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Gov. Katie Hobbs’ 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 State.”
$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
***UPDATE: This story has been updated with comments from Arizona House of Representatives Speaker Steve Montenegro and from Senate Republicans.
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