New Revenue Forecast Deepens Arizona Budget Challenges, Raises Stakes for Lawmakers  

PHOENIX —  Arizona’s budget outlook grew more strained today as the state’s Finance Advisory Committee (FAC) lowered revenue projections, further tightening the resources available to meet growing needs across the state to ensure a thriving economy. 

State economists now project Arizona will have $378 million available to spend this year — a nearly $200 million drop from the January estimate of $578 million. The revised forecast reflects increasing economic uncertainty tied to global instability and federal policy decisions, they said. 

“This update makes clear that Arizona is entering a more difficult fiscal environment at the exact moment when needs are rising,” said Geraldine Miranda, assistant director of fiscal policy at the Arizona Center for Economic Progress. “Lawmakers are facing a growing gap between what the state has and what Arizonans need to get by and get ahead.” 

Even before the revised forecast, Arizona faced significant funding pressures across policy priorities, including: 

• Up to $784 million for tax conformity tied to recent federal changes  
• More than $300 million for developmental disability services  
• $195 million to maintain state employee health insurance  
• At least $183 million for K-12 building renewal
• $50 million for rental assistance  
• $45 million to prevent approximately 3,800 children per month from losing access to child care, but in actuality $160 million to eliminate the waitlist  
• Funding for school meals, low-income student support, and higher education scholarships  
• Resources needed to implement major federal policy changes, including H.R. 1  

Advocates say the tightening budget outlook underscores the long-term impact of past tax policy decisions. 

“Years of tax cuts have left Arizona with fewer tools to respond when the economy shifts or when families need support the most,” Miranda said. “Now, as revenue projections fall, those choices are making it harder to invest in the services that keep our economy affordable and strong and communities stable.” 

Arizonans continue to face rising costs for basic necessities, including child care, housing, and health care — all while the state must also plan for long-term investments in infrastructure like water and roads. 

Advocates point to revenue options that could help stabilize the state’s finances and support critical investments, including closing corporate tax loopholes and adopting more balanced, progressive tax structures. 

“Lawmakers still have a choice,” Miranda said. “They can continue down a path that leads to deeper shortfalls and harder cuts, or they can take a more balanced approach that ensures Arizona has the resources to meet this moment.” 

The FAC update comes as state leaders continue budget negotiations and consider how to address both immediate funding gaps and longer-term fiscal challenges. 

For more analysis on Arizona’s budget outlook and the impact of recent federal policy changes, read our latest blog: Arizona’s Budget Just Got Tighter — and the Stakes Got Higher