Arizona’s current budget

Governor Katie Hobbs released her FY 2026 budget proposal and gave the state of the state address in January 2025. The FY 2026 budget was enacted in June 2025.

Arizona enacted its FY 2025 budget in June 2024. The budget reported $16.2 billion in general fund spending, a decrease of 6 percent over the previously enacted budget. Arizona also approved a one-time tax rebate for residents in calendar year 2023. This followed a large, permanent individual income tax cut in 2021.

Under the American Rescue Plan, Arizona received $4.2 billion in direct state fiscal aid and $2.4 billion in local government aid from the federal government. As of January 2025, Arizona had fully allocated its state ARP. States must spend the funds by Dec. 31, 2026.

According to the National Association of State Budget Officers (NASBO), Arizona’s total expenditures in fiscal year FY 2025 were $111.3 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2025 were $2.9 trillion, ranging from $5.4 billion in Wyoming to $413.8 billion in California.

According to NASBO, Arizona’s recent expenditure totals (general fund spending/total spending, including federal transfers) were:

• FY 2025: $16.2 billion/$73.6 billion
• FY 2024: $17.9 billion/$96.4 billion
• FY 2023: $16.0 billion/$112.4 billion
• FY 2022: $12.4 billion/$87.6 billion
• FY 2021: $11.7 billion/$66.8 billion
• FY 2020: $15.4 billion/$71.8 billion
• FY 2019: $10.7 billion/$38.7 billion

For more on Arizona’s budget, see

• the Arizona General Accounting Office,
• the Arizona Financial Transparency Portal,
  
• the Arizona Joint Legislative Budget Committee, and
  
• the Arizona State Legislature research briefs.

Arizona’s budget institutions, rules, and constraints

Arizona uses an annual budget. The legislature must pass a balanced budget, but it can carry a deficit into the following year. Arizona limits spending growth based on personal income growth with a binding rule that requires a legislative supermajority or a vote of the people to override it. A supermajority is similarly required for any legislation that increases taxes or revenues. Arizona also places limits on the total authorized debt the state can incur but not on debt service.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Overview of Arizona’s state and local expenditure and revenue sources

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Arizona’s combined state and local direct general expenditures were $70.0 billion in FY 2022 (the most recent year census data were available), or $9,503 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $12,083.

Arizona’s largest spending areas per capita were public welfare ($3,430) and elementary and secondary education ($1,524). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Arizona’s combined state and local general revenues were $83.0 billion in FY 2022, or $11,270 per capita. National per capita general revenues were $13,619. Arizona uses all major state and local taxes. After federal transfers, Arizona’s largest sources of per capita revenue were general sales taxes ($2,218) and property taxes ($1,259).

Arizona’s economic trends

Arizona’s per capita income (per the Bureau of Economic Analysis) was $64,456 in 2024, ranking 35th among the states. It was below the national average of $72,425, but above the Southwest regional average of $63,623. The state’s median household income (five-year estimate) was $79,964 in 2024, ranking 20th among the states and below the national average of $80,734. Arizona’s poverty rate was 12.5 percent in 2024 (five-year estimate), equal to the national rate of 12.5 percent.

Although Arizona’s averages tell a story about the entire state, Arizona is composed of diverse localities. For example, the city of Bullhead City’s median household income was $50,556, and its poverty rate was 18.7 percent; the city of Queen Creek’s median household income was $141,978, and its poverty rate was 3.7 percent.

Arizona’s unemployment rate historically tracks the national average, but in recent years it has been among the highest in the country.

Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Arizona, the average unemployment rate in 2024 was 3.4 percent for white residents, 1.6 percent for Black residents, and 4.2 percent for Hispanic or Latino residents.

The major industries that contributed the most to Arizona’s gross domestic product (GDP) in 2024 were finance, professional services, government, social services (i.e. health and education), and manufacturing. Finance and social services contributed more to Arizona’s GDP than they did to the nation’s and region’s GDP, while professional services and manufacturing were less important to Arizona than they were to the nation and region in 2024.

Looking at more specific industries, among those that accounted for at least 1 percent of Arizona’s GDP in 2023, real estate produced more for the state than for the nation, contributing 15.6 percent to Arizona’s GDP and 12.4 percent to the nation’s. Other industries that overperformed in Arizona relative to national averages in 2023 were construction, transportation equipment manufacturing, administrative and support services, and retail.

Arizona’s politics

Governor Katie Hobbs, a Democrat, was elected in 2022 with 50 percent of the vote. The next gubernatorial election is in 2026.

Arizona has a divided government. Republicans control both the House of Representatives (31 Republicans to 29 Democrats) and Senate (16 Republicans to 14 Democrats). The entire legislature is up for election in 2026 because both representatives and senators serve two-year terms.

Arizona’s demographics

As of July 2024, Arizona’s population was 7,582,384. That was up 18.2 percent from 2010. The state’s population growth rate was faster than than the nation’s 9.9 percent growth over the same period. The Urban Institute estimates the state’s population will increase 34.7 percent between 2010 and 2030, more than the nation’s estimated growth rate of 16 percent.

Additional resources

• The State and Local Finance Initiative’s Backgrounders explain the tax and spending issues highlighted in these briefs.
  
• The State Economic Monitor presents updated data and customized visualizations of state economic indicators.
  
• State and Local Finance Data: Exploring the Census of Governments allow users to sort, customize, and download the Census of Governments State and Local Finance series data featured in these summaries.
  
• The State Tax and Economic Review series provides quarterly reports on state tax collections and underlying economic trends in all 50 states.
  
• The Urban Institute’s State Tax Data Subscriptions provide access to up-to-date revenue data in all 50 states.