Arizona approves bipartisan budget prioritizing local tax relief, data center moratorium
Arizona's Legislature approved an $18.29 billion bipartisan budget, which includes a historic three-year moratorium on new data center tax incentives. This measure, a response to community pressure over water and energy consumption, allows data center construction but bars new facilities from lucrative state sales tax exemptions. The budget, now awaiting Gov. Katie Hobbs' signature, also provides tax relief for working families and invests in social programs.
The Arizona Legislature has approved an $18.29 billion bipartisan budget for the upcoming fiscal year, averting a government shutdown before the July 1 deadline. This agreement follows weeks of intense negotiations and a previous veto by Gov. Katie Hobbs on a Republican-backed proposal, which she deemed "unbalanced and reckless" for prioritizing corporate tax adjustments over essential community services.
A key provision of the newly approved budget is a historic three-year moratorium on new data center tax incentives. Described by the Arizona Senate Democratic Caucus as the "largest pause on tech-industry incentives anywhere in the nation," this measure permits the construction of new data facilities but prohibits them from qualifying for the state's sales tax exemptions during the three-year period. This compromise emerged from sustained pressure by community organizations like Living United for Change in Arizona (LUCHA), which raised concerns about the massive water and energy consumption of major tech facilities. Lawmakers estimate the suspension will preserve approximately $38 million annually in state revenue.
Gov. Katie Hobbs emphasized that the moratorium is a crucial step towards long-term resource management and protecting household expenses, stating it will help "develop a responsible path forward that protects our water future and lowers utility bills for Arizona families." Alejandra Gomez, executive director of LUCHA, applauded the deal, highlighting it as a victory against corporate welfare for billion-dollar data centers. In addition to the data center moratorium, the budget includes a $1.4 billion tax cut for working-class families, investments in job creation, education, water security, and the preservation of critical social safety net programs like healthcare coverage and SNAP benefits.
Senate Democratic Leader Priya Sundareshan noted that while the budget is not perfect, it is "undeniably stronger because Democrats refused to accept a partisan proposal that put corporations ahead of working families." The plan also allocates funding for childcare assistance, preserves the state’s Housing Trust Fund, provides support for Indigenous elders and tribal veterans, and injects $37 million into public K-12 education through Opportunity Weight funding.