Hobbs vetoes GOP budget proposal, calling it ‘Washington-style’ chaos

PHOENIX – Gov. Katie Hobbs vetoed the GOP budget proposal Tuesday, saying it was “unbalanced and reckless” and would force “chaotic and dysfunctional Washington-style budgeting” on Arizona.

“With it, Arizona would default on our debt obligations, endanger vulnerable children, slash critical public safety funding and pay for tax breaks to billionaires, data centers and special interests by kicking Arizonans off their healthcare and taking food off their tables,” Hobbs said in her veto letter. “Arizonans cannot afford chaotic and dysfunctional Washington-style budgeting in our state government.”

Hobbs argued the plan delivers more than $600 million in tax breaks to “billionaires, data centers and special interests” while potentially kicking up to 200,000 Arizonans off their healthcare. She also said it ends funding for the Rio Nuevo project, cuts $16 million from the Department of Child Safety, slashes $1.8 million in SUN Bucks summer grocery benefits for 640,000 children, sweeps the Border Security Fund and zeroes out money for the Colorado River Litigation Fund and Colorado River Protection Fund.

“While forcing devastating cuts on Arizonans, the legislature has refused to sweep their own $28 million slush fund, including $6 million that may be used to replace their carpets, upgrade their media studio and renovate their offices,” Hobbs said. “I have made it clear that I will engage in good-faith negotiation. But I will not sign a budget that brings Washington-style chaos and dysfunction to Arizona’s budget.”

Republicans tout budget proposal as focused on affordability

Republicans presented their budget to the Governor’s office this afternoon, with House Speaker Steve Montenegro saying the plan “deserves a governor’s signature.”

“This budget focuses on what matters most to Arizona families: higher take-home pay, lower costs, protecting core services and a responsible plan for state spending,” Montenegro said. “The fastest way to help families in an affordability crisis is simple: let people keep more of what they earn.”

The veto sets up a showdown over taxes and spending with less than two months until the state’s new fiscal year begins July 1.

The $17.9 billion GOP budget, about $800 million less than Hobbs proposed in January, centered on what Senate President Warren Petersen called one of the largest tax cuts in state history:  eliminating state taxes on tips and overtime, raising the standard deduction, expanding the child-care deduction, boosting the dependent tax credit by $25 and adding a $6,000 deduction for seniors with retirement income.

Many of the provisions mirror President Donald Trump’s federal tax cuts, a measure meant to help Arizona’s small businesses.

Petersen accused Hobbs of walking away from negotiations, calling it “an epic leadership failure.”

“We’ve been asking for the governor to come to the table even before the session to address these important issues of tax conformity, delivering one of the biggest tax cuts in the history of Arizona, bringing certainty to the taxpayer,” Petersen said. “She finally did come to the table, and then when she didn’t like something that was said, she threw a tantrum, and she walked away, and she said, ‘Send me a budget.'”

To offset the cuts, Republicans called for tighter eligibility checks on AHCCCS and SNAP, 5% reductions to most agency budgets and the repeal of several tax credits, including solar subsidies.

Their proposal held K-12 and public safety funding at last year’s levels and limited overall spending growth to 1.9%.

House Majority Leader John Kavanagh said Republicans faced a choice between expanding government or helping struggling families.

“We made a conscious decision to look out for the ordinary person, for our constituents, and that’s why this budget is less than the governor’s budget and does not have gimmicks, and borrowing, and wasteful spending,” Kavanagh said. “We’re trimming government, not the pockets of our constituents.”

The budget debate still has a wide chasm between the sides

The two sides also remain far apart on Arizona’s Empowerment Scholarship Accounts. Hobbs wanted to cap eligibility at households earning $250,000 or less and ban the use of voucher funds for luxury purchases, neither of which made it into the GOP plan. She also pushed to end the state’s data center tax exemption, which Republicans rejected.

Hobbs’ January budget proposal leaned on direct spending rather than broad tax cuts, including housing development, utility bill assistance, child care subsidies and summer grocery benefits for low-income kids. She also called for $590.3 million in new K-12 funding on top of a Prop 123 renewal, $30 million for the Colorado River Protection Fund and $20 million to fight wildfires.

Republicans released a video early Tuesday positioning their budget as one that keeps more money in the hands of Arizonans.

Because Hobbs has not lifted the bill moratorium, the Arizona House is recessing for a month-long break, returning to session on June 1.

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