Every child matters. At Children's Action Alliance, that belief guides our work every day and remains at the center of our advocacy during Arizona's budget process. With the FY27 state budget now complete, we must first acknowledge that more investments in children and families are needed. However, Children's Action Alliance is encouraged to see investments that support Arizona's children and families at a time when federal policy decisions are shifting significant costs onto states and creating new challenges to access health care, nutrition assistance, and other basic supports.

The final budget includes some key investments and preserves vital critical services, but it also falls short of meeting the scale of the challenges facing children across our state. Too many opportunities to strengthen child care, early learning, education, kinship families, and economic security were left on the table.

Extended Foster Care Funding was Increased, but Kinship Families Were Overlooked

Win: The FY27 budget continues and expands support for extended foster care coaching at $8.2M, which helps young people transitioning out of foster care navigate adulthood, access services, pursue education and employment opportunities, and build long-term stability.

Lost Opportunities: The budget did not include an increase to the Kinship Care Stipend, missing an opportunity to better support grandparents and other relatives who step in to care for children during difficult circumstances, even as they face significant financial challenges while providing stable homes for children. The budget also failed to restore federally funded Temporary Assistance for Needy Families (TANF) cash assistance for kinship caregivers, limiting support for relatives caring for children outside the formal foster care system.

Looking Forward: Children's Action Alliance will continue advocating for policies that strengthen kinship families. Increasing the Kinship Care Stipend and restoring TANF assistance for kinship caregivers are both proactive, cost effective, and remain critical priorities for ensuring relatives have resources to care for children and prevent unnecessary placement in congregate care. These investments support better outcomes for children.

K-12 Education Received Wins, but Early Gaps Are Creating Lasting Impacts

Wins: K-12 Education: There was important investment in K-12 education by funding the School District Additional Assistance and Opportunity Weight funding for the third year in a row. The $37M and $29M appropriations provide targeted support to students to help address longstanding resource gaps. Continued funding for two years foruniversal school meals is also appreciated at a time when we have seen that almost 200,000 children have lost access to nutrition benefits in the last several months.

Affordable Child Care: For the second year in a row, the budget invests almost $45M for child care assistance. While this allocation of state funds is one of the highest state investments in affordable child care in more than 15 years, families are struggling with the affordability crisis and the waitlist for assistance has grown to 13,000 children. CAA and our partners advocated for $160 million in child care assistance to eliminate Arizona's growing child care waitlist, and it is a disappointment to miss out on the opportunity to help children, families, and our economy thrive through affordable child care.

Lost Opportunities: Children’s Action Alliance is disheartened to see no investment for early literacy coaching to help more children reach reading proficiency by fourth grade. Investments that provide targeted support for teachers and students are proven strategies for improving educational outcomes. The evidence is clear that literacy coaches help strengthen classroom instruction and have been associated with improved reading proficiency rates in schools and states across the country.

A clean renewal of Proposition 123 remains essential to maintaining stable funding for Arizona's K-12 schools. With Proposition 123 expired and not renewed for a second year in a row, Arizona is required to backfill the amount that was originally generated from the state land trust to public schools. We must keep working to renew Prop 123.

Looking Forward: Arizona's future depends on the well-being of its youngest children. Early investments in child care, early learning, and literacy improve long-term outcomes for children, families, and Arizona's economy.

This year, Arizona missed key chances to move these priorities forward. HB2239, which would have expanded child care and early learning infrastructure in rural and underserved communities, stalled in the Senate after passing the House. Yet families cannot fully participate in the workforce when quality child care is unavailable, and children need strong early learning opportunities to enter kindergarten ready to succeed.

Beyond child care accessibility and affordability, the state should strengthen funding for early childhood, like Arizona’s early childhood agency First Things First, whose tobacco-tax revenue has declined over time, limiting services for children and families. Closing the loophole on taxing vape and nicotine products through HB4032 would help restore funding for critical early childhood programs.

Protecting Health Care and Nutrition Assistance

Wins: The FY 27 budget supports the health of Arizonans by fully funding caseload growth, including for individuals with developmental disabilities, and protecting against across-the-board agency cuts in health and human service agencies such as AHCCCS, DES, and DHS. It also provides funding needed to implement the disastrous federal bill H.R. 1 (formally known as the One Big Beautiful Bill) which forces significant cost shifts to states and makes it harder to access Medicaid and nutrition assistance benefits. State funding is critical to allowing eligible Arizonans continued access to health and food assistance programs as state agencies work to implement costly, federally required administrative hurdles.

This budget also provides important continued investments in the 9-8-8 Suicide & Crisis Line ($4M) and the AZ Psychiatry Access Lines which provides behavioral health support for perinatal, postpartum, and pediatric patients. It also continues investment in programs supporting rural health care such as Critical Access Hospitals ($4.3M).

Lost Opportunities: The FY27 budget fails to invest in needed medical services in maternal and oral health, such as lactation consultation services and comprehensive adult dental. It is also concerning that the 2-1-1 line is not funded, which helps to connect Arizonans with needed services such as health care, housing, food assistance, and other social services.

Looking Forward: For more than a year now, Children’s Action Alliance has brought attention to the harm of H.R. 1, and we now see this with children all across Arizona at risk of not having enough to eat. The cuts and red tape get worse in future years. While this budget provides the requested funding, it is still imperative that Arizona’s agencies work hard to minimize the harm to Arizonans who are eligible for benefits. Funding for staffing, technology, and enrollment support can help ensure eligible children and families do not lose health coverage or food assistance because of administrative barriers. In taking on a difficult task, DES has failed to mitigate the harms of H.R. 1 implementation, leaving 400,000 fewer Arizonans – many of whom are still eligible – without access to SNAP benefits, including 180,000 children. State agencies must do better, and Children’s Action Alliance will be monitoring how agencies utilize the technology and staffing resources provided in this budget.  Since day one, it was clear that the federal passage of H.R. 1 would bring pain to Arizonans, and it is now up to state leaders to work with urgency to restore SNAP benefits for those who are eligible and prevent a similar problem with health coverage when AHCCCS provisions go into effect in early 2027.

Investing in Arizona's Future Means Investing in Children and Families

Facing financial uncertainties and significant cost shifts caused by Congress, Arizona’s FY27 bipartisan budget has wins and lost opportunities. It provides funding needed for caseload and enrollment growth in education and health and human services programs – but fails to meet the need for child care assistance. It provides the funding needed to implement H.R.1 but still risks Arizonans losing access to health and food assistance benefits they are eligible to receive. It provides funding for some K-12 programs but fails to renew Pro 123 or to invest adequately in literacy and early childhood programs. This budget increases funding to support foster youth as they age out but fails to invest in kinship families to improve the outcomes and placement while in the state’s care.  

Just this week, the 2026 KIDS COUNT Data Book was released and ranked Arizona 40^th in the nation for overall child well-being. It makes clear that too many Arizona children continue to face barriers to economic security, educational success, and healthy development. Arizona's ranking underscores that investments in children are not optional – they are essential to the state's future. While these challenges will not be solved in a single budget cycle, every investment in children's health, education, and economic security brings Arizona closer to becoming a state where every child can thrive.

Every child matters – Children’s Action Alliance stands for this truth. As the legislature and Governor negotiate a state budget, we ask that policymakers remain committed to the children of this state and investments that support them.

The FY27 budget will be difficult to navigate, especially considering the harmful impact of H.R. 1, formally titled the One Big Beautiful Bill. This federal legislation institutes unprecedented cost shifts to states. Just one example of the harm that comes with H.R. 1 is the loss of benefits for many Arizonans who need food assistance. We urge investments to fix this and to avoid similar losses of health care through AHCCCS.  

We recognize that developing the budget is a complex process that requires balancing competing priorities within available resources. Lower state revenue estimates were announced just last week, signaling growing budget constraints that will make it harder to address funding needs. Tough decisions will be made, but – especially in the face of rising costs – they should not leave Arizona’s children and families behind.

We call for support of the following budget requests that prioritize investments for children and families:

Child Welfare

Increase Kinship Stipend, $2.2 million

• Allows more grandparents and other kin to serve as caregivers for children in difficult times, and to reduce placement of children in congregate care

Restore TANF federally funded cash assistance for kinship caregivers, Federal funds only with no budget impact

• Deploys federal funding for children to financially support grandparents and other kin who are stepping up as caregivers in urgent circumstances
• Supports families caring for children outside of DCS under the authority of a court order

Early Learning and Education

Child Care Assistance, $160 million

• Provide quality, safe child care and promote economic mobility for families
• Emphasize reducing the waitlist

Universal School Meals, $3.8 million

• Improve student health, academic performance, and overall well-being, while reducing food insecurity for children

Foundational Literacy Coaching, $2 million

• Provide support and improve reading proficiency by 4^th grade

Proposition 123

• Fund K-12 schools with a clean renewal of funding distributions from the State Land Trust
• Maintain flexibility for school districts while strengthening funding for K-12 schools

School District Additional Assistance, $29 million

• Provide targeted resources for students in low-income families to address resource gaps and promote positive student outcomes

Opportunity Weight Funding, $37 million

• Provide targeted resources for students in low-income families to promote positive student outcomes

AHCCCS/Medicaid & SNAP – Implementation of H.R.1

AHCCCS Implementation of H.R. 1, $14.4 million

• Provide needed FTE’s and technology to meet new federal requirements and mitigate the loss of benefits to eligible Arizonans due to H.R. 1 administrative hurdles

Navigation Assistance of AHCCCS Requirements, $3.2 million

• Help eligible Arizonans access and maintain Medicaid/AHCCCS expert assistance with enrollment

DES Implementation of H.R. 1, $16.6 million

• Enhance staffing to meet administrative demands of H.R. 1 so that eligible children and families are not denied critical hunger prevention benefits

As we urge these funding priorities, we recognize that Arizona increasingly lacks revenue because of tax policy choices made by state policymakers. Now, our state has to wrestle with even more tax cuts due to H.R.1 in exchange for massive cost shifts to states and loss of health care and basic needs assistance to hundreds of thousands of Arizonans.

Arizona’s children and families should not pay for the unwise decisions of policymakers at the state and federal level. These priorities matter to children, families, and the future of Arizona.  

Please weigh in with your legislators and let them know what budget priorities matter most to you.

On January 13, 2025, a new Arizona legislature will be sworn in and begin forming the 2026 state budget. Today’s budget outlook is significantly different from what legislators faced last January. Then, the state faced an $835 million deficit for the budget year that was already halfway over, with an additional $879 million deficit for the 2025 budget year. The Finance Advisory Committee recommended legislators identify $2.2 billion in solutions to re-balance the budget. In contrast, reports are already surfacing that today the state has a budget surplus for Fiscal Year 2026: the beginning balance was $324 million above what was originally expected, and, through the end of October, revenues are $235 million above what was anticipated in the budget.

Does this mean that the legislature has more than half a billion dollars to spend? Not exactly. There are key realities that advocates and legislators need to keep in mind when looking at budget priorities.

Current budget projections exclude spending that will eventually be added back in. State law requires the legislature to not only adopt a balanced budget for the upcoming year but to also estimate revenues and expenditures for the two years that follow. Arizona’s legislature has traditionally treated some spending that should be funded every year as one time – these “ongoing one-time issues” are funded in the budget being adopted but are not included in out-year projections. The largest of these funds that are vital on an ongoing basis are the K-12 building renewal grants and the state employee health insurance trust fund, totaling more than $323 million. Had just these two issues been treated as ongoing in the forecast, the three-year budget would not have been balanced.

Some of the steps taken to balance last year’s budget will be reversed at a cost to the General Fund in the future. Most of these reversals will not occur in the 2026 budget, but they will impact future spending. These include:

• $37 million for the K-12 poverty weight and $29 million for K-12 additional assistance, both of which were recategorized as one-time in the current budget but with the intent that they be returned to ongoing in budget year 2028. These funds invest in additional supports and resources so all students can thrive and be successful in school and their future.
• $200 million to reverse the temporary use of other funds in the Department of Juvenile Corrections, the Department of Corrections, and AHCCCS.
• $2.9 million to replace the temporarily increased deposits into the General Fund from the regulatory boards. Many Arizona regulatory boards, such as the medical board and board of psychology examiners, deposit 10 percent of their revenues into the state’s General Fund and retain the remaining 90 percent for their operations. The legislature changed the distribution to the General Fund to 15 percent through budget year 2028, bringing an additional $2.9 million a year into the General Fund.

Some priorities that were unfunded or underfunded should be revisited. These include:

• Child care assistance for families who can’t afford to work without affordable care. While the current budget included $12 million in increased funding, it was not enough to avoid the creation of a waiting list for low-income families in August 2024. Child care assistance not only helps families pay for quality child care but also helps employers by reducing the absences parents might have when other options fail. In the 2024 legislative session, $100 million in funding was sought to avoid placing families on a waiting list.
• Financial support for informal kinship families. When children cannot live with their own parent(s), a grandparent or other relative is often the next best place for them. Children who are taken into Department of Child Safety custody and are placed with relatives through the court system are eligible for assistance of $204 a month for the first child and $71 for each additional child. Informal kinship families where the grandparent or other relative took the child in without the Department of Child Safety being involved also used to receive assistance – called “child only” payments – however, that part of the program was eliminated during the Great Recession and never restored. In these times of rising costs, restoration of this support for grandparents and kin is more important than ever.
• Teachers Academy to grow new teachers. The teachers academy has provided more than 1,000 teachers a year since 2021. This program provides free tuition for students who agree to teach in an Arizona public school. For budget year 2025, funding was cut from $30 million to $16 million.
• Promise Scholarships to make college affordable for eligible students with financial need. This program provides financial aid to Arizona high school graduates who meet the eligibility requirements for Pell Grants, making in-state higher education accessible for students who might not otherwise be able to afford it. The funding was cut from $40 million to $20 million. In addition, although the budget bills established a community college promise fund, no monies were appropriated for that fund.
• Community college pathways for learning and job skill development. The budget continues to suspend the operating budget funding formula for Maricopa and Pima community colleges, and it suspends inflationary adjustments for STEM and workforce programs for all community colleges.

What caused last year’s budget problems? While the solutions to resolve last year’s budget problems were primarily spending cuts, the problem was caused by revenues that fell short of projections. This was not due to a softening of the state’s economy. Instead, while Arizona’s economy was strong, revenues failed to reach needed levels due to the final phase-in of the flat income tax, which reduced state revenues by more than $2 billion.

Bottom Line. While on the surface, Arizona’s budget picture appears much rosier than it did a year ago, there are critical ongoing expenditures masked as “one-time” investments as well as reversals of temporary shifts that must be taken into account for a true understanding of Arizona’s fiscal standing. Legislators and advocates need to remember that the steps taken to balance the budget, whether by changes in terminology or actual cuts, will have impacts several years into the future.