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Governor's 2026 State of the State Address and Priorities
The 57th Arizona Legislature convened on Monday for its second regular session at the State Capitol, where Governor Katie Hobbs delivered her fourth State of the State address outlining her policy priorities for the upcoming election year. Her proposals fall into three primary areas:
Affordability - Governor Hobbs called for partial conformity of Arizona’s tax code with federal H.R. 1 to provide targeted tax relief for individual and joint filers, though Republican lawmakers favor full conformity and broader tax cuts. She also proposed a new fee on short-term rentals to fund utility bill assistance and announced plans for a public-private partnership to promote affordable housing development.
Water - The Governor announced the creation of an Active Management Area in La Paz County to strengthen groundwater oversight. She also proposed eliminating tax incentives for data centers and imposing a new fee on future facilities, with proceeds directed toward Colorado River conservation and resiliency efforts.
Education - Governor Hobbs urged a clean renewal of Proposition 123, which expired last year and previously generated approximately $300 million annually for K-12 education. While she did not call for eliminating the ESA program, she reiterated the need for greater transparency and protections against fraud and abuse.
Her first major test of the session could come as early as this week, as Republican lawmakers plan to advance a tax cut package totaling up to $1.1 billion over three years. Governor Hobbs is expected to veto the proposal and continue advocating for a more targeted approach.
On Friday, the Governor is expected to release her fiscal year 2027 Executive Budget, formally launching budget negotiations with the Legislature.
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