Tag: revenues

ICE Raids, Mass Deportation Threats, and Public Services: What Schools, Health Care, and Housing Might Face

Across Arizona, schools, health clinics, and housing providers are already navigating rising costs, workforce shortages, and growing community needs. Intensified immigration enforcement adds another layer of disruption, one that can spill directly into public services that keep families stable and local economies functioning.

These policies don’t just affect immigrant families; they can disrupt Arizona’s workforce, reduce local consumer spending, and weaken the state’s tax base, which ultimately shapes the strength of schools, health systems, and housing markets that all Arizonans rely on.

They can also change how safe people feel accessing essential services—whether it’s sending children to school, seeking medical care, reporting concerns, or applying for programs they’re legally eligible for. These chilling effects can push families into deeper instability, making the work of educators, providers, and community organizations even harder.

Below are three public systems that could feel the impact most immediately:

1. Schools may see more disruption, more absenteeism, and higher student needs

Arizona schools are a frontline public service for kids in immigrant families, especially in mixed-status households, where some family members are U.S. citizens.

When enforcement increases, schools can see ripple effects that go far beyond the immigration system:

Lower attendance and higher mobility. Families under stress may keep children home out of fear, move suddenly, or withdraw from activities that involve paperwork or visibility. In 2025, the U.S. saw a noticeable decline in teenagers in mixed-status households enrolled in school full time. In Arizona, chronic absenteeism is a serious issue: 29 percent for grades 1-8 and more than 1 in 3 high school students according to 2025 reports by Helios Education Foundation.

More trauma in the classroom. Students may show signs of anxiety, sleep disruption, concentration issues, or emotional withdrawal when they’re worried about a parent’s job, safety, or deportation risk.

Reduced uptake of school-based supports. Even when programs aren’t immigration-related, families may avoid interacting with institutions they perceive as connected to government systems, particularly if misinformation spreads quickly or policies are unclear.

This matters because school systems don’t just educate; they stabilize. When families disengage, educators spend more time responding to crisis, not instruction. And schools serving high-need communities often have the least margin for sudden shocks.

2. Health care providers may see delayed care, worsening health, and avoidable emergencies

When immigration enforcement intensifies, people often delay medical care, even for urgent needs. That’s not speculation; national research and advocacy documentation has consistently shown that immigration-related fear and confusion can reduce participation in critical health supports, including when families are eligible. According to a survey from Physicians for Human Rights, 26 percent of clinicians report that immigration enforcement has directly affected patient care.

The Center on Budget and Policy Priorities has also documented a broader pattern: Policy changes and enforcement-linked actions can worsen fear and discourage families from accessing health coverage and other supports they qualify for, creating broader public health risks.

What Arizona health care systems may face:

More emergency-room reliance. When people delay routine care, conditions worsen, shifting care to expensive.

Higher strain on safety-net clinics and hospitals. Providers may see more acute cases and greater unmet social needs (housing instability, food insecurity, stress-related conditions).

Worsening health outcomes for children and pregnancy patients. Family instability is a health risk factor, especially for kids, seniors, and people with chronic conditions.

The end result is a system that costs more, serves people later, and prevents less.

3. Housing instability could increase, while communities lose resources that keep families afloat

Housing is one of the most fragile parts of any family budget, and enforcement shocks can turn “barely making it” into homelessness risk fast.

How ICE threats destabilize housing:

Job disruptions lead to missed rent. Detention, deportation, or even fear-related workplace exits can cut household income overnight. In Los Angeles, following intensified ICE raids, immigrant tenants reported losing an average of $2,000 per month in wages, and the share of their income going toward rent jumped to 91 percent, up from 42 percent prior to the raids.

Families double up or move suddenly. That can increase overcrowding, disrupt school enrollment, and strain extended family networks.

People avoid asking for help early. If families are afraid to interact with agencies or fill out forms, they may not seek assistance until an eviction notice is already in motion. A 2020 Urban Institute study found that 9.8 percent of adults in low-income immigrant families avoided housing assistance due to immigration concerns, despite being eligible. With growing concern around deportation and enforcement, that number is likely to grow exponentially.

Meanwhile Arizona communities also face quieter fiscal reality: Immigration enforcement doesn’t just change who lives where; it can also affect local public revenues.

According to the Institute on Taxation and Economic Policy (ITEP), undocumented immigrants contribute billions in state and local taxes nationwide, and in most states, they pay a higher effective state and local tax rate than the top 1 percent of households.

Those revenues help fund the very systems Arizona depends on: schools, transportation, emergency response, and public health infrastructure.

When enforcement creates widespread fear, people may disengage from public systems, including tax filing, shrinking revenue that supports public services.

The 'chilling effect' is real, and it spreads beyond who is targeted

One of the most dangerous dynamics of heightened enforcement is that it can cause families to avoid programs even when they are eligible, particularly when public information is confusing or when people fear the using services could harm their immigration prospects.

Protecting Immigrant Families (PIF) documents how public charge policies and enforcement-linked fear can create a persistent chilling effect that extends beyond the actual legal rules.

This is how enforcement becomes a public services issue, not only through removals, but through community-wide withdrawal and instability. It reaches into classrooms, waiting rooms, and housing markets, creating instability for families and now strain for public services that are already stretched thin.

The bottom line

Arizona communities function best when people can work, learn, get care, and stay housed without fear. When families retreat from public life, the consequences don’t disappear; they just show up later. More expensive, and harder to fix.

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

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.

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.

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.”

Arizona Lawmakers Consider Corporate Tax Giveaway as State Faces Budget Pressures

PHOENIX — Joseph Palomino, Director of the Arizona Center for Economic Progress, will testify Wednesday in committee in opposition to HB 2288, legislation that would reduce corporate tax accountability for large multinational corporations while worsening Arizona’s long-term budget outlook.

The bill would decouple Arizona from federal anti-profit-shifting tax rules designed to prevent multinational corporations from moving profits to low-tax foreign jurisdictions — a move that would cost the state significant revenue at a time when Arizonans are struggling with rising housing, health care, and child care costs.

“At a time when Arizonans are struggling to afford the basics, this bill cuts taxes for multinational corporations and sends the bill to working families,” Palomino said.

WHY THIS MATTERS

Congress enacted federal guardrails — known as GILTI/NCTI — to stop large corporations from hiding profits overseas to avoid paying taxes. Arizona already is decoupled from GILTI, and HB 2288 also would decouple the state from NCTI, allowing likely billions of dollars in corporate profits to escape the state tax base.

GILTI – Global Intangible Low-Taxed Income
NCTI – Net Controlled Foreign Corporation Tested Income

More than 21 states and Washington, D.C. already tax some portion of this income, primarily affecting the largest corporations — not small businesses.

IRS data show:

Corporations with over $2.5 billion in assets account for more than 93% of this income
Businesses without foreign subsidiaries are not impacted at all

“This bill asks teachers, first responders, and small businesses to make do with less so multinational corporations can shift profits overseas,” Palomino said.

IMPACT ON ARIZONA

Arizona’s Constitution makes long-term deficits unsustainable, which means lost revenue always comes with consequences.

“Arizona can’t afford tax policies that work for the few and fail the many,” Palomino said. “Every dollar we give away in corporate tax breaks is a dollar we can’t invest in schools, infrastructure, housing, or public safety.” “

This bill doesn’t help everyday Arizonans — it deepens the hole in our state budget so big corporations can pay less,” Palomino said.

TESTIMONY DETAILS

WHO: Joseph Palomino, Director, Arizona Center for Economic Progress WHAT: Committee testimony opposing HB 2288

WHEN: Wednesday, Jan. 21 at 10 a.m.

WHERE: House Ways & Means, House Hearing Room 3, Arizona Legislature

LIVESTREAM: https://www.azleg.gov/videoplayer/?clientID=6361162879&eventID=2026011051

WHY: To oppose a bill that cuts taxes for large multinational corporations while worsening Arizona’s fiscal outlook

AZCenter Reacts to Gov. Hobbs' budget

PHOENIX — The Arizona Center for Economic Progress released the following statement Friday from Director Joseph Palomino following the release of Gov. Katie Hobbs’ budget:

“Gov. Hobbs’ budget includes targeted investments to lower everyday costs for Arizona families — from K-12 public education and food assistance to housing and energy bills — and uses alternative tools to stretch limited dollars.

“But many of these investments rely on one-time funding or short-term solutions, and affordability cannot be sustained without stable, long-term revenue. By shrinking the state’s revenue base through the flat tax and other tax cuts, lawmakers have constrained Arizona’s ability to sustain the investments families rely on.

“The Arizona Center for Economic Progress will closely review the full budget and legislative proposals and provide further analysis on whether they strengthen Arizona’s fiscal foundation and truly support families over the long term.”

For more:

AZCenter Director Testifies in Opposition to Tax Conformity Package, Warns Bill Would Deepen Structural Deficit and Undercut Arizona Investment in Essential Programs

Key takeaways:

HB 2153 would deepen Arizona’s structural deficit, limiting the state’s ability to fund core services and key priorities.
JLBC estimates the bill would cost Arizona $441.3 million in FY 2026 alone, while the state is projected to have just $67 million available in FY 2027 before accounting for ongoing obligations and one-time commitments.
Tax cuts do not reliably generate enough growth to replace lost revenue, raising the risk of future service cuts or revenue increases — especially as federal funding risks grow.
HB 2153 does nothing to address Arizona’s affordability crisis or meaningfully strengthen the state’s economy.

PHOENIX — Joseph Palomino, Director of Arizona Center for Economic Progress (AZCenter), testified Wednesday in opposition to HB2153, Arizona’s tax conformity package, warning lawmakers that the bill’s tax cuts could weaken Arizona’s ability to fund core services at a time when families across the state are struggling with rising housing costs, child care shortages, and basic affordability.

”This bill spends money Arizona doesn’t have,” Palomino said. “Every dollar we give away in tax cuts is a dollar we can’t invest in the things that actually make Arizona affordable.”

He noted that affordability pressures show up in whether families can find child care, keep up with rent, or absorb unexpected costs without falling behind.

What HB 2153 does

HB 2153 would update Arizona’s tax conformity date to align with the federal Internal Revenue Code as of Jan. 1, 2026, while also adopting several new subtractions and deductions that reduce taxable income for entities like big corporations and private equity.

While Arizona must regularly conform to changes in federal law to maintain administrative consistency, Palomino cautioned that several provisions in HB 2153 go well beyond standard technical conformity and could reduce state revenues substantially, which would likely gut essential services that support Arizona’s families and economy.

Using Joint Legislative Budget Committee estimates, Palomino said HB 2153 is projected to cost the state $441.3 million in FY 2026 alone, a cost he compared to major unmet obligations and urgent investments Arizona continues to delay.

“That is equivalent to the $280 million budget-formula obligation Arizona has failed to pay for university buildings and financial aid, plus the $160 million investment our child care program needs to eliminate the current waitlist and provide quality services,” Palomino said.

Palomino said those are investments that affect whether parents can work, students can afford college, and communities can grow.

How HB 2153 affects Arizona long-term

Palomino also pointed to Arizona’s broader budget outlook, warning that the state is entering the next fiscal year with little room to absorb permanent revenue losses. He cited the Finance Advisory Committee’s projection that Arizona will have only $67 million available in FY 2027, before accounting for ongoing onetime obligations, FY 2026 one-time investments, and supplementals.

He warned that such a narrow margin leaves the state vulnerable to even minor economic shocks or unexpected costs.

“Tax cuts don’t magically pay for themselves. Arizona has already run that experiment,” Palomino said.

How HB 2153 fails to meaningfully invest in Arizona

In his testimony, Palomino acknowledged that HB 2153 includes some provisions that protect state revenues, including the decision to remain decoupled from corporate bonus depreciation and the bill’s approach to limiting the state and local tax (SALT) deductions to $10,000.

He said those elements help preserve state revenues. However, he emphasized that other provisions in the bill could force lawmakers to consider cuts to public services or identify other ways to equitably and efficiently raise revenue.

Palomino also raised concerns about several individual income tax provisions, warning that some tilt toward the wealthy or treat similarly situated taxpayers differently, while distracting from solutions that more directly improve affordability.

He emphasized that many low- and moderate-income households are already stretched thin and see little benefit from tax changes. He pointed to priorities like increasing affordable housing, strengthening public schools, and creating a refundable child tax credit as examples of policies that would better support Arizona families and the economy.

Finally, Palomino urged lawmakers to weigh HB 2153 against the ongoing risk of federal funding cuts to state budgets. He pointed to recent federal actions, including H.R. 1, as evidence that Arizona needs stronger, not weaker, revenue stability to withstand further reductions in federal support.

“Given the federal fiscal landscape and the potential for further cuts, I would advise extreme caution,” Palomino warned.

Link to testimony