ARIZONA NEWS

Here’s what Gov. Katie Hobbs, Arizona Legislature face when 2024 session starts Monday

Jan 5, 2024, 12:00 PM

Gov. Katie Hobbs speaks while standing in front of House Speaker Ben Toma, left, and Senate Preside...

Gov. Katie Hobbs will deliver her second State of the State address at the Arizona Capitol on Monday, Jan. 8, 2024. (AP Photo/Ross D. Franklin, File)

(AP Photo/Ross D. Franklin, File)

Tune to KTAR 92.3 FM, our app or online for live coverage of Gov. Katie Hobbs’ 2024 State of the State address starting at 2 p.m. Monday, Jan. 8.

PHOENIX (AP) — Democratic Gov. Katie Hobbs and the Republican-controlled Arizona Legislature return to the state Capitol on Monday with a nearly $1 billion problem on their hands.

Less than six months after they celebrated passing a bipartisan budget, lawmakers face a steep deficit due mostly to plummeting revenues from a massive tax cut that took full effect last year and skyrocketing costs from a school voucher program expansion.

A year ago, the state had a budget surplus of $1.8 billion. Now, it has a shortfall of about $400 million for the current fiscal year and another $450 million shortfall in the following year. Budget analysts say the shortfall will likely grow when the state’s next revenue forecast is released later this month.

The tax cut approved by legislators in 2021 and signed into law by Hobbs’ Republican predecessor, Gov. Doug Ducey, had eliminated the state’s graduated income tax and replaced it with a flat tax, which was phased in and took full effect during 2023.

From July through November, Arizona saw a decrease of over $830 million in revenues from income taxes, marking a nearly 30 percent decline.

The voucher program lets parents use public money for private-school tuition and other education costs. It started in 2011 as a small program for disabled children but was expanded repeatedly over the next decade until it became available to all students in 2022.

Originally estimated to cost $64 million for the current fiscal year, budget analysts now say it could top $900 million.

Stan Barnes, a political consultant in Phoenix and a former Republican state lawmaker, said it’s hard to say how legislators and Hobbs will confront the growing costs, but he predicted they’ll be forced to compromise.

“It’s going to be one of the most difficult exercises in recent memory, given the Grand Canyon-sized space between the Republican legislature and the Democratic governor,” Barnes said. Sen. John Kavanagh, chair of the Senate Appropriations Committee, disputed a budget crisis, saying Arizona could balance its books by postponing building projects, having state agencies return unspent state money and other measures.

“In an $18 billion budget, it’s easily manageable,” Kavanagh said. Rep. Oscar De Los Santos, a Democrat who serves as assistant minority leader in the Arizona House, blames Republican policies for the budget problems. The tax cut likely won’t be repealed, he said, but he believes the voucher program can be limited.

“This is a self-created, self-inflicted wound that the Republicans have caused,” he said. “Now we don’t have the resources we need to tackle the important issues in our state.”

The income tax cut championed by Ducey had eliminated the state’s previous graduated tax scale, which started at 2.59% and had a maximum of 4.5% for income over $159,000 a year for a single person. All taxpayers now pay a maximum of 2.5%.

Democrats have criticized the cut as a windfall for the wealthy, while offering fewer benefits for most taxpayers. Supporters have trumpeted the overall effects of the cut on the state’s economy and said citizens want to see lower taxes.

The changes in Arizona’s voucher program led to a sharp increase in the number of participants. Before the expansion, nearly 12,000 students — including disabled children, those living on Native American reservations and children in low-performing schools — took part in the program.

Now that all students can apply for the vouchers, nearly 73,000 students participate. The average scholarship is roughly $9,700 per student.

Critics say the expansion is a drain on the state’s coffers, while backers say the expansion lets parents choose the best school for their children.

About 75% of the students who got vouchers immediately after the program was expanded had no prior record of attending an Arizona public school, according to Department of Education data reported in 2022. That suggests the state subsidies went largely to students whose families already were paying private school tuition.

Water issues will also be key for the Legislature amid a severe long-term drought in the arid southwestern state. Concerns are growing in Arizona about shortages from the Colorado River system, which provides the state with about 40% of its water, and about shrinking supplies of groundwater and regulation in rural areas.

Hobbs has cast drought as the “challenge of our time.” Her administration has limited housing development in parts of metro Phoenix over concerns about water canceled state land leases that for years gave a Saudi-owned farm nearly unfettered access to pump groundwater.

On the voucher program, Hobbs vowed to bring accountability when she began her term a year ago as the first Democratic governor since 2009. Despite her criticism, the budget proposals negotiated by Hobbs last year didn’t include any caps on the expansion, leading Democratic lawmakers to express dissatisfaction with the lack of action.

She’s now proposing changes like requiring private schools that receive voucher funding have minimum education requirements for teachers and that students attend public school for 100 days before becoming eligible for the vouchers. She reiterated a desire for accountability and transparency in the program.

“Arizonans deserve to know their money is being spent on educating students, not on handouts to unaccountable schools and unvetted vendors for luxury spending,” like ski resort passes and pianos, she said.

Kavanagh said controls to the Empowerment Scholarships Account voucher program — such as Hobbs’ idea to require fingerprinting for teachers at private schools that receive tax dollars — make sense. But he believes the program will remain on the books.

“We are not getting rid of ESAs,” Kavanagh said.

We want to hear from you.

Have a story idea or tip? Pass it along to the KTAR News team here.

Arizona News

A man died after a motorcycle crash early Sunday morning in Desert View Village. (MCSO Photo)...

David Veenstra

Motorcyclist dead after crash in Desert View Village, near Cave Creek

A man died after a motorcycle crash early Sunday morning in Desert View Village, near Cave Creek, according to authorities.

36 minutes ago

World's Biggest Bounce House (XL Event Lab photo)...

Damon Allred

World’s Largest Bounce House coming to Phoenix for weekend stop on nationwide tour

The Big Bounce America is bringing its coterie of inflatable attractions to Phoenix this weekend, featuring eight inflatables.

2 hours ago

Singer Matt Shultz of Cage the Elephant performs onstage during day two of the 2021 Pilgrimage Musi...

Damon Allred

Grammy-winning Cage The Elephant announces Phoenix stop during North American tour

Grammy Award-winning rock band Cage The Elephant announced a stop in Phoenix on its upcoming summer tour in conjunction with a new album.

2 hours ago

SkyBridge Arizona is an emerging business park in Phoenix-Mesa Gateway Airport. It, along with othe...

Ron Davis/Phoenix Business Journal

Major aerospace developments near Phoenix-Mesa Gateway Airport move forward

The skyline around Phoenix-Mesa Gateway Airport has some changes in store, including major aerospace develoments.

3 hours ago

Republican presidential candidate former President Donald Trump gestures at a campaign rally Saturd...

Associated Press

Donald Trump wins Missouri and Idaho caucuses, sweeps Michigan GOP convention

Trump continued his march toward the GOP nomination, winning caucuses in Idaho and Missouri and sweeping the convention in Michigan.

14 hours ago

Maine man, 79, dies while hiking Pyramid Trail in Sedona...

Damon Allred

Gov. Katie Hobbs announces Extreme Heat Preparedness Plan, establishes chief heat officer

Gov. Katie Hobbs announced the state's first Extreme Heat Preparedness Plan, creating the country's first state level heat officer.

15 hours ago

Sponsored Articles

...

Day & Night Air Conditioning, Heating and Plumbing

Day & Night is looking for the oldest AC in the Valley

Does your air conditioner make weird noises or a burning smell when it starts? If so, you may be due for an AC unit replacement.

...

Fiesta Bowl Foundation

The 51st annual Vrbo Fiesta Bowl Parade is excitingly upon us

The 51st annual Vrbo Fiesta Bowl Parade presented by Lerner & Rowe is upon us! The attraction honors Arizona and the history of the game.

...

Day & Night Air Conditioning, Heating and Plumbing

Valley residents should be mindful of plumbing ahead of holidays

With Halloween in the rear-view and more holidays coming up, Day & Night recommends that Valley residents prepare accordingly.

Here’s what Gov. Katie Hobbs, Arizona Legislature face when 2024 session starts Monday