A note to our readers: Today’s round-up highlights Gov. Katie Hobbs’ State of the State Address, as well as her budget proposal. Facing a growing deficit, Hobbs and lawmakers will need to find how to balance funding their priorities with cutting back on spending.
As a reminder, these round-ups are prepared by 1912 analysts. Unlike our regular commentary and opinion contributions, round-ups are straight news — we present the situation as clearly as possible, and leave you, the reader, free to make up your own mind. Enjoy!
In what was an eventful opening week for state lawmakers, the two biggest stories come from the Office of Governor Katie Hobbs. On Monday, Hobbs delivered her second State of the State address, later releasing her plan to combat Arizona’s current growing budget deficit on Friday. Also last week, the Arizona Joint Legislative Budget Committee (JLBC) revised the state’s expected FY24 budget deficit from around $400 million to $835 million, intensifying interest in the Governor’s plans for funding the government this year and beyond.
Given the requirement for state lawmakers to pass a balanced budget, Democrats and Republicans paid keen attention to Hobbs’ actions and statements this week. She will almost assuredly find agreement with those in her own party on issues such as reining in Empowerment Scholarship Accounts (ESAs) and expanding healthcare options, and will venture to find some common ground with Republicans on issues such as housing, water, and immigration.
The State of the State
In her Monday address before state lawmakers, Hobbs outlined actions taken by her administration in 2023, in addition to forecasting policy priorities for the year ahead. Amid skyrocketing unaffordability in the state’s housing market, a continuing crisis at the border, and a projected $1.7 billion two-year budget deficit, Hobbs highlighted areas for potential bipartisan collaboration moving forward.
During her speech, she commented that she was set to prioritize: (i) “ensur[ing] Arizona’s economy works for middle-class families”; (ii) “taking action on securing the border where the federal government has so clearly failed”; (iii) “creating good-paying jobs for working-class Arizonans”; (iv) “lower[ing] costs on everyday items”; (v) “that our water future is secure”; (vi) “that our schools are safe and places of opportunity”; (vii) “that healthcare is accessible for those who need it and when they need it”; and (viii) “that our rights and freedoms are protected.”
Border security and immigration
Hobbs discussed the importance of state government action given the federal government’s “ongoing failure to secure our southern border – a failure decades in the making under both Democratic and Republican administrations.” She then highlighted the need to “find real solutions, support law enforcement, first responders, and community leaders” at the forefront of the border issue, before subsequently calling on “Washington to do its job to secure our border.”
“One needs to look no further than the decision to close the Lukeville Port of Entry, which did nothing to actually solve our immigration crisis but did hurt businesses and families. My administration worked tirelessly to reverse this short-sighted action by the federal government and took extraordinary steps – including sending the National Guard to the border – to bring security and common sense to this situation.”
“This year, [leaders on the border] asked for boots on the ground, improved communications systems, resources to combat human trafficking, and the latest technologies to keep communities on both sides of the border safe. And I delivered. By refusing to waste money on cheap political stunts, we awarded over eighty-four million dollars to help border communities manage the massive influx in migrants.”
“I launched Operation SECURE, creating a Border Coordination Office within the Arizona Department of Homeland Security. This session, I’m seeking ongoing funding to better coordinate our border response and continue fighting this humanitarian, economic, and enforcement crisis. This new funding will expand the Operation with critical investments in border security, as well as resources to intercept the flow of fentanyl.”
Budget
Given the Friday release of her budget, Hobbs only briefly described her plans to address the current budgetary shortfall during her speech. With that being said, Hobbs emphasized the need to “find common ground, focus on real solutions, and strengthen our state’s balance sheet.” Hobbs subsequently commented that she “look[s] forward to working with leadership and members from both sides of the aisle in the months ahead to get the job done.”
“[W]e will not shirk our responsibilities and we will not kick the can down the road for our children and the next generation to solve. And we will not cut spending on vital services.”
“We will rein in wasteful spending without sacrificing public safety and public education. We will establish guardrails on unaccountable programs without hurting hard-working families. And we will tighten our collective belts through increased efficiencies and innovation without gutting programs that support small businesses, seniors, and those in need.”
Economy
Despite the state’s budgetary issues, Hobbs proudly championed the strength of the current job market, as well as “record investment” in the Arizona economy. During her speech, Hobbs touted the importance of investments in child care and higher education in order to increase access to job opportunities for Arizonans. Additionally, Hobbs touched on proposed investments in: (i) Future48 workforce accelerators, which would “prepare thousands of Arizonans” for jobs in sectors such as semiconductors, renewable energy, aerospace, and defense; (ii) the Build it AZ Apprenticeship Initiative which seeks to “double the number of apprentices in construction and the trades”; and (iii) “building the infrastructure, and deploying the technology needed to expand high-speed internet” in communities across the state.
Also, Hobbs emphasized her support for the continuation of the Arizona Commerce Authority (ACA) as she applauded the economic development group, among others, for its “tireless efforts to attract new, high-quality jobs – jobs that can be life-changing for families and transformational for communities.”
“Let us celebrate that today, more Arizonans are employed than at any point in our state’s history…Just as impressively, our state has attracted thirty-two billion dollars in foreign investment – more than California, Texas, or any other state in the nation.”
“Arizona leads the way in attracting the high-tech and advanced manufacturing businesses that are building our nation’s future. I’m proud to say these achievements were possible because of partnerships between the public and private sectors.”
“High-speed internet is crucial for businesses, healthcare, and education, particularly for our rural and tribal communities who are on the frontlines of our rapidly changing economy. We must build fast, reliable, and affordable broadband access for every Arizonan no matter where they live.”
Housing
Hobbs discussed potential effects of the current “housing affordability crisis” on Arizonans of all backgrounds, adding that the current situation “has erased feelings of prosperity for too many.” Looking to the future, Hobbs emphasized that she would “work with any member of this Legislature to find innovative and effective solutions to help Arizonans access the homes they and their loved ones need to thrive.” Already in 2024, Hobbs announced plans to invest $89 million in affordable housing, and homeless response initiatives.
“We directed one hundred and fifty million dollars to keep more Arizonans housed through rental assistance programs; allocated money to provide access to legal aid for up to one million more Arizonans who are facing eviction or housing instability; and made a historic investment to create more housing that’s actually affordable for middle-class families.”
“Further, we accelerated the awarding of low-income housing tax credits that enabled the Arizona Department of Housing to maximize the building of affordable housing across this state.”
“[T]oday I am announcing the Arizona Is Home Mortgage Assistance Program. This program will help working-class families throughout the state with down payment assistance and mortgage interest rate relief.”
“And we will enhance homebuyer assistance for our state’s rural communities by providing access to less costly home loans for working-class households.”
Water
Unsurprisingly, Hobbs’ speech focused heavily on water issues, as she pondered “how to protect what we have today, how to navigate the challenges ahead, and how to maximize opportunities when mother nature offers them.” Moving forward, Hobbs emphasized the fact that she will “take decisive action to protect Arizona’s water future.” Further, she highlighted a water conservation agreement made with Nevada and California last year, as she reiterated the importance of “ensur[ing] our water future is secure for tomorrow and for generations.”
“We have not put the decades-long drought in our rearview mirror yet. We must always strive to do more through expanding public-private partnerships, increasing conservation, exploring new technology, and maintaining a steadfast commitment to strengthening protections where needed.”
“The bipartisan Water Policy Council I created last year – comprised of water leaders from across the state with a wide range of experience – has embodied this spirit with a series of commonsense recommendations to secure our water future.”
“[W]e must have the courage to take action where others haven’t and empower rural Arizonans to have a say in how their water is used. And for too long, we have allowed development that skirted our smart and commonsense consumer protections for water availability. We must close the loopholes that allow build-to-rent and wildcat developments.”
“I have directed the Arizona Department of Water Resources to finalize a new pathway for water providers and communities who have historically relied on groundwater resources. This new Alternative Designation of Water Resources program will provide an opportunity for these entities to achieve a one hundred-year assured water supply by contributing new water sources and reducing groundwater pumping – which will help ensure our future growth is both smart and sustainable.”
Education
Hobbs’ remarks emphasized the need for continued public school investments to “ensure Arizona truly is the best place to raise a family.” For example, she called for a “stronger” Prop 123–one that gives public schools “another decade of funding certainty.” Also, Hobbs announced plans to work with the Legislature to: (i) establish an engineering-focused medical school at ASU; (ii) double the size of the U of A’s medical schools; and (iii) create a medical school focused on serving rural and tribal communities at NAU.
Long critical of the state’s Empowerment Scholarship Account (ESA) program, Hobbs’ address emphasized the need to increase “transparency and accountability on behalf of Arizona parents and all taxpayers.” Specifically, Hobbs outlined her intention to reform the program by “deliver[ing] common sense solutions like ending the luxury spending, keeping our children safe by requiring background checks for educators, and expanding the authority of the Auditor General,” in addition to “requir[ing] recipients to have attended a public school for at least one hundred days.”
“Without question, we must give teachers a raise. But we must also hear the Arizonans asking us to do more. Let’s take this opportunity to increase compensation for teachers and the support staff who are all critical for students’ success. And let’s take the necessary steps to invest in school safety.”
“It is our responsibility as stewards of this state to put in place guardrails to ensure taxpayer dollars dedicated to education are used properly. Without these guardrails, waste, fraud, and abuse take root and thrive. That’s why we must take action to bring transparency and accountability on behalf of Arizona parents and all taxpayers.”
“[W]e must also recognize many of our actions have been one-time investments. We must seize the opportunity as our budget outlook improves in future years to strengthen support for efforts such as scholarship programs for students from low-income households; programs that provide students the opportunity to earn college credits while still in high school; and other initiatives that offer students the chance at a better future through education.”
Healthcare
As part of the address, Hobbs discussed several healthcare-related initiatives she intends to prioritize this year. Most notably, She called on the state Legislature to “strengthen [the] state’s standards for sober living homes and long-term care facilities, and significantly increase penalties for bad actors.” Additionally, Hobbs discussed her upcoming proposal that would “driv[e] down the price of prescription drugs.” Further, Hobbs emphasized the importance of expanding access to healthcare for children, especially as “federal efforts that raised so many kids out of poverty just a few years ago are phasing out.” In her Friday budget release, Hobbs followed up on the topics of her address as she announced initiatives related to long-term care, as well as prescription drug affordability.
“[T]oo many long-term care facilities are failing some of the most vulnerable with devastating effects. Physical and mental abuse, neglect, exploitation, and poor quality of care have severely hurt, and in some tragic cases, led to the deaths of too many Arizonans…We should also be outraged at the separate, but just as infuriating, sober living home scandal that ruined countless lives and cost taxpayers hundreds of millions of dollars.”
“No family should have to go bankrupt to care for a sick child. To combat this disturbing trend, we expanded KidsCare eligibility for thousands of Arizona children – enabling them to receive the care they need whether it’s routine check-ups or life-saving procedures without forcing their parents into mountains of debt or heartbreaking GoFundMe campaigns.”
“Let’s continue working together to find new and innovative ways to lower the costs of doctor visits, medical exams, and other quality of life measures that will provide relief for Arizona families today.”
Abortion
During her speech, Hobbs stated that she “refuse[s] to back down in the face of those who want to criminalize doctors and outlaw abortion.” Subsequently, Hobbs commented that “Arizonans across the political spectrum agree” on: (i) repealing the 1864 abortion ban; (ii) passing the Right to Contraception Act; and (iii) preventing the government from “collecting and publishing data on every abortion in Arizona.”
“I truly believe that fighting for Arizona families means defending every individual’s right to make their own reproductive healthcare decisions. I speak for millions of Arizonans with a clear message: These deeply personal decisions should be made between a woman and her doctor – not politicians and the government.”
“As I have said before and will continue to say again and again, reproductive freedom is not a partisan issue. Women deserve to have access to the healthcare we need; we deserve to have our individual rights protected; and we deserve to make the personal decisions we deem best for ourselves and our families.”
FY2025 budget proposal
On Friday, Hobbs announced the release of her FY2025 Executive Budget Proposal. While many of the items in Hobbs’ proposal are likely to be left out of the final version due to the Legislature’s Republican stranglehold, the budget provides a glimpse into the governor’s policy priorities, as well as areas where she may seek cuts moving forward. Hobbs’ $16.2 billion state budget includes $1.5 billion in proposed cuts, intended to help “close the current budget shortfall.”
Though the Joint Legislative Budget Committee (JLBC) recently announced that the aforementioned deficit sits around $1.7 billion for FY24-25, Hobbs’ budget only accounts for roughly a $1.4 billion shortfall. As part of her proposed budget cuts, Hobbs is targeting the state’s ESA program and the “school tuition organization” program, which helps Arizona families in accessing tax credits for private school tuition. Also, the budget would roll back more than $400 million in various road projects throughout the state. Another notable measure includes proposed 1% cuts to both the Executive and Legislative branch budgets.
In addition to cuts, Hobbs’ FY2025 Executive Budget is specifically focused on: (i) The Economy; (ii) Public Safety, Border Security, and Corrections; (iii) Healthcare Access; (iv) Housing and Human Services; (v) Improving Education; (vi) Resilience, Water, and the Environment; (vii) Infrastructure; (viii) Affordable and Thriving Economy; (ix) Good Government; and (x) Fiscal Response to the COVID-19 Pandemic and Other Federal Funds. Hobbs’ budget announcement also highlights the following programs and initiatives:
Child care: Hobbs commented that many in Arizona are “struggling with access to and the affordability of child care,” before announcing a proposal to invest $100 million in child care for 5,000 qualifying families. The proposal would seek to “[l]ower barriers to enrollment” for families, while also offering “special incentives to child care providers.”
Arizona is Home Program: The $13 million Mortgage Assistance Program, which is a joint initiative involving both the Arizona Department of Housing (ADOH) and the Arizona Industrial Development Authority (AZIDA), specifically “consists of enhanced down payment assistance and mortgage interest rate relief to qualifying low, moderate, and middle-income first-time homebuyers.”
Operation SECURE and the SAFE Initiative: Governor Hobbs requested $1 million for Operation SECURE, which calls for the Department of Homeland Security to “monitor border operations, mitigate impacts of mass migration in the State’s border communities, and address humanitarian issues. Also, Hobbs’ plan calls for $15 million to “combat[] the fentanyl epidemic” with the SAFE Initiative.
Long-term care: Calling for “more accountability in healthcare settings,” Governor Hobbs is seeking nearly $25 million as part of a Healthcare Licensing Reform proposal that would “root out fraud, waste, and abuse in healthcare settings and enact common sense reforms to protect vulnerable Arizonans.” Mainly, the initiatives would provide for the Arizona Healthcare Cost Containment System (AHCCCS) to implement “targeted behavioral health rate increases,” as well as to “incentivize participation in behavioral health quality improvement initiatives and activities.”
Prescription drug affordability: Hobbs’ budget asks for over $500,000 to establish a Prescription Drug Affordability Division at the Department of Insurance and Financial Institutions (DIFI). Most notably, the proposal would mandate that Pharmacy Benefit Managers (PBMs) obtain approval from the Prescription Drug Affordability Division before implementing any price increases that go “beyond the rate of inflation.”
Natural resources: In total, Hobbs is requesting more than $73 million to help “secure clean air, reliable water, healthy forests, and resilient lands for the benefit of Arizona families, businesses, and communities.” Specifically, these natural resources provisions include $33 million annual investments in the Long-Term Water Augmentation Fund from FY25-FY27, and a $27 million “proactive forest restoration” investment intended to help prevent wildfires.
Higher education: For FY25, Hobbs’ proposal would grant state universities the authority to “issue new bonds” totalling $325 million. Additionally, the budget’s $46 million AZ Healthy Tomorrow initiative would “provide[] scholarships to low-income students” at ASU, NAU, or the U of A.
Lawmakers respond to Governor Hobbs
Democrats
Ahead of Hobbs’ speech, the Joint Democratic Caucus held a press conference where they unveiled policy priorities for the 2024 legislative session. The Democrats’ legislative priorities include: (i) Lowering Costs for All Arizonans; (ii) Improving Education and Investing in Children; (iii) Protecting Arizonans Healthcare and Personal Freedom; (iv) Protecting Our Water; and (v) Securing A Better Future for All Arizonans.
After Hobbs’ speech, Democrat Minority Leaders Representative Lupe Contreras and Senator Mitzi Epstein gave an interview where they offered their initial response. Specifically, the leaders applauded Hobbs for her comments on the border, echoed calls for “transparency and accountability” in the state’s ESA program, and emphasized that legislators “need a plan” for water.
In his release on the Governor’s budget, House Democratic Leader Lupe Contreras highlighted the importance of “continued investment in public education,” as well as an “additional focus on our affordable housing crisis and protecting our most vulnerable Arizonans.”
House Democratic Leader Contreras: “We applaud the Governor for producing a budget that protects the priorities that will drive our state forward and that our caucus has consistently championed for our communities – public education, affordable housing, childcare for working families and vital services for the most vulnerable Arizonans. She is listening and leading. However, decades of irresponsible Republican tax policies and expansion of ESA vouchers with no oversight have created a revenue shortfall that appears to be ballooning. Even in a strong and growing economy, our job gets tougher every day. We will have to work very hard and together to fulfill our obligations to help our most vulnerable populations, to fund our public-school students and teachers, to ensure public safety, to help our overburdened border communities and to secure our incarcerated populations.”
Republicans
Responding to Hobbs’ address, House Speaker Ben Toma and Senate President Warren Petersen highlighted “grave concerns” regarding the “direction the Governor and Democrats want to take our state.” Later in the week, Toma and Petersen were interviewed by AZPBS as they defended the ESA program, and also emphasized the need for a deal at the border.
Senator Jake Hoffman–who serves as leader of the state’s Freedom Caucus–introduced legislation that would defund the Arizona Commerce Authority (ACA). Hoffman’s SB1044 comes as Governor Hobbs praised the public-private partnership in her speech, stating that “there’s no question we must pass continuation” of the ACA.
Senator Hoffman: “The mission of supporting the creation of jobs has never been called into question. Unfortunately for the people of Arizona, the Arizona Commerce Authority has demonstrated gross mismanagement and negligence in the execution of that mission. The Auditor General's report details incredibly concerning failures in oversight and accountability with taxpayer dollars.”
In their response to the Governor’s “wildly unrealistic partisan” budget, both Senate and House Republicans announced their intentions to “block [Hobbs’] efforts to raise taxes and cut school choice.” Specifically, Republican lawmakers criticized Hobbs over her decisions to “eliminate ALL tax credits available for donations to School Tuition Organizations (STOs),” as well as to “remove half of the students enrolled in Arizona’s Empowerment Scholarship Account (ESA) program” in her FY2025 Executive Budget Proposal. Additionally, Republicans wrote that Hobbs’ budget “erroneously assumes a $463 million shortfall in the current fiscal year,” before explaining that “year to date revenues are already nearly $500 million less than anticipated.”
Senate Appropriations Chairman John Kavanagh: “These elements in her proposal are dead on arrival with the Republican Majority. Her grandstanding of bipartisanship during her State of the State Address is a far cry from the reality of this budget proposal, as her funding cuts strictly target Republican priorities.”
House Appropriations Chairman David Livingston: “Like last year’s proposal, the governor’s budget is an unserious mess. Her revenue and enrollment predictions don’t reflect reality, and her solution to the deficit proposes cuts to K-12 and water investments. We understand most of this is meant to appeal to her base. When she is willing to engage more seriously, Republicans are ready.”
In their January 13 newsletter, the Senate Republican Caucus outlined their week-in-review, with a focus on their rebuttal to the Governor’s State of the State address, as well as on the pending budgetary process.
Senate President Warren Petersen: “The State of the State Address portrayed a Governor who supports securing our border and ending the lawlessness caused by Joe Biden’s broken immigration system. Although it was encouraging to hear, the reality is her actions have not matched her rhetoric…However, we remain optimistic about having a productive session. Our plan from the Republican Majority for 2024 is one that any Arizonan can get behind, and prioritizes issues such as securing our border, lowering gas prices, and increasing teacher pay.”
Senator Jake Hoffman: “Hobbs has rolled out a plan on ESAs, which merely proposes solutions in search of a problem and manipulates facts to please her union boss allies. I hosted a press conference at the Capitol this week, and ensured the public that Legislative Republicans will do everything in our power to give your children the greatest potential for opportunity, prosperity and a vibrant life. Rest assured that any plan to destroy school choice will be dead on arrival at the Legislature.
In the headlines
Arizona House unanimously passes pro-Israel resolution — without the support of all members (January 9, 2024) - “The Arizona House of Representatives unanimously passed a resolution Monday in support of Israel amid its ongoing war with Hamas, despite opposition from a small contingent of Democratic lawmakers who kept quiet about their objections.”
OPINION: Some lawmakers want to dismantle the agency that made Arizona an economic powerhouse (January 11, 2024) - “Last year, we attracted more foreign investment than any state, we’re No. 1 for new jobs in the all-important semiconductor industry, and we boast one of the fastest employment growth rates in the country.”
Phoenix passes ordinance promising fair wages for construction workers on city-funded projects (January 9, 2024) - “[Phoenix City Council’s] prevailing wage ordinance that was passed gives the workers a basic hourly rate based on their trade, but it’s only for construction employees working on city-funded projections. Supporters say it’s a tool to make sure there are level wage standards.”
Canadian ambassador visits Arizona (January 9, 2024) - “Canadian Ambassador to the U.S. Kirsten Hillman traveled to Arizona for the first time as part of a program sponsored by the Arizona Commerce Authority and the Phoenix Committee on Foreign Relations…She met with multiple legislative leaders and the governor to point out all of the successes with the relationship and to double down on what is working.”
Arizona’s first extreme heat preparedness plan is on the way thanks to ASU, state officials (January 9, 2024) - “The extreme heat preparedness plan is an initiative from the Governor’s Resiliency Office. And it is tapping into Arizona State University’s knowledge exchange for resilience for development. ASU said its role is to share knowledge and create solutions for all kinds of issues that help build a more resilient community, including heat resilience.”
Phoenix asks DOJ to let city reform police without any federal oversight (January 11, 2024) - “Phoenix officials are asking the U.S. Department of Justice to sign an agreement that commits the city to reforming its Police Department without federal oversight from a judge or independent monitor.”
Phoenix considers partial ban on homeless encampments (January 11, 2024) - “[The City Council’s ban would] prevent camping near schools, day cares and city parks. The potential ban was discussed during a public safety subcommittee meeting last week. It would be modeled after an ordinance passed in San Diego in June preventing homeless encampments in public areas.”
House subcommittee hears testimony on Arizona homelessness crisis (January 12, 2024) - “A state House of Representatives subcommittee met Thursday to address Arizona’s growing homelessness crisis. Legislative efforts have amplified following court orders to clear the homeless encampment called ‘The Zone’ in downtown Phoenix last year.”
US airstrikes on Yemen: Here's what Arizona's members of Congress are saying (January 12, 2024) - “The U.S. and U.K. airstrikes on more than a dozen sites in Yemen used by the Iranian-backed Houthis have split Arizona’s congressional delegation. More than 60 targets at 16 sites in Yemen were hit Thursday by U.S. airstrikes, which President Joe Biden said were meant to show the Houthis that the group's attacks on commercial ships in the Red Sea wouldn’t be tolerated by the United States and its allies.”
This round-up was written by Jared (JJ) Cichoke. He currently works as a Policy Analyst after previously holding various roles with Senator Martha McSally (R-AZ) and the Senate Committee on Indian Affairs. A graduate of Vanderbilt University, he recently moved to Arizona after spending nearly his entire life in Portland, Oregon.