Budget negotiations are underway at the Arizona Capitol as the clock ticks toward the end of the fiscal year, but the governor's office, state House and Senate still have differences to sort out.

The big picture: The Legislature and governor must pass a new budget by the start of the 2025-26 fiscal year on July 1.

The intrigue: The GOP-controlled Legislature and Democratic governor don't see eye to eye on spending, Senate Appropriations Committee chair Sen. John Kavanagh (R-Fountain Hills) said, and state Republicans still disagree over how to give their members a lump sum to spend on projects of their choosing — as was done in the fiscal year 2024 budget.

• Senate Republicans want $90 million to divvy up among themselves — Democrats wouldn't be included — with an identical amount for the House and a similar, if not slightly higher, sum for Hobbs.
• Meanwhile, their House colleagues have balked at the idea and want to focus on larger-scale projects.

What they're saying: "Many of the things our members pick are things there's consensus on … [I]t also provides an opportunity every now and then to get some local projects done that ordinarily would get lost in the shuffle," Kavanagh said.

The other side: Rep. Matt Gress (R-Phoenix), vice chair of the House Appropriations Committee, told Axios that House Republicans agree there should be some funds "set aside for legislative and executive priorities, while also balancing some statewide large-scale projects."

• That could mean smaller allocations for GOP lawmakers, or they could find money elsewhere in the budget to make up the difference.

Hobbs spokesperson Christian Slater declined to comment on specific points of disagreement between the governor and the Legislature.

• But he emphasized that Hobbs' budget priorities include alleviating veterans' homelessness, raising pay for law enforcement and firefighters, and making child care more affordable.

Threat level: Legislative budget analysts estimated in April that the state's projected revenue growth for next year dropped to about $277 million from the previous projection of $612 million.

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Freshman U.S. Sen. Ruben Gallego is already making moves to appeal to moderates and boost his national profile barely five months after taking his seat.

Why it matters: Gallego — like a growing number of Senate Democrats — is positioning himself for a possible 2028 presidential run as his party looks to build a fresh bench after their devastating loss last November.

• Gallego criticized his Party last month for "kicking people out of the tent" ahead of the 2024 election.
• "What happened the last election is that we got so pure, and we kept so pure that we started kicking people out of the tent," he said at a town hall in a Philadelphia-area swing district that Trump narrowly flipped.
• "It ends up there aren't enough people in the tent to win elections," he added.

Zoom in: Gallego released an immigration reform plan that pairs liberal priorities such as pathways to citizenship with conservative principles like increased border security funding.

• He had one of the best-ever fundraising debuts for a Senate Democrat, pulling in more than $1 million in his first quarter.
• Axios has learned that Gallego — who kept his seat in the Democrats' column despite Trump's victory in Arizona — is planning additional stops in key battlegrounds over the coming months.

The big picture: There are signs that Gallego's appeals to moderates and conservatives are starting to make a difference for him back home.

• Gallego's 50% statewide approval rating in May is higher than Trump's and Democratic Arizona Gov. Katie Hobbs', according to a recent poll by Noble Predictive Insights, a Phoenix-based nonpartisan polling firm.
• Gallego also doubled his overall favorability with Republican voters, with 37% of GOP voters viewing him favorably. His net favorability is higher than that of Sen. Mark Kelly (D-Az.), according to the survey.

What they're saying

🛣 Construction is finished on the Arizona Department of Transportation's years-long Broadway Curve reconstruction project. (12 News)

🚫 Gov. Katie Hobbs vetoed a bill Monday that would've banned the Chinese government from owning land in Arizona, which supporters say is intended to protect military bases from spying. (Arizona Mirror)

• She signed legislation creating a study committee that could open the door to Arizona's Medicaid program providing coverage for obesity treatments. (KJZZ)

📰 The Fountain Hills Town Council retaliated against the Fountain Hills Times Independent newspaper for coverage it disliked by removing a reporters' desk in the meeting area. (AZcentral)

🌮 CRUjiente Tacos shut down over the weekend after temporarily delaying its closure. (KTAR)

⚾ The Arizona Diamondbacks placed pitcher Corbin Burnes on the 15-day injured list after he left Sunday's game due to elbow discomfort. (Arizona Sports)

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Nine Fortune 500 companies currently call Arizona home, one fewer than last year.

The big picture: Mining giant Freeport-McMoRan displaced Avnet as the top Arizona company on Fortune's annual list, rising from 178 to 169 this year, with nearly $25.5 billion in revenue.

• Electronics company Avnet dropped from 157 to 181, with nearly $24 billion in revenue, taking second place on the list among local companies.
• The two companies have traded places as Arizona's top spot multiple times on the Fortune 500 in recent years.

The other Arizona companies on the list are:

• Republic Services (No. 266)
• Reliance (309)
• Carvana (314)
• Insight Enterprises (447)
• Taylor Morrison Home (467)
• Sprouts Farmers Market (481)
• Microchip Technology (485)

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