PHOENIX — Gov. Katie Hobbs vetoed a 16-bill budget package passed by the Arizona Legislature a day earlier.
Republicans, who have majorities in both chambers, introduced the budget package last week, more than a month after Hobbs walked away from budget talks because of a dispute over whether to renew Proposition 123, a now-expired K-12 funding mechanism.
The legislation on how to fund the state government starting July 1 would have added all the tax cuts in President Donald Trump’s One Big Beautiful Bill Act to Arizona’s tax code, including deductions on tips and overtime and business tax breaks.
“This budget is unbalanced and reckless,” Hobbs said in a statement announcing the vetoes. “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.”
Do you have a concern in your community or a news tip? We want to hear from you!
Connect with us: share@abc15.com
Republicans had touted the tax cuts, which would have added up to a $1.45 billion income tax cut over four years, saying it would bring relief to Arizona families struggling with high prices and ensure taxpayers would not need to file amended returns for this tax year.
“This is a good budget,” Senate President Warren Petersen said after the Senate passed the bills Monday. “It should have been a bipartisan budget.”
If it had been enacted, Arizona would be the first state to fully conform to all of Trump’s business tax breaks.
Earlier this year, Hobbs vetoed two different Republican bills on tax conformity. She's called for Arizona to only enact the cuts aimed at individuals, such as the deductions on tips and overtime.
The budget would also have cut nearly all state agencies’ operating budgets by 5%, hiked insurance premiums for state employees, required quarterly eligibility checks for Medicaid and SNAP and ended various solar tax credits.
The plan would have maintained tax incentives for data centers and did not include additional revenue proposed by Hobbs, such as a fee on short-term rentals and a big fee hike for large sports betting operators.
What happens next
The state's new fiscal year begins July 1, so a new budget must be passed before then to prevent a state government shutdown.
In her veto letter to House Speaker Steve Montenegro, Hobbs said she and lawmakers should return to budget talks, writing: "I am ready when you are."
Petersen told reporters Monday that Republicans were ready to go back to the negotiating table if Hobbs vetoed the budget bills. But he said the governor should not count on talks leading to a much different budget.
“There may be a couple of things where she can provide an alternative, where there's some consensus, but you're not going to see a budget that's much different than the one you saw today,” he said.
The Arizona House is recessed until June 1, and the Senate is off until Monday.
