PHOENIX — As she heads into 2026, Arizona Gov. Katie Hobbs says her legislative focus will be affordability for working families.
“Since I got elected, I’ve been focused on lowering costs for Arizonans,” Hobbs said. “It should be no surprise that that’s going to be a highlight of what we focus on this year.”
At the center of her agenda is a new middle-class tax cut proposal similar to provisions contained in President Donald Trump’s Big Beautiful Bill.
“It will give a bigger standard deduction for the 88% of Arizona filers who use that,” Hobbs said. “It includes an exemption for tips and overtime as well as a big senior tax credit.”
While the cost of living remains a major concern, Governor Hobbs is also facing challenges on the state’s long-term water supply as negotiations among seven Colorado River Basin states continue.
“Colorado River is a top priority this year, and I am at the table fighting for Arizona’s interests,” Hobbs said. “We are home to the semiconductor industry that is important to our economy, but not just our economy, the nation’s economy, and our national security.”
ABC15’s Javier Soto pressed the governor on water-intensive industries such as semiconductor manufacturers and data centers.
“You talked about TSMC,” Soto said. “We also see a lot of data centers popping up across the state. They require a lot of water. Many people think the growth is too fast, and considering the water situation, we can’t sustain that growth.”
“There’s absolutely some validity to that concern,” Hobbs said. “I’m focused this year on making sure we get the balance right with data centers. A while back, Arizona made a strategic decision to incentivize data centers, and those incentives have worked. We are the top two markets in the world for data center growth. So I think we have to look at, do we think the taxpayers of Arizona should keep subsidizing this industry, or should the industry work for Arizonans?”
Another major concern heading into the new year involves new federal worker and education requirements for SNAP food assistance, which could result in roughly 150,000 Arizonans losing benefits.
“We’re doing what we can to mitigate the cuts that are coming,” Hobbs said. “But we can’t replace those dollars.”
That fallout is part of more federal funding cuts, including fewer resources for rural hospitals.
Soto asked how the state plans to respond after federal officials provided $33 million less than requested for the rural hospital fund.
“We’re working with the department right now to see if there’s anything we can do,” Hobbs said. “This Rural Health Transformation Grant is important. It’s going to help us bolster services and support in rural areas of the state, but it doesn’t replace the $34 billion that we stand to lose over the next 10 years from these Medicaid cuts, and it’s not going to necessarily help these rural hospitals that are faced with closure stay open.”
Even with policy priorities outlined, questions remain about whether the Republican-controlled Legislature will entertain Democratic proposals in an election year.
“This year is a political year,” Soto said. “How willing do you think Republicans will be to give you a win, reach across the aisle and work with you?”
“Look, there’s always politics whether it’s an election year or not,” Hobbs said. “I’m up for re-election. So is everyone in the Legislature who wants to keep their seats. And I think the issues we’re hearing from Arizonans are the same. They’re not telling me one thing and Republicans something else. They want affordability. They want border security. They want to have our water protected. And those are areas we can work together on.”
Watch Javier's full conversation with the governor on the ABC15 Streaming app, YouTube, or in the player below.
