Arizona’s budget basics

According to the National Association of State Budget Officers (NASBO), Arizona’s total expenditures in fiscal year (FY) 2021 were $45.1 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2021 were $2.7 trillion, ranging from $4.7 billion in Wyoming to $512.8 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Arizona’s combined state and local direct general expenditures were $52.9 billion in FY 2019 (the most recent year census data were available), or $7,251 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $10,161.

Arizona’s largest spending areas per capita were public welfare ($2,181) and elementary and secondary education ($1,313). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Arizona’s combined state and local general revenues were $59.0 billion in FY 2019, or $8,094 per capita. National per capita general revenues were $10,563. Arizona uses all major state and local taxes. After federal transfers, Arizona’s largest sources of per capita revenue were general sales taxes ($1,639) and property taxes ($1,148).

Arizona’s politics

Governor Doug Ducey, a Republican, was elected in 2018 with 56 percent of the vote. The next gubernatorial election is in 2022.

Republicans control both the House of Representatives (31 Republicans to 29 Democrats) and Senate (16 Republicans to 13 Democrats). Control of the governor’s mansion and each house of the legislature gives Republicans a trifecta in Arizona. The entire legislature is up for election in 2022 because both representatives and senators serve two-year terms.

Arizona’s budget institutions, rules, and constraints

Arizona uses an annual budget. The legislature must pass a balanced budget, but it can carry a deficit into the following year. Arizona limits spending growth based on personal income growth with a binding rule that requires a legislative supermajority or a vote of the people to override it. A supermajority is similarly required for any legislation that increases taxes or revenues. Arizona also places limits on the total authorized debt the state can incur but not on debt service.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Arizona’s current budget

Governor Ducey released his FY 2023 budget proposal and gave his state of the state address in January 2022.

Arizona enacted its FY 2022 budget in June 2021. The enacted budget included $12.8 billion in general fund spending. According to the governor, Arizona also passed a large individual income tax cut—that reduced the state’s top tax rate from 8 percent to 4.5 percent, among other changes—in June 2021.

Under the American Rescue Plan, Arizona will receive $4.2 billion in direct state fiscal aid and $2.4 billion in local government aid from the federal government. As of January 2022, Arizona had spent part of its state ARP funds on refilling its unemployment insurance trust fund, K-12 education, workforce development, and broadband expansion.

According to NASBO, Arizona’s recent expenditure totals (general fund spending/total spending, including federal transfers) were:

• FY 2021: $11.5 billion/$45.1 billion

• FY 2020: $11.2 billion/$40.8 billion

• FY 2019: $10.7 billion/$38.7 billion

For more on Arizona’s budget, see

• the Arizona General Accounting Office,
• the Arizona Financial Transparency Portal,
• the Arizona Joint Legislative Budget Committee, and
• the Arizona State Legislature research briefs.

Arizona’s economic trends

Arizona’s per capita income (per the Bureau of Economic Analysis) was $54,301 in 2021, ranking 41st among the states. It was below both the national average of $63,444 and the Southwest regional average of $57,647. The state’s median household income (five-year estimate) was $61,529 in 2020, ranking 28th among the states and below the national average of $64,994. Arizona’s poverty rate was 14.1 percent in 2020 (five-year estimate), above the national rate of 12.8 percent.

Although Arizona’s averages tell a story about the entire state, Arizona is composed of diverse localities. For example, the city of Nogales’s median household income was $29,043, and its poverty rate was 28.2 percent; the city of Queen Creek’s median household income was $104,161, and its poverty rate was 5.2 percent.

Arizona’s unemployment rate historically tracks the national average, but in recent years it has been among the highest in the country. (See how COVID-19 is affecting state employment and earnings data.)

Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Arizona, the average unemployment rate in 2021 was 5 percent for white residents, 7.6 percent for Black residents, and 5.7 percent for Hispanic or Latino residents. (This is preliminary data. See the 2020 data for a more detailed breakdown of state unemployment rates by race and ethnicity.)