Arizona Budget Battle Looms, Governor Hobbs Admits ‘Tough Year’ Ahead

As the 2026 Arizona legislative session nears, Governor Katie Hobbs (D) has acknowledged the challenges after a year of heavy criticism for fiscal mismanagement from Republican lawmakers. Despite the admonishment of legislative leaders, several of her departments are pushing for increased spending.

“We’re facing a tough budget year and we’re faced with a lot of uncertainty coming from the federal government,” Hobbs told Capital Media. “We want to act responsibly and ensure that we’re safeguarding taxpayer dollars and not increasing budgets to a level that’s not sustainable, knowing that we’re going into a tough year.”

As reported by the Arizona Capitol Times, the Governor’s office appears to be crafting a Fiscal 2027 budget based on agency budget requests developed around known budget shortfalls.

In one notable example, the Division of Developmental Disabilities (DDD), which was the subject of a lengthy budget battle between Hobbs and GOP legislative leaders, is once again projecting a massive shortfall of $159 million, according to ABC15 News.

 “We’re going to need some additional funding to make sure that we don’t have to reduce services or benefits for any individual who is in the Developmental Disabilities program,” DES Director Michael Wisehart told the outlet.

In April, House Speaker Steve Montenegro (R-LD29) blasted the Hobbs administration during a protracted budget battle, stating in a press release that the governor “created this crisis.”

“Governor Hobbs’ decision to hold every bill hostage because she didn’t get her way on a blank check is not leadership—it’s political blackmail. She created this crisis by foolishly expanding the DDD program without legislative approval or funding in place, and now she’s throwing a tantrum because the Legislature is doing the responsible thing: funding services while putting guardrails in place to keep the program from collapsing. 

“Let’s be clear: House Republicans are already advancing legislation to fully fund the DDD program. What the Governor demands is no oversight, no reforms, and no accountability for the financial mess she clearly made. That’s not a solution. 

“If Governor Hobbs was serious about protecting families, she’d stop the partisan press releases, stop the threats, and finally come to the table. Until then, she’s the one playing political games—at the expense of every Arizonan waiting for her to do her job.”

Despite calls from legislative GOP leaders for the DDD to reduce costs before it faces another shortfall, ABC15 has reported that the department is poised to blow through the $122 million supplemental budget already given and will need another $159 million.

“We certainly didn’t come lightly to requesting additional funding, but we did implement what was expected of us,” Wisehart claimed, attributing the increased costs to a growing population, better diagnosis of qualifying disabilities, and people moving into the state.

However, Montenegro described the issue quite differently in April, telling AZ Free News. He explained that Hobbs, “created this crisis by foolishly expanding the DDD program without legislative approval or funding in place, and now she’s throwing a tantrum because the Legislature is doing the responsible thing: funding services while putting guardrails in place to keep the program from collapsing.”

In an exclusive interview, the Speaker revealed that Hobbs had been aware of the budget problem since at least January 2025. “In January, we pointed out there were failures in her proposal failing to include certain budget items. But now we’re seeing that in, specifically, this latest debacle where we get an email sent to the wrong place, and when we finally are able to see the email, there’s less than two weeks left before the Congregate Care program goes bankrupt. Then, the letter that she emailed states almost as a demand, ‘If this happens, kids will be sleeping in offices,’ a result that was only narrowly averted.”

“It’s almost as if there’s, first of all, no care, and second, no understanding that she should have let us know early on specifics on where we would need supplementals. So asking the question, is this a level mal-intent or incompetence?”

 Montenegro added, “This is sheer incompetence in mismanagement of budgets, not understanding how to manage a budget, and when you’re talking about kids and the most vulnerable individuals in the state, it’s gross incompetence. Arizonans deserve better.”

According to Wisehart, “The only way that we can avoid having this additional funding need is to either reduce the number of individuals that are coming into the program – waiting lists would be the only way to do that – or to further reduce the array of services.” 

Indeed, this would appear to be precisely what AZ House leadership is seeking: a rollback of Hobbs’ “foolishly expanding” the Developmental Disabilities program “without legislative approval or funding in place,” albeit characterized as a negative by Wisehart.

House and Senate Republican leaders have been relatively quiet about the upcoming budget discussions going into the session. However, the Common Sense Institute and the Arizona Center of Civic Leadership are set to host a ‘Coffee & Common Sense event’ on October 1^st with a bipartisan panel that could yield a glimpse into the forthcoming budgetary battle.