Key Points:

• Governor says Medicaid recipients would be hard hit

• Federal tax cuts would reduce state revenue

• Rural health care would suffer

Gov. Katie Hobbs said there’s no way the state can help Arizonans who will lose federal assistance if President Trump’s “Big Beautiful Bill” becomes law.

“This budget bill will be devastating for Arizona in so many regards,” the governor said just hours after the U.S. Senate gave its approval to the package. And top of that list, she said, are “the hundreds of thousands who are going to lose their health care” as a result of cuts being made in federal Medicaid spending. 

Those affected, Hobbs said, should not look to the state for help. “We don’t have the capacity to mitigate the cuts,” she said.

The federal cuts are not isolated to Medicaid. The Supplemental Nutrition Assistance Program, informally known as food stamps, would see reductions as well.  Also in danger are the revenue figures used in preparing the state’s $17.6 billion spending plan.

What’s in the bill approved by the Senate is an increase in the standard deductions that seniors can take to reduce their reported income. That’s designed to compensate them for the federal income taxes they owe on their Social Security benefits. And there also are provisions exempting tips and overtime from federal earnings.

What makes this important is that Arizona is a “piggy-back” state: when Arizonans are computing their state income taxes, the starting point is the federal adjusted gross income.

Put simply, the reductions in what Arizonans report on the federal form translate to a lower bottom line in the amount filed with the Arizona Department of Revenue, which is subject to state income taxes. Approximately one-third of the budget is based on personal income taxes.

Hobbs, when questioned about the Big Beautiful Bill, did not address the revenue side of the equation. Instead, she focused on the harms that the federal spending cuts will have on Arizonans. It’s not just going to affect those who will lose Medicaid benefits. There are concerns that the loss of the federal dollars will have a disproportionate impact on rural hospitals that depend on Medicaid.

“Hospitals and health care centers will have to close,” Hobbs said, leaving patients without local options.

Still, the governor left the door open to the possibility that the state may be able to do something — she’s not exactly sure what — if some version of the federal bill becomes law. “We’re going to have to look at that when it happens,” she said.

“The bill keeps changing, the impact keeps changing,” Hobbs continued. “And I don’t know if what came out of the Senate can get through the House.”

The governor’s comments were made during a ceremonial signing of the same budget she had approved last week. The ceremony was not just for the TV cameras, but also for the more than 100 lawmakers, lobbyists and others she invited, who pushed for one or more provisions in the final package.

It also provided a chance for the governor, facing what could be a tough reelection campaign next year, to explain what remains to be done — presumably under her direction.

“This budget moves us in the right direction, but it’s not the end of our efforts,” she said. “Arizonans can trust that I will continue to fight for the things that will actually improve our lives and provide you with the opportunity to support your family, the security to sleep peacefully at night, and the freedom to choose a path that works best for you.”