Tag: budget

Immigration Bills Stack Up at the Capitol — What They Could Mean for Arizona’s Economy 

PHOENIX — Immigration bills advancing during the 2026 Arizona legislative session could significantly reshape how Arizona’s economy functions, affecting access to courts, financial institutions, public programs, and public safety. 

While many of these proposals are framed around enforcement, their ripple effects extend into workforce participation, state and local budgets, and community stability. 

The Arizona Center for Economic Progress released on Wednesday an overview of several immigration-related bills currently moving through the legislature and what they could mean for Arizona’s economy and communities.  

The snapshot highlights proposals that would: 

  • Restrict access to financial services and remittances for residents without certain forms of identification 
  • Expand immigration status verification requirements across public programs and state systems  
  • Increase state and local coordination with federal immigration enforcement 
  • Appropriate tens of millions of dollars in state funding for border enforcement, detention, and infrastructure 
  • Expand data sharing between state agencies and federal immigration authorities 

Taken together, these proposals represent a broad push to expand immigration enforcement tools while also affecting Arizona’s workforce stability, economic participation, and access to essential systems. 

“While these proposals are often framed around enforcement, in reality they carry real impact for families as well as economic consequences for Arizona,” said Joseph Palomino, director of the AZCenter. “Policies that affect access to financial systems, education, and public services can shape workforce participation and economic stability across the state.”  

The full snapshot includes detailed explanations of each bill, its current status, and analysis of potential fiscal and economic impacts.  

2026 Arizona Legislature Immigration Bills

Immigration bills are stacking up at the Capitol. Here’s what they do 

Immigration bills at the Capitol this session could reshape how Arizona’s economy functions — affecting access to courts, financial institutions, public programs, and law enforcement systems.  

While these proposals are often framed around enforcement, their ripple effects extend into workforce participation, state budgets, and community stability. Here’s what the major bills would do and why they matter. 

How to check bill status: Legislative activity changes quickly. To view the most current status of any bill, visit the Arizona Legislature website (azleg.gov) and enter the bill number (for example, 1708 rather than SB 1708) in the search bar. Bill statuses are current as of March 4.

Restricting economic and financial participation 

SB 1421 — Financial services and remittances restrictions  

What it does: Restricts what identification financial institutions can accept and ban using Individual Taxpayer Identification Numbers (ITINs) to apply for loans. It also requires proof of immigration status before someone can send money internationally and requires businesses to report and verify that information.  

Why it matters: This could push many Arizona residents out of mainstream banking and into higher-cost alternatives like payday lenders or unregulated financial services. It may also disrupt remittance flows that support families abroad while reducing participation in Arizona’s formal financial economy.  

Status: Passed Senate; awaiting action in the House. 

Check status at azleg.gov. 

HB 2806 — Lawful presence verification for public programs and licenses  

What it does: Expands requirements to verify lawful presence across several systems, including voter registration processes, driver licenses, and public health program eligibility. It also requires agencies to use the federal SAVE (Systematic Alien Verification for Entitlements) program and submit ongoing verification reporting to state oversight bodies.  

Why it matters: Expanded verification requirements could increase administrative costs for state agencies and create delays for eligible residents trying to access licenses or public programs. These policies may also increase fear around interacting with public systems, creating ripple effects for workforce participation, public health access, and economic stability statewide.  

Status: Passed House; awaiting Senate action.  

Check status at azleg.gov. 

Expanding enforcement and increasing state spending 

SB 1474 — State and local immigration enforcement coordination and training  

What it does: Expands requirements for state and local cooperation with federal immigration enforcement. It allows and encourages state and local agencies to enter agreements with federal immigration authorities to enforce federal immigration law, requires immigration enforcement training for law enforcement, and allows the state attorney general to investigate local governments suspected of limiting cooperation.  

Why it matters: This could significantly expand state and local involvement in federal immigration enforcement. It may increase administrative and training costs for agencies and could increase enforcement activity at the local level. Policies that increase perceived enforcement presence can also affect community trust, crime reporting, workforce participation, and engagement with public systems. 

Status: Passed Senate; awaiting action in House. 

Check status at azleg.gov. 

SB 1213 — Expanded immigration status verification requirements  

What it does: Amends state law requiring immigration status checks during certain law enforcement encounters and reinforces requirements to notify federal immigration authorities in some circumstances.  

Why it matters: Expanded verification requirements could increase administrative burdens on law enforcement and courts. It could also increase the fear of interacting with public systems, with potential downstream impacts on economic participation and community safety.  

Status: Passed Senate Military Affairs and Border Security Committee; awaiting further action. 

Check status at azleg.gov. 

SB 1156, SB 1157, and HB 2416 — Border enforcement and detention funding package  

What these do: Increase state funding for immigration enforcement and border-related detention and prosecution. SB 1156 appropriates $20 million to reimburse local governments for costs tied to short-term detention holds for unauthorized immigrants, while HB 2416 appropriates $20 million to support local border enforcement staffing, prosecutions, detention, and equipment.  

Why it matters: Taken together, these bills signal a continued shift toward state-funded immigration enforcement infrastructure. These appropriations could increase ongoing state and local budget pressures, particularly if enforcement activity and detention costs grow over time.  

Status: SB 1156/SB 1157: Passed Senate committee; awaiting Senate floor action. HB 2416: Passed House; awaiting Senate action. 

Check status at azleg.gov. 

SB 1635 — Criminal penalty for warning someone about an imminent arrest 

What it does: Creates a new misdemeanor crime for warning a specific person about a real-time or imminent law enforcement effort to arrest them if the warning is intended to help them avoid arrest. The law applies to many types of communication, including electronic messages, gestures, verbal statements, or signals, with exceptions for attorneys providing legal advice and people responding to law enforcement requests.  

Why it matters: This bill raises concerns about potential impacts on community communication and free speech, especially in communities where people already have limited trust in law enforcement. Although the bill is tied to an active arrest attempt targeting a particular individual, policies that increase fear of communication or public interaction can also indirectly affect workforce stability and willingness to engage with public systems.  

Status: Passed Senate; awaiting action in the House 

Check status update at azleg.gov. 

SB 1707 — Artificial intelligence border security funding  

What it does: Appropriates $5 million from the state general fund to the state Department of Public Safety for artificial intelligence tools related to border security. The bill also allows DPS to distribute funding to local law enforcement agencies to support border enforcement using artificial intelligence technologies.  

Why it matters: This could expand the use of surveillance and data analysis technology in border enforcement. New technology investments can increase enforcement capacity but may also create long-term costs tied to maintenance, data systems, training, and oversight. Increased technology-based enforcement can also raise privacy and civil liberties considerations depending on implementation.  

Status: Passed Senate Military Affairs and Border Security Committee; awaiting further action. 

Check status at azleg.gov. 

SB 1520 — Mandatory state data sharing with federal immigration authorities 

What it does: Requires the state and any state agency to share any data requested by the U.S. government regarding the status of, or any information relating to, an unauthorized immigrant, undocumented immigrant, or individual who overstays a visa. The requirement would apply even if other state laws normally limit information sharing, and it would automatically expire after Dec. 31, 2028 unless lawmakers extend it.  

Why it matters: This would significantly expand state participation in federal immigration enforcement by requiring broad data sharing across agencies. Depending on implementation, it could raise concerns about privacy and information security while increasing fear around interacting with public systems, with potential ripple effects for public health access, workforce stability, and economic participation. 

Status: Passed legislature; awaiting action in the House. 

Check status at azleg.gov. 

SB 1474 — State and local immigration enforcement coordination and training  

What it does: Expands requirements for state and local cooperation with federal immigration enforcement. It allows and encourages state and local agencies to enter agreements with federal immigration authorities to enforce federal immigration law, requires immigration enforcement training for law enforcement, and allows the state attorney general to investigate local governments suspected of limiting cooperation.  

Why it matters: This could significantly expand state and local involvement in federal immigration enforcement. It may increase administrative and training costs for agencies and could increase enforcement activity at the local level. Policies that increase perceived enforcement presence can also affect community trust, crime reporting, workforce participation, and engagement with public systems.  

Status: Passed Senate Military Affairs and Border Security Committee; awaiting further action. 

Check status at azleg.gov. 

SB 1156 — Short-term immigration detention reimbursement funding  

What it does: Appropriates $20 million from the state general fund to reimburse cities, towns, and counties for costs associated with short-term detention holds for unauthorized immigrants.  

Why it matters: This could shift detention-related costs from local governments to the state budget and may incentivize expanded use of short-term detention holds. Increased detention activity can create ongoing operational and fiscal pressures for local justice systems and detention facilities.  

Status: Passed Senate Military Affairs and Border Security Committee; awaiting Senate floor action.  

Check status at azleg.gov. 

SB 1157 — Border barrier and fencing  

What it does: Appropriates $20 million from the state general fund to reimburse local governments that install supplemental fencing or bollard barriers in high-crossing areas along Arizona’s southern border.  

Why it matters: This could increase state spending on physical border infrastructure and shift costs from local jurisdiction to the state. Infrastructure investments can also create long-term maintenance and enforcement-related costs while shaping migration patterns and enforcement strategies along the border.  

Status: Passed Senate Military Affairs and Border Security Committee; awaiting further action. 

Check status at azleg.gov. 

Overall legislative trend  

Taken together, these bills represent a broad push to expand immigration enforcement tools, all of which intersect with Arizona’s families and economy, workforce stability, access to financial systems, and use of public services.  

For Arizona’s economy, the biggest risks include workforce disruptions, reduced participation in formal financial systems, and increased state and local enforcement costs. These policy choices will shape not just immigration enforcement, but also long-term economic stability and community well-being for all Arizonans. 

What we would like to see 

Arizona’s economy is strongest when policies promote stability, participation, and opportunity for all residents. Rather than policies that create fear or discourage families from accessing schools, health care, financial institutions, or public services, we support approaches that protect immigrant communities while strengthening economic inclusion.  

Policies that build trust in public systems help workers stay employed; families remain financially stable, and communities contribute fully to Arizona’s economy. Investments that expand access, protect due process, and reduce unnecessary barriers ultimately support a healthier workforce and a stronger state economy.  

Following the Money: Major 2026 Tax Bills at the Capitol — and What They Mean for Arizona 

PHOENIX — The Arizona Center for Economic Progress released on Tuesday a new overview of major tax-related bills advancing during the 2026 Arizona legislative session, warning that several proposals could significantly reduce state and local revenue, create new tax loopholes, and divert funding away from shared priorities such as public K-12 education, child care, infrastructure, and public safety. 

The snapshot outlines proposals that would: 

  • Provide high-end capital gains tax breaks that disproportionately benefit wealthy homeowners 
  • Freeze local government revenue for nearly four years 
  • Create new refundable tax credits that divert General Fund dollars away from public K-12 education 
  • Commit Arizona to a new federal voucher-style tax credit program with uncertain long-term fiscal consequences 
  • Restrict the ability of state agencies and local governments to respond to rising costs 

“These proposals may be framed as tax relief, but many would primarily benefit the wealthy few and big corporations while increasing pressure on state and local budgets,” said Joseph Palomino, director of the Arizona Center for Economic Progress. “Arizona’s long-term economic growth depends on stable, sustainable revenue and smart public investments — not structural changes that make budgeting harder or tax breaks that disproportionately flow to the ultra rich.” 

The full snapshot includes detailed explanations of each bill, its current status, and analysis of potential fiscal and economic impacts. 

Follow the money here.

2026 Arizona Legislature Tax Bills 

Tax bills are moving quickly at the Arizona Capitol, and some bills could significantly reduce state and local revenue, create new loopholes, or divert funding away from shared priorities like public K-12 education, child care, and infrastructure.  

Below is a snapshot of major tax-related bills still in play — what they would do, where they stand, and our take on how they could impact Arizona’s long-term fiscal health and economic future. 

How to check bill status: Legislative activity changes quickly. To view the most current status of any bill, visit the Arizona Legislature website (azleg.gov) and enter the bill number (for example, 1708 rather than SB1708) in the search bar. Bill statuses are current as of March 3.

Constitutional and structural changes that make budgeting harder 

SCR 1028 — Unfounded fears of “fee abuse” 
What it does: Asks voters to amend the Arizona Constitution to require a two-thirds legislative vote before lawmakers could allow agencies to set or adjust fees. 

Why it matters: This proposal could disrupt basic government operations and create unnecessary risks to public safety by forcing agencies back to the legislature for routine fee adjustments needed to deliver services. Current law already includes guardrails — such as fee caps and “reasonably necessary” standards — that prevent abuse. Rather than addressing the real issue of insufficient revenue to fund government, this measure would make it harder for agencies to respond efficiently to changing costs and community needs. 

Status: Passed Senate, awaiting House action. 

Check status update at azleg.gov. 

High-end, poorly targeted individual tax breaks 

SB 1633 — A tax break for sales of multimillion-dollar primary residences 
What it does: Allows taxpayers to exclude additional capital gains from the sale of a primary residence beyond the existing federal limits. 

Why it matters: This tax break is expensive, poorly targeted, and would overwhelmingly benefit high-income homeowners in high-priced markets, while renters and most homeowners would see little to no benefit. By providing large tax cuts to a narrow group of wealthy sellers, the bill would make Arizona’s tax code more regressive and divert resources away from shared priorities like child care, housing stability, and utility assistance. It is also unlikely to meaningfully increase housing supply, since federal capital gains taxes and current high interest rates remain dominant factors in home sale decisions. 

Status: Passed in Senate; awaiting House action. 

Check status update at azleg.gov. 

Local government revenue freeze that threatens community services 

HCR 2052/HB4030 — Restricting local taxes and fees (2026–2030) 
What it does: Prohibits counties and municipalities from raising any tax, fee, or utility rate for nearly four years unless approved by local voters with a 60 percent supermajority. 

Why it matters: This measure would tie the hands of local governments at a time when communities are facing rising costs, aging infrastructure needs, and the expiration of federal pandemic aid. Even as inflation drives up the cost of providing basic services like water, fire protection, and transportation, local leaders would be stripped of the flexibility to respond. Local voters already hold their elected officials accountable for fiscal decisions, and this proposal undermines local control while putting community growth, affordability, and livability at risk. 

Status: Passed House Ways & Means Committee; awaiting action on the House floor. 

Check status update at azleg.gov. 

School funding diversions through the tax code 

HB 4037 — Refundable tax credit that diverts general fund dollars from public K–12 education 
What it does: Creates a refundable income tax credit for households that do not send their children to public schools and do not participate in ESAs or STO scholarships. 

Why it matters: This bill raises serious concerns about accountability and intent. It appears designed to sidestep potential voter action to limit ESAs by creating a new, less regulated subsidy through the tax code. With fewer guardrails than existing programs, the credit could be used for non-educational purposes, increasing the risk of misuse while draining General Fund dollars that support public K–12 education and other essential services. At a time when Arizona should be strengthening oversight and investing in proven systems, this proposal moves in the opposite direction. 

Status: Passed House Ways & Means Committee; awaiting action in the House. 

Check status update at azleg.gov. 

SB 1142 — Opt-in to a terribly flawed, expensive voucher-like federal tax credit 

What it does:  Commits Arizona to participating in a newly created federal K-12 education scholarship tax credit program established under H.R. 1. The federal law creates a tax credit for individuals who donate to Scholarship Granting Organizations (SGOs), but each state must formally opt in for SGOs within that state to receive donations. 

Why it matters: This proposal would align Arizona with a new and not yet fully defined federal voucher-style tax credit that could carry significant long-term fiscal consequences. Large federal revenue losses tied to this credit could increase pressure for cuts to federal funding that supports education, health care, and other essential services. At the state level, the policy could further strain Arizona’s public K–12 system, which already ranks near the bottom nationally in per-pupil spending. Based on Arizona’s experience with ESAs and similar voucher-style tax credits in other states, there is also a strong likelihood that the primary beneficiaries would be higher-income households, while public schools and taxpayers bear the broader fiscal impact. 

Status:  Passed Senate; awaiting House action. 

Check status update at azleg.gov. 

Overall legislative trend 

Taken together, these bills would shrink Arizona’s revenue base, make the tax code more regressive, and limit the ability of both state and local leaders to respond to changing economic conditions. While they are framed as tax relief or taxpayer protection, many primarily benefit high-income households and large corporations while increasing pressure on the General Fund and local budgets that support public K-12 education, public safety, water infrastructure, child care, and other core services. 

What we would like to see 

Arizona’s long-term economic growth depends on stable, sustainable revenue and smart public investments — not structural changes that make budgeting harder or tax breaks that disproportionately flow to the wealthy few. As these proposals continue to move through the legislative process, lawmakers should carefully weigh who truly benefits and what trade-offs communities will face in the years ahead. 

AZCenter Raises Concerns Over HB 4037

PHOENIX — Arizona Center for Economic Progress testified today before the Arizona House Ways & Means Committee to oppose HB 4037, warning that the bill would create a school-voucher-like program, primarily benefitting high-income households, undermining equitable tax policy, and weakening accountability in education funding — all while threatening Arizona’s long-term economic future.

During the hearing, Joseph Palomino, director of the AZCenter, told lawmakers that HB 4037 creates a large tax credit, similar to a school voucher, for wealthy households regardless of whether a child is receiving a quality education, diverting public resources away from the very public services that support workforce readiness and economic growth.

“HB 4037 offers a significant tax benefit to families who already have the resources to send their children to private school, while doing nothing to ensure children are receiving a high-quality education or that public dollars are being used responsibly,” Palomino said.

In fiscal year 2026, the bill would allow families to claim a tax credit worth thousands of dollars per child, tied to the state’s perpupil funding level. It also would largely reward behavior that would happen anyway, rather than incentivize new investments that strengthen Arizona’s economy or improve educational outcomes.

Palomino also warned that HB 4037 could be used to bypass any future guardrails placed on empowerment scholarship accounts (ESAs), such as income caps, restrictions on how funds are spent, or requirements to ensure students’ safety and civil rights, effectively undermining legislative efforts to ensure accountability and protect public dollars and children.

Beyond education policy, the AZCenter raised serious concerns about the bill’s underlying approach to taxation and its implications for Arizona’s fiscal stability.

“HB 4037 is built on the flawed idea that people should only pay for public services they personally use,” Palomino said. “We don’t let people opt out of paying for roads they don’t drive on, fire protection they never need, or infrastructure projects that benefit other communities. If we applied this logic across the board, Arizona wouldn’t be able to fund the basic services our economy depends on.”

The AZCenter emphasized that public K-12 education is a foundational public good with broad economic benefits, including a skilled workforce, stronger communities, and long-term business competitiveness.

“Strong public schools are not just an education issue — they are an economic imperative,” Palomino added. “Businesses rely on an educated workforce, communities rely on stable schools, and Arizona’s future growth depends on shared investments that benefit everyone, not carve-outs for a few.”

Palomino also noted that HB 4037 would create inequities between taxpayers, allowing families who opt out of public K-12 education to pay less in taxes than similarly situated families who do not have children at all or use public schools — a violation of basic tax fairness principles.

AZCenter urged lawmakers to reject HB 4037 and instead pursue tax and education policies that strengthen Arizona’s workforce, promote equitable growth, and support the state’s long-term economic well-being.

Behind the Tax Filing Noise: A $1.45B Hit to Arizona’s Budget

HB 2785 and SB 1638 deepen Arizona's affordability crisis

PHOENIX — In the House Ways and Means Committee Wednesday the Arizona Center for Economic Progress opposed HB 2785, the latest attempt to conform Arizona’s tax code to federal Trump tax law at a cost of $1.45 billion over Fiscal Years 2026-2029.

The bill passed committee today, and a mirrored bill, SB 1638, will be heard in a state Senate committee Thursday.

While some proponents have framed tax conformity as an administrative necessity to reduce confusion during tax filing season, the real impact of this legislation has nothing to do with forms — and everything to do with permanently draining Arizona’s budget to deliver tax breaks that primarily benefit wealthy individuals, profitable corporations, and private equity firms.

“This is another bite at the apple,” said Joseph Palomino, director of the AZCenter. “Lawmakers are using temporary confusion around tax forms to push through permanent changes that overwhelmingly benefit those at the very top — while everyday Arizonans are left with underfunded schools, strained health care systems, and rising costs that make life unaffordable across the state.”

What’s more: Arizona's illusory $578 million budget cushion is dwarfed by $6+ billion in H.R. 1 tax conformity ($1.45 billion alone) and the state’s known funding needs, including child care, K-12 public education, health care, and higher education.

WHAT TAX CONFORMITY MEANS FOR ARIZONANS

Public K–12 education

Tax conformity would further undermine Arizona’s ability to fund public K–12 education, leaving:

  • Schools without funding for basic A/C repairs in extreme heat
  • Teachers and school staff continuing to be underpaid
  • Districts forced to stretch already inadequate resources even thinner

Health care

The bill fails to address critical gaps in Arizona’s health care system, including:

  • Long waitlists for people with developmental disabilities
  • Seniors receiving fewer caregiving hours than they need
  • Children excluded from essential services due to lack of funding

Universities and community colleges

At a time when higher education is key to workforce development, tax conformity means:

  • Fewer resources for financial aid for in-state students
  • Greater barriers to accessing affordable post-secondary education
  • Continued erosion of Arizona’s long-term economic competitiveness

Child care

Tax conformity does nothing to address Arizona’s child care crisis:

  • Child care waitlists would remain unresolved
  • Providers would continue to be underpaid
  • Children in care would not receive high-quality services
  • Parents would struggle to work and afford basic necessities
  • More providers would be forced to close, reducing options for all families — even those not receiving assistance

WHO BENEFITS — AND WHO DOESN’T

HB 2785 also includes an amendment that extends a corporate tax break for large multinational corporations. The amendment allows companies to continue excluding certain foreign income from Arizona’s tax base — a provision originally designed to curb corporate profit shifting.

By keeping this loophole in place, Arizona stands to lose billions in corporate tax revenue, primarily benefiting multinational corporations with assets exceeding $2.5 billion.

Despite claims of broad relief, tax conformity primarily benefits wealthy households and large corporations: Expansions of state and local tax deductions overwhelmingly benefit those earning over $200,000.

Business tax provisions favor large partnerships, private equity, and profitable corporations — potentially tied to activity outside Arizona. Wealthy taxpayers and corporations typically extend their tax filings, meaning the urgency argument does not match reality.

“Tax cuts are not magic beans,” Palomino said. “They don’t pay for themselves, and they don’t magically grow the economy. Arizona has already tried this experiment — and the result has been decades of underinvestment.”

A QUESTION OF PRIORITIES

If Arizona were to conform to federal tax law, lawmakers would still need to find a way to pay for it. Instead, this bill locks in permanent costs while Arizona’s budget outlook remains uncertain — leaving families to pay the price through reduced services.

“We need revenue to rev up Arizona’s economy,” Palomino said. “Not policies that put it in neutral while pretending the math will somehow work itself out.”

Arizona’s $578M Projected Balance Is a Mirage — State Faces Billions in Unfunded Obligations and Growing Economic Risk

PHOENIX — While new legislative budget projections released Thursday in the state’s Finance Advisory Committee meeting suggest Arizona may have $578 million in available revenue, that figure masks deep fiscal instability and billions of dollars in unmet obligations, according to the Arizona Center for Economic Progress (AZCenter).

As lawmakers begin negotiations for the FY2027 state budget, AZCenter warns that Arizona’s revenue outlook is far more fragile than it appears — and nowhere near sufficient to meet the state’s existing commitments to education, health care, child care, and higher education.

“This isn't a budget cushion; it’s smoke and mirrors,” said Geraldine Miranda, assistant director of fiscal policy for AZCenter. “The reality is that Arizona has far more obligations than available revenue — and the economic conditions driving recent revenue growth are volatile, uneven, and unlikely to last.”

$578 million available — but billions owed

Even under optimistic assumptions, Arizona’s projected available revenue falls dramatically short of the state’s known ongoing funding needs for the years FY 2026 through FY 2029.

The illusory $578 million budget cushion is dwarfed by $6+ billion in H.R. 1 tax conformity ($1.4 billion) and known funding needs, including child care ($595 million), K–12 public education ($1.5 billion minimum), health care ($1.3 billion), and long-overdue obligations to universities and community colleges (more than $1.3 billion).

“These are not wish-list items,” Miranda said. “Many of these are statutory obligations the state has already failed to meet — or essential investments lawmakers routinely say they support but never fully fund.”

Revenue growth driven by a fragile, unequal economy

AZCenter also cautions that the $578 million figure itself is highly uncertain, as recent revenue growth is being driven by volatile and uneven economic factors rather than broad-based economic strength.

Key warning signs include:

  • Corporate income tax volatility, with monthly revenue swinging sharply above and below forecasts
  • Slowing sales tax growth, including a sharp downturn in construction-related revenue tied to a slowdown in residential building
  • Income tax gains concentrated among high-income households, driven by capital gains rather than wage or job growth — a hallmark of a K-shaped economy
  • Speculative AI investment potentially masking deeper economic weaknesses
  • Rising credit card delinquencies, signaling household financial strain and potential risk to future consumer spending
  • Reduced immigration and workforce supply

Arizona is still paying for years of tax cuts

The AZCenter also pointed to the long-term impact of past tax cuts, which have narrowed the state’s ability to respond to economic uncertainty and invest in public priorities — a dynamic explored in AZCenter’s recent analysis, “Karma's a Budget: Arizona’s Past Decisions Are Catching Up Fast.”

“Arizona has already given away billions in permanent tax cuts,” Miranda said. “Now lawmakers are being asked to consider even more tax cuts at the exact moment the state can least afford them.”

Lawmakers should prioritize core needs — not more tax giveaways

As budget negotiations continue, AZCenter urges policymakers to resist additional tax cuts and instead focus on investments that support the majority of Arizonans, including:

  • Public K-12 education
  • Child care and working families
  • Health care and disability services
  • Affordable higher education and workforce training

“The budget math doesn’t lie,” Miranda said. “Arizona has a backlog of unpaid bills and growing economic risk. Pretending otherwise only makes the eventual reckoning more painful.”

AZCenter Urges Lawmakers to Reject SB 1142, Warns Federal Private-School Tax Credit Could Harm K-12 Public Schools and Arizona’s Budget

PHOENIX — The Arizona Center for Economic Progress (AZCenter) testified today in opposition to SB 1142, warning that the bill would commit Arizona to a new and largely undefined federal scholarship tax credit program that could strain state finances and further undermine public K-12 education.

The federal tax credit, created under H.R. 1, allows taxpayers to donate to Scholarship Granting Organizations (SGOs) that fund private-school tuition in exchange for federal tax breaks. However, key program rules and oversight mechanisms have not yet been finalized by the U.S. Treasury, raising concerns about accountability, state control, and fiscal risk.

“We should not surrender state oversight to a federal program that isn’t fully defined,” said Joseph Palomino, director of the AZCenter. “This bill asks our state to sign onto a system before we’ve seen the fine print — and once we opt in, we may not be able to set our own guardrails or fix problems if they arise.”

AZCenter also cautioned that the tax credit could result in significant federal revenue losses, potentially leading to cuts in funding for education, health care, and other essential services.

Those federal reductions, in turn, could place new financial pressure on Arizona’s already tight state budget.

“This tax credit has no cap — meaning it could drain billions from public revenue and force states like Arizona to pick up the tab,” Palomino said. “Arizona’s current revenue situation cannot absorb new cost pressures without risking cuts to services families rely on while wealthy donors and private institutions benefit.”

In addition to fiscal concerns, AZCenter warned that SB 1142 could exacerbate funding challenges for Arizona’s public schools, which already rank 49th in the nation in per-pupil spending. The organization noted that recent expansions of Arizona’s Empowerment Scholarship Account (ESA) program have already redirected substantial resources away from traditional public schools.

“Public schools cannot simply downsize buildings, transportation, or utilities when funding is pulled away,” Palomino said. “Students who remain in public schools end up bearing the cost. Arizona should be strengthening its public education system — not further draining resources to subsidize private-school tuition.”

AZCenter urged lawmakers to pause and seek greater clarity on the federal program’s structure, fiscal impact, and oversight requirements before committing the state.

“This is a high-risk decision with long-term consequences for Arizona’s budget and our children’s education,” Palomino said. “We should not gamble with Arizona’s budget or our children’s future on an untested federal experiment.”