Arizona budget plan has money for parents but no cap on school vouchers as sought by Hobbs

Arizona families with children would get a tax rebate and dozens of local road projects would receive funding under a $17.8 billion state budget crafted by Democratic Gov. Katie Hobbs and the Republican legislative leaders.

The plan, which starts moving through the Legislature with hearings Tuesday, includes a $250 rebate for parents with dependents younger than age 17, and $100 for those with dependents 17 and older. The rebate would only apply to people who have at least $1 of tax liability, which would exclude many of Arizona's lowest-income families.

Senate President Warren Petersen, R-Gilbert, portrayed the budget negotiations between him, Hobbs and House Speaker Ben Toma, R-Glendale, as including "respectful disagreement" but always with a nod toward "reality."

"She got some wins, some priorities — those are not bipartisan, not too far left,” Petersen said. “As far as new spending goes, we also got wins, like the tax rebate. That’s a huge win for us. That wasn’t too far right for as far as policy goes."

Myriad local projects — 70 total — in the spending plan reflect a novel budget strategy, where lawmakers were allotted a slice of the state's $2.5 billion budget surplus as a way to create bipartisan buy-in for passage of the overall budget.

That strategy also reduced the amount of money for larger projects, such as boosting funding for state agencies.

But missing from the new plan was any attempt to roll back funding for the state's universal voucher program, which was central to Hobbs' budget proposal in January. On Monday, however, she said that was a longer-term goal and suggested it was a negotiation tool.

“I think that we can agree that the voucher program is a drain on resources that should be directed at public education. I didn't say we're going to end it, it is a goal, certainly. We put that in our executive budget as the goal knowing that we would be in a place where we were going to have to negotiate. That's what we're doing,” Hobbs said at a Monday news conference.

The empowerment scholarship account program has grown rapidly, and has officially surpassed the enrollment of the state's largest school district, Mesa Public Schools. As of Monday, 54,987 students were using taxpayer-funded scholarship accounts, compared to 54,234 students in the sprawling Mesa district.

Before the empowerment scholarship account program was made available to all students last summer, the enrollment was 12,000. While the enrollment has ballooned, the average scholarship amount has decreased to $10,000, compared to $15,500 less than a year ago.

Critics push for a voucher cap

The lack of any attempt to rein in the program drew immediate condemnation from many Democratic lawmakers, as well as Save Our Schools, a teacher-led movement that supports the public school system. The organization has scheduled a Tuesday afternoon news conference to protest.

Voucher critics are pressuring Hobbs to impose a cap on the voucher enrollment, arguing that to leave it unchecked will lead to budget overruns that will harm public schools as well as other state programs, from water to housing.

"Any budget that fails to rein in this off-the-rails program is unacceptable," said Beth Lewis, a Tempe school teacher and director of Save Our Schools.

Petersen doesn't see any pending budget disaster. A cap on the ESAs was a “nonstarter” in the negotiations, he said. The “rules of engagement” to which the parties agreed included the idea that if something was in place, it would not change “too far left or too far right.”

"If there was going to be any kind of shutdown, that would have been on her," he said, referring to the governor, adding that Democrats could keep on fighting for a cap, but "as long as we're in the majority, it's not going to happen."

Senate Minority Leader Mitzi Epstein, D-Tempe, said the Democrats "are fighting like crazy” for a cap on the voucher program.

“We are going to go to the mat for the people of Arizona and not let this fiscally imprudent, downright irresponsible idea go forward,” she said.

However, Toma, who negotiated this plan with Hobbs and Petersen, is the sponsor of the universal program and many viewed it impossible to get him to agree to cut back a program that had just become law after years of trying.

What's in the budget for Arizona's state agencies?

Concerns with the budget extend to Democrats outside of the Legislature, too.

Attorney General Kris Mayes on Saturday wrote to Hobbs, objecting to flat funding for her agency and others that she said amounted to a budget cut given high inflation. Mayes blamed the stagnant funding on the “catastrophic drain” on state resources from the growing voucher program.

The budget agreement “will push the Attorney General’s Office to the edge of a steep cliff,” the Democrat wrote.

Mayes doubled down on her criticism Monday, saying in a news release "Today, we see a budget proposal moving forward that appears to be politically expedient for a few, but wholly inadequate for the majority of people in our state."The budget does not allow for inflation growth for many state agencies, keeping spending close to current levels.

The public's best chance to weigh in on the spending proposal will be in hearings before the House and Senate appropriations Tuesday.

The Senate hearing will begin at 9 a.m.; the House begins at 1 p.m.

More money for housing, K-12

Despite the protests, many lawmakers quietly pointed to items in the nearly $18 billion spending plan that they favor. They include:

• A $150 million deposit into the state Housing Trust Fund, as well as an extra $20 million this year for homeless shelters and services. For the coming year, the homeless fund would get $40 million.

• Diversion of $139 million from the state Water Infrastructure Fund to pay for other water projects, although details weren't immediately available. WIFA is due to get $333 million from a $1 billion water investment former Gov. Doug Ducey championed last year, primarily to move forward a controversial desalination plant.

• A $300 million increase in K-12 funding for the next year.

• A provision that would exempt K-12 funding from the state's aggregate spending cap next year. This would avoid the cliffhanger drama of getting a waiver on the limit, which was an issue the past two years.

• The plan is peppered with transportation projects ranging from $9.2 million for design costs for the West Pinal Parkway to $35.5 million for the Lake Havasu City bridge project — location-specific items that reflect how lawmakers opted to spend their piece of the budget pie. In all, the transportation projects add up to 50 items, on top of 44 projects approved last year.

• There also are 26 local projects, such as $800,000 for sewer improvements in Snowflake to $15.3 million for capital improvements for the Prescott Frontier Days Rodeo, another reflection of specific projects lawmakers want to see funded next year.

Arizona Republic reporter Ray Stern contributed to this article.

Reach the reporter at maryjo.pitzl@arizonarepublic.com or at 602-228-7566 and follow her on Twitter @maryjpitzl.

Stacey Barchenger is stacey.barchenger@arizonarepublic.com or at 602-480-416-5669. Follow her on Twitter @sbarchenger

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This article originally appeared on Arizona Republic: Arizona Gov. Katie Hobbs and GOP leaders strike deal on state budget