(The Center Square) – Gov. Katie Hobbs’ budget proposal continues the “trend of large increases in general fund expenditures” Arizona has seen in recent years, according to Glenn Farley, research and policy director at Commons Sense Institute Arizona.
Last week, Hobbs unveiled her budget for the 2026-2027 fiscal year, totaling $17.7 billion. Her proposal is $100 million more than the Arizona Legislature passed last year, at $17.6 billion.
Farley told The Center Square that caseload and formula funding saw the largest increases in Hobbs’ budget proposal, which includes Arizona’s Medicaid program, the K-12 program and other health care programs such as the Department of Economic Security.
“This budget continues the trend of massive increases, really historically unprecedented increases in the state’s Medicaid-funded disability program run out of DES,” he explained.
Normally, the biggest caseloads came from the Arizona Department of Education and the state’s Medicaid program, Farley said. However, in this budget, the biggest caseload increase is for the DES disability program.
Arizona has a population of people who need home-based care because of their disabilities, so the state adjusted how care is “subsidized” by its Medicaid-funded program at DES to “enable more home-based services by home-based providers,” the research director stated.
The budget proposal noted 62,000 Arizonans qualify for this program.
Hobbs’ budget gives an extra $128.1 million from the general fund and another $271.9 million to the Department Long Term Care System Fund in fiscal year 2026.
For fiscal year 2027, the budget proposal plans to give DES in ongoing funds an additional $298.8 million from the general fund and another $673 million in the DLTCSF.
Hobbs’ budgets have relied on one-time funding instead of ongoing funding, Farley noted
To align with federal changes, Hobbs’ current proposal mirrors some provisions of HR 1, also known as the One Big Beautiful Bill Act.
According to Farley, the two biggest changes HR 1 made were to federal income taxes and to the cost growth in Medicaid and Supplemental Nutrition Assistance Programs.
The federal government is attempting to restrain cost growth in these programs by “increasing the administrative responsibilities on the states,” he told The Center Square.
Hobbs’ budget conforms to those changes, Farley explained.
Earlier this month, the Arizona Republicans introduced a tax plan estimated to save Arizonans $1.1 billion over the next three years. However, Hobbs vetoed the bill.
Farley, who worked in the Ducey administration in Arizona for eight years, said during that time, state budgets were typically signed in March or April.
But he noted that under Hobbs, that has been pushed out to May or June.
According to Farley, the volume of tax code changes this year exceeds that in a typical year.
Farley said the changes “are very significant,” noting the federal government made a large change to the adjusted gross income and added new subtractions, deductions and exceptions for the tax code.
”The result is if you file your taxes based on one assumption in February and March, and what the state ultimately passes in April, May or June is very different. You have a lot of taxpayers amending their returns, and the amendments could be very significant,” he explained.
