Arizona’s budget basics

According to the National Association of State Budget Officers (NASBO), Arizona’s total expenditures in fiscal year (FY) 2022 were $80.5 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2022 were $2.9 trillion, ranging from $5.6 billion in Wyoming to $510.0 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 $58.6 billion in FY 2020 (the most recent year census data were available), or $8,157 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 $10,540.

(Note: We cite data from both NASBO and Census to provide a broader picture of each state’s fiscal situation. However, these sources detail spending from different levels of government in different years, and the COVID-19 pandemic and the federal government’s response to it significantly affected these totals in different ways in different years. Please only use one source if you are looking for historical comparisons.)

Arizona’s largest spending areas per capita were public welfare ($2,410) and elementary and secondary education ($1,347). 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 $63.1 billion in FY 2020, or $8,788 per capita. National per capita general revenues were $10,933. Arizona uses all major state and local taxes. After federal transfers, Arizona’s largest sources of per capita revenue were general sales taxes ($1,742) and property taxes ($1,206).

Arizona’s politics

Governor Katie Hobbs, a Democrat, was elected in 2022 with 50 percent of the vote. The next gubernatorial election is in 2026.

Arizona has a divided government. Republicans control both the House of Representatives (31 Republicans to 29 Democrats) and Senate (16 Republicans to 14 Democrats). The entire legislature is up for election in 2024 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 Hobbs released her FY 2024 budget proposal and gave her state of the state address in January 2023.

Arizona enacted its FY 2023 budget in June 2022. The enacted budget included $15.8 billion in general fund spending. In July 2021, under the previous governor, Doug Ducey, Arizona passed a large individual income tax cut that reduced the state’s top tax rate from 8 percent to 2.5 percent, among other changes.

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 2022: $12.7 billion/$80.5 billion
• FY 2021: $11.7 billion/$66.8 billion
• FY 2020: $15.4 billion/$71.8 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 $56,667 in 2022, ranking 39th among the states. It was below both the national average of $65,423 and the Southwest regional average of $57,647. The state’s median household income (five-year estimate) was $65,913 in 2021, ranking 26th among the states and below the national average of $69,021. Arizona’s poverty rate was 13.5 percent in 2021 (five-year estimate), above the national rate of 12.6 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 $31,997, and its poverty rate was 29.8 percent; the city of Queen Creek’s median household income was $111,743, and its poverty rate was 4.5 percent.

Arizona’s unemployment rate historically tracks the national average, but in recent years it has been among the highest in the country.

Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Arizona, the average unemployment rate in 2022 was 3.9 percent for white residents, 4.3 percent for Black residents, and 4.5 percent for Hispanic or Latino residents.