PHOENIX — Republicans who control the Arizona Senate said Monday they have reached a deal with Democratic Gov. Katie Hobbs for the upcoming state budget year that includes $300 million more in spending than the stand-alone plan passed by GOP House members last week.

And the package, whose details are being formally unveiled Tuesday, contains some key provisions that will directly affect Arizonans.

There are a host of local road improvement projects designed to ease commuters’ pain and about $40 million in new funding to help low-income working parents pay for child care expenses. It also scraps a proposal to extend a $100 million tax on hospitals, a levy health care executives said could limit their ability to provide life-saving care.

The Senate package also scraps a provision in the House budget for a 2.5% cut in the tuition Arizona parents pay to send their children to state universities and freeze it there for three years. While in-state students would have benefited, it would have cut into each school’s operating budget.

And senators also won’t enact new work or education requirements on Medicaid recipients demanded by House Republicans. But Sen. John Kavanagh, R-Fountain Hills, who chairs the Senate Appropriations Committee, said it may not matter in the end if the Trump administration imposes its own mandates.

There never was any secret the Senate would develop its own plan.
The House package, which Democrats boycotted when it came up for a vote Friday, has no chance of being signed by Hobbs. And Sen. T.J. Shope, R-Coolidge, on Monday called the House plan a “fantasyland.”

By contrast, Senate President Warren Petersen, R-Gilbert, called the $17.6 billion spending plan for the fiscal year that begins July 1 “a bipartisan budget the Republican majority can fully support and the governor will sign.”

The measure could still get some slight tweaks, said Kavanagh who was heavily involved in the budget discussions.

“There are a few minute items outstanding, which shouldn’t be a problem,” Kavanagh said.

Hobbs spokesman Christian Slater agreed.

“I think there’s still a few of these details that will be worked out in the coming days,” Slater said. “I don’t want to say things like ‘set in stone’ — that doesn’t happen usually until it’s on the floor and it’s being passed.”

While the package of Senate budget bills wasn’t immediately available, documents laying out individual spending line items obtained by Capitol Media Services show items both parties sought.

It contains spending Hobbs and Democrats in both chambers wanted. They got funding for potential litigation over Arizona’s Colorado River water supply, eliminating half of a wait list for state-subsidized day care for children and boosting pay for child care providers. Low pay has led to staff shortages at day care centers statewide.

Individual Republican senators packed the budget with road projects designed to fix traffic bottlenecks in their hometowns and cash for local police and fire departments. And a key Hobbs priority, scaling back Arizona’s universal private school voucher program, was rejected by Republicans.

The Senate also scrapped some key items House Republicans included in their spending plan, like that 2.5% tuition cut and three-year tuition freeze for in-state university students. That was essentially a cut to the three university’s funding because they got no additional cash to make up it.

And the Senate included another Democratic priority: a required yearly waiver of the constitutional limit on K-12 spending. Without the waiver, schools could not spend all the money the Legislature is allocating.

There are, however, some areas of agreement between the House and Senate plans, like 5% raises for state troopers and Department of Forestry and Fire Protection firefighters. Universities also get an expanded ability in both budgets to issue bonds to expand their campuses, and K-12 students qualifying for reduced-price lunches will have those co-pays erased.

Both budgets also contain provisions that shift $15.3 million appropriated in 2023 to the private foundation that runs the Prescott Frontier Days rodeo instead to go directly to the city of Prescott, allowing the city to take over the plan for a major update to the rodeo grounds.

A judge ruled last month the original appropriation to the foundation violated the state constitution’s gift clause and permanently blocked the spending that had been held up while a lawsuit made its way through the courts.

Prescott Mayor Phil Goode said Monday he’d spoken to two of the three Republican lawmakers representing the area, Sen. Mark Finchem and Rep. Selina Bliss, about the inclusion in the budget.

“They’re pretty adamant about making sure it goes to the city for the benefit of the rodeo, as it was originally intended,” Goode said.

Kavanagh said the Senate’s $17.6 billion spending plan shows all the signs of a bipartisan budget: Neither side got everything they wanted but both could notch wins.

“Everybody realized that we’re not getting everything, (A) because there’s not that much money, and (B) because we kept the really toxic red meat for the base items out of the budget,” he said. That included a provision that would have frozen the salaries of Family Court judges because several lawmakers are unhappy with some of their rulings.

And Kavanagh said there was a benefit to getting such a late start in budget negotiations.

“Instead of nickel-and-diming back and forth for weeks and weeks, each meeting resulted in major concessions for both sides,” he said.

Of note is that the Senate divided a projected budget $270 million budget surplus among the governor, House Republicans and Senate GOP members. That move led to more than $70 million in road projects and in excess of $15 million to local police and fire agencies, plus a smattering of other individual line items sought by individual senators.

But with the House not participating in negotiations with the governor, that $70 million allocated for its members was set aside for Republicans there to dole out if they decide to stop going it alone and work off the Senate plan.
House Majority Leader Michael Carbone declined to comment on the Senate plan saying he had not yet seen the details.

Petersen said Kavanagh’s committee will consider the Senate budget on Tuesday, followed by a vote by the full Senate on Wednesday. Because Hobbs has signed off and legislative Democrats participated in budget talks, its likely to be sent to the House that night with broad support.

That means House members could be called on to debate the budget as early as Thursday.

Republican Rep. Nick Kupper, R-Surprise, tweeted Sunday night he would not support a spending plan with $300 million more in spending than the $17.3 billion House-passed version.

“Ours isn’t perfect, but we’re actually doing our jobs properly & stewarding your money better,” Kupper wrote. “I’m happy to work with my Senate colleagues on what our specific priorities are, but I will NOT vote yes on a budget with their proposed price tag.”

But horse trading has already started between House and Senate Republicans, Kavanagh said, mainly because Hobbs has pronounced the House budget dead and members realize they need her signature or government will shut down on June 30. With the Senate reserving that $70 million for House GOP spending requests, those back-channel communications are now coming in.

“It’s my sincere hope that they will communicate their member requests so that, with the space that was left for them, we can insert it and we can all move forward together,” Kavanagh said.