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Democratic Gov. Katie Hobbs delivers her State of the State address on Jan. 9. Hobbs and the Republican-controlled legislature are on a collision course after they laid out diametrically opposed plans for the state budget this week. (Capitol Media Services photo by Howard Fischer)
Arizona’s Democratic governor and Republican-controlled legislature are on a collision course after they laid out diametrically opposed plans for the state budget this week.
In a $17.1 billion budget released on Friday, Gov. Katie Hobbs made bold proposals on some of the most contentious issues in state politics, including repealing Arizona’s universal Empowerment Scholarship Account program (ESA), better known as school vouchers, and spending most of the state’s more than $2 billion surplus carried over from the prior fiscal year to fund policy priorities from education to housing.
Republicans, for their part, have said they want to pass a “continuation budget” that would mirror the $18 billion budget signed last year by former Gov. Doug Ducey, a Republican. And they’re likely to mount a fierce resistance to reversing the universal ESA expansion, which was a signature policy achievement for the caucus last year.
“Repealing ESA is obviously a non-starter,” said Rep. John Kavanagh, R-Fountain Hills, on Friday morning.
“With the state of the national economy in limbo, a continuation budget is the fiscally prudent, conservative approach for Arizona to safeguard essential governmental services,” legislative Republicans said in a joint statement on Thursday afternoon.
Allie Bones, the governor’s chief of staff, said Hobbs’ budget proposal is a “starting point” and they expect to negotiate with lawmakers as the legislative session unfolds. But she said a continuation budget isn’t something the Hobbs team is interested in.
“The governor has been very clear that her door is open for anybody who wants to work to find solutions for the people of Arizona, and a continuation budget is not working for the people of Arizona,” Bones said.
The competing proposals come as Arizona enters its first legislative session with divided party power in state government in more than a decade. And the wide gap between both sides’ initial offerings suggests that the governor and the legislature may have several months of tough negotiations ahead.
The spending programs in Hobbs’ budget include several education initiatives: a $200 million increase in annual base funding for public schools; $520 million in one-time funding for school facilities; and $80 million for college scholarships. There’s also $150 million for the Housing Trust Fund; more than $165 million for the Department of Economic Security; $254 million to boost public employee salaries.
On top of the spending, a pair of proposed tax reforms items would cut into state revenues. Hobbs wants to provide a $100 per child annual tax credit for low-income families and exempt diapers and feminine hygiene products from state sales tax. Hobbs’s administration officials predict repealing the universal voucher program (officially Empowerment Scholarship Accounts, or ESAs), would save about $144 million per year.
The proposal for fiscal year 2024, which begins on July 1 of this year, would be smaller than the budget signed by Ducey six months ago. And Hobbs’ team projects that figure declining in coming years – to $15.8 billion in fiscal 2025 and $15.7 in fiscal 2026 as one-time spending programs expire.
The budget Ducey signed last year for fiscal 2023 is Arizona’s largest budget to date and was the result of a last-minute bipartisan budget deal that included additional education funding pushed by Democratic lawmakers.
In a presentation to journalists on Friday, Hobbs administration officials said Arizona’s economy is strong, but warned of the state’s high inflation and predicted an economic slowdown or recession beginning this year. Their plan to address the headwinds on the horizon in the fiscal 2024 budget is to add another $250 million to the state’s rainy day fund, which would bring the fund up to $1.6 billion.
The governor’s office briefed Democrats on the budget proposal on Thursday and were set to give a presentation to Republicans on Friday morning, after meeting with journalists, officials said.
Rep. Andres Cano, D-Tucson, the House minority leader, praised Hobbs’ budget. “Gov. Hobbs has come forward with a fiscally responsible and balanced budget that makes game-changing investments in Arizonans,” he said in a statement provided by a spokesman.
Republicans have also offered their own ideas for tax breaks this term, but they differ from the cuts proposed by Hobbs. They’re proposing eliminating rental taxes and food taxes throughout the state.
If both Hobbs’ budget proposal and the GOP’s suggestion of a continuation budget represent opening salvos in what could be a lengthy budget fight, then the question hanging over this week’s propositions is where and how the two sides will compromise. The coming weeks and months are likely to be filled with efforts to create or eliminate leverage in budget negotiations.
Signing a continuation budget, for example, would eliminate a bargaining chip that Hobbs currently holds. With the state government funded for another year, Republican lawmakers might be content to stonewall any other spending proposals the governor puts forth.
Sen. T.J. Shope, R-Coolidge
Sen. T.J. Shope, R-Coolidge, insisted that’s not the plan.
“We’re talking about something that we know is not going to be the finished product,” Shope said on Friday, speaking about the continuation budget proposal.
“Legislators still have their priorities as well. There are numerous spending bills that are being introduced, so I don’t think that those folks are going to just give all those up,” he added.
On the other side, Hobbs’ proposal to repeal the ESA expansion looks like an effort to gain leverage by putting a major Republican priority into play in the budget negotiations.
Still, the Hobbs team insisted that it’s not just a stunt.
“We think it’s important to (show) what could be possible if we made a true investment in public education,” Bones, the governor’s chief of staff, said.
Arizona Capitol Times reporter Camryn Sanchez contributed to this report.
This story has been corrected to reflect the size of the fiscal year 2023 budget: it was $18 billion, not $15.7 billion. Former Gov. Doug Ducey’s budget proposal for fiscal 2023 was $15.7 billion.
Regardless of where students attend school, public school private school or homeschool with the ESA they are all getting the exact same amount of government money for each student period. Going after the ESA is basically wanting to send homeschooled children and private school children back to public schools, which they know isn’t going to happen so that’s basically just stealing the allocation for those students to give it to the public school students