Arizona Republicans Unveil Budget Plan With Sweeping Tax Cuts and Agency Spending Reductions

Arizona Republican lawmakers introduced a budget proposal this week that includes significant tax relief and spending reductions across most state agencies, though it leaves out an education funding mechanism that has become a sticking point between the GOP-controlled Legislature and Governor Katie Hobbs (D-AZ).

The plan spends roughly $800 million less than Gov. Hobbs' own budget proposal and includes $1.45 billion in tax relief. It would align state tax law with federal cuts passed by Congress, including eliminating taxes on tips and overtime.

To offset costs, the proposal calls for across-the-board cuts of approximately 5% to nearly all state agencies, expected to save around $99 million.

The Department of Public Safety, Department of Corrections, and Department of Child Safety would be exempt from those reductions.

Additional savings would come from eliminating solar energy tax credits, cutting funding to economic development organizations, and incorporating roughly $100 million in government efficiency savings previously outlined by Hobbs.

Reductions in Funding

KJZZ also reports that the plan reduces funding for Arizona State University by $16 million, cuts $7 million from the Superintendent of Public Instruction's Office, trims $4 million from graduate medical education, and reduces community college funding.

Senate President Warren Petersen (R-AZ) and House Speaker Steve Montenegro (R-AZ) said the proposal funds core services while offering Arizonans cost-of-living relief.

"We're moving a budget that cuts taxes, funds core services, shrinks government, includes priorities both sides have raised and gives Arizona a responsible path to finish the session," Petersen said.

Notably absent is any renewal of Proposition 123, a voter-approved education funding mechanism that expired last year and had directed roughly $300 million annually to public schools.

Republicans said budgeting around a measure still requiring voter approval would be fiscally irresponsible.

The budget arrives more than a month after budget negotiations broke down, with each side blaming the other for the impasse.

Hobbs has said the absence of Prop. 123 is "incredibly concerning," calling it a once-in-a-decade opportunity to direct a billion dollars into public education without raising taxes.

Republicans contend the governor walked away from the negotiating table, and they are moving forward regardless.