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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
AMENDED
2025-2026; commerce
Purpose
Makes statutory and session law changes relating to commerce necessary to implement the FY 2026 state budget.
Background
The Arizona Constitution prohibits substantive law from being included in the general appropriations, capital outlay appropriations and supplemental appropriations bills. However, it is often necessary to make statutory and session law changes to effectuate the budget. Thus, separate bills called budget reconciliation bills (BRBs) are introduced to enact these provisions. Because BRBs contain substantive law changes, the Arizona Constitution provides that they become effective on the general effective date, unless an emergency clause is enacted.
S.B. 1738 contains the budget reconciliation provisions for changes relating to commerce.
Provisions
Office of Defense Innovation
1. Establishes the Office of Defense Innovation (Office) within the Arizona Commerce Authority.
2. Allows the Office to:
a) act as a liaison between Arizona, the U.S. Department of Defense and national security organizations, including federal and state agencies and law enforcement and industries that support the purposes of defense innovation in Arizona;
b) identify and pursue, as appropriate, opportunities to increase the amount of federal funding to foster the development of products, services and technologies that support the U.S. Department of Defense in Arizona;
c) support any ongoing U.S. Department of Defense industry development mission that is directed at Arizona;
d) support Arizona-based companies that seek federal defense contracts;
e) advance for Arizona's economic interests that are related to the U.S. Department of Defense's aerospace mission and defense sectors and industries;
f) develop and implement a reoccurring strategic plan to enhance Arizona's competitiveness in defense-related industries;
g) identify and support emerging technology, including commercialization support services to accelerate technology development;
h) collaborate with the Arizona Board of Regents and universities and research institutions that seek to increase the amount of defense research and development funding for applied research and advance prototyping of critical defense-related products and technologies;
i) support rapid technology transfer and transition capabilities;
j) collaborate to enhance workforce development that prepares innovators and intrapreneurs to support industries of the future; and
k) coordinate with the Governor and the Legislature on the Office's activities, achievements and recommendations.
3. Requires the Office, by December 31, 2026, and each year thereafter, to submit a report regarding its activities and recommendations to:
a) the Governor;
b) the President of the Senate;
c) the Speaker of the House of Representatives; and
d) the Secretary of State.
Microbusiness Loan Fund and Program
4. Continues the Microbusiness Loan Fund and Program (Fund and Program) for two years, retroactive to June 30, 2025, until July 1, 2027.
5. Repeals the Fund and Program and transfers all unexpended and unencumbered monies in the Fund to the state General Fund on July 1, 2027.
6. Requires the Office of Economic Security (OEO), by February 1, 2026, rather than February 1, 2024, to submit a report on the number of microfinance lenders in Arizona, the availability of microbusiness credit in Arizona and any recommendations for increasing the availability of credit to microbusinesses in Arizona to:
a) the Governor;
b) the President of the Senate;
c) the Speaker of the House of Representatives;
d) the Joint Legislative Budget Committee (JLBC);
e) the Governor's Office of Strategic Planning and Budgeting; and
f) the Secretary of State.
7. Requires the OEO, by July 31, 2026, rather than July 31, 2024, to submit a report to the Governor, the President of the Senate, the Speaker of the House of Representatives, JLBC and the Secretary of State that contains the following:
a) a list of the eligible entities that have received funding from the Program;
b) the number of microbusiness loans made by each eligible entity using monies from the Program and the type of business each loan recipient operates;
c) the average principal amount of microbusiness loans made by each eligible entity using monies from the Program;
d) the county and zip code of each eligible entity;
e) the county and zip code of the recipients of each loan made to an eligible entity with monies from the Program;
f) the current outstanding principal of microbusiness loans made by eligible entities using Program monies;
g) the total amount of loan losses for microbusiness loans made by eligible entities using Program monies;
h) the total amount of principal repaid to eligible entities for microbusiness loans; and
i) the total amount of interest earned and fees charged by eligible entities for microbusiness loans.
Miscellaneous
8. Becomes effective on the general effective date, with a retroactive provision as noted.
Amendments Adopted by Committee of the Whole
1. Removes the establishment of the Office of Defense Innovation.
2. Makes conforming changes.
Amendments Adopted by the House of Representatives
1. Reinserts the establishment of the Office of Defense Innovation.
2. Makes conforming changes.
Senate Action House Action
APPROP 6/17/25 DP 8-2-0 Rules 6/25/25 DP/C&P 8-0-0
3rd Read 6/19/25 17-13-0 3rd Read 6/26/25 40-16-4
Prepared by Senate Research
September 18, 2025
JT/ci