PHOENIX — Gov. Katie Hobbs said Tuesday she wants to put the proposed $17.9 billion Republican budget behind her so that real negotiations can begin. But she would not say outright that she will veto it.
"We'll see if they have the votes to pass it,'' she said. "I don't know that's the case.''
So far, though, the votes appear there: Just hours after the governor's comments, the Senate and House Appropriations committees approved the package of nine bills that make up the state budget.
That sets the stage for a final action Wednesday in the Republican-controlled Legislature.
Tuesday's committee votes came over the objections of Democrats who said the cuts from the $18.7 billion spending plan proposed in January by Hobbs will impact needed services.
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"I think children will be suffering,'' said Sen. Lela Alston, a Phoenix Democrat. "Elderly will be suffering. Everyday Americans will not have the opportunity that they have had in the past for health care or food or everyday necessities.''
Tempe Democratic Sen. Mitzi Epstein said these cuts from Hobbs' proposal are unnecessary. She said there was no reason for Arizona to mirror all of the tax cuts in last year's federal "Big Beautiful Bill,'' particularly those that benefit businesses.
But Phoenix Republican Rep. Matt Gress said Hobbs is deluding herself if she thinks that by vetoing this budget she will be able to negotiate something more to her liking.
And Rep. Justin Olson, a Mesa Republican, said it is wrong for Democrats to claim the GOP plan is in any way a cut in the budget. He pointed out that the overall spending plan for the coming fiscal year would be about $300 million more than the current state budget.
Olson said state spending is outstripping inflation and population growth. "There is a significant amount of spending in this budget,'' he said. "We are not cutting spending.''
That is true on an overall broad basis. But Democrats said it isn't true across the board.
"It reduces affordable housing funding, in the middle of a housing crisis,'' said Rep. Mariana Sandoval, a Goodyear Democrat.
"And it takes $100 million from our public universities, pushing tuition further out of reach,'' she said.
The GOP plan would cut 5% from the budgets of most state agencies, excluding K-12 education and those not dealing with public safety. Also, some dollars for universities included in the budget for the current year are not being renewed.
None of those cuts are in the governor's budget proposal.
The reason for that, however, is simple: Hobbs built her spending plan on more money being available.
Some would come from the decision to mirror tax cut provisions in the federal bill.
Hobbs was willing to go along with some, notably raising the standard deduction, eliminating state income taxes on tips and overtime, and adding a tax break for seniors. But Arizona's GOP lawmakers also included various provisions in the federal bill designed solely to help businesses, cutting another more than $100 million a year in state revenues.
Epstein said there's a flaw in the state simply copying what was decided by Congress.
"The federal budget can do these bad policies because they just print more money,'' she said, noting the Congressional Budget Office says all those tax cuts will push the federal deficit to more than $4 trillion in the next decade. But Epstein pointed out that's not an option in Arizona, where the state is required to enact a balanced budget every year and constitutionally prohibited from running a deficit.
During the debate, Chandler Republican Rep. Jeff Weninger chided Democrats who said repeatedly that lawmakers were approving the plan to help corporations.
He said there's more to it, as there are restaurants and small businesses in his district that also will be able to take advantage of some of the changes in tax code. "They're the ones who will be benefiting from this,'' he said. "They're not a big corporation.''
There's more to the Republican plan than simply conforming to the federal tax code
For example, the governor's proposed budget plan included eliminating tax breaks for data centers, a move that would save the state about $38.5 million a year, money that could be used for other programs.
GOP lawmakers, however, want to keep it. Tempe Democratic Sen. Lauren Kuby said that's a mistake.
"Arizona should not be subsidizing big tech, especially as electricity prices rise and tech profits soar,'' Kuby said. "Instead of giving more tax breaks, we should be closing loopholes, protecting consumers and lowering costs for our energy-burdened residents, not shifting the burden on to them.''
And Rep. Stephanie Stahl Hamilton, a Թ Democrat, said this particular tax break that Republicans like undermines the claim they are interested in helping small business.
"There are no mom and pop data centers,'' she said.
Hobbs also hoped to free up an extra $89 million to spend on other programs by limiting vouchers for private and parochial schools only to children from families earning less than $250,000. Republicans have pronounced that a non-starter.
And her plan also included some increases in taxes and fees, all of which were rejected by GOP leaders.
All that comes back to what happens next.
"We're monitoring the situation,'' Hobbs said Tuesday of Republicans advancing their spending plan. "I'm hopeful that we can get back to the table and start having real conversations about a budget that works for Arizona.''
Gress, however, had a message for Hobbs, who walked away from negotiations last month, if she thinks the Republican budget will simply be a starting point for new talks.
"You are mistaken,'' he said.
"Whoever gave her the advice to walk away from the table, you gave up incredible amounts of any impact and leverage that you had because you now have a united Republican caucus in both the House and Senate,'' Gress said. "And we are going to be very insistent on keeping 95% — if not 99% — of this package intact.''
Howard Fischer is a veteran journalist who has been reporting since 1970 and covering state politics and the Legislature since 1982. Follow him on X, and Threads at @azcapmedia or email azcapmedia@gmail.com.

