Governor Katie Hobbs rolled out her budget last month and, unsurprisingly, it doesn’t add up.
Not only because her “solutions” don’t match the problems she claims to be solving, like suggesting we can make goods and services more affordable by piling on new taxes and fees, but because her budget quite literally just doesn’t add up.
While it’s become common for governors to release budgets built on rosier revenue assumptions than the Legislature’s more conservative Joint Legislative Budget Committee (JLBC), Hobbs’ proposal relies on projections so fanciful it resembles a fairy tale more than a fiscal plan.
Counting Chickens Before They Hatch
Hobbs’ budget is a $17.7B spending plan ($100M more than last year) that leaves a meager $37.8M balance at the end of FY27. That means her revenue projections leave very little room for error. Yet one of the more obvious facts about her budget is just how likely error-prone these projections are, a fact that Republicans during a joint appropriations hearing were sure to point out.
One of the most speculative assumptions Hobbs is making in her budget proposal is relying on $760 million of “reimbursements” from the federal government for expenditures the state has made for border security since 2021. That is a good chunk of change, and her budget is unworkable without it.
The problem is it is actually way more likely than not that even if the state receives something in the way of reimbursement, it will not be the full amount, and who knows on what timeline. Regardless, it is irresponsible to commit money out the front door that may never come in.
This is nothing new for Hobbs. Just last year she continued a COVID-era program that neither had legislative authorization to continue nor the ongoing financial allocations to support it. That wound up blowing a $122M fiscal hole in the previous year’s budget mid-session that Republicans had to mop up.
The Governor’s budget also depends on tapping the State Land trust for another $1.5 Billion. Setting aside whether its a good idea to raid the land trust set up for various beneficiaries (K-12, Universities, deaf and blind, etc), changing the formula for trust land distributions requires a constitutional amendment that would need to be approved by voters in November.
Hobbs’ “Affordability” Plan is Really a Chaotic Tax-And-Spend Plan
Hobbs wants to brand her budget as improving affordability, but it does just the opposite. Every idea in her plan is built around $1B in new taxes and fees and the hope that the bureaucracy can “manage” the cost of living while literally contributing to its inflation.
Even Hobbs faux $220M tax cut plan is really a thinly veiled tax hike. Her announced plan only provides around half of the conformity tax relief provided under Trumps one big beautiful bill, meaning Arizona taxpayers will be paying around $200 Million more than what Republicans are pursuing.
But if the hidden tax hike wasn’t bad enough, Hobbs decided to create chaos for taxpayers by having her own Department of Revenue develop tax forms that don’t even align with her own budget proposal!
Tax officials from the agency had to admit last week that it’s likely 1/3 of all taxpayers will have to file amended returns because of the confusion created by Governor Hobbs. Her solution to this mess? Just pass her plan that conflicts with current tax forms and call your accountant if you have any questions. Just an embarrassing lack of competence.
Cruel to be Kind?
Speaking of political hostages, for Hobbs these include thousands of tax-paying families who choose to send their kids to non-district schools. Another hallmark of Hobbs’ budget balancing gimmicks is the proposal to kick thousands of these students out of their schools by capping the Empowerment Scholarship Account program and limiting a family’s eligibility.
Hobbs has suggested this in every budget since taking office, and every session it has not happened. No one actually believes she can or will accomplish rolling the Republican-led legislature to accomplish it. So, including it as an $89M assumption in her budget is not just a cruel endeavor, but unserious budgeting; mere virtue signaling to the public-school industrial complex.
Arizona Doesn’t Have a Revenue Problem. Hobbs has a Spending Problem.
Federal border aid, massive tax hikes, and kicking kids out of the ESA program would represent about 5.5% of the state’s budget. But this isn’t “cost-savings,” Hobbs’s plan is to spend every dollar of that.
But Arizona’s problem is not the revenue side of the ledger. State revenues have grown dramatically over the last decade. The state has brought in more money year after year despite making strides to reduce the tax burden of its citizens. With the dramatic reductions in income taxes, a boon to everyday Arizonans, the state and local cities have actually enjoyed a windfall. What Democrats are trying to label as a “revenue crisis” is really a spending addiction, evidenced by a state budget that has doubled in a decade.
It’s because Hobbs and her big government allies believe every new dollar should be treated as permission to create a permanent new program, a permanent new entitlement, and a permanent new obligation, with taxpayers stuck funding it forever.
In other words, Hobbs CA-governance mentality is to kill the goose that lays the golden eggs. Taxpayers.
Republicans will have to bring sanity to the Budget Debate
Arizona families are tightening their belts. They’re cutting back. They’re trying to make groceries, rent, gas, and utility bills work in the real world.
Katie Hobbs’ budget is not grounded in the real world.
It’s grounded in political fantasy: federal money that may never arrive, policy extensions that haven’t happened, and a spending plan that grows government while pretending it’s helping families.
The State’s hope now is that the Republicans in the legislature put forth a responsible budget built around first, the full tax benefits of conforming to the Trump tax cuts, and then resisting the urge to feed the endless appetite of government, all while addressing the critical short term and long-term contributors that hinder affordability in Arizona.
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