IN FOCUS - Aug. 22, 2025

Lean days are here. In terms of the Arizona State budget, anyway.

That’s the takeaway from a memo recently sent to State agencies by Ben Henderson, Director of the Governor’s Office of Strategic Planning & Budgeting (OSPB). Henderson instructed agency heads to cap their requested funding increases at no more than 2% for next year’s budget, telling them “this is not the year to ask for significant investments from the General Fund.”

Agency funding requests are due next month, which the Hobbs administration will reference as they draft an FY2027 Executive Budget. Governor Hobbs will unveil that plan in January when lawmakers reconvene at the State Capitol.

Why is the State having to tighten its fiscal belt? Here’s One hint: It’s Big and Beautiful.

An array of tax cuts and other provisions included with H.R. 1, which President Trump signed into law in July, is projected to cost State coffers over $380 million next year alone. Governor Hobbs’ spox savaged the new law, saying it “slashes funding for critical services.”

State spending has been a see-saw affair in recent years. General Fund spending, which supports key State services, was down 5% in fiscal 2022, up 21% in 2023, up 10% in 2024 and down 6 percent a year ago. The spending plan signed into law by Governor Hobbs in June increases expenditures by nearly 9% this year.