Will the year bring more collaboration or partisan fighting?

Arizona lawmakers are returning to the Capitol today to begin their annual session, but whether this year will be dominated by more of the same intransigence that marked last year’s session, as the slim GOP majority passed 143 bills that Democratic Gov. Katie Hobbs rejected with a record number of vetoes remains to be seen.

The key players this year will be mostly the same, with Hobbs in the executive tower and a one-vote majority for Republicans in both chambers of the legislature. There’s a chance that things will go the same way as last year, with Republicans writing and passing bills to send to Hobbs’ office even when the legislators know that Hobbs would not sign them. 

“Governor Hobbs promised to bring sanity, not chaos, to state government,” Hobbs spokesman Christian Slater told the Arizona Mirror. “She will remain focused on the issues everyday Arizonans care about like creating jobs and growing our economy, expanding access to affordable housing and securing our water future. She will continue to serve as a stopgap to any legislation that threatens freedoms for Arizonans.”

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But the two parties did manage some collaboration last year, the most significant accomplishment being the $17.8 billion annual budget

But last year, there was a $2.5 billion budget surplus to work with. Things will be different this session, with a $407 million shortfall already realized in this year’s budget. The deficit, which continues to grow, is mostly caused by Republican tax cuts for the wealthy that resulted in much lower income tax collections than expected, and which could be driven higher by larger-than-expected costs in the school voucher, or ESA program, according to legislative budget analysts. 

During the Arizona Chamber of Commerce and Industry’s 2024 Legislative Forecast event on Jan. 5, Speaker of the House Ben Toma, R-Peoria, attributed the deficit to overspending over the last couple of years, and did not initially mention how the tax cuts and school vouchers that he championed had impacted the state’s revenue, but he later claimed that both the tax cuts and voucher program had set up the state to increase its revenue in the future. He did not explain how. 

“This is not a structural issue,” Toma said, “but a short-term cash flow issue.” 

During the same event, House Assistant Minority Leader Oscar De Los Santos, D-Laveen, blamed the deficit squarely on the tax cuts and the huge increase in the cost of the voucher program. 

“Month after month after month, the revenue numbers are coming in way lower than projected,” De Los Santos said. 

Senate Minority Leader Mitzi Epstein agreed with De Los Santos and added that the issue came from only looking at the spending side of things when Republicans voted in 2021 to go to a flat 2.5% income tax when the state was flush with cash from federal stimulus programs, instead of looking at both revenue and spending. 

Republicans and Democrats will have to come to an agreement on a state budget at some point, but they are definitely not in consensus about the cause of this year’s deficit or the seriousness of the shortfall. 

“Thank God we passed the tax cuts,” Senate President Warren Petersen said during the chamber event. “That was one of the best things we did.”

Petersen, a Gilbert Republican, explained that the shortfall was caused by economists’ incorrect projections of the state’s revenue this year. However, he didn’t acknowledge either that those incorrect projections vastly underestimated the impact of the tax cuts or that he voted to enshrine those projections in the budget. 

He added that the state has increased its spending every year for the past several years, and now it’s time to make cuts. 

“This is not a problem,” Petersen said of the budget shortfall. “We’re going to get together and we’re going to make these cuts. We’re going to shrink government.” 

Hobbs, also during the chamber event, said that some areas would be off-limits for cuts, including health care, public education and public safety. Those areas account for some 75% of the state budget.

Possibility for bipartisanship 

Despite their disagreements on the budget, leaders from both sides of the aisle said they were ready to attempt to work together on water, an issue that they all agreed was crucial to the state’s future success. 

Even before the session began, Republican state representatives had introduced dozens of bills that included proposed changes to water policy, or water-related issues. 

Those included proposals to allow cities to enact water reuse and recycling initiatives, to encourage projects to increase groundwater recharge, establish a study committee for water banking in Yuma and speed up the issuance of certificates of assured water supply. 

Federal officials have said that voluntary cuts by Arizona, Nevada and California will be substantial enough to stabilize the vital source of water for the Colorado River Basin for the next few years, but an ongoing decades-long drought and an increasing population in the Valley mean that state leaders need to shore up Arizona’s future water supply. 

And there are also concerns with the groundwater reserves used by many parts of the state, particularly in the Phoenix area.

Hobbs announced in June that the building of housing subdivisions in some areas of the Valley would be limited to protect groundwater supplies, but during the Chamber event she promised that the state is not running out of water and said that’s “not going to happen on my watch.” 

“Water is a big challenge, but it’s not insurmountable,” she said. 

Slater, the spokesman for Hobbs, told the Mirror that the governor had traveled across the state to speak with farmers and business owners about her Water Policy Council’s proposals, which he said had gained support from Republicans and Democrats. 

“This issue knows no political party, and Arizonans are ready for meaningful action that will protect our water future for generations to come,” Slater said. “They are tired of elected officials sticking their head in the sand, and know that a prosperous Arizona only happens if we take this issue seriously.”

De Los Santos added that he hopes to garner bipartisan support for tools to preserve the long term future of rural groundwater. 

“Rural communities are crying out for the legislature to take action,” he said. 

Petersen promised that Arizona would continue to grow while also using less water, adding that it doesn’t make sense to highly regulate water for housing projects while allowing businesses to pump as much water as they please. Petersen, a real estate broker, has said that the state’s 100-year water supply requirement to build houses in many parts of the state ought to be replaced with a much lower requirement.

Lawsuit looms

Even as Republican and Democratic leaders spoke at the Chamber event about the possibilities for bipartisanship, a lawsuit that Petersen filed against Hobbs over her circumvention of Senate approval for her nominees to head state departments still looms. 

Hobbs decided to cut out the Senate after a series of her nominees were shot down by a committee headed by far-right Freedom Caucus member Jake Hoffman, R-Queen Creek, after being subjected to acrimonious and highly-partisan questioning. 

Hobbs said at the Jan. 5 event that all of her nominees were experienced and qualified and that state agencies need good leaders to ensure they’re serving the people of Arizona. 

“I’m going to work to make sure Arizona government keeps working and ask the Senate to help me do that,” she said. 

Slater called the lawsuit a “political distraction.” 

It remains to be seen whether the legislative Republicans will continue to send bills to Hobbs’ desk that she will surely veto, but members of the Freedom Caucus have already introduced several bills that would undoubtedly be vetoed if they make it to her desk. Those include a prohibition on using public funds for Diversity, Equity and Inclusion training, divestment of state funds from any organization that promotes abortion for minors and a ban on “15-minute cities.” 

But for those proposed bills to make it to Hobbs’ desk, they would have to garner support from beyond Freedom Caucus membership, and it’s unclear if there’s any appetite from Republican leadership to send up as many bills as last year that have no chance of becoming law.

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