Key Points:

• Key Republican lawmaker says he’s willing to wait until next year to reconsider a Prop. 123 renewal

• GOP lawmakers have not found consensus on the education funding measure

• Democratic Gov. Katie Hobbs is up for reelection this November and has prioritized a Prop. 123 renewal in her budget plan 

Gov. Katie Hobbs’ proposed budget includes nearly $300 million in funding for the renewal of Proposition 123, but Republicans at the Legislature have signaled that voters might not get the chance to vote on the renewal question this November.

House Education Committee Chairman Rep. Matt Gress, R-Phoenix, said on April 8 that he thinks the odds of a Prop. 123 deal getting done between Republicans lawmakers and Hobbs this session is “almost zero.”

Prop. 123 is an education funding mechanism that voters passed in a 2016 constitutional amendment. It increases the annual distribution from the State Land Trust Permanent Fund to public K-12 education from 2.5% to 6.9%, which is about $300 million annually, with the express purpose of raising teacher salaries. 

Prop. 123 expired in 2025, and lawmakers backfilled the education funding from the measure through the general fund. Hobbs and Democrats have proposed sending a Prop. 123 renewal to voters so the Legislature can restore the money that’s being backfilled to fund education. 

“The governor wants to tie Prop. 123 to the budget,” Gress said. “We do not think that’s a responsible play. We’re talking about a $300 million question mark that will have to be resolved at the ballot.”

House Democrats did attempt to move a Prop. 123 proposal through the House Appropriations Committee on March 31, with House Minority Leader Nancy Gutierrez, D-Tucson, offering a strike-everything amendment to Senate Concurrent Resolution 1012 that proposed replacing the measure with one that would extend Prop. 123 with voter approval.

Gutierrez’s proposal comes after Hobbs put budget talks on hold and criticized GOP lawmakers for the lack of a compromise on a Prop. 123 deal. 

“I don’t believe the conversation around Prop. 123 renewal needs to be contentious or partisan,” Gutierrez said during the Appropriations Committee meeting. 

Hobbs and Democrats have proposed a continuation of the 6.9% withdrawal from the state land trust to fund a Prop. 123 renewal, but Republicans said in a March 20 press release that Hobbs’ office proposed increasing the distribution from 6.9% over 10 years to 10.9% over 20 years, which they argue would “bankrupt” the land trust.

The attempt from Gutierrez failed on a party line vote and a measure on Prop. 123 will have to wait for another time. House Appropriations Chairman David Livingston, R-Peoria, called Gutierrez’s amendment ‘hostile’ to the original measure, which had nothing to do with a Prop. 123 renewal, although he said he was happy to discuss the proposal in committee.

Livingston earlier told the Arizona Capitol Times that he thinks the Legislature can get a budget deal done and signed by Hobbs without Prop. 123 — and a decision about Prop. 123 likely won’t be made by Republicans until the budget is signed. 

During the April 8 Appropriations Committee, Gress said he thought the 6.9% distribution was too high and said somewhere between 5% to 5.5% would be more appropriate. He also said he thinks Prop. 123 will be reconsidered next year — potentially under a different governor since Hobbs is up for reelection. 

“There are only a few people that care a lot about 123. I’m one of them, and I’m willing to wait until next year,” Gress said. “There isn’t consensus in the caucus right now for that.”

Hobbs’ office has accused legislative Republicans of backing off from Prop. 123 negotiations because Sen. Jake Hoffman, R-Queen Creek, wrote in a post on X that he doesn’t want to give Hobbs a win on the issue and would be “effectively underwriting” Hobbs’ reelection campaign. 

House Minority Leader Oscar De Los Santos said he doesn’t know how lawmakers will pass a budget without Prop. 123 this year as lawmakers are trying to find a way to pay for federal tax conformity, which is expected to cost the general fund more than $400 million this year. 

“I have a hard time seeing a budget without Prop. 123,” De Los Santos said. “Given the serious budget shortfall situation we’re facing, that money is going to need to come from somewhere. This is a way to support public schools and create savings in the general fund without raising taxes.”