Home>Budget>Montenegro Labels Hobbs Budget ‘Fundamentally Flawed’

Speaker of the Arizona House Steve Montenegro speaks at a press conference hosted by Republican House Leadership at the Arizona State Capitol in Phoenix, Jan. 13, 2025. (Photo: Gage Skidmore)

Montenegro Labels Hobbs Budget ‘Fundamentally Flawed’

Criticizes the Governor for lack of leadership over exploding costs

By Christy Kelly, January 22, 2025 3:40 pm

Arizona’s financial landscape has become a focal point of debate between Governor Katie Hobbs and Republican legislators, particularly concerning the state’s budget projections and spending priorities. Marge Zylla, the Governor’s legislative and fiscal affairs director, recently presented Governor Hobbs’ budget for the upcoming fiscal year in a joint hearing of the Senate and House appropriations committees.

Rep. David Livingston (R-28), who chairs the House Appropriations Committee, expressed significant concerns about the proposed budget, stating, “The budget proposal you’ve presented does not add up.” Livingston pointed to $864 million in higher expenses, $340 million in supplemental costs, and numerous mistakes. “The math simply doesn’t work,” he added.

“If the governor wants to pass a budget by February, this body is capable of doing so—but not with a plan like this'” Livingston continued. “Aas it stands, we’re nowhere near a realistic solution. At this rate, when July 1 arrives, state agencies will face shutdowns. The gap between the executive branch and legislative leadership is far too wide, and significant work is needed to bridge it.”

Livingston also highlighted discrepancies in revenue and spending estimates, notably the omission of anticipated growth in the state’s Medicaid program, known as AHCCCS, amounting to $846 million over the next two years. Livingston emphasized that such omissions could lead to substantial budget shortfalls if not addressed.

State Representative David Livingston at the 2025 Legislative Forecast Luncheon hosted by the Arizona Chamber of Commerce & Industry at the Phoenix Convention Center in Phoenix, January 10, 2025. (Photo: Gage Skidmore)

Speaker Steve Montenegro told the Arizona Globe, “Last week, I expressed my disappointment in this budget proposal. Now, every time I turn a page, more troubling issues emerge. This fundamentally flawed, bankrupt budget demonstrates a tremendous lack of leadership on the Governor’s part.” He continued, “In Tuesday’s joint appropriations committee hearing, House Republicans exposed the immediate shortfalls of the proposal plastered across what is a $846 million deficit overall. Passing this budget would leave the state essentially insolvent with a dim future for Arizona’s taxpayers.”

The Speaker concluded, “The Governor’s proposal is a non-starter.”

Representative Matt Gress, former budget director under Governor Doug Ducey, expressed astonishment at the omission of projected growth in the Arizona Health Care Cost Containment System (AHCCCS) for the fiscal years 2027 and 2028. He remarked, “So the executive is forecasting no growth in any cost to provide medical care and that nobody else enrolls in AHCCCS in the next two years, which is unheard of.”

State Representative Matt Gress at an event hosted by Arizona Talks at Greenwood Brewing in Phoenix on October 26, 2023. (Photo: Gage Skidmore)

Gress and Livingston each hammered Zylla with questions she often found difficult to answer. In fact, it was an exceptionally tough day for the Governor’s embattled representative. At one point, Gress added, “I don’t know if you’re purposely obfustacate this question or not.” He continued, “There’s an error in your budget.”

Livingston further pressed Zylla on the issue of supplemental funding required for the current fiscal year, which ends June 30, 2025, asking, “Do you know how much the supplement will be requested if you add them all up for the 24-25 budget that ends on June 30?” When Zylla did not answer immediately, Livingston continued, “I would love the executive to provide us a detailed list of all supplemental needed before June 30. When we did it over the weekend, we came up with a figure almost $340 million in needed supplemental.”

He emphasized the urgency by noting that without this supplemental funding, some agencies, such as those handling developmental disabilities, could run out of money by April 1.

A central point of contention is Governor Hobbs’ proposal to reduce funding for Arizona’s Empowerment Scholarship Accounts (ESAs). The Governor aims to implement an income cap, gradually decreasing state funds for families earning over $100K annually, with a cutoff income of $200K.

However, Livingston firmly opposes this initiative, stating that the Republican-controlled Legislature will not support any reduction in the ESA program. He indicated that Governor Hobbs was not “serious” about passing a budget in February.

Representative Gress told the Globe, “This isn’t the way to run a government, and these mid-year shortfalls were avoidable.” He continued, “We’re in this situation because Governor Hobbs made unilateral decisions around contracts for a subset of services after being told to wait until the Legislature comes back into session to consider adjustments. As a result, she has now threatened government services for individuals with developmental disabilities and children who are in our care.”

The Joint Appropriations Committee hearing is viewable here.

Christy Kelly
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