Hobbs touts affordability in fourth State of the State address
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Gov. Katie Hobbs delivers her fourth State of the State address. Photo: Jeremy Duda/Axios
Addressing the Legislature for what may be the last time, Gov. Katie Hobbs called for bipartisanship as she touted several proposals that are likely to be a tough sell for the Republican majority.
Why it matters: The State of the State address, which Hobbs delivered Monday on the first day of the 2026 session, outlines the governor's priorities.
Yes, but: Republicans control both legislative chambers and are unlikely to support Democratic policies.
What she's saying: Arizonans "don't care if good ideas come from Democrats or Republicans — they care that the people they elect get things done to make their lives better regardless of party affiliation and ideology," the governor said.
State of play: "Affordability is my top priority. I'm encouraged it's yours as well," Hobbs told lawmakers as she outlined several proposals aimed at addressing the issue.
🤑 Tax cuts: Hobbs urged lawmakers to quickly send her a "middle class tax cuts package" that would raise the standard deduction she said is used by 88% of Arizonans, eliminate taxes on overtime and tips, and give additional relief to seniors.
- Republicans favor more extensive cuts that would, unlike Hobbs' plan, fully conform with recent federal changes made in the One Big Beautiful Bill. They pledged to send the package to her desk this week.
🏘️ Short-term rentals: Hobbs wants a $3.50 nightly fee on short-term rentals like Airbnb, with the money going to a new Arizona Affordability Fund that would help people pay for utilities and lower energy costs.
- She said she's starting the fund immediately with a $20 million investment.
- The governor's office didn't respond to a question from Axios about where the initial funding will come from.
🏬 Data centers: Hobbs wants new water fees for data centers that would increase funding for a new Colorado River protection fund.
- She also wants to eliminate a tax exemption for data centers, a proposal she noted has some bipartisan support.
💧 Water: She announced the creation of a new Active Management Area to impose groundwater restrictions in La Paz County.
✂️ Efficiency: Hobbs also announced a new Arizona Capacity and Efficiency Initiative to "streamline, consolidate and cut costs" in state government, which she said could save $100 million over the next three years.
🎒 And Hobbs again called on lawmakers to enact new restrictions to tackle fraud and abuse in the K-12 voucher-style Empowerment Scholarship Account (ESA) program, which has long been a red line for pro-school choice GOP lawmakers.
- Additionally, she urged the Legislature to send the renewal of the K-12 funding measure Proposition 123 to the ballot, without the ESA protections that some GOP lawmakers have pushed for.
The other side: "In a time where every Arizonan is tightening their belt … what I heard today is more government spending, more investing in government programs," House Speaker Steve Montenegro (R-Goodyear) told reporters after the speech.
- Rep. Michael Carbone (R-Buckeye), the House majority leader, disputed Hobbs' assertion that data centers don't pay their "fair share" for water.
- Rep. Matt Gress (R-Phoenix) said a third of the people who rent short-term rentals in this state are other Arizonans, saying, "This just sounds more like tax-and-spend policies on the Democrat side."