Arizona

Arizona

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FY2025 (proposed)
FY2024 (enacted)
FY2023 (enacted)
FY2022 (enacted)
FY2021 (enacted)
FY2020 (enacted)

Proposed Budget - Fiscal Year 2025

On January 12, Arizona Governor Katie Hobbs released her budget proposal for fiscal 2025. The budget projects $67.2 billion in total agency operating expenditures from all appropriated and non-appropriated funds for fiscal 2025. General fund spending, including baseline changes and new initiatives as well as ongoing and one-time expenditures, is recommended at $16.2 billion, a 6.1 percent decrease compared to the revised level recommended by the governor for fiscal 2024. The governor’s general fund budget includes a net baseline spending reduction of $2.1 billion, largely driven by removing one-time appropriations occurring in fiscal 2024, and a net increase in executive initiatives of $503 million. The net reductions in spending in fiscal 2025 also represent the governor’s proposed actions to close the state’s budget deficit. The budget, which includes $15.4 billion in ongoing spending, is based on ongoing forecasted general fund revenues of $15.8 billion, reflecting a 4.5 percent increase from fiscal 2024 estimated revenues. With an annual structural balance (the difference between ongoing revenues and ongoing spending) of $346 million, the fiscal 2025 executive budget recommendation has a projected ending balance of $134 million in the general fund. Despite facing a deficit, the governor does not plan to tap the state’s rainy day fund (known as the Budget Stabilization Fund), which had a balance of $1.5 billion as of January 2024.

Proposed Budget Highlights 

The governor’s budget closes the state’s budget shortfall through a balanced approach including: one-time and capital appropriation revisions for fiscal 2024 and prior years; fund transfers in fiscal 2024; a 1 percent one-time cut to the general fund operating lump sum of the executive and legislative branches for fiscal 2025; delays of non-critical spending in fiscal 2025; savings through reforming the state’s school choice voucher program; and repealing the Student Tuition Organization income tax credit set to begin in tax year 2025. Meanwhile, the budget makes significant investments in key priorities including childcare expansion, housing assistance, border security and combatting the fentanyl epidemic, long-term care reforms, prescription drug affordability, natural resources, and higher education. Spending initiatives in these areas include:

Childcare Expansion

• $100 million one-time increase from the general fund and $91 million appropriation increase from the Federal Childcare Development Fund to support the Department of Economic Security’s Child Care Assistance program.

Housing Assistance

• $10 million from existing funds in the Housing Trust Fund to provide statewide grants to organizations providing down payment assistance and mortgage interest relief to qualified homebuyers and a new loan product targeted at homebuyers in rural counties.
• $3 million one-time funding from general fund to expand statewide grants to middle-income first-time homebuyers under Arizona is Home Mortgage Assistance Program.

Border Security & Combatting Fentanyl Epidemic 

• $5 million for local law enforcement drug interdiction efforts in border communities.
• $5 million one-time funding to expand drug interdiction efforts to curtail drug trafficking.
• $2 million one-time funding to distribute and equip first responders with naloxone.
• $2 million one-time funding to expand rural access to medication-assisted treatment.
• $1 million one-time funding for statewide fentanyl awareness and education campaign.
• $1 million to monitor border operations, mitigate mass migration impacts, and address humanitarian issues.

Healthcare Licensing Reforms for Long-Term Care

• $10 million for Medicaid targeted behavioral health rate increases.
• $10 million to incentivize participation in behavioral health quality initiatives.
• $2 million to increase workforce capacity for licensing, inspections, and enforcement.
• Additional ongoing and one-time funds to add sober living homes and behavioral health residential facilities to the AZ Care Check Portal, hire additional long-term care ombuds, commission an independent assessment of the state’s network of mental health services, and other actions.

Prescription Drug Affordability

• $545,200 one-time to establish the Prescription Drug Affordability Division at the Department of Insurance and Financial Institutions.

Natural Resources

• $9.5 million deposit to Water Quality Fee Fund to ensure water safety and cleanliness.
• $33 million to Long-Term Augmentation Fund to invest in water supply development.
• $27 million for proactive forest restoration.
• $2.9 million to support emissions-related vehicle repairs through the Voluntary Vehicle Repair Fund.
• $300,000 to maintain network that provides ongoing monitoring data of water supplies.
• $469,100 for three additional full time employees to conduct air quality planning.

Higher Education

• $46 million one-time funding to invest in the healthcare workforce through AZ Healthy Tomorrow Initiatives at state universities.
• $325 million in new bonding authority for universities to expand their capacity.
• $20 million one-time funding for the Arizona Promise Program (in addition to $20 million ongoing).
• $15 million one-time funding for the Arizona Teachers Academy (in addition to $15 million ongoing).

Proposed Budget Information
Fiscal Year 2025 Budget Proposal 

Budget Summary 

Budget Presentation

Governor’s Press Release & Fact Sheets