Proposed Budget Highlights
The governor’s budget focuses on investments to make Arizona more affordable for working class families. The proposal also prioritizes public safety, child welfare and protection, water security and wildfire resilience, education and workforce training, and government efficiency. The governor also proposes tax relief measures, including cuts that conform with recent federal changes, and revenue enhancements to generate new revenue. Highlights of the budget include:
Affordability
- Proposes a package of middle class tax cuts, including increasing the standard deduction, adding another deduction for seniors, and allowing taxpayers to deduct eligible tipped and overtime income as well as car loan interest on new American assembled vehicles.
- Directs one-time American Rescue Plan Act (ARPA) funds (along with other fund sources) to the Housing Acceleration Fund to jumpstart more housing development and to assist working families with paying utility bills.
- Provides one-time funds to eliminate or reduce school meal copays for eligible families.
- Provides one-time funds to continue the SUN Bucks program to provide eligible families with a $120 grocery benefit during the summer.
- Invests in the Child Care Assistance Program to maintain quality and promote affordability.
Public Safety
- Directs one-time funds to task force efforts aimed at combatting the fentanyl epidemic.
- Provides one-time funding to support state and local entities with cybersecurity.
- Proposes funding for the Border Coordination Office.
Children & Families
- Provides one-time funding to support young adults transitioning out of foster care.
- Invests ongoing and one-time funds, including from general and federal sources, to protect the Division of Developmental Disabilities.
Water Security and Wildfire Resilience
- Directs funds towards extreme heat mitigation.
- Invests in the Colorado River Protection Fund.
- Provides funding to combat and respond to wildfires.
Education and Workforce Development
- Invests new resources in K-12 education, including through assuming renewal of Proposition 123 that would restore the enhanced distribution rate from the Permanent Land Endowment Trust Fund to the Public Institution Permanent School Earnings Fund.
- Directs one-time funds to several school construction projects.
- Provides one-time funds to: assist community college students in obtaining industry recognized credentials; free online courses and other options to help adults earn a high school diploma; and to increase access to dual enrollment opportunities.
Government Efficiency and Capacity
- Achieves cost savings through the Arizona Capacity and Efficiency (ACE) Initiative that cuts spending, maximizes efficiencies, and streamlines processes.
- Establishes a household income cap for universal Education Savings Account (ESA) eligibility and bans the purchase of luxury items through the ESA program.
Revenue Enhancements
- Incorporates one-time federal funding for reimbursement of border-related expenses that has been requested from the State Border Security Reinforcement Fund, created by the One Big Beautiful Bill Act.
- Establishes a tiered fee structure for event wagering.
- Eliminates data center tax exemption and adds a data center water usage fee to fund the Colorado River Protection Fund.
- Generates additional revenue through increased advertising for the state lottery.
- Identifies alternative fund sources for two state agencies.