(C) Arizona Mirror This story was originally published by Arizona Mirror and is unaltered. . . . . . . . . . . Republicans challenge Hobbs budget as ‘based on fantasy revenue’ in contentious hearing [1] ['Caitlin Sievers', 'Jerod Macdonald-Evoy', 'More From Author', 'January', '.Wp-Block-Co-Authors-Plus-Coauthors.Is-Layout-Flow', 'Class', 'Wp-Block-Co-Authors-Plus', 'Display Inline', '.Wp-Block-Co-Authors-Plus-Avatar', 'Where Img'] Date: 2026-01-20 The Republicans who control the Arizona Legislature and the Democratic governor just kicked off the political show that is their annual budget negotiation process, made more difficult this year by cuts from the federal government and election-year politics, as everyone involved prepares to go before voters later this year. Gov. Katie Hobbs released her $17.7 billion proposal last week, which immediately came under criticism from legislative Republicans. On Tuesday, during a joint meeting of the Arizona House of Representatives and Arizona Senate Appropriations Committees, Republicans grilled Ben Henderson, the governor’s budget director, on revenue projections, uncertain funding sources and whether the governor believes there’s a “problem at the border.” House Appropriations Committee Chairman David Livingston said during the meeting that he had grave concerns about Hobbs’ proposed budget. Chief among the Peoria Republican’s issues were economic projections based on growth in the artificial intelligence industry, coupled with plans to nix tax incentives for AI businesses and a reliance on a large reimbursement from the federal government to balance the budget that might not materialize. The governor’s budget would eliminate tax exemptions for the data centers that make AI possible to bring in $38.5 million in tax revenue, and it would give the director of the Arizona Department of Environmental Quality the power to place fees on data center water usage. Livingston, and Rep. Matt Gress, who was Republican Gov. Doug Ducey’s budget director, both said that a reliance on a strong AI industry alongside cuts to incentives for that industry were contradictory. Henderson countered that the state had created incentives to drive AI to Arizona, and now that the state is the “No. 2 market for data centers in the world,” it’s time to cancel those incentives. Gress argued that canceling tax incentives for AI businesses that had made decisions based on those tax breaks would be bad for business. And the revenue projections in the governor’s budget were too far off the forecast from the Joint Legislative Budget Committee to be realistic, Gress added. “I appreciate your excitement and optimism, but this budget is based on fantasy revenue,” he said. Several Republican legislators said they were concerned that the governor’s budget was balanced on $760 million in reimbursement from the federal government through the State Border Security Reinforcement Fund, created by the “One Big Beautiful Bill.” The fund is meant to provide grants to states to reimburse them for border-security related expenditures made after Jan. 20, 2021. Both Hobbs and Republican legislative leaders have requested more than $700 million from the fund, but there’s no guarantee Arizona will receive it, as the state must compete for funds with other border states, like Texas, which has asked for more than $11 billion in reimbursements from the $13 billion fund. Gress said he was worried about what would happen if the state isn’t awarded the border fund money, especially since the Hobbs administration “hasn’t had a good track record in getting money from the federal government.” “This is a staggering sum of money, and it goes to the point of serious financial weaknesses of the executive budget,” he said. Gress was referring to a federal Rural Health Transformation Grant that was included in last year’s budget for which the state received about $33 million less than anticipated from the Trump administration, because it was scored as the 39th-most rural state, giving it lower priority than other states. Arizona received among the least of any state, joining other states with Democratic governors in getting far less than requested. Senate Majority Leader John Kavanagh, R-Fountain Hills, said that the Trump administration has been more generous in awarding funding to states that cooperate with his mass deportation agenda, and suggested that if state police begin working with U.S. Immigration and Customs Enforcement raids, the president would be more likely to award money to Arizona. Because her budget commits around $9 million to border security funds, Gress repeatedly asked Henderson whether Hobbs believed that there is a problem at the state’s southern border. Democrats protested the question, saying it was outside of Henderson’s purview as budget director, but Henderson answered that Hobbs was concerned about drugs coming across the border with Mexico, the primary focus of her border security agenda. In response to Livingston’s advice that the Hobbs administration should meet with someone from the Trump administration to increase the likelihood that Arizona would receive the border funding, Henderson said the Hobbs had met with Tom Homan, Trump’s border czar, in December to talk about it. Gress and Livingston both said they were concerned about increasing costs to the state coming from the Department of Corrections, Rehabilitation & Reentry and from the Arizona Health Care Cost Containment System, the state’s Medicaid program. Henderson pointed out that many of the increased Corrections Department costs were due to court orders requiring better health care and treatment of prisoners whose rights not to be subjected to cruel and unusual punishment had been violated. One point of agreement with the governor’s budget, Livingston said, was $24.4 million to maintain last year’s bonuses for correctional workers. If that funding isn’t included in the budget correctional officers would see a $2,000 decrease in pay this year. Increased costs to AHCCCS are due, in part, to cuts from the federal government coupled with increased administrative duties to evaluate whether recipients qualify twice a year instead of once, and to verify more expansive work requirements. Gress and Livingston, two of the most vocal opponents of the fight for supplemental funding for the Division of Developmental Disabilities last year, set the table for more of the same this year. Last year, DDD asked for $122 million in supplemental funding to get it through the last month of the fiscal year. Republican legislators blamed the cost increase on the Parents as Paid Caregivers Program, which trains and pays parents to care for their own children who have disabilities. However, information released by AHCCCS after the funding fight was resolved showed that the increase in usage of caregiving services happened across the board, from both outside and parent caregivers. Even though Democrats and the governor agreed to tighter guardrails on DDD funding as part of the supplementing funding that was finally awarded in April of last year, the implementation of those guardrails was delayed. Costs continued to skyrocket in the meantime, and DDD is asking for another $120 million in supplemental funding this year. Families in the DDD community say cuts to the programs they rely on could upend their lives and end with either their children being institutionalized or families becoming homeless. Livingston and Gress have both harshly criticized the supplemental funding requests from DDD, something that isn’t uncommon in state government. When Democratic Rep. Nancy Gutierrez of Tucson pointed out that the state’s $1 billion Empowerment Scholarship Account school voucher program had also requested supplemental funding this year, Livingston said that wasn’t true. Henderson countered that the program that provides tax dollars to any K-12 student to attend private school or be homeschooled did ask for supplemental funding this year, and budget documents back that up. The Department of Education is asking for $47.2 million in supplemental funding for the ESA program, which Democrats and school advocates have criticized as an entitlement for wealthy families who were already sending their kids to private school. In response to claims that the Hobbs budget wasn’t actually balanced because it relied on unrealistic funding, Henderson pointed out that Republicans’ proposed tax cut bill that Hobbs vetoed on Friday would have put “a giant hole” in the budget. He suggested that many of the issues brought up during the hearing could be resolved through the budget negotiation process. [END] --- [1] Url: https://azmirror.com/2026/01/20/republicans-challenge-hobbs-budget-as-based-on-fantasy-revenue-in-contentious-hearing/ Published and (C) by Arizona Mirror Content appears here under this condition or license: Creative Commons CC BY-NC-ND 4.0. via Magical.Fish Gopher News Feeds: gopher://magical.fish/1/feeds/news/azmirror/