As Arizona lawmakers prepare to convene for the 2026 legislative session, a leading nonpartisan think tank is warning of a demanding agenda driven by fiscal discipline, persistent housing shortages, and critical water policy decisions.
Katie Ratlief, Executive Director of the Common Sense Institute (CSI), emphasized the need for urgent action from the Legislature and Governor Katie Hobbs to address these issues. In a recent report by The Center Square, Ratlief highlighted that the session will require decisive leadership to tackle spending trends, affordability barriers, and the state’s long-term water security.
Arizona’s budget has expanded significantly over the past decade, rising from approximately $10 billion to nearly $18 billion, with $6 billion of that increase occurring in just the last five years. Ratlief urged policymakers to rein in spending increases and reassess recent commitments to determine whether they remain necessary, warning against expenditures outpacing economic growth.
Housing affordability remains a top concern for CSI Arizona, with the latest quarterly report underscoring ongoing challenges despite some cooling in the market. The average home price stands at $426,164—$53,400 more expensive than pre-pandemic trends—leaving households facing high costs amid elevated mortgage rates.
According to CSI Senior Economist and Research Analyst Zachary Milne, Arizonans now need to work more than 64 hours per month, at the average wage, just to afford a typical home payment, significantly up from the historical average of 45 hours.
Real-time estimates show an instantaneous housing shortfall of 52,846 units in Q2 2025, a 6.9% improvement from the revised 56,812 units in 2024. Arizona faces a cumulative housing deficit of 121,334 units, as of 2024, reflecting years of inadequate construction relative to population growth.
Ratlief believes the housing shortfall is not the result of state policy but of holdups originating within cities, noting that local governments control permitting, building codes, and enforcement—factors that can significantly slow housing development.
CSI revealed that most Arizona counties—including Maricopa, with a projected deficit of 34,737 units—are falling behind demand. Even with recent improvements in permitting, Maricopa County is still building thousands of units short of what is needed annually.
Water policy will also dominate discussions this legislative session, as ongoing negotiations over the Colorado River allocations approach a pivotal February 14, 2026, deadline set by the U.S. Department of the Interior.
This is viewed as likely the final opportunity for the seven basin states to reach a consensus agreement on sharing the river’s water before current operating guidelines expire at the end of the year. With Arizona’s unique constitutional requirement, any agreement reached will require legislative approval, setting the stage for intense debate in the 2026 session. Ratlief indicated that if states finalize a deal, the Legislature will debate and vote on authorizing the Department of Water Resources to sign on, potentially shaping Arizona’s water future for decades.
Ethan Faverino is a reporter for AZ Free News. You can send him news tips using this link.
The Kyrene School District (KSD) will be closing six schools over the next two years due to budgetary concerns from declining enrollment.
After months of deliberations, the KSD Governing Board voted unanimously to close four elementary schools and two middle schools.
The four elementary schools closing are Kyrene de la Colina, Kyrene de la Estrella, Kyrene de las Manitas, and Kyrene Traditional Academy. The two middle schools closing are Kyrene Akimel A-al and Kyrene del Pueblo.
Kyrene de la Colina, Kyrene de la Estrella, and Kyrene de las Manitas will close in the 2026-27 school year. Kyrene Traditional Academy, Kyrene del Pueblo, and Kyrene Akimel A-al will close in the 2027-28 school year.
This consolidation will result in the boundary modification of nine schools within the district: Kyrene de la Esperanza, Kyrene de las Lomas, Kyrene del Milenio, Kyrene de la Mirada, Kyrene de la Sierra, Kyrene Altadena, Kyrene Aprende, Kyrene Centennial, and Kyrene Middle School will experience boundary changes.
The governing board projected the six closures would save the district around $5.8 million annually, thereby avoiding most of a projected $6.7 million budget deficit.
Some parents who spoke against the school closures asked the governing board to reduce the number of closures to five instead of six. Overall, most who took to the podium recognized the need for a reduction in the number of schools in the district.
Superintendent Laura Toenjes promised the district would prioritize student needs during the upcoming transition.
“This is about caring for people through change and making sure students and staff are supported every step of the way,” said Toenjes.
KSD will provide families with information on enrollment pathways and school assignments, bell schedule updates, and transportation information in January prior to the enrollment portal opening in February.
Per the Common Sense Institute Arizona, KSD’s enrollment declined by nearly 20 percent over the past six years, but its budget increased by nearly 80 percent.
Kyrene’s enrollment is down 19 percent since 2019. Over the same period of time, their total budget has increased by 79 percent. Total capital expenditures have increased by 44 percent.
A data dashboard on all district enrollment, capacity, and budgets by the Common Sense Institute Arizona shows that over half the school districts in the state have declined in enrollment since 2019.
On average, their research found school districts haven’t grown since 2008. Apart from the declining student-age population, parents are choosing alternatives to traditional public schooling. Charter school enrollment nearly doubled during the pandemic, from 2020 to 2022; a majority of private schools researched had reported enrollment growth; and homeschooling increased from two percent to an 11 percent peak during the pandemic before falling back to a new high average between six and seven percent.
Despite this significant decline in traditional public school enrollment, Common Sense Institute Arizona found, further, that these schools reported a significant increase in spending: 80 percent since 2010.
Since January, at least eight other school districts have announced school closures and consolidations: Cave Creek Unified School District (two schools), Phoenix Elementary School District (two schools), Mesa Unified School District (staff layoffs), Isaac School District (two schools), Edkey, Inc. Sequoia Village School (one school), American Heritage Academy (one school), Roosevelt Elementary School District (five schools), Amphitheater School District (proposed four schools for closure).
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Arizona’s childcare system is in crisis, with the number of licensed providers plummeting nearly 50% since 2002, while costs have skyrocketed beyond the reach of many working families, according to a new report from the Common Sense Institute (CSI).
The state’s licensed childcare providers have fallen from 5,126 in 2002 to just 2,779 in 2024—a 46% decline that has driven up prices, lengthened waitlists, and left hundreds to thousands of Arizona children without access to formal care.
The report, Childcare in Arizona: An Economic Opportunity with Wide Implications, warns that without urgent policy action, the shortage will continue to push parents—predominantly mothers—out of the workforce and widen economic disparities across urban and rural communities.
Currently, Arizona ranks 6th in the country for infant care costs relative to median income. The state is behind California, Vermont, Washington, Washington, D.C., and Massachusetts.
Licensed facilities have dropped from 4,660 in 2010 to 2,687 in 2022 before a modest rebound to 2,779 in 2024, with closures accelerating to 9.2% annually between 2018 and 2022 due to COVID-era restrictions, labor shortages, and rising regulatory costs.
Arizona has only 256,267 licensed slots for 460,882 children under age 6. Rural counties like Santa Cruz barely have enough licensed capacity to support 1% of the infant population in the county.
“Even as demand remains high, the number of licensed providers has fallen sharply — limiting supply, driving up costs, and constraining labor force participation,” said Glenn Farley, Director of Policy and Research at CSI. “These pressures ripple through the broader economy, reducing productivity and household income. Based on our analysis, expanding access to affordable, quality care is not only good policy, but a necessary step for sustaining long-term economic growth in the state.”
The median daily cost of infant care now stands at $61.40, a 42.7% increase from $43.03 in 2018, requiring a minimum-wage worker to labor 72.8 hours per month just to afford one infant’s care.
Urban counties like Maricopa and Pima fare better than rural areas, yet shortages remain acute. In Maricopa County, infant slot coverage reaches 13%, and families need 37.6 hours at the average wage to afford care.
Childcare workers earn just $13.67 per hour—57 cents for every dollar the average Arizona worker makes, and per-capita employment in the sector has fallen from 1.5 to 0.8 workers per 1,000 residents since its peak.
CSI estimates that closing the childcare gap could bring 50,000 jobs into the workforce, boosting Arizona’s GDP by up to $17.5 billion and generating $188 million in new income tax revenue under a midpoint scenario.
“Costly, scarce childcare sidelines too many parents,” the report concludes. “Make it more available and affordable, and Arizona wins—more people working, higher incomes, and more state revenue.”
Ethan Faverino is a reporter for AZ Free News. You can send him news tips using this link.
A new report from the Common Sense Institute (CSI) Arizona examines the state’s management of its state trust lands, set aside in 1912. It makes the case that the lands represent a “$140 Billion Missed Opportunity.” CSI Arizona argues that the beneficiaries of the trust, primarily K-12 education, could benefit from developing the land, while potentially addressing Arizona’s growing demand for developable space.
In a release posted to X on Wednesday, the CSI wrote, “Arizona’s State Land Trust was supposed to be a generational funding engine for K–12 schools. But new research shows how much potential has been left on the table. CSI finds Arizona could have distributed up to $140 billion to K–12 students if trust land had been sold and reinvested more efficiently over the last century — compared to just $5.8 billion distributed to date.”
Arizona's $140 Billion Missed Opportunity
Arizona’s State Land Trust was supposed to be a generational funding engine for K–12 schools. But new research shows how much potential has been left on the table.
Arizona received about 10.96 million acres under The Arizona-New Mexico Enabling Act of 1910, with roughly 8 million acres dedicated to K-12 education—one of the largest such grants in the nation. As of 2024, the state retains approximately 84% of its original grant, compared to an average of 36% across other land-grant states. More than 80% of the remaining trust land is used for low-intensity purposes such as grazing or rights-of-way, generating an average annual return of $8.40 per acre for K-12 beneficiaries.
The report estimates that historical delays in selling and developing trust lands have cost beneficiaries approximately $134 billion in lost distributions over the past century. Had lands been sold early (1913–1923) and proceeds invested at market rates, the K-12 Permanent Land Endowment Trust Fund (PLETF) could be worth $163 billion today, compared to its current combined value (distributions plus assets) of approximately $19 billion.
The ASLD has grown the trust’s value from $811 million in 1995 to $8.7 billion today, with the PLETF reaching over $9 billion in 2024. However, only 80,000 acres statewide are under commercial lease, and since 1998, the department has sold 101,600 acres while initiating new commercial leases on just 588 acres.
The report identifies up to 3 million acres of trust land within a 10-mile radius of population centers and argues that even if a portion of this land were sold or leased strategically, Arizona could add more than 1 million new housing units over the next 20 years easing pressure on a market where prices have risen more than 40% since the pandemic.
Arizona is one of the fastest-growing states in the country, but more than 8 million acres of state trust land remain largely unused. Most of Arizona’s growth has occurred on less than one-fifth of the land in the entire state.
An econometric model using REMI TaxPI+ projects that an orderly sale of remaining trust lands over the next decade could generate $18.5 billion in direct revenue, $55 billion in new economic activity, and an additional $65 billion in distributions to public schools over 50 years, while reducing housing prices by approximately 10% over two decades.
Arizona remains one of the most land-constrained states in the country. Roughly 83% of all land within its borders is publicly owned, in the form of federal, tribal, or state trust land, leaving comparatively little privately held land for growth.
CSI argues that this structural constraint has pushed up development costs and slowed housing construction, even as the state’s population has more than doubled over the past 30 years.
The study concluded that modernizing ASLD’s statutory framework, improving development timelines, and exploring new leasing and disposition tools could unlock long-untapped value for taxpayers, schools, and communities.
Former Arizona Governor Doug Ducey sharply rebuked Gov. Katie Hobbs’ announcement of her 2026 reelection campaign, accusing her of fiscal mismanagement that turned a $2.5 billion surplus into a $1.4 billion deficit.
Hobbs launched her bid for a second term on Wednesday in a two-minute video posted to X, where she emphasized her administration’s focus on education, public safety, and housing affordability.
“Arizona is a place of hard work, hope and determination,” Hobbs said. “That’s why I’m running for reelection — to continue putting your family first.”
Ducey, a Republican who preceded Hobbs in office, responded hours later on X, quoting Hobbs’ video and writing: “This dishonesty isn’t surprising given the current struggles on the 9th floor. When I left office, I turned over a $2.5B SURPLUS to Katie Hobbs. She blew it all AND created that $1.4B deficit in only a year. AZ didn’t have a revenue problem, Hobbs had a spending problem.”
This dishonesty isn’t surprising given the current struggles on the 9th floor.
When I left office, I turned over a $2.5B SURPLUS to Katie Hobbs. She blew it all AND created that $1.4B deficit in only a year. AZ didn’t have a revenue problem, Hobbs had a spending problem. https://t.co/VXpovqDp2M
The exchange between the former and current governors highlights Arizona’s ongoing budget tensions. Hobbs inherited the surplus from Ducey in January 2023, but the state faced a projected $1.4 billion shortfall for fiscal year 2025. According to a report from the Common Sense Institute of Arizona (CSI), that shortfall was mainly driven by increased spending and not the state’s adoption of a flat income tax rate of 2.5% or the Empowerment Scholarship Account (ESA) program.
A new report from CSI sets the record straight on Arizona’s budget—and takes aim at the myths surrounding the 2.5% flat tax.
FICTION: The flat tax caused Arizona’s budget deficit. FACT: Since adopting the flat tax, Arizona’s General Fund revenues grew by $3.3 billion—but at its… pic.twitter.com/UvYV0tLsNX
— Common Sense Institute Arizona (@CSInstituteAZ) June 13, 2025
The GOP-led Arizona legislature approved a $16.1 billion budget in June 2024, following a major budget battle that addressed the deficit by incorporating spending cuts and one-time adjustments. Hobbs signed the measure, though Republican critics, including House Speaker Ben Toma, have described her fiscal approach as unsustainable.
Reactions to Ducey’s post were polarized. A few users defended Hobbs, claiming Ducey’s tax cuts and ESA expansions as root causes of the shortfall. Others echoed his criticisms. A few, urged Ducey to support GOP challengers in the 2026 gubernatorial race, like U.S. Rep. Andy Biggs. The vast majority offered critiques of the former Governor.
