Gov. Katie Hobbs’ new $17.7 billion budget proposal for Arizona is drawing heat for continuing what critics call an unsustainable trend of runaway general fund spending. The plan, which is $100 million larger than last year’s budget, pours major increases into Medicaid and disability services, prompting fears of fiscal instability and tax filing chaos for Arizona residents.
The largest single increase targets Arizona’s Medicaid-funded disability program run through the Department of Economic Security (DES). The program, which supports approximately 62,000 Arizonans needing home-based care, would get an additional $128.1 million from the general fund in 2026, plus $271.9 million more from the Department Long Term Care System Fund. That amount swells in 2027 to a staggering $298.8 million from the general fund and $673 million from the fund.
Critics warn this explosion in spending, particularly on a program that historically trailed behind education and general Medicaid in caseload size, sets a dangerous precedent. They also note Hobbs’ continued reliance on one-time funding rather than sustainable revenue sources.
The budget also aligns with major federal changes under HR 1 — dubbed the “One Big Beautiful Bill Act” — which restructured income taxes and altered Medicaid and SNAP cost growth. While the federal government shifts administrative burdens to states, Hobbs’ budget complies, further expanding state obligations.
Amid these shifts, Arizona Republicans introduced a tax relief plan to save taxpayers $1.1 billion over three years — a proposal Hobbs swiftly vetoed.
Tax professionals and policy analysts warn that Hobbs’ budget and ongoing tax code changes could force large numbers of Arizonans to amend their tax returns later this year, especially with the budget’s passage likely delayed into May or June. That lag could create confusion and major financial consequences for taxpayers who file early.
