PHOENIX — Democratic Gov. Katie Hobbs laid out a vision Monday for the new legislative session that focuses on helping average Arizonans struggling with high costs of housing and child care by proposing measures to boost new home construction, limit short-term rentals and set up a new public-private partnership designed to lower soaring child-care costs.
But newly elected House Speaker Steve Montenegro said while he wants to work toward solutions, he thinks the governor is out of touch with what Arizonans want. That portends trouble for Hobbs to get her agenda through an emboldened and larger Republican majority in both the House and the Senate.
“Today we heard a speech with the governor that is not reflecting the values that Arizonans have sent us to do,’’ said Montenegro, a Goodyear Republican. “This last election, Arizonans spoke loud and clear,’’ continued the Goodyear Republican. “And they gave us a mandate to focus ... on public safety.’’
Gov. Katie Hobbs gives her third State of the State speech Monday as House Speaker Steve Montenegro, left, and Senate President Warren Petersen look on.
Hobbs appeared to acknowledge the new political reality with her focus on meat-and-potatoes policies like housing and child-care costs after voters here and across the nation rebuked Democrats in November and elected Donald Trump as they faced soaring prices. With her own reelection coming up in two years, the governor appears to be staking out ground as a champion for average Arizonans.
Her priorities include extending a long-running tax credit that helps developers build affordable homes.
She also wants to expand a program she began last year that provides down-payment assistance to first-time homebuyers, and to give cities the authority to rein in vacation rentals that suck regular rental housing from the market. She set an ambitious goal of ending homelessness among veterans by the end of the decade with a new “Homes for Heroes’’ program.
All are part of what she called the “Arizona Promise’’ in her third State of the State speech, a promise she said is threatened by soaring prices.
“Today, the high cost of housing is forcing that promise out of reach,’’ Hobbs told the joint session of the Legislature on its opening day. “From Flagstaff to Sierra Vista, housing shortages and out-of-state speculators are driving up the price of housing. To combat this, we are taking action.’’
Without providing specifics, she said she wants to build on other housing initiatives adopted last year that limit cities’ restrictive zoning and require municipalities to allow homeowners to build backyard casitas in many areas.
“I’m proud of the progress we’ve made expanding access to casitas and building duplexes and triplexes in our downtowns,’’ Hobbs said. “But Arizonans are depending on us to find more common-sense solutions that don’t expose our neighborhoods to untested experiments.’’
One “solution’’ that dates back to when Republican Doug Ducey was governor allows homeowners and investors to buy up houses and then rent them out on a short-term basis. State lawmakers have barred cities from placing restrictions on those operations, leading to concern about “party houses’’ popping up in the middle of residential neighborhoods.
Montenegro said, however, that Republicans will be hesitant to enact anything that interferes with property rights.
On child care, Hobbs noted that it can now cost $15,000 a year, sapping families’ ability to pay for other costs or buy a home. She said she had been a working mother who raised two children with her husband and she knows the struggles families go through.
“That’s why I am putting forward the Working Families Child Care Act to lower the cost of caring for your kids by two-thirds,’’ she said. “Through partnerships with employers, we can make life easier for families who are struggling with the high cost of raising a child.’’
Details are yet to come.
Despite a larger Republican legislative majority that is certain to crimp many of her initiatives, Hobbs didn’t avoid two hot-button issues that seem unlikely to get traction among GOP lawmakers.
One is repealing a law that mandates a yearly report on abortions performed in the state. Hobbs doesn’t want doctors collecting all sorts of information from patients, ranging from the procedure used and the gestational age of the fetus to the race of the woman and the reason she wanted to terminate a pregnancy.
The other would place limits on the universal school voucher program that gives state cash to parents to send their children to private and parochial schools.
Reining in the massive voucher law enacted under Ducey in 2022 has been a top Hobbs goal since she took office in 2023 but is a non-starter for GOP lawmakers.
Arizona school vouchers, formally called Empowerment Scholarship Accounts, are on track to cost nearly $1 billion in the next budget year.
She called for accountability measures and income caps on who is eligible for the program.
Not doing so, she said, means the state will continue to write “blank checks’’ while allowing what she called waste, fraud and abuse to continue without oversight. It will also leave less money available for child care, housing and raises for police or border security efforts.
“The current program is unchecked, flawed, and rife with exploitation,’’ the governor said. “Three years ago, it went far beyond its original purpose, which was to support kids with special needs and military families. Today, it has ballooned into a billion-dollar boondoggle increasingly scamming Arizonans.’’
That is just part of the problem, Hobbs said. She said there are no guardrails on how parents spend those voucher funds — more than $7,000 a year per student — something she said has meant to “paying for grand pianos to sit in multi-million-dollar homes.”
Senate President Warren Petersen, R-Gilbert, preemptively nixed any Hobbs effort to limit vouchers in a short speech that came just before Hobbs took the stage.
“We will protect parental rights,’’ he said.
Hobbs used her speech to also lay out other priorities for the coming session.
They include asking lawmakers to send to voters an extension of a measure that taps the state Land Trust to boost K-12 school funding.
First OK’d by voters in 2016 as Proposition 123, the measure, which has added about $3.5 billion to school funding since passage, was designed to settle a long-running lawsuit filed by local schools after state funding cuts. The authorization to take those dollars from the trust expires later this year.
Republicans and Democrats, including Hobbs, were unable to reach an extension deal last year and must act this year if they want the money to keep flowing. But even here there are differences: Republicans generally want all the money to go to teacher pay, while Democrats say support staffers such as counselors and bus drivers should also get raises.
Hobbs also wants the Legislature to eliminate the aggregate expenditure limit, a decades-old constitutional provision that limits local school district spending. The Legislature has repeatedly passed one-time waivers to the law to allow public school districts to spend all the money allocated by the state.
Arizona is also facing a water crisis decades in the making as most rural areas lack limits on groundwater pumping, and as the supply of Colorado River water that flows to metro Phoenix and Tucson is crimped by long-term drought driven by climate change.
Hobbs said she will fight to retain Arizona’s right to its Colorado River allocations, and to take action to protect groundwater if the Legislature continues to balk in the face of resistance from developers.
Last year, she limited new construction in some areas on the outskirts of Maricopa County because of a lack of water. She also initiated, in Cochise County, the first new state-mandated groundwater management area in more than 40 years. She said she won’t stop acting when needed.
“When we fail to take action to protect our groundwater, big corporations will recklessly over-pump this finite resource regardless of the people and communities they hurt,’’ the governor said.
While pledging to work with the Legislature on solutions to over-pumping, she said she’ll take unilateral action if lawmakers won’t.
“Further, any bills that attack our assured water supply program, undermine our water future, or are political cover for this Legislature’s lack of action on water security, will meet my veto pen,” she said.
One of Democrats’ few victories in the 2024 election was on reproductive rights, when voters overwhelming passed a measure enshrining the right to abortion in the state constitution.
Hoping to build on that win, the Democratic governor wants lawmakers to enact laws guaranteeing the right to obtain contraceptives and fertility treatments such as in-vitro fertilization procedures.
“Arizonans have spoken clearly,’’ she said. “It’s our responsibility to deliver on their mandate.’’
Whether GOP lawmakers who widely oppose abortion will take up those proposals, which Hobbs could point to as wins as she seeks reelection in 2026, is unclear.
That election could be not far from the governor’s mind.
Sitting in the second row, an invited guest of one of the Republican lawmakers was Karrin Taylor Robson, who already indicated she wants to run again for governor. Taylor Robson ran in 2022 but lost the Republican primary to Kari Lake who, in turn, went on to lose to Hobbs.
Montenegro said Hobbs is on the right track in talking about public safety.
“We have to make sure we have safe communities,’’ he said. “We have to make sure that law enforcement has everything they need.’’
Montenegro said that means having “safe communities from your front door to the border.”
But Republicans see this as having the state take an active role in halting illegal immigration. Hobbs, by contrast, said her focus has been more on programs including having National Guard soldiers on the border to help interdict drugs.
Hobbs will have other fights with Republicans on her hands.
The leader of the Legislature’s ultra-conservative Freedom Caucus, Sen. Jake Hoffman, R-Queen Creek, held a news conference hours before the speech excoriating Hobbs. He said Republicans and Freedom Caucus members were able to keep Hobbs in check — specifically pointing to a committee he leads that vets her agency director nominees.
After blistering hearings in 2023, Hobbs pulled her nominations from Hoffman’s committee and tried to avoid Senate confirmation by directly placing directors in leadership roles. A court sided with the Senate, and Hoffman is set to soon begin hearings anew.
“The state of the state, if measured solely by Katie Hobbs’ systemic failures, is bleak at best,’’ Hoffman told reporters.
“However, thanks to the leadership of conservative Republicans in the Arizona Legislature, the state of Arizona’s future is bright and getting brighter,’’ he said. He promised to fight over the next two years before the next gubernatorial election “for a more accountable, more efficient state government with leaner budgets and greater efficiencies that focuses on the core functions of constitutionally limited government.’’
Hobbs made no mention in her speech of the upcoming fight over getting her agency directors confirmed by the Senate.
