Katie Hobbs vetoed a Republican-backed state budget proposal Tuesday, escalating a growing standoff over taxes and spending with less than two months before Arizona’s next fiscal year begins.
In a veto letter, Hobbs criticized the GOP plan as “unbalanced and reckless,” arguing it would create what she described as “Washington-style” dysfunction in state government. The governor said the proposal would jeopardize healthcare coverage for thousands of residents, reduce support for vulnerable children and cut critical public safety funding while delivering large tax breaks to corporations and wealthy taxpayers.
The dispute centers on a $17.9 billion spending proposal crafted by Republican lawmakers at the Arizona Legislature. The budget comes in roughly $800 million below Hobbs’ January proposal and focuses heavily on tax relief measures aimed at lowering costs for Arizona families.
Among the GOP priorities are eliminating state taxes on tips and overtime pay, increasing the standard deduction, expanding child-care deductions and creating a new deduction for seniors with retirement income. Republicans described the package as one of the largest tax-cut efforts in Arizona history.
Steve Montenegro said the proposal was designed to help families facing affordability challenges by allowing residents to keep more of what they earn. Senate President Warren Petersen accused Hobbs of abandoning negotiations after disagreements emerged during talks over the spending package.
To offset the proposed tax cuts, Republicans called for tighter eligibility requirements for AHCCCS and SNAP benefits, reductions to most agency budgets and the repeal of several tax incentives, including solar-energy subsidies. Their plan also would hold K-12 and public safety spending flat compared to last year’s levels.
Hobbs argued the proposal would eliminate or reduce funding in several key areas, including the Rio Nuevo project, the Department of Child Safety and SUN Bucks summer grocery assistance for children. She also criticized lawmakers for preserving legislative spending accounts while proposing cuts elsewhere in state government.
The two sides also remain divided over Arizona’s school voucher program, known as Empowerment Scholarship Accounts. Hobbs previously proposed income caps for eligibility and restrictions on luxury purchases using voucher funds, neither of which were included in the Republican plan.
The governor’s own budget proposal released earlier this year emphasized direct investments in housing, childcare assistance, wildfire prevention and water protection efforts, along with hundreds of millions in additional K-12 funding.
Because Hobbs has not lifted a bill moratorium tied to budget negotiations, the Arizona House plans to recess until June 1 as talks continue.
