PHOENIX — The Arizona House passed a GOP budget proposal Wednesday, but Republicans say the door is open for budget talks to resume with Gov. Katie Hobbs.
Republicans introduced the budget package on Monday, five weeks after Hobbs walked away from budget talks over a dispute over whether to renew the now-expired school funding mechanism, Proposition 123.
The proposal for how to fund the state government starting July 1 adds all the tax cuts in President Donald Trump’s One Big Beautiful Bill to Arizona’s tax code, including deductions on tips and overtime and business tax breaks.
“I'm really proud of how much this helps families,” state Rep. David Livingston told ABC15. “I would be shocked if you told me that you didn't get a refund.”
The proposed budget would also cut nearly all state agencies’ operating budgets by 5%, hike insurance premiums for state employees, require quarterly eligibility checks for Medicaid and SNAP, and end various solar tax credits.
The budget bills passed on party-line votes, with Republicans touting the package’s tax cuts and Democrats saying the proposed budget would hurt state services.
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“The budget, the Republican budget, can be summed up in five words: Data centers first, Arizona last,” House Minority Leader Oscar De Los Santos told ABC15.
Hobbs and Democratic lawmakers have called for the repeal of tax breaks for data centers. De Los Santos said the incentives were put into place more than a decade ago to attract data centers and are no longer needed.
“Right now, we're at a moment thanks to Donald Trump's war in Iran, the rising gas prices, the tariffs, where, frankly, families cannot afford some of the basics,” he said. “And we need to take a serious look at our priorities.”
Other than tax conformity, the proposed budget is largely the same as last year’s, said Livingston, the chair of the House Appropriations panel.
Republicans say their plan includes several items Hobbs proposed during budget talks, such as funding that will remove families’ co-pay for reduced-price school meals.
"We left them in because we had agreed to that,” Livingston said. “But we didn't put anything else in they wanted, because they're not negotiating.”
On Tuesday, Hobbs told reporters she was encouraged by some things in the budget proposal but opposes the agency cuts.
"I think we need to make these cuts strategically and smartly and not slash and burn with just across-the-board cuts like we're seeing come out of Washington, D.C.,” she said.
Her office said the GOP plan doesn’t include funding to fight wildfires, grocery assistance in the summer for families with children who qualify for free or reduced-price school meals, and other programs. And Hobbs' office continued to call for a new Prop. 123, even if the money isn't used.
The Governor's Office also said some of the proposed “sweeps” of money taken out of various funds could leave those accounts insolvent.
The budget ball is now in the Senate’s court. But talks between the governor and Republican leadership could also resume.
“The door is open for the governor to call the speaker and the Senate president and ask for meetings,” Livingston said. “I think both would say yes.”
While Republicans have majorities in both chambers of the Legislature, the state budget needs Hobbs’ signature before it can become law.
Democrats described the Republican budget plan as a jumping-off point for negotiations.
"We had to wait for more than three months for the Republicans to release their proposal,” De Los Santos said. “At long last, it is finally here. So I think we can now begin to say that negotiations may begin in earnest.”
