Arizona Republicans, Democratic Gov. Katie Hobbs announce deal on $18.29B state budget

Arizona Republican lawmakers and Democratic Gov. Katie Hobbs announced Tuesday they have reached a deal on an $18.29 billion state budget for the next fiscal year.

The spending plan includes over $1.4 billion in tax relief over four years.

Hobbs said the tax cuts will help working class families, while the state will benefit from responsible investments in job creation, education and water security.

“This bipartisan compromise shows what we can do when we put common sense before political games and focus on delivering real results for our communities. It will put money back in the pockets of Arizona families and lower costs, make our communities safer and protect the vital services that Arizonans rely on,” she said in a statement.

The deal also will change the state’s tax code to align with changes made last year to the federal code under President Donald Trump’s One Big Beautiful Bill Act, ensuring that Arizonans won’t have to refile their returns for the current year.

“By adopting President Trump’s tax cuts at the state level, expanding tax relief for families and protecting educational freedom, we’re helping Arizonans keep more of their hard-earned money while ensuring our state remains economically competitive,” Senate President Warren Petersen said in a press release.

The Legislature is expected to vote on the budget bills Thursday, a day after a Joint Appropriations Committee hearing on the spending package.

“In the coming days, I look forward to working with legislators in both parties to pass this bipartisan budget agreement that will make Arizona stronger, safer and more prosperous,” Hobbs said.

What does Arizona state budget deal include?

Hobbs didn’t release many details with her statement. However, Republicans said the 2026-27 state budget includes the following elements:

• $68 million reduction in ongoing net spending.
• $112 million for corrections operations.
• $23 million for victims of crime assistance.
• $58 million for child safety operations.
• $10 million for wildfire suppression efforts.

Additionally, the deal protects the state’s Empowerment Scholarship Account (ESA) school voucher program and imposes a three-year moratorium on new data center sales tax exemptions.

“While Arizona families are struggling with the affordability crisis, billionaire-owned data centers should not be getting special tax treatment,” House Democratic Leader Oscar De Los Santos said in a press release.

🚨 PRESS RELEASE: Democrats Force Bipartisan Budget Deal, Win Historic Data Center Moratorium and Save Healthcare for 40,000 Arizonans. ⬇️#AZLeg #Budget #Democrats #AnArizonaWeCanAfford pic.twitter.com/HaisvJiBnv

— Arizona Senate Democrats (@AZSenateDems) June 10, 2026

De Los Santos and other Democrats touted the following provisions of the agreement:

• $235 million in food assistance.
• $48 million to reduce childcare costs.
• $66 million in support for public school textbooks, technology and transportation.
• Fully funding Arizona’s Medicaid agency.
• Two years of free school meals for students from working families.

“This budget is better because Democrats fought for it,” Senate Democratic Leader Priya Sundareshan said in a press release.

Budget agreement comes three weeks before deadline

Under state law, a new budget must be in place before the next fiscal year starts July 1.

Republicans passed a $17.9 billion spending plan in early May, but Hobbs vetoed what she called an “unbalanced and reckless” partisan proposal.

But after weeks of productive talks, Petersen and Hobbs both said recently that a final agreement was near.

“Budgets are ultimately about priorities and compromise,” Senate President Pro Tempore T.J. Shope said in Tuesday’s press release. “Republicans came to the table focused on finding common ground without abandoning our principles. This agreement proves that bipartisan governing can still work when everyone is focused on results.”

State budget negotiations are historically contentious with a GOP-led Legislature and Democratic governor. Last year, Hobbs didn’t sign the state’s $17.6 billion spending plan for 2025-26 until June 27, narrowly averting the state’s first government shutdown by a few days.

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