Governor Hobbs' Executive Budget Recommendation

On January 12, Governor Katie Hobbs (D) released the details of her state budget proposal and set the groundwork for negotiations with the legislature. The Governor’s $16.2 billion proposal allocates limited resources toward initiatives that align with her policy goals. It addresses some of the projected budget deficit by:

• Sweeping funding from prior appropriations that have not yet been spent;
• Cutting funding for the legislature and executive office budgets by 1%;
• Delaying spending for capital and IT projects that have not yet begun, unless they are court-ordered or necessary for safety, and reverting $418.6 million in funding previously allocated to 24 transportation projects;
• Sweeping $282 million from funds of 44 state boards and agencies; and
• Repealing the Student Tuition Organization (STO) tax credit.

As expected, the Governor’s plan also proposes new requirements for ESA enrollment – changes that she believes would save the state $244.3 million. 

Higher Education

The budget provides $46 million to the AZ Healthy Tomorrow initiative, which is a new ABOR initiative focused on state universities’ role in addressing the healthcare workforce shortage. UA will receive 32% or $14.7 million of the $46 million. Additionally, the recommendation provides an additional $325 million in bonding authority for the universities (reaching a total of $1.125 billion in bonding authority). The distribution of this additional capacity will be determined by ABOR. 

The Governor also recommends the continuation of one-time funding from FY24 into FY25 for the Arizona Promise Program scholarships ($20 million) and the Arizona Teachers Academy ($15 million).