January 21, 2026

The Governor’s Proposed FY 2027 Budget – What you need to know

On Friday, January 16th, 2026, Governor Katie Hobbs released her proposed FY 2027 budget.  The Governor’s priorities align with Arizona voters’ values and Education Forward Arizona’s advocacy agenda, including ESA accountability, Proposition 123 renewal, K-12 investments and postsecondary education funding. The proposed budget makes some progress in stabilizing and strengthening parts of the education continuum with more to go across the board, especially in the postsecondary education and workforce training required to meet Arizona’s long-term workforce demands and the Achieve60AZ goal.

Education Forward Arizona continues to urge the Governor and the State Legislature to prioritize education and training to the state’s overall economic health and workforce opportunities. As our polling shows, Arizona voters want leaders to fund education and training across our state.  

Below is a summary of the proposed budget from early childhood to education after high school.

Proposed Early Childhood Education Investments

  • $44.8M ongoing funding for childcare to maintain the 40% quality reimbursement rate

Investments in quality early learning and childcare remain critical for families across the state and the economic health of Arizona as a whole. In the proposed FY 2027 budget, there is ongoing funding under the Bright Future Arizona Initiative to help support childcare affordability. These investments assist working families by helping to ensure children enter school ready to learn, laying the foundation for long-term academic success. Parents and caregivers can remain in the workforce knowing their children are in quality care, helping to support economic mobility for themselves, their families, and our state.  While this investment is a step in the right direction, the mix of federal funding uncertainty and decades of de-prioritization means many communities across the state still lack access to quality early learning, which is foundational for success.

Proposed K-12 Education Investments

  • $590.3M total investment in K-12 education
    • $2M for Foundational Literacy Coaching
    • $29M increase to Additional Assistance
    • $37M increase to the Free and Reduced-Price Lunch also called “Opportunity Weight”
    • $76.4M for other Caseload Adjustments
    • $174.1M for Inflation Adjustments
    • $271.3M Base Level increase tied to the renewal of Proposition 123
  • School Facilities Proposed Investments
    • $94.1M one-time funding to complete three new schools currently under construction
    • $40.1M one-time funding for year-one construction costs, land donation, and site condition projects

The proposed FY 2027 budget includes investments in K-12 education to improve opportunities for all students, address enrollment growth, and stabilize school funding. There is new funding proposed to help students increase literacy scores through literacy coaches in elementary classrooms, an essential component of Arizona Literacy Plan 2030. These investments are an important step toward improving student outcomes and if paired with stronger, permanent investments in postsecondary pathways, will help ensure students can successfully transition from high school into careers.

Proposition 123 Proposed Renewal

While the details of a potential renewal of Proposition 123 are still to be determined, the Governor’s budget proposes that Prop 123 return to the voter-approved 6.9% distribution level from the State Land Trust (in other words, a re-authorization of the previous proposal). Under this budget proposal, the following items would be funded, assuming a return to the funding percentage passed by voters in 2016, which expired on June 30th, 2025: 

  • $36.8M for School Facilities Building Renewal bond debt service
  • $271.3M Base Level increase
  • $72.3M added to Basic State Aid in baseline funding
  • $117.5M added to the Classroom Site Fund in baseline funding

Proposed Empowerment Scholarship Accounts (ESAs) Accountability Measures

In her proposed FY 2027 Arizona budget, Governor Katie Hobbs has continued her push to strengthen accountability and transparency for Arizona’s ESA program, which has grown rapidly in cost and scope in recent years while incurring multiple issues with waste, fraud, and abuse. Her plan includes:

  • Income base eligibility, limiting ESA eligibility for households earning more than $250,000 annually to help focus state resources on students with greater financial need and reduce overall program spending by approximately $89M.
  • Eliminating the practice of allowing ESAs to carry forward balances between years, closing a loophole that lets unused funds accumulate and potentially be spent on non-academic expenses later.
  • Programmatic reforms to enhance oversight and safety and to end luxury purchases with ESA dollars, tightening rules around allowable expenses and increasing monitoring to ensure taxpayer funds are used for legitimate educational purposes.

This aligns with Arizona voters’ concerns around how ESA taxpayer dollars are spent. 

Proposed Postsecondary Education & Workforce Training Investments

  • $1.5M renewal of last year’s one-time funding for dual enrollment, a proven strategy to accelerate credential attainment and reduce college costs
  • $9Mone-time funding for adult education, including high value credentials and certifications and assistance in earning a high school diploma
    • $6M to community colleges via Arizona Department of Education
    • $2M to the Office of Economic Opportunity
    • $1M to Arizona Department of Education
  • $4.9M one-time funding for the Arizona Promise Program (Funding from the Spouses of Military Veterans Scholarship Fund), in addition to $20M in baseline funding
  • $2.5M one-time funding for the Arizona Teachers Academy (Funding from the Spouses of Military Veterans Scholarship Fund), in addition to $15M in baseline funding
  • $830K one-time funding for the Arizona Community College Promise Program (Funding from the Spouses of Military Veterans Scholarship Fund)

The proposed budget includes targeted investments in postsecondary education, workforce training, and educator pipelines. Greater, sustained funding for community colleges, universities, adult education, and credential-aligned pathways is essential to close workforce gaps and increase attainment statewide.  The proposed budget decreases the funding for the Arizona Promise Program by a significant amount, which will impact the number of students able to pursue postsecondary education.  

Even with these potential investments, Arizona continues to lag behind other states in sustained funding for postsecondary education and training. Notably, where other states are making long-term investments that expand capacity, improve completion rates, and ensure that learners of all ages can access credentials aligned with workforce demand, Arizona is consistently utilizing one-time appropriations and redirected resources.

Education Forward Arizona urges lawmakers to build on this proposal by significantly increasing ongoing investments in postsecondary education and workforce training, including community colleges, universities, dual enrollment, adult education, and student success initiatives. If they do not, Arizona risks falling short of its workforce needs and limiting economic opportunity for students, families, and employers across the state. Arizona has Everything to Gain when individuals continue their education and training after high school.