FY27 Budget Wins, Lost Opportunities, and Everything In Between
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 40th 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.
