Highlights
- Gov. Katie Hobbs signed an $18.3 billion state budget on June 13, two weeks before the shutdown deadline.
- The package delivers $1.4 billion in tax cuts over three years by conforming Arizona's code to Trump's federal tax legislation.
- Democrats secured a three-year moratorium on data center tax credits; Republicans preserved the universal school voucher program without new restrictions.
- Agency budgets were cut 2.5%, down from the 5% Republicans had originally sought.
Arizona Gov. Katie Hobbs signed an $18.3 billion state budget into law on June 13, locking in $1.4 billion in tax cuts for Arizona residents by aligning the state's tax code with President Donald Trump's federal tax legislation, a deal that arrived about two weeks before the deadline to avoid a government shutdown.
The fiscal year 2027 budget passed the Legislature on June 11 with wide bipartisan support, the product of weeks of negotiations between the Republican-controlled House and Senate, Democratic lawmakers, and Hobbs. Republicans had insisted the tax cuts be included; Hobbs and Democrats had proposed adopting some but not all of the federal conformity provisions.
Starting July 1, Arizonans will pay no state taxes on tips or overtime income, benefit from a higher standard deduction, and receive a deduction for seniors. An expanded child tax credit takes effect the following year. The conformity with Trump's "One Big Beautiful Bill" applies fully only for the current year, to prevent residents from having to refile taxes after the Arizona Department of Revenue had already sent out forms assuming full federal alignment.
The cuts come at a cost: state agency budgets were reduced 2.5%, down from the 5% Republicans had sought in their party-line budget passed in early May, which Hobbs vetoed. Future years replace the State and Local Tax deduction, which the source notes primarily benefits the wealthy, with an increased child tax credit.
Democrats' primary win was a moratorium on new certificates for data center tax credits, a program tied to generative AI infrastructure. Republicans preserved the universal school voucher program, which exceeds $1 billion annually, without the guardrails Democrats sought after reports of parents using voucher funds for household goods.
A notable loss for Hobbs: she failed to persuade Republicans to refer a continuation of Proposition 123 to voters. The original 2016 measure had directed roughly $300 million annually from the state land trust to K-12 public education; its lapse removes that funding stream.
House Speaker Steve Montenegro credited Republican negotiators for securing the tax provisions. "With this historic middle class tax cut, I'm proud to say that every year I've been governor, we've cut taxes," Hobbs said in a statement.
The budget takes effect July 1.
Sources
Every factual claim in this article traces to one of the sources below. See how we work for the editorial process.
- azmirror.com retrieved 14/06/2026 01:48
Authored by The Scottsdale Signal. Drafted by AI from primary-source material under our beat-specific editorial guides; reviewed by humans before publish under our five-gate process. Sources retrieved at 14/06/2026 01:48. Every claim traces to a source.
