Key Points:

• Hobbs vetoed House continuation budget

• Veto comes just days before government shutdown

• It is still unclear if Legislature can pass a budget before deadline

Gov. Katie Hobbs has vetoed the House’s proposed “continuation budget,” leaving legislators scrambling to pass a proposal before a government shutdown on June 30. 

The veto follows a contentious standoff between both chambers and the governor in which House and Senate leadership disagreed on which of the three budget proposals, two from the House and one from the Senate, should be passed along to the governor. 

Hobbs also vetoed the House’s first attempt at a budget, which passed the chamber on June 13 on a party line vote.

“I have long made clear that both of the partisan and reckless House Republican budgets are unacceptable. They gut public safety, slash health care for Arizonans, harm businesses, fail to lower costs, and leave our Veterans out in the cold. These unserious budgets are wrong for the people of Arizona,” Hobbs said in a June 25 statement. 

House members passed the continuation budget package, a proposal they deemed a compromise to allow for further negotiations, on a party line vote late on June 24. So far, the House has not voted on the Senate’s bipartisan budget, the plan Hobbs seems to favor, which passed last week. 

Republicans in the House say they don’t think the chamber has enough votes to pass the bipartisan budget, and the continuation budget was introduced as a last-resort measure to prevent a government shutdown. 

A continuation budget carries over the previous year’s budget with no new spending items and is used to maintain state operations. 

The House’s first proposal was a $17.3 billion budget drafted without negotiations from the Senate and governor’s office. The Senate did not immediately consider that budget and proceeded with their own $17.6 billion budget negotiated with the governor’s office.

House Republicans have consistently opposed the higher spending package. 

“This is the second time that the majority of the members in this body have expressed their concern on the spending habits of government; of waste, fraud and abuse, and we are sounding the alarm,” said House Speaker Steve Montenegro, R-Goodyear.

The Senate passed both House budget packages in two separate mass motions on June 25, bypassing the chamber’s rules in an effort to get both budgets to Hobbs’ desk as quickly as possible. Each budget was passed on a party line vote of 16-11.

House Appropriations Committee Chairman David Livingston, R-Peoria, said he had hoped the Senate would follow its procedural rules and wait to vote on the continuation budget later in the week.

Senate President Warren Petersen, R-Gilbert, criticized legislators opposing the bipartisan deal he and his caucus struck with Hobbs, accusing inexperienced legislators of being “hoodwinked by charlatans.” 

“One of the consequences of the charades is that we diminish our chances for success in the future. Another consequence is that we waste our most precious resource: our time,” Petersen said. “Members, let’s stop wasting our time. Let’s end the chicanery.”

The continuation budget is missing several key priorities that House Republicans included in their first budget, including pay raises for Department of Public Safety officers and transportation projects for Interstate-10 and State Route 347. 

House Minority Leader Oscar De Los Santos, D-Laveen, called the continuation budget a “colossal waste of time” that eliminates appropriations for public safety, child care, health care, and education compared to both earlier budgets that lawmakers have proposed. 

“This is a political partisan tantrum that is going nowhere,” De Los Santos said. 

Livingston said during a House Appropriations Committee hearing that both House and Senate leaders are working on alternative budget proposals with the governor’s office, but he hasn’t seen a deal that he thinks could succeed in gaining the governor’s approval other than the continuation budget. 

“This is (Hobbs’) last chance,” Livingston said. “We have a very basic budget to keep the lights on.”

Rep. Justin Olson, R-Mesa, said the continuation budget still has too much spending for his liking. The final spending number is a 5.7% increase from last year’s $16.1 billion budget and includes supplemental funding for some state agencies and programs. It also raises the funding formula for public schools by 2%, which is constitutionally required. Olson said the population and inflation rates in the state have grown by 4.1% from last year.

“We’re hearing tonight that that’s not enough. That is, in my view, fiscally irresponsible to grow government by a rate that is not sustainable,” he said.

While all Republicans in the House voted to pass the continuation budget, some criticized the process from GOP leadership in the House and Senate. 

Several members of the House and Senate Freedom Caucus have criticized the bipartisan budget and accused Senate GOP leadership of capitulating to Hobbs. 

“Make no mistake, the purpose of this bill is to go over to the Senate, to be voted out of the Senate and to be vetoed by Katie Hobbs at the 11th hour so that the Senate and others involved can wash their hands of the Senate-Hobbs budget,” said Rep. Alexander Kolodin, R-Scottsdale.

Kolodin also called the continuation budget “a reasonably conservative budget,” which earned his vote. 

Rep. Teresa Martinez, R-Casa Grande, called out House leadership for introducing the budget so late. Martinez was the House GOP whip under former Speaker Ben Toma in the previous two sessions, and she noted that the House also sent a continuation budget to Hobbs in February 2023. 

Hobbs also vetoed that budget.

All of this leads Arizona’s Legislature into the unsteady position of being dangerously short on time to produce an approvable budget package. While the Senate’s budget is most likely to find favor with Hobbs, it is still unclear whether the House will approve a measure they have yet to sincerely consider signing off on with so little time left.