Key Points:

• Republicans say they are close to a state budget proposal 

• Negotiations occurring amid ongoing bill moratorium by Gov. Katie Hobbs

• A Prop.123 extension hangs in the balance

Republican negotiators say they’re close to sending the governor a state budget, signalling a potential end to Gov. Katie Hobbs’ recent bill moratorium.

Out of frustration and with no budget in hand, Hobbs declared on April 13 that she would reject any measure that made it to her desk until Republican lawmakers delivered her a proposal. That challenge was echoed by her spokesman Christian Slater, who again demanded a budget on April 21 — the 100th day of the legislative session. 

“It has been a month since Governor Hobbs called on legislators to show their budget to the public, and Republican leadership has given Arizonans nothing but evasive answers and empty promises about their budget proposal,” Slater said in a prepared statement. “It’s time for Republican leadership to show the people of Arizona their plans and come back to the negotiating table to pass a bipartisan and balanced budget.”

Now, less than two weeks after that announcement, GOP leaders say they are close to a plan.

Senate Appropriations, Transportation and Technology Committee Vice Chairman John Kavanagh, R-Fountain Hills, told the Arizona Capitol Times that it could come within the next “week or two,” although he said he wouldn’t be surprised if what’s proposed is vetoed by the governor. 

“This is an offer we’re making to her. Short of lacing the tower water supply of psychedelic drugs, we expect there will be some changes,” Kavanagh said.

Last week, Senate Pro Tempore T.J. Shope, R-Coolidge, also confirmed Republicans were aiming to get a budget done around the 100-day mark of the session. 

The effort to coordinate a budget has been complicated by recent reports of lower-than-expected state revenue for January. The Joint Legislative Budget Committee’s updated April 16 forecast now projects $378 million in available resources rather than the $577 million originally estimated last year, a nearly $200 million reduction which staff attributes to the ongoing U.S. conflict with Iran, disruptions in oil markets and changing consumer behavior. 

The forecast does not take into account conforming the state’s tax policy to President Donald Trump’s One Big Beautiful Bill Act, an already-approved federal tax measure expected to reduce general fund revenue by more than $400 million if the state fully conforms.

Kavanagh said he expects the reduced revenue projections to have a minimal impact on budget negotiations since they’re working with more than $17 billion. 

“We hate to lose the estimate, but I think it’s a transient loss,” Kavanagh said. 

Republicans have also signaled they don’t intend to send a ballot referral to voters this year to renew Proposition 123, which Hobbs and Democrats have pushed as a way to free up about $300 million for the state budget. With Prop. 123 expired, the Legislature has had to backfill education funding for the voter-approved school funding measure using money from the state’s general fund. 

Still, Capitol observers are optimistic that a Prop. 123 referral could be passed this year — and they may not have a choice. 

HighGround Political Affairs Consultants CEO Chuck Coughlin said he believes lower revenue projections might force lawmakers to turn to a Prop. 123 renewal for additional revenue. 

“That’s where my head would go,” Coughlin said. “If I’m the Democrats, I would say what do I need to give up here to go get that money and put it in the bank.”

But Republicans have been divided on what a Prop. 123 renewal should look like. Rep. Matt Gress, R-Phoenix, previously told the Arizona Capitol Times that there isn’t agreement on the issue within the caucus and Republicans don’t want to bet $300 million at the ballot. 

With uncertainty abound, lawmakers will likely look to make cuts to last year’s budget. Kavanagh said he expects “minor” cuts all across the state government, except for public safety. 

“Government has grown since the last round of big cuts when we had the Great Recession, so there’s probably a little slab here and there that can be excised without pain,” Kavanagh said. 

Whatever budget is first produced will likely just be a starting point between GOP lawmakers and the governor. 

“(Hobbs) will be standing at the door of the Capitol with her veto stamp,” said lobbyist Barry Aarons. 

The Legislature has until June 30, the end of the fiscal year, to pass a budget and avoid a government shutdown. 

Correction: This article was updated to reflect Sen. John Kavanagh’s position on the Senate Appropriations, Transportation and Technology Committee.