Hobbs targets ‘entitlement’ vouchers in $17.7B Arizona budget plan

Gov.
Katie Hobbs’ state budget proposal aims to reduce spending on private school
vouchers — which her staff described as an “entitlement” for wealthy
Arizonans. 

However, her 2026 fiscal year budget,
with a proposed nearly $17.7 billion in spending, takes a different
approach than she’s taken in prior years to reform school vouchers,
formally called the Empower Scholarship Account program. 

Hobbs has abandoned her initial call to completely end the universal voucher system
— a proposal that was never entertained by the GOP-controlled Legislature — and now is seeking to impose means testing on students,
limiting the amount that children in wealthy families can receive. 

Since the program was expanded in
2022, any K-12 child, regardless of parent income, can receive a voucher
to pay private school tuition, to use for homeschooling or to save for
college tuition. 

Before the universal expansion, the
voucher program served around 12,000 students who met specific criteria.
Now, there are more than 83,000 students enrolled, according to the
Department of Education, with a total budget of almost $1 billion. 

In 2022, Hobbs proposed nixing the
expanded portion of the ESA program altogether, and last year she called
for a new requirement that each universal voucher student attend a public school for at least 100 days before receiving a voucher. 

This year, Hobbs is proposing
graduated income limits with households bringing in $100,000 or less
each year eligible for the full voucher reimbursement, with 25%
decreases at various income points up to a cut-off at household incomes
of $200,000 and above. 

This proposal, just like her previous
ESA reforms, will almost certainly never make it into the state’s final
budget, which must get approval from the Republican-led state
Legislature. 

Republican legislators, along with
then-Gov. Doug Ducey, ushered in the expansion of the voucher program in
2022 and have praised and promised to protect “school choice” since
then. 

In her budget, Hobbs’ office claims
that 73% of students in the universal portion of the program — about
55,600 students — never attended public school and were already
attending private school or being homeschooled before they received a
voucher. 

Christian Slater, a spokesman for
Hobbs, told reporters on Friday that the governor was committed to
improving accountability over what he called an “entitlement program,”
even if Republicans didn’t want to do so. 

“At
some point, our friends in the Legislature are gonna have to ask
themselves, do you like pay raises for police firefighters, or would you
like the key paying for grand pianos in multimillion dollar homes?”
Slater said. 

At the same time, Hobbs is also
calling on state lawmakers to put $285.6 million in additional funding
toward public K-12 schools — though whether that money would be new
funding depends on the fate of a hoped-for extension of Proposition 123
is extended — or would keep funding at the same level if it expires, as
it is set to do at the end of June. 

In 2015 Arizona voters approved Prop.
123, increasing from 2.5% to 6.9% the distribution from the State Land
Trust that goes to K-12 education. But that extra money is set to expire
at the end of June. Hobbs, a Democrat, and the Republicans who control
the Legislature have been squabbling over the past year or so about when
to put a Prop. 123 renewal to voters and at what distribution
percentage. 

They are eyeing a May 2025 special
election, but negotiations are ongoing. And if an agreement can’t be
reached, or if voters ultimately reject whatever Hobbs and lawmakers
agree to, Hobbs’ proposed $285 million K-12 spending would be used to
backfill the amount lost by Prop. 123’s expiration.

After Hobbs released her proposal on
Friday, Arizona House of Representatives Speaker Steve Montenegro,
R-Goodyear, said in an emailed statement that he looks forward to
working with her on a “serious and responsible budget” but that they
have “a long way to go.”

“While we share a commitment to improving
the lives of Arizonans, the Governor’s budget proposal as presented
raises concerns about parental choice, fiscal responsibility, public
safety, economic growth, and the undue burdens it places on the backs of
taxpayers,” Montenegro said. “Our House Republican Majority remains
focused on policies that support hardworking families, encourage job
creation, and strengthen Arizona’s future.”

Republicans in the Senate had a similar reaction.

“We share the same concerns about some of
the same issues the Governor has raised in her budget proposal,” Kim
Quintero, spokesperson for Senate Republicans, said in a statement.
“However, some of the Governor’s solutions are going to be a burden to
the taxpayer and won’t deliver results. Senate Republicans have a
fiscally responsible budget that will ensure the core functions of
government are funded, will provide relief to the taxpayer, and will
ensure our state is not creating unsustainable government programs.”

By the numbers

Hobbs’ proposed $17.7 billion budget
includes $886 million in one-time spending. That’s an increase of more
than $1 billion over last year’s bipartisan state budget of $16.1
billion. 

The governor’s staff expects moderate
revenue increases for the state over the next few years due to a
growing state economy, although lack of clarity on what sorts of federal
policies President-elect Donald Trump will enact and what impact they
will have leaves significant uncertainty. 

Hobbs plans to modestly increase the amount in the rainy day fund from $1.48 billion to $1.54 billion. 

She plans to spend $10 million to expand the Arizona Low Income Housing Tax Credit program for 6 years. 

She also plans to deposit $15 million
in the Housing Trust Fund and put $5 million into creating a new
program to help homeless veterans, called Homes for Heroes. 

As promised in her State of the State
address, Hobbs plans to put more than $7 million toward a
public-private partnership that will give tax credits to businesses that
open up more child care slots for the 76,690 children who need care. 

Her plans for spending on the state’s
universities are modest, with a total of $40 million toward the Arizona
Promise Program, including $20 million in one-time spending; $15
million toward the Arizona Teachers’ Academy; and $23.2 million in
operation funding restoration for the universities. 

Arizona Health Care Cost Containment System proposed spending: 

• $344,000 in state funds and $3.9 million in federal funds to expand eligibility for family planning services for families
• More than $1 million in combined funds to permanently extend postpartum coverage from 60 days to a year
• An increase of $334 million to AHCCCS for an expected increase in caseload

Public safety and border security

• A total of $23 million for the
  Stopping Arizona’s Fentanyl Epidemic (SAFE) initiative, including $10
  million for grants to local law enforcement for drug interdiction, and
  $2 million to equip first responders with naloxone
• $20.7 million in federal funds to provide services to victims of crimes
• $35 million for a 5% pay increase to frontline law enforcement and correctional officers
• A total of $12 million to bring the
  state in line with a federal court ruling that found that the Arizona
  Department of Corrections, Rehabilitation and Reentry violated
  prisoners’ constitutional rights when it came to health care and
  housing
• $335,000 to create two new positions at the Attorney General’s Office in the Internet Crimes Against Children Task Force

Additional spending proposals

• $5 million for major events “to support Arizona’s ability to manage major events that attract economic activity to the dtate” 
• $3 million for the creation of a new
  Colorado River Litigation in case Arizona has to enter into litigation
  when negotiating the Colorado River Compact with the six other states in
  the river basin. The current agreement expires at the end of 2026
• $17.5 million for the largest ongoing increase in highway maintenance funding in state history