Arizona lawmakers and Gov. Katie Hobbs reach agreement on $18.29 billion fiscal 2027 budget
Arizona’s top lawmakers and Gov. Katie Hobbs said Tuesday they have finalized a bipartisan agreement on an $18.29 billion state budget for the coming fiscal year, narrowly ahead of the state’s July 1 deadline. The package includes more than $1.4 billion in tax relief phased over four years and a mix of new investments and spending reductions lawmakers said balance competing priorities across public safety, education, social services and disaster response.
Hobbs, a Democrat, framed the tax relief as targeted help for working families while emphasizing that the deal preserves funding for what she called responsible investments in job creation, education and water security. In a statement accompanying the announcement, she described the agreement as a compromise that prioritizes “delivering real results for our communities,” saying it will “put money back in the pockets of Arizona families and lower costs, make our communities safer and protect the vital services that Arizonans rely on.” She also indicated she will work with legislators in both parties to finalize the measures over the coming days.
One technical but consequential change in the package is an update to the state tax code to mirror a federal tax-code revision enacted last year under President Donald Trump’s One Big Beautiful Bill Act. State leaders said that alignment will prevent the need for Arizonans to refile their 2026 tax returns to reflect federal changes. Senate President Warren Petersen touted the move as part of the overall tax-relief effort, saying that by adopting the federal provisions at the state level and expanding relief for families the state is helping residents “keep more of their hard-earned money” while remaining competitive economically.
Republican negotiators laid out several specific spending adjustments and increases included in the agreement. Those items listed by GOP leaders include a $68 million reduction in ongoing net spending, $112 million designated for corrections operations, $23 million for victims of crime assistance, $58 million to support child safety operations and $10 million for wildfire suppression efforts. The deal also protects Arizona’s Empowerment Scholarship Account school voucher program and imposes a three-year moratorium on new sales tax exemptions for data-center projects — a point GOP and Democratic negotiators said responds to statewide concerns about targeted tax giveaways.
Democrats highlighted additional provisions that they said resulted from their participation in the talks. Among the items Democrats emphasized were $235 million for food assistance, $48 million intended to reduce childcare costs, and $66 million earmarked for public school textbooks, technology and transportation. The budget also fully funds Arizona’s Medicaid agency, according to Democratic leaders, and provides two years of free school meals for students from working families. Senate Democratic Leader Priya Sundareshan said simply that “this budget is better because Democrats fought for it,” reflecting her party’s view that the final package includes meaningful protections and benefits for vulnerable families.
The moratorium on new data-center tax exemptions drew praise from House Democratic Leader Oscar De Los Santos, who said the pause was necessary while many Arizona families contend with affordability challenges. “While Arizona families are struggling with the affordability crisis, billionaire-owned data centers should not be getting special tax treatment,” he said in a press release touting the deal’s provisions and the freeze on new exemptions.
Lawmakers expect to move quickly to finalize the agreement. The Legislature is scheduled to take up the budget bills on Thursday, a day after a Joint Appropriations Committee hearing on the spending package is set to be held. The deal follows weeks of negotiations after Republicans advanced a $17.9 billion spending plan in early May that Gov. Hobbs vetoed as an “unbalanced and reckless” partisan proposal. Senate President Pro Tempore T.J. Shope said the final agreement demonstrates that “budgets are ultimately about priorities and compromise” and argued Republicans engaged in the talks “focused on finding common ground without abandoning our principles.”
The timing of the deal comes amid a history of late budget resolutions in Arizona. By law, the state must adopt a spending plan before the new fiscal year begins July 1. Last year, Hobbs did not sign the state’s $17.6 billion spending plan for 2025-26 until June 27, a late signature that narrowly averted a government shutdown. With little more than three weeks until the current fiscal year ends, leaders on both sides said they will press to complete legislative work on the budget this week so appropriations are in place when the new fiscal year begins.
X (Twitter) Activity
Live searches on X for the budget agreement, @GovHobbs, @Warren_Petersen, and related terms show minimal social-media activity as of the Tuesday announcement. Engagement is limited largely to retweets of stories from Arizona news outlets such as @azcentral and @azcapitoltimes, with no viral threads, major verified-user commentary, or organized public initiatives evident.