Hobbs avoids partisan politics and prioritizes affordability in State of the State address

On Monday afternoon, Gov. Katie Hobbs opened up the second session of the 57th Arizona Legislature with her fourth and potentially last State of the State address. The themes? Affordability and bipartisanship.

Her message was clear. She wants to lower the costs of living for Arizonans and invest in long-term stability without sacrificing fiscal responsibility.

“Affordability is my top priority,” Hobbs said. “I’m encouraged it’s yours as well. And now is the time to back up that talk.”

Hobbs, who is up for reelection this year, focused on last year’s bipartisan wins, namely the budget dubbed the “Arizona Promise.” She touched on the state’s dedication to workforce development, public safety, confronting transnational crime and energy affordability.

Despite a record-setting 174 vetoes last year, she emphasized her willingness to work across party lines. Hobbs condemned “Washington, D.C. elites” for prioritizing “hyper-partisan politics and ideology over common sense,” pointing to H.R. 1, better known as President Trump’s “One Big Beautiful Bill”. 

“Here in Arizona, we’re going to do things our way, and we’re going to do them better,” she said. “Washington has failed us. But we will not fail our fellow Arizonans.”

Here’s what to know about Hobbs' budget priorities for the latest legislative session. 

Middle-class tax cuts 

Hobbs opened her budget pitch with a direct call to pass a middle-class tax cut, urging lawmakers to send her a package worth more than $200 million in tax relief.

The proposal would increase the standard deduction used by roughly 88% of Arizona filers, eliminate taxes on overtime pay and tips and provide additional tax relief for seniors

The ask is ambitious as Republicans introduced their own tax plan last week. The plan included some of Hobb’s proposals, but avoided plans laid out in Trump’s “One Big Beautiful Bill”. 

“We should all agree that middle-class families deserve a tax cut now,” she said. “If you think billionaires and big corporations should get a tax break before hardworking families, then you need to spend more time with real Arizonans who are struggling to get by.”

Cutting government costs

Hobbs announced a new Arizona Capacity and Efficiency Initiative, aimed at saving up to $100 million over the next three years.

Although she did not explicitly state what measures they would take to cut costs, she was clear that Arizona “will not slash and burn with stunts that do more harm than good,” Hobbs said. “We will not decimate important services that families and businesses rely on.”

The proposal allowed Hobbs to claim fiscal responsibility and reduce government spending while avoiding deep cuts favored by conservatives.

Corporations pay more

About halfway through the speech, she zeroed in on corporate accountability. 

She proposed eliminating the data center tax exemption, calling it a “$38 million corporate handout,” and said the industry should pay more for the water it consumes.

She pointed out that if data centers paid the same rates as everyone else, the state could make a multi-million dollar contribution to conservation efforts on the Colorado River.

The topic is certainly timely. In December, Chandler City Council unanimously rejected a rezoning request for a 43,000-square-foot data center, citing water usage and high utility costs, while other areas, such as Marana and Pima County, are moving forward with plans to build data centers despite public opposition.

New investments in water security

Hobbs proposed putting $30 million toward a new fund to protect the Colorado River, along with more conservation efforts and continued legal action over water rights

Hobbs framed the funding as both fiscally responsible and essential to Arizona’s economic future.

The governor also announced a new Active Management Area in La Paz County, arguing that state intervention is necessary to protect rural communities from unchecked groundwater pumping.

Housing affordability

Affordable housing remains a cornerstone of Hobbs’ agenda, with record levels of construction and the announcement of a new Housing Acceleration Fund.

“For every dollar we invest, we’ll generate up to $10 to finance projects that house Arizonans,” Hobbs said.

The fund would launch with $2.5 million investment, with Hobbs urging lawmakers to commit to ongoing funding in future budgets.

She also proposed a $20 million Arizona Affordability Fund to help families pay utility bills, weatherize homes and support construction. To sustain the fund, Hobbs proposed a $3.50 nightly fee on short-term rentals, such as Airbnbs. She explained that tourists can help offset costs for residents.

“Less than a cup of coffee,” she said regarding the fee. 

Education spending and ESA oversight

The governor also renewed calls for public education funding and oversight of the Empowerment Scholarship Accounts (ESA) voucher program.

Hobbs, who has been a critic of the voucher program, argued that it lacks accountability and said taxpayer dollars are being misused. She said she supports its original purpose to help students with disabilities and military families.

There were also calls to renew Proposition 123, originally passed in 2016, which provides additional K–12 funding by drawing revenue from state trust lands. With the measure set to expire this year, Hobbs warned that failure to renew it would fuel the ongoing “teacher exodus” and leave schools severely underfunded.

Avoiding the immigration question

The governor did not address the escalating immigration enforcement in Phoenix and did not use the word immigrant during the entirety of her nearly 45-minute speech. During a recent appearance on 12 News, Hobbs said she couldn’t keep U.S. Immigration and Customs Enforcement out of Phoenix. 

“If they’re gonna come in, they’re gonna come in.” 

The interview came as a result of reports that ICE activity will increase in Phoenix, home to one of the largest populations of Latinos in the country.

However, Hobbs’ office told CALÓ News in early January that the state will not participate in “indiscriminately rounding up individuals” or enforcement activities that violate civil rights and harm communities.

The topic of immigration is far from absent in the legislature. Just before her address, Republican lawmakers joined Pinal County Attorney Brad Miller to announce a proposed legislation that makes it a felony to interfere with ICE operations. 

Protesters drowned out the press conference, forcing organizers to move indoors. The disruption signaled a potentially polarizing election year, with every seat in the Arizona House and Senate on the ballot, along with the governor’s office and other key statewide offices. 

Hobbs finished her address once again denouncing hyper-partisan politics in Washington and promoting cooperation over divisiveness. 

“Together, we can ensure Arizona is blessed with security, opportunity, and freedom,” she said. “Arizonans are counting on us, and we will deliver. Now, let’s get to work.”