Veridus Advisory: AZ House passes FY ’27 budget plan; proposal’s fate murky

Dear clients:

Wednesday afternoon, the Arizona House of Representatives via a party-line vote advanced the GOP majority’s spending plan for fiscal year 2027. The proposal was  introduced earlier this week. 

The $17.9 billion House spending plan is $800 million smaller than the executive budget unveiled by Democratic Governor Katie Hobbs in January. She has not formally pledged to veto the legislative package, but expressed serious reservations given the proposal’s deep cuts to state services and programs.

It remains unclear if the House spending plan will reach the Governor’s desk at all. With Democrats opposing the proposal en masse, opposition from even two Senate Republicans would be enough to sink the plan.

Highlights of the House budget plan:

• Nearly $1.5 billion in tax cuts by fully conforming Arizona’s state tax code with H.R. 1 - President Trump’s “Big Beautiful Bill”;

• No new discretionary spending, and 5% across-the-board cuts to state agencies, excluding K-12 and public safety;

• Fully funds K-12 education, despite the absence of Proposition 123 renewal;

• Cuts $100 million from economic development and employer recruitment initiatives, including over $60 million from the Arizona Commerce Authority and $8 million from the Arizona Office of Tourism;

• Ends tax credits and a sales-tax exemption for the purchase of solar equipment

• Adds $45 million to fund childcare for underserved Arizonans;

• Provides a 4% pay stipend for correctional officers.

The package also requires AHCCCS enrollees to prove eligibility more regularly, and includes work requirements for food stamp recipients. Notably, House Republicans do not include any cuts or reforms to Arizona’s ESA program - something Governor Hobbs earlier proposed.

We will keep you informed as budget deliberations continue.

Sincerely, 

The Veridus team