Arizona budget squeaks through House and Senate

PHOENIX — A plan to balance the state budget squeaked through the Legislature Saturday over the objections of some Republicans who said it spends too much and Democrats who said it spends too little.

The package, which was set for final Senate approval, cuts $729 million from the current budget, reducing it to $17.2 billion. That brings expenses into line with revenues and avoids violating constitutional provisions that forbid the state from ending this fiscal year June 30 with a deficit.

Lawmakers also adopted a $16.1 billion spending plan for the new budget year after trimming $690 million in expenses, with many of the provisions getting the bare minimum votes needed for approval.

All that became necessary due to a combination of soft sales tax collections linked to the economy; a sharp drop in income taxes related to Arizona’s 2023 switch to a flat personal income tax system; spending versus saving a nearly $2 billion surplus from a year ago; and new expenses from allowing all students to get vouchers to go to private and parochial schools.

The plan boosts funding for the state prison system. That includes funds being taken from a $1.14 billion multi-year opioid settlement, a transfer that Attorney General Kris Mayes contends is illegal.

There also is some additional cash for K-12 education beyond normal student growth and inflation increases, though some of that could prove temporary.

Conversely, the state’s three universities are losing money, though a last-minute addition puts another $1 million in one-time funding for the teaching academy, addressing one of the concerns of the Arizona Board of Regents.

The overall bottom line closes a $729 million gap between revenues and expenses for the current fiscal year, avoiding violating constitutional provisions that require the state to not end the budget year on June 30 with a deficit. That will reduce total spending to $17.2 billion.

Even with a $1.1 billion drop in spending in the coming budget year, Rep. Barbara Parker, R-Mesa, said that is too much. She said education and health care, the two largest items in the budget, were filled with “bloat and corruption.’’

But Rep. Travis Grantham, the House speaker pro-tem, said Republicans who wanted bigger cuts need to recognize political reality.

“We have a divided government in this state,’’ he said, as Gov. Katie Hobbs is a Democrat.

“If I could have everything my way, this budget would probably be half this size and most of what’s being asked for wouldn’t be in it,’’ Grantham said. The Gilbert Republican chided fellow party members who refused to support the plan.

He pointed out that the GOP has a one-vote majority in both the House and the Senate. That meant for every Republican who wouldn’t vote for the package, supporters had to find a Democrat to support it — moves that only added to the fiscal bottom line.

Still, he said, Republicans should be proud of the budget. “The fact that we’re shrinking government to me is a victory,’’ Grantham said.

The rounding up of the necessary votes resulted in some last-minute additions to the spending plan, however.

Those include $1 million to the Pascua Yaqui tribe for social services and an identical amount to nonprofits in Cochise County for food distribution services for low-income individuals.

There also is additional money for heat mitigation programs in Southern Arizona, cash for senior health promotion and coordination in Santa Cruz County, and an allocation of funds to nonprofit organizations that provide counseling and community services in Southern Arizona.

And there’s something else demanded by Democrats and some Republicans: Lawmakers agreed to waive the “aggregate expenditure limit’’ for schools.

A 1980 vote-approved constitutional amendment caps total K-12 spending at what it was then, with annual adjustments for inflation and student growth. That is currently more than $6.9 billion.

But additional dollars added in the past few years have boosted it past that point.

Without a waiver, districts would not be able to spend the money they already are set to receive this coming school year.

House Minority Leader Lupe Contreras, D-Avondale, who voted against each element of the budget, said all those additions are not enough.

“There’s always more that we can be doing for the people,’’ he said. “I’m not settled on this is enough.’’

Some of what’s in the final plan is a mixed bag.

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For example, the budget eliminates $37 million a year in state aid earmarked for schools based on the number of students they have from low-income homes. Also disappearing is another $29 million extra for certain capital needs such as books and buses.

But the deal promises to restore the funds for the 2027-2028 school year.

That choice is not by accident: That is the time by which legislative budget analysts say revenues should once again exceed expenses.

Only thing is, the promise is just that, as it does not bind future lawmakers to providing the funds.

Contreras made it clear he thinks legislative Democrats would have gotten more had they been involved in the negotiations. Instead, the talks involved House and Senate GOP leaders and the Democratic governor.

“And then we were informed of what was going on,’’ he said.

So is Hobbs at fault for not getting more?

“I’m not going to totally put the blame on her,’’ Contreras said.

One of the ways lawmakers managed to bring the budget into balance amounted to kicking financial obligations down the road — especially for roads.

For example, gone is more than $9.2 million for Pinal County to engineer and design the West Pinal Parkway East-West Corridor. It is now penciled in the budget for the 2027-2028 fiscal year — again, with the realization that future lawmakers are not bound by that decision.

The plan also reduces funding by $27.7 million for a project to extend State Route 24 in Queen Creek.

But there is cash for other projects, including $10 million to design a traffic interchange between Interstate 10 and Cortaro Road in the Tucson area, $8.2 million for work on a road connecting the Douglas international port of entry and State Route 80, $35.5 million for an emergency evacuation bridge in Lake Havasu City, and $18 million to improve an intersection on Route 347 and Casa Blanca Road north of Casa Grande.

At least part of the proffered reasons some Republicans voted against the plan was their claim the whole thing was being rushed.

“I did not have time to read the budget, vet it, digest it,’’ complained Rep. Rachel Jones, R-Tucson. “And I made a promise to my constituents, to the people, that I would always do better, that I would never rush, that I would wait until I know what was in something, especially a budget.’’

Other foes had different concerns.

Rep. David Cook, R-Globe, objected to ending a program that now provides higher education scholarships to the spouses and children of fallen officers.

“These are law enforcement officers who have lost their lives defending the citizens of this state,’’ he said. He said the budget plan takes away the ability of the families “to put their lives together and educate those children and move forward.’’

Rep. Joseph Chaplik, R-Scottsdale, had a different issue.

On one hand, Republicans beat back efforts by Hobbs to cap the number of students in a program that gives vouchers of state dollars to parents to send their children to private or parochial schools or to home school their children.

It requires the Department of Education to construct an online database of allowable expenses for what are formally known as empowerment scholarship accounts. That followed reports of parents using voucher money for everything from ski trips to Lego sets.

“I just feel like this is letting the camel’s nose under the tent,’’ Chaplik said, opening the door to future restrictions “which I won’t stand for.’’

He said if lawmakers were looking to cut spending they should be looking at publicly funded schools “where the fraud and the waste is.’’