AFCCA Legislative Updates – June 12, 2026

Provided by Capitol Consulting, LLC

AFCCA Updates

SB1668 (disposition; remains; authorization; legal decision making) Sponsored by Senator Shawnna Bolick clarifies in statute who has decision making authority over a decedent minor in very specific instances. This bill was voted out of the Senate with bipartisan support, and was signed by the Governor.

The Association has been working closely with the Department of Health Services to develop an outline for the policies and procedures manuals that each establishment will be required to adopt under the new rules. This outline is intended to ease the drafting process for members as the industry works toward full compliance. It is worth noting that while the current implementation date is set for July 4, that date falls on both a federal holiday and a Saturday, meaning the rules will effectively become enforceable the following Monday, July 6.

You can track the status of these bills on your live interactive tracking link found here –Skywolf AI– this link will automatically update as the bills move through the process. As always please do not hesitate to let me know if you would like to make any additions or removals from your bill tracking list.

Arizona Legislative Session Weekly Report – Week Twenty Two

The Senate Director Nomination Committee (DINO) also met this week to move three more nominees through the confirmation process. Office of Economic Opportunity Nominee Mary Foote did not appear for her hearing and members voted 3-2 against her advancement. Both the Department of Health Services Nominee Deborah Johnston and Department of Insurance and Financial Institutions Nominee Charles Bassett advanced to the Senate floor where we anticipate their successful confirmation before the legislature adjourns Sine Die.

The FY 2027 Budget Highlights  

The Arizona Legislature has officially passed the Fiscal Year 2027 state budget, establishing a $18.3 billion spending plan that resolves immediate fiscal year shortfalls and cuts state agency budgets to address shortfalls from conformity from H.R.1. 

Revenue Adjustments and Tax Conformity

The budget package updates individual and corporate income tax codes to match federal tax guidelines under H.R. 1. Key individual adjustments include coupling the state standard deduction with the federal standard deduction framework, establishing a $6,000 deduction for taxpayers aged 65 and older, and providing deductions for qualified tips (up to $25,000) and qualified overtime (up to $12,500 for single filers and $25,000 for married couples) from state income tax calculations.

The corporate tax structure implements 100% full expensing for eligible business property, full expensing for domestic research and development expenditures, and business interest deductions calculated under the federal framework. It also increases the small business immediate expense threshold to $2.5 million. Non-itemizers may now deduct up to $1,000 for single filers and $2,000 for married couples in charitable contributions, while itemized charitable deductions are subject to a 0.5% floor. Lawmakers opted to decouple from the federal $40,000 State and Local Tax (SALT) deduction expansion, keeping Arizona’s cap at $10,000. Additionally, lawmakers decoupled from the federal 100% special depreciation allowance for non-residential production property beginning in Tax Year 2026.

To help balance these new provisions from H.R.1, starting in FY 2027, the budget places a three-year moratorium on new data center tax incentives while maintaining all existing incentives. This is projected to generate $12 million in FY 2027, $19 million in FY 2028, and $26 million in FY 2029. The agreement also rolls back corporate credits for business hiring, the purchase of pollution control equipment, and the refundable portion of the Research and Development tax credit.

Lawmakers maintained a $19 million Transaction Privilege Tax (TPT) distribution for the Tucson Rio Nuevo project and continued funding for the Arizona Commerce Authority’s Compete Fund, rejecting early proposals from the majority budget plan that targeted nearly $100 million in cuts across both initiatives. Under a new provision within the taxation budget implementation framework, following the payment of operating expenses and debt service, 80% of the Rio Nuevo District state sales tax diversion program funding must be expended specifically on TPT-generating projects.

Absent from the final revenue agreement are several of the Governor’s proposed revenue provisions, including a levy on short-term rentals, new fees on sports betting, and an anticipated $760 million reimbursement from the federal government for border-related expenses. Lawmakers also incorporated the non-renewal of certain veterans funding lines from fiscal year 2026.

Housing Provisions

State housing programs and tenant relief networks received targeted appropriations within this budget package. Lawmakers approved a $3 million appropriation for civil legal aid for nonprofit organizations providing statewide general civil legal aid services.

The FY 2027 budget also modifies the existing order of priority for Housing Trust Fund awards during the first four months of the fiscal year, codifying a new top priority that directs state monies to match federally funded housing programs.

Health and Human Services

The agreement completely covers ongoing operational needs for health and welfare programs, adapting to caseload growth and new regulatory guidelines. The budget provides full ongoing funding for the Department of Economic Security’s Division of Developmental Disabilities (DDD) services, alongside additional supplemental appropriations to address formula shortfalls carried over from the prior fiscal year.

The framework also sets aside specific funding blocks for targeted health and community priorities:

The final budget package also codifies statutory compliance measures that increase the frequency of eligibility redeterminations for Medicaid (AHCCCS) participants to at least every six months for Medicaid expansion adults beginning January 1, 2027, alongside database cross-checks against state and federal files for food stamp recipients. 

Infrastructure, Capital Projects, and Water Defense

Large-scale infrastructure and municipal development programs received key limited expansions in this package. The Public Infrastructure Improvement Program expanded its cap by $50 million each year over three years and extended eligibility to include municipal wastewater projects, targeting incentives for cities to attract major manufacturing facilities. The budget also expanded the Cyber Ready Arizona eligibility criteria to include local wastewater facilities.

Additional  infrastructure and rural transportation appropriations include:

The final budget compromise implements a 2.5% across-the-board reduction to state agency operating budgets, an adjustment from initial 5% proposals. Key exemptions to these operational cuts were maintained for public safety and welfare operations. The budget also converts the one-time 4% correctional officer stipend into a permanent 4% annual salary increase.

This operational environment replaces last year’s strategy of using fund transfers to avoid direct agency reductions. In terms of agency organization, the budget continues the Civil Rights Division within the Attorney General’s Office while officially terminating the Civil Rights Advisory Board.