The starting point

The budget balancing act … Executive order overload … And no dresses on the front lines.

After attempting to kill off Arizona’s universal school voucher program entirely in her first budget proposal, then trying to keep kids who already attend a private school from receiving them in her second budget proposal, Gov. Katie Hobbs’ budget proposal this year attempts to implement an income cap on vouchers.

That lowering of expectations is in line with the “moderate” spending proposal the governor outlined on Friday for the upcoming fiscal year.

The state’s finances have swung wildly since Hobbs took office, going from an estimated $2 billion surplus when she was first elected to a deficit of over $1 billion just a year later.

Now, after a round of dramatic cuts to get the budget back in line, the state once again has a little cash to spend.

Hobbs’ budget proposal for Fiscal Year 2026, which starts in July, is more grounded in political reality than her past proposals. But its investments in the social safety net and a focus on driving down the cost of living still reflect her priorities and values as a Democrat and former social worker who has lived through foreclosure and had to side-hustle as an Uber driver.

Arizona has a nearly $18 billion budget. But only a small fraction of that money is really up for debate during budget season.

The vast majority of Arizona’s spending is locked in for programs the state is required to fund, like education, healthcare and prisons. The cost may go up or down depending on the number of people using each program, but the spending isn’t really discretionary.

So when we talk about budget proposals, we’re really only looking at the $1 billion or $2 billion that our politicians are fighting over.

Those fights show up as questions like, should we put more money into the state Housing Trust Fund, or should we give taxpayers a rebate? Should we kick schools more funding beyond the required minimum, or should we build more roads? Should we put away money to fight wildfires, or should we give state employees a raise?

Those are tough decisions, and ultimately these fights over spending are not just about economics — they’re about values.

Here are some of the values Hobbs emphasized in her third budget proposal.

K-12 Education

One of the bigger unknowns in the budget is who’s paying the roughly $285 million to schools that usually comes from Prop 123. That proposition, which takes an additional draw from the State Land Trust to fund schools, is expiring this year unless lawmakers and voters reapprove it before July.

Hobbs’ budget assumes that won’t happen, and she set aside money in case the state is on the hook for backfilling those funds. (If Prop 123 does get reapproved in time, however, that $285 million she’s setting aside would still go to schools under Hobbs’ proposal.)

That spending, plus keeping up with inflation adjustments, accounts for the vast majority of new school funds.

The proposal also includes about $41 million to subsidize lunch prices at schools across the state, including an additional $37 million on the state’s free and reduced school lunch program, and a $3.8 million one-time allocation to eliminate the copay some families have to pay under the reduced lunch program.

But the biggest takeaway from the K-12 portion of the budget isn’t on the spending side — it’s how much Hobbs proposes cutting costs.

Hobbs’ proposal would actually cut a big chunk out of the state’s K-12 education budget — if you take into account that the state would save $150 million by putting an income cap on who can receive school vouchers.

However, given Republican opposition to cutting Arizona’s universal Empowerment Scholarship Account program, it’s unlikely we’ll realize those savings.

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Universities

Universities would see some of last year’s cuts restored under Hobbs’ budget proposal, including an $11 million restoration at Arizona State University, $8 million for University of Arizona and $4 million for Northern Arizona University.

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Hobbs also wants to spend an additional $20 million on the Arizona Promise Program, which guarantees scholarships to Arizona residents who qualify for federal aid and want to go to one of Arizona's public universities, and $15 million on the Arizona Teachers Academy, which offers scholarships to people who agree to teach in an Arizona public school.

Other spending initiatives at state universities include $7 million to the Arizona State Museum run by UA to return indigenous human remains and artifacts to the Native American tribes they were taken from.

But the largest boost for the university system in the budget isn’t actually an appropriation — she wants to increase the universities’ bonding authority to let them take out an additional $325 million in bonds.

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Health and economic security

One of the largest line items in Hobbs’ budget would dedicate roughly $113 million to making child care more affordable and accessible. The governor has a variety of proposals to get that done.

One idea is to create a “public-private partnership” program where the state, parents and parents’ employers each pay a third of the cost of child care. That allows employers to offer a low-cost benefit to employees.

Another is to offer a state tax credit to businesses that offer child care benefits to employees.

This section of the budget would also dedicate $24.4 million to subsidize raises to people providing long-term care to the state’s elderly population and people with disabilities.

Hobbs also wants to give the Arizona Division of Developmental Disabilities $14.8 million to help expand efforts to ensure developmentally disabled people can receive care in their homes, and another $24.4 million to increase pay for long-term caregivers, and reduce turnover in those positions.

But the single largest item in this category, roughly $322 million, is simply keeping up with caseload growth within the Division of Developmental Disabilities which serves more than 50,000 people with conditions like autism and cerebral palsy.

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Prisons

Under Hobbs’ proposal, the Department of Corrections would get more than $40 million in extra funding for things like new uniforms, keeping drugs out of mail sent to prisoners and updating prisons’ communications systems with the outside world.

Private prisons would see a rate increase totaling $54 million (though some of that spending would be offset by about $63 million in prison savings this year).

Hobbs’ budget would also add $14.5 million to cover the cost of food for inmates. The cost of the state’s contracts with prison food providers is expected to increase this year as the number of people in prisons increases, in part due to Donald Trump’s plans for mass deportations.

Hobbs is also proposing adding $6 million for ongoing litigation as the state fights a lawsuit for violating prisoners’ constitutional rights related to housing and healthcare. But that spending could increase after the results of a court-mandated staffing study come out.

Several smaller items, including $3.5 million for prison guard uniforms, round out the proposed prison budget.

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Child Safety

The Department of Child Safety lost about $40 million after the federal government significantly cut back on reimbursing the state for children in group care facilities.

To cover that shortfall, Hobbs proposes spending about $29 million this year and $23 million next year.

There’s also a proposed one-time increase of $11 million to update the cloud-based system DCS uses for nearly all aspects of its operations, including case worker management and family interactions.

Hobbs would also put $1.4 million into the Family Connections and Nurturing Parenting Programs, which “increase placements in kin-like settings.” The program’s funding is set to expire.

There’s also $300,000 earmarked to beef up security at DCS’s field offices where workers hold meetings between children and parents. In November, a DCS worker was nearly strangled to death by a disgruntled parent.

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Public Safety

The governor’s new Stopping Arizona's Fentanyl Epidemic or “SAFE” initiative calls for about $19 million in one-time and ongoing General Fund money spread across several departments.

For the Department of Public Safety, that includes $10 million in grants to local law enforcement to intercept drugs. Arizona’s Department of Emergency and Military Affairs would get $5 million for its Counterdrug Task Force, specifically to help local police get rid of fentanyl.

The governor would also put up $8.7 million to give DPS new patrol cars and $1.5 million to cover climbing fuel costs.

But the biggest chunk of new public safety money, nearly $28 million, is dedicated to reversing a budget cut DPS sustained last year.

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Housing

Hobbs has a grab-bag of other priorities listed under proposed General Fund spending for the next fiscal year, but some of the most interesting ones have to do with housing.

Her budget includes a proposed $15 million deposit into the state’s Housing Trust Fund, which is like a bank account dedicated to affordable housing initiatives. The governor proposes $5 million to jump-start a “Homes for Heroes” program to tackle veteran homelessness.

The Arizona Department of Veterans’ Services, which operates veterans care homes in Phoenix, Tucson, Yuma and Flagstaff, would receive an extra $1 million from the General Fund under Hobbs’ plan, though that’s still a drop in the bucket of the fund’s quickly plummeting budget.

So it begins: During his inaugural address on Monday, President Donald Trump said he’s going to declare an emergency at the U.S.-Mexico border and order the U.S. military to “repel forms of invasion,” the Republic’s Lauren Villagran and Bart Jansen report. Trump has a list of 10 executive orders related to the border, including suspending refugee resettlement and finishing the border wall. He’s also trying to end birthright citizenship (which is protected by the Constitution). All of those are sure to spur legal battles, but he will have a Republican-led Congress to help move his border agenda forward, as well as Democrats who appear to be moving to the right on border issues, the Republic’s Laura Gersony reports.

Trump saves: TikTok influencers in Arizona braced for the app/platform’s short-lived shutdown, the Republic’s Dina Kaur reports. And state Sen. Analise Ortiz, who thrives on the app, argued the ban sets a bad precedent, the Phoenix New Times’TJ L’Heureux reports.

New faces at the top: Democrats booted their state party chair and treasurer, the Arizona Capitol Times’ Kiera Riley reports. Former Chair Yolanda Bejarano was ousted in favor of Robert Branscomb, the former vice chair and owner of an insurance agency in Phoenix. Former Treasurer Rick McGuire was taking heat after he was accused of “self-dealing” by accepting payment to help county and legislative party groups train their treasurers. He was replaced by Greg Freeman, a candidate for Maricopa County Assessor last year. The Arizona Republican Party is slated to hold its reorganizational meeting this Saturday.

Execution questions: As state officials gear up to resume executions, the drug they use for lethal injections is being stored in unmarked jars and it’s not clear whether it’s expired, the Arizona Mirror’s Michael Kiefer reports. The pentobarbital salt was purchased in October 2020, and although Arizona officials say it lasts forever, others say its shelf life is 2.5 years. Meanwhile, in one of outgoing Attorney General Merrick Garland's final acts, he argued the federal government should stop using pentobarbital (the same drug Arizona uses) in lethal injections because there is “significant uncertainty” over whether it’s humane, the Republic’s Jimmy Jenkins noted.

“I’m flabbergasted that a medical doctor would draw anything from an unmarked container and put it into people,” said David Duncan, the retired federal magistrate judge who Hobbs hired in 2023 to investigate the state’s lethal injection protocols.

Italian inspiration: A Republican lawmaker is trying to remove ultra-processed foods from meals served at Arizona’s public schools, Arizona Public Media’s Zac Ziegler and Christopher Conover report. The bill’s sponsor, Rep. Leo Biasiucci, said that after returning from a trip to Italy with his family, he started noticing ingredients in U.S. food that are banned in other countries. His bill would ban about a dozen ingredients, mostly food dyes, along with others like potassium bromate, which is used in bread making.

Sea change in accounting: Thanks to an Arizona law that allows nonlawyers to own law firms, a multinational accounting firm is trying to break an industry barrier in the U.S., the Wall Street Journal reports. If the Arizona Supreme Court approves of the move by KPMG later this month (and a committee already gave a preliminary green light last week), then KPMG would be the first of the “Big Four” global accounting firms able to do legal work across the country. That would give them a leg up on their competition, but the legal community is sounding the alarm about ethics concerns and conflicts of interest.

Did you know the state relies on two different organizations to come up with two different sets of revenue projections to base the yearly budget on? Or that the budget is actually passed through several different types of bills?

Last year, we explained the whole convoluted process in plain language.

And for a big-picture view of where the state’s budget comes from and goes to, check out our emoji budget explainer from 2022.

And if that’s not enough budget content for you, check out Hank’s interview with Arizona's Family’s political editor Dennis Welch, where the dynamic duo offered their initial thoughts on the governor’s spending proposal.

The discussion included hot takes on Hobbs’ State of the State speech, prospects of staying at lawmakers' AirBNBs and one’s God-given right to bring their own booze to the golf course.

Political Twitter showed a clear sign of ideological rifts yesterday as, for the first time in decades, Martin Luther King Jr. Day coincided with a presidential inauguration.

The likes of Gov. Katie Hobbs and Phoenix Mayor Kate Gallego posted themselves at the MLK March, while Arizona Republicans like Sens. David Gowan and Warren Petersen braved below-freezing temperatures in Washington, D.C., to see the action live.

Petersen posted some important takes from the speech, like: “Today is the end of male military leaders wearing dresses.”

But our favorite moment from the inauguration had to be watching George W. Bush trying to sit calmly and not make any weird faces.