Arizona Governor Signs $18.3 B Budget, Delivering Largest Tax Cut for Working Families in Four Years

On Saturday, Gov. Katie Hobbs crossed the line to sign Arizona’s FY 2027 budget, a bipartisan deal that will leave more money in working families’ pockets and strengthen public safety and schools.

The $18.29 billion package, dubbed the “Arizona First” plan, carries a headline‑grabbing $1.4 billion in tax relief. That amount is the biggest cut for families that Hobbs has enacted since she took office in 2023. The relief raises the standard deduction, removes taxes on tips and overtime, expands the child tax credit, and introduces a new deduction for seniors. According to the Governor’s office, the changes target households earning less than $75,000 in 2025, with the bulk of the savings flowing to low‑ and middle‑income earners.

Public‑safety funding is front and center. The budget earmarks $7 million for sheriffs and border‑security agencies and keeps Operation Desert Guardian alive. The task force, created in 2025, works to disrupt drug‑smuggling and human‑trafficking networks along the U.S.–Mexico border. A further $6 million is set aside for litigation over the Colorado River, a long‑running water‑rights dispute that has shaped Arizona’s agriculture and urban water supply.

Education gets a noticeable boost. The plan authorizes free school meals for all students, expanding the program beyond low‑income families. It also earmarks $37 million for low‑income school funding and $183.3 million for school‑facility improvements, aiming to upgrade infrastructure in schools that serve the state’s most vulnerable students.

In the business‑tax arena, a three‑year moratorium on data‑center tax incentives is included, projected to save the state roughly $57 million. The Governor’s office said the decision followed a review of the data‑center industry and its impact on local economies.

The bipartisan flavor of the budget was underscored by Senate President Warren Petersen, who told listeners on KTAR News 92.3 FM’s The Mike Broomhead Show that the package is “99 % what we put on.” Petersen called it a Republican victory that preserves school choice and avoids the tax increases or fees the governor had previously floated.

Arizona’s FY 2025 budget was enacted in June 2024, making this the first major fiscal package since then. The Governor’s office framed the new plan as a balance between growth and fiscal responsibility, with a clear focus on families, public safety, and education.

The budget will take effect on July 1, 2026. The Department of Revenue will begin processing the new tax rules in the upcoming filing season, and the Governor’s office confirmed that citizens will not need to refile past returns.

In short, the $18.29 billion Arizona First budget blends tax relief, public‑safety investment, and educational support into a bipartisan framework that will shape the state’s fiscal landscape for the next year.