blueprint, and touted the party’s defense of the ESA program.

“Republicans are again successfully supporting our hard working citizens, while simultaneously reining in spending,” said Senate President Warren Petersen, in a written statement on June 15.

“We tightened the state’s belt by trimming fat from state agencies, and we reallocated unspent tax dollars to the general fund to eliminate the deficit, without irresponsibly tapping into our rainy-day fund,” added Senate Appropriations Chairman John Kavanagh. “Most government operations within the state received a healthy and manageable 3.5% reduction in spending, with a few exceptions.”

Democrats offered a more somber outlook, lauding the successful lifting of a public schools spending cap, called the Aggregate Expenditure Limit, that was set to become an issue again next year, and blaming Republicans for the budget deficit that led to so many cuts.

“On the state budget, we recognize that the Republican majority and our former Republican governor have put our state in an extremely difficult deficit situation because of irresponsible tax cuts for the wealthiest Arizonans and a ballooning ESA voucher giveaway to those same families,” said Democratic Minority Leader Lupe Contreras, in a written statement on June 15. “Whether they were a yes or a no vote on the state budget, I respect the work each of our members put in for their constituents and their districts to move our state forward as best we can.”

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