By AZ Mirror
Arizona’s budget outlook has improved since last year, but the tentatively solid future is shrouded in uncertainty because economists have no idea which of President Donald Trump’s proposed policies he’ll actually implement versus which ones were just for show.
The good news is that revenues have been better than expected since lawmakers passed the 2025 budget in mid-June, and for the first time in the past two years, economists don’t project a recession, according to one of the private economists on a panel that advises lawmakers on the economy and budget, Danny Court.
In the 2024 fiscal year, which ended June 30, the state took in $425 million more than expected and has continued to bring in more than forecast in the first half of 2025, to the tune of $244 million. That’s a big change from the projected $1.8 billion deficit the state was facing during budget negotiations last year.
The increased revenues in 2024 were primarily due to one-time Medicaid payments to the state for keeping costs below expectations, according to the Joint Legislative Budget Committee.
Income tax collections decreased by $2.7 billion from 2022 to 2024, after Republicans implemented a 2.5% flat tax, but collections increased by 7.4% so far in fiscal year 2025 contributing to increased revenue. Also contributing were a 11.2% increase in corporate income tax payments and a 3.4% increase in sales tax collections.
With the year ahead looking to tentatively be a solid one for the economy, Republicans who head the state Legislature and Democratic Gov. Katie Hobbs will still have to work together on a package of spending bills that make up the state budget. The two sides have many disagreements on how much money the state should be spending and how best to allocate that money, but they must reach a consensus by June 30, the last day of the fiscal year.
