Legislative Update June 30th

Governor Katie Hobbs signed the bipartisan $17.6 billion state budget on Friday, June 27.

Timeline of events:

• House passage: The Arizona House passed the budget late Thursday, June 26th by a bipartisan vote of approximately 41–15
• Senate agreement & final vote: The Senate had approved a version earlier; after the House adopted minor amendments, the Senate finalized approval of the amended budget around midday Friday, June 27th.
• Governor’s signature: Hobbs signed the budget package on Friday evening, cementing the deal and averting a potential state government shutdown.

This marks the culmination of a tense budget cycle where initial Republican-led House proposals were vetoed by Governor Hobbs before a middle-ground, bipartisan negotiation was reached with the Senate and with minor tweaks from the House. Absent the Governor calling a special session, the Arizona legislature will be adjourned until early 2026.

Impact on Transportation Funding

• Total transportation investment: Over $100 million for roads and highways via general infrastructure allocations.
• Some specific projects funded:
  • $27 million to begin widening I‑10 between Citrus Road and SR 85
  • $54 million allocated to finish work on SR 347
  • Additional funding for State Route 30 land acquisition and planning—supported by a Prop 479 sales-tax extension approved in Nov 2024, with construction starting 2027.
• Revenue mechanisms (unchanged but reaffirmed): funding relies on HURF and federal programs (STP, NHPP, HSIP)
• Unfortunately, there is no mention in the FY 2026 budget summaries (the House/Senate budget bills or JLBC summaries) of any new General Fund or Other Fund allocation to replenish or enhance the SMART Fund. Without the additional funding, the SMART Fund will likely run out of the remaining balance within about six months.
• There is no significant negative impact on ADOT’s overall agency budget in the FY 2026 (2025–26) Arizona state budget. But, unrelated to the budget but an impact nevertheless, there is a bit of a change in ADOT governance through Senate Bill 1750. SB 1750 institutes new transparency — ADOT must hold public meetings on grant applications and share info with legislative transportation committee chairs.

Year-over-Year Comparison

• 2024 budget earmarked about $94 million for “major highway infrastructure”—the 2025 plan boosts this to $100 million and adds specific project funding
• New targeted allocations represent a shift from broad grants to more defined, shovel-ready road projects.

Potential Construction Industry Implications

1. Highway & Road Jobs
   • The SR 347 and I‑10 widening projects are poised to create bidding opportunities in roadwork, earthmoving, and surfacing—expected over the next 2–4 years.
   • Early SR 30 segments will enter ROW and planning phases in the coming year, laying groundwork for major construction by late 2020s.
2. Procurement Transparency
   • ADOT’s new grant meeting requirements may change solicitation timelines and stakeholder engagement, requiring earlier prep from contractors and engineers.
3. Stable Regulatory Environment
   • ROC’s budget safeguard ensures continued stability for contractor licensing and compliance—minimizing administrative uncertainty.
4. Environmental Compliance
   • ADEQ’s steady funding is a signal of continued enforcement—businesses should plan for standard permit cycles and emissions controls. Although a committee vote was held on the Director position, the nominee was not voted on by the full Senate. The nominee is able to continue to serve in her leadership capacity until early 2026 so there should not be any significant change or lapse in leadership stability.

The budget package will now return to the Arizona Senate for concurrence with the House’s minor amendments and, after final Senate Approval, the budget will be sent to Governor Katie Hobbs who is expected to sign it before the June 30th deadline to avoid a state government shutdown.

Assuming the budget is signed into law, this budget solidifies an increase in infrastructure investments via ADOT which is a win for the state and AZAGC members especially given the gloomy picture of revenue projections throughout the first of the year.