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Governor Katie Hobbs Lays Out Plan to Lower Costs and Put Arizona First in Her Fourth State of the State

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Affordability, water security, and public education take center stage

Phoenix, AZ – Today, in her fourth State of the State address, Governor Katie Hobbs outlined her plan to lower costs, protect Arizona's water, make data centers pay their fair share and invest in hardworking Arizonans. Governor Hobbs also highlighted major accomplishments of the past year, including generational water legislation, the success of her landmark border security initiative Operation Desert Guardian, and lowering the cost of childcare, health care, and housing.

Governor Hobbs' Arizona First Plan includes:
  • The Middle Class Tax Cuts Package, which puts more money in the pockets of Arizona families. Includes increased standard deduction, no tax on tips, no tax on overtime, and an additional $6,000 deduction for seniors over 65.
  • The proposal of the creation of the Arizona Affordability Fund to help working class families pay their utility bills, weatherize their homes to lower energy costs, and build more affordable housing units.
    • Revenue generated from a nightly fee as low as $3.50 on short term rental stays.
    • Fund will be used to expand the Low Income Home Energy Assistance Program (first $15 million generated) and assist Arizonans with home weatherization (next $3 million generated)
    • Any additional funds will support the Housing Trust Fund to continue to build more affordable housing and prevent homelessness.
  • A new data center water usage fee to pay for the Colorado River Protection Fund.
  • The Housing Acceleration Fund, to help affordable housing developers access low cost financing to build thousands of new housing units.  
    • The fund leverages public and private dollars to unlock lower cost financing and multiply the affordable homes we build.
    • Every dollar invested will help generate up to ten dollars to finance housing projects for Arizonans.

In addition to these new initiatives, Governor Hobbs announced the creation of a new AMA in the Ranegras Plain basin and called for the renewal of Prop 123. She also urged the federal government to reimburse the state for border security costs and to reverse its decision to deny emergency assistance for communities impacted by devastating flooding.

Governor Hobbs' special guests included:
  • Paul Russell, President of the Intertribal Council of Arizona
  • Holly Irwin, La Paz County Supervisor
  • Mayor Mila Besich, Mayor of the Town of Superior
  • Mayor Al Gameros, Mayor of the City of Globe
  • Sheriff David Clouse, President of the Arizona Sheriffs Association
  • Rose Contreras, President of TSMC Arizona
  • Dan Freiberg, President of the Professional Fire Fighters of Arizona
  • Marisol Garcia, President of the Arizona Education Association
  • Captain Garrett Thomas and Captain Gerardo Diaz, who fought the Dragon Bravo Fire
  • Kara Riley, President of the Arizona Association of Chiefs of Police

Governor Hobbs' State of the State marks the first day of the Second Regular Session of Arizona's 57th Legislature. You can read the full transcript of the speech here.

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EXCERPTS

Middle Class Tax Cuts Package

Affordability isn't a joke or some hoax. It's a real and consequential challenge that families across Arizona must grapple with every day. Pocketbooks are strained, and Arizonans need their elected officials to take action.

Affordability is my top priority. I'm encouraged it's yours as well.
And now is the time to back up that talk.
Put the Middle Class Tax Cuts Package on my desk immediately. I'll sign it.

Tale of Two Budgets

There's no better example of how we deliver for our people — and how Washington fails — than the tale of two budgets: the partisan Washington budget, known as H.R. 1, compared to the Arizona Promise budget we passed last year.

Last session, we worked together to protect Medicaid while the partisan politicians in Washington slashed it, endangering the future of Arizona's rural hospitals in order to pay for tax breaks for billionaires…

We delivered ten million school meals to children who needed them while Washington cut food assistance and then held it hostage during the federal government shutdown…

And the budget we passed was bipartisan and balanced, while the Washington budget was partisan and skyrocketed the national debt by trillions of dollars — leaving our children and grandchildren to pick up the tab for our federal government's reckless and irresponsible spending.

Securing Our Border

When Washington politicians failed us, I proudly deployed members of the Arizona National Guard to our southern border. The efforts of these brave men and women have stopped millions of fentanyl pills, thousands of pounds of other illicit substances, and hundreds of illegal weapons from entering our state.

But transnational crime doesn't stop at our border.

That's why last year, I launched Operation Desert Guardian. We brought together local police departments, county sheriffs, state troopers, Tribal, and federal law enforcement officers to disrupt and dismantle transnational criminal organizations in Arizona – and they have made an impact statewide…

While the federal government neglects drug smuggling and human trafficking cases to chase deportation quotas, Arizona is taking on the cartels. While the federal government uses law enforcement resources to score political points in cities thousands of miles from the southern border, Arizona is laser-focused on securing the border, getting drugs off the streets, and cracking down on criminals poisoning our neighborhoods and our children.

Protecting Groundwater In The Ranegras Plain Basin

Unlike politicians of the past, I refuse to bury my head in the sand. I refuse to ignore the problems we face. I will tackle them head on to deliver for our state.

I did just that when my administration established the Willcox Active Management Area to protect the region's groundwater…

And when I ended state land leases for Fondomonte, who was recklessly pumping our groundwater to boost their corporate profits.

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I will continue to stand up for communities across our state to ensure they are protected from corporations who care only about today's profits, not Arizona's future.

That's why today I am announcing a new Active Management Area for La Paz County, to crack down on the out-of-state special interests that are pumping our state dry while Arizona families and farmers suffer.

Making Data Centers Pay Their Fair Share

Last year, I created a Colorado River Litigation Fund to ensure we have the resources we need to fight the upper basin for the water we deserve. This year, my Executive Budget will include thirty million dollars for a new Colorado River Protection Fund to supercharge our conservation efforts and continue building a sustainable and growing economy.

To pay for ongoing investments, I am proposing one key action:

Make data centers pay their fair share for the water they use. The average Arizona family pays one cent for every gallon of water used in their home. If data centers were to pay the same amount, we could make a multi-million dollar deposit into the Colorado River Protection Fund every single year.

It's time we make the booming data center industry work for the people of our state, rather than the other way around. If we are to be successful, we must rethink our state's approach to data centers more broadly. More than a decade ago, we made a strategic decision to grow data centers by creating a tax exemption for them – I voted for it. Now, Arizona is a national leader in this sector. We must ask ourselves: should taxpayers continue subsidizing the data center industry?

I know my answer. My executive budget will eliminate the Data Center Tax Exemption, putting an end to a thirty-eight million dollar corporate handout. And I'm glad legislators in both parties agree with me – I can't wait to get to work and get this done.

Lowering Costs for Arizonans

That's why, today, I am announcing a new Housing Acceleration Fund to build more affordable housing, faster. The fund leverages public and private dollars to unlock lower cost financing and multiply the affordable homes we build. For every dollar we invest, we'll generate up to ten dollars to finance projects that house Arizonans.

I'm proud to also announce we will kickstart this initiative with a two-and-a-half million dollar investment. I call on this Legislature to continue this funding annually to ensure we build the housing Arizona families need.

Let's keep fighting to bring back the Arizona that I grew up in – one where a working-class couple could buy a house to call home and raise their family in…

Utility bills are now one of the largest expenses people pay every month – and too many Arizonans are falling behind.

To support our fellow Arizonans, today I am proposing the creation of the Arizona Affordability Fund to help families manage the high cost of housing and utilities. The fund will help working class families pay their utility bills, weatherize their homes to lower energy costs, and build more affordable housing units.

I'm starting this initiative today with a twenty million dollar investment.

But we need a funding source for the long-run. Tackling affordability isn't a one-year project. That's why I am proposing a nightly fee on short-term rental stays to fuel the Arizona Affordability Fund. By asking vacationers to kick in three dollars and fifty cents … less than a cup of coffee … we can deliver major change for the working people in our state who are struggling to get by.

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