Gov. Katie Hobbs is entering her fourth and final legislative session of her first term — and an election year that could decide whether she gets another term — with a focus on affordability, education and the Colorado River. The governor sat down with the Arizona Capitol Times ahead of the session’s Jan. 12 opening day to discuss her priorities.

Questions and answers have been lightly edited for style and clarity. 

What issues absolutely need to be addressed this session?

So Proposition 123 renewal, that’s a priority for me. I know there’s a lot of education folks in the community who consider it a priority, and it seems to be emerging as a priority for the Republicans as well, especially given our challenging budget situation. It’s a way to just give more dollars to our public schools that need it without costing taxpayers anything. What I hear from Arizonans, and thankfully, it sounds like Republicans have gotten the message too, is that we need to do what we can to lower costs. So you’ll hear more about proposals for that in my agenda, and hopefully, there’s a lot of room to work with Republicans on those things. And then, potentially (we) will need legislative approval of a deal that gets done … on the Colorado River post-2026.

Where do negotiations stand on Prop. 123?

I haven’t been directly involved yet, so I don’t have specifics on that. Given our budget situation, I can’t imagine wanting to leave money on the table that’s going to help fund public schools, especially given that (Republicans) haven’t been willing to make any reforms to the now-billion dollar (Empowerment Scholarship Accounts) entitlement program.

Will you, once again, propose guardrails for the ESA program?

Absolutely, and I hope this is the year that Republicans decide it’s time to take action to bring some accountability there. We’ve seen through multiple different reports that it is a program that is ripe with abuse and fraud, and so far from the original intent of helping kids with disabilities and failing schools that I don’t know how they keep defending it. 

Affordability is top of mind for all lawmakers this year. What is your office proposing to address it?

The first thing, and I hope it’s the first bill that the Legislature sends me, is middle-class tax cuts, the pieces of conformity with the federal tax cuts that will benefit most Arizonans right now as they’re beginning to file their taxes. So the greater standard deduction, the tax exemption on overtime and tips, a senior tax credit. Those are the things I included in my executive order, and I think they will provide immediate relief to Arizonans. I know the Republicans very likely want to do full conformity. I think both these tax cuts and the full conformity come with a big price tag, and we need to negotiate how that’s going to be paid for in the budget, the piece for corporations and the wealthy.

Republicans have proposed a special session on tax conformity. Have there been any more conversations on that?

If it makes sense to do a special session, sure, but there’s no reason we can’t just do it in regular session with an emergency clause, so that it goes into effect right away.

This year will be a difficult budget year. How are you planning to address the shortfalls caused by federal spending and tax cuts?

It was challenging to craft this year’s budget, given the cuts we know are coming and those that have already been put in place. I’m actually really proud of the budget, which we’re going to present that is balanced, that continues to invest in important areas for Arizonans and addresses some of the affordability challenges we know Arizonans are facing. You’ll hear more details on Monday, and see them next Friday. But we’ve proposed specifically the Arizona Affordability Fund and a housing acceleration fund to build more affordable housing. So those are two of the things I think will really help Arizonans with their energy bills, and then getting more housing built for sure.

What are you hoping to accomplish on groundwater conservation this year?

One of the things that we’re proposing is a water usage fee on data centers, and that will create a fund to really supercharge some of the conservation efforts that will need to happen. We’re looking at the possibility of another (active management area) in La Paz County. So more to come on that. And I think the Colorado River is really going to dominate the water conversation this year, but I know that we’re going to continue to see rural leaders pushing for more rural groundwater reform.

You’re also looking at ending tax incentives for data centers. Can you talk more about that?

I think we just have to find the right balance. We, as a state, made a strategic decision to incentivize data centers. We’ve done that really well. We’re the top two markets in the world for data centers. And there are concerns about water use, concerns about energy usage, and concerns in communities. You saw a very contentious vote in Chandler and a previously contentious vote in Tucson. So we need to strike the right balance. And I think ending the tax incentive is the right way to do that. We’re not telling cities what they can or can’t do. And I think you see bipartisan support for doing that.

You have eight agency nominees awaiting confirmation. Are you confident they will be confirmed this session?

Our staff has continued to reach out to Sen. (Jake) Hoffman, and had some good conversations. That could be meaningless. I’ve nominated qualified people who are willing to put themselves out there as public servants to run these state agencies that provide important services to Arizonans, and I will continue to fight for them. We are working with them to prepare for contentious hearings. And (Department of Environmental Quality) Director (Karen) Peters went through (the committee) last year, hopefully they’ll get her through Senate confirmation early on.

Republicans will try, and have already tried, to make this session about your reelection campaign. How will you stay focused?

There’s always going to be political distractions, whether it’s an election year or not, and I’ve always tried to just stay focused on what I think is the right thing for Arizonans. Going back to where I started, everyone’s getting the message that affordability is an issue, and so I think there’s a lot of opportunity to find common ground there. And it’s not just an issue in Arizona, it’s an issue nationally, and I am laser-focused on ways that we can do that at the state level.