Arizona Governor Signs Budget Enacting Three-Year Data Center Tax Incentive Moratorium
Arizona Governor Katie Hobbs signed an $18.3 billion bipartisan budget, which notably includes a three-year moratorium on new tax incentives for data centers. This decision aims to save the state $57 million and promote sustainable data center growth. The budget also features significant tax cuts and addresses education funding.
Arizona Governor Katie Hobbs has signed an $18.3 billion bipartisan budget package, concluding the 2026 legislative session. The budget includes $1.4 billion in tax cuts, a 2.5% reduction in agency budgets, and a key provision for the data center industry: a three-year moratorium on new data center tax incentives.
Governor Hobbs stated that this moratorium is a "responsible balance" between continued data center growth and community concerns, projecting $57 million in state savings. She emphasized the need for sustainable growth, noting Arizona's position as a top market for data centers. The budget also aligns state tax code with federal cuts from President Donald Trump's "One Big Beautiful Bill Act," a win for Republicans.
Despite the bipartisan agreement, the budget faced contention, particularly regarding education funding. Hobbs was unable to secure a renewal of Proposition 123, a significant education funding measure, which she had pushed for, even instituting a bill moratorium in April to force negotiations. Instead, the budget backfills approximately $300 million from the state’s general fund for public schools. Other provisions include enhanced eligibility checks for Medicaid and SNAP, and a 4% stipend for correctional officers.