Veridus Advisory: Legislative leaders, Gov. Hobbs announce AZ budget deal

Dear clients:

Following weeks of negotiations, it appears a bipartisan State budget deal has been reached between legislative leaders and Governor Katie Hobbs.

The FY 2026-27 spending package totals nearly $18.3 billion, a compromise between the $18.7 billion plan the Governor proposed in January and the $17.9 billion plan approved by GOP lawmakers last month (and subsequently vetoed). It remains TBD whether the bipartisan caucus can hold together, but we’ll find out quickly: the budget is scheduled to be heard in a joint session of the House and Senate Appropriations committees Wednesday morning, before advancing to the full chambers on Thursday.

Details are still emerging, though political positioning has already begun as both parties tally victories in the budget package. In short, neither side got everything they wanted.

To wit:

• Republican legislators are celebrating that the plan includes full conformity with federal tax changes, meaning Arizonans will receive $1.45 billion in tax cuts over three years.

• Those cuts will be paid, in part, via a 3-year pause in tax incentives for new data centers - a policy priority of Governor Hobbs. 

• The plan includes stricter eligibility requirements for Medicaid and food stamp program enrollees, as sought by Republicans.

• However, legislative Democrats say the plan also invests $235 million in low-income food assistance, supports K-12 education and spares throwing tens of thousands of Arizonans off welfare, as was initially proposed.

For longtime Capitol-watchers, the traditional budget axiom is that “it has to fall apart before it can come together.” For now, though, it looks like this spending plan is steaming ahead.

We will know more over the next 48 hours, and will keep you informed of developments.

Sincerely, 

The Veridus team