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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
AMENDED
higher education; 2025-2026
Purpose
Makes statutory and session law changes relating to higher education 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. 1742 contains the budget reconciliation provisions for changes relating to higher education.
Provisions
Tuition Scholarship Fund Money Requirements (Retroactive to July 1, 2025)
1. Requires, on notice from the Arizona Board of Regents (ABOR), the State Treasurer (Treasurer) to invest and divest monies in the Arizona Veterinary Loan Assistance Fund and credit monies earned from investment to the Arizona Veterinary Loan Assistance Fund.
2. Requires, on notice from ABOR, the Treasurer to invest and divest monies in the Spouses of Military Veterans Tuition Scholarship Fund and credit monies earned from investment to the Spouses of Military Veterans Tuition Scholarship Fund.
3. Requires, by June 30 of each year, ABOR to deposit any unexpended and unencumbered monies remaining in the Spouses of Military Veterans Tuition Scholarship Fund as follows:
a) 30 percent in the Arizona Teachers Academy Fund;
b) 60 percent in the Arizona Promise Program Fund; and
c) 10 percent in the Arizona Community Colleges Promise Program Fund.
4. Specifies that ABOR must deposit the Spouses of Military Veterans Tuition Scholarship Fund monies as prescribed only after scholarships are awarded and surplus monies are distributed for tuition waiver scholarships for qualifying children and spouses of deceased veterans or members of the U.S. Armed Forces, peace officers or firefighters who died by suicide.
Spouses and Dependents of Law Enforcement Officers Tuition Scholarship Fund Modifications
5. Delays, from July 1, 2025, to July 1, 2027, the repeal of the Spouses and Dependents of Law Enforcement Officers Tuition Scholarship Fund.
6. Adds, to the eligibility requirements to qualify for a Spouses and Dependents of Law Enforcement Officers Tuition Scholarship, requirements that an individual:
a) be an Arizona resident when the individual both applies for and receives a tuition scholarship; and
b) be physically present in Arizona during each semester for which the individual receives a tuition scholarship, if the individual is enrolled in a public university.
7. Redefines law enforcement officer as an individual who is an Arizona resident and is currently employed as an Arizona peace officer or correctional officer.
ABOR Lease-to-Own and Bond Transactions
8. Raises, from $800,000,000 to $1,125,000,000, the maximum amount in lease-to-own and bond transactions that ABOR may enter into.
9. Stipulates that, of the $1,125,000,000 in lease-to-own and bond agreements authorized, ABOR must allocate $325,000,000 as follows:
a) beginning in FY 2026, $162,000,000 to Arizona State University (ASU), Northern Arizona University (NAU) and the University of Arizona (UA); and
b) beginning in FY 2027, $162,000,000 to ASU, NAU and UA.
10. Specifies that ABOR must allocate at least 25 percent but not more than 45 percent of the outlined monies in FYs 2026 and 2027 to each public university for authorized lease-to-own and bond agreements.
11. Requires ABOR to submit the scope, purpose and estimated cost of each new project that will be financed by lease-to-own and bonds transactions to the Joint Committee on Capital Review (JCCR).
12. Prohibits ABOR from distributing lease-to-own and bond transaction monies for a project until the JCCR approves the project by a majority vote of a quorum of members.
13. Requires the JCCR to hear and approve or disapprove a submitted project before the JCCR's second meeting after the project is submitted to the JCCR.
14. Defines financed as funded, in whole or in part, by payments pursuant to lease-to-own agreements or proceeds of one or more bond agreements entered into by ABOR.
Miscellaneous
15. Requires, by November 1, 2025, and each year after, ABOR to submit to the Joint Legislative Budget Committee (JLBC) for review:
a) the amount of monies that ABOR retained from each public university to supplement ABOR's operating budget;
b) ABOR's current fiscal year expenditure plan for the monies that ABOR retained from each public university; and
c) an accounting of how ABOR spent the monies retained from each public university in the immediately preceding fiscal year.
16. Continues, for FY 2026, to allow the required state match to be less than two dollars for each dollar raised by the surcharge on student registration fees pursuant to the Arizona Financial Aid Trust Fund.
17. Specifies that operating state aid for community college districts (CCDs) in FY 2026 is as prescribed in the FY 2026 General Appropriations Act.
18. Specifies that state aid for CCD science, technology, engineering and mathematics and workforce development programs in FY 2026 is as prescribed in the FY 2026 General Appropriations Act.
19. Makes technical and conforming changes.
20. Becomes effective on the general effective date, with retroactive provisions as noted.
Amendments Adopted by Committee of the Whole
1. Requires ABOR to submit specified information relating to retained public university monies to JLBC for review by November 1, 2025, and each year after.
2. Replaces the requirement for ABOR to allocate specified amounts to ASU, NAU and UA for authorized lease-to-own and bond agreements in FYs 2027 and 2028 with a requirement to allocate $162,000,000 to ASU, NAU and UA in FYs 2026 and 2027 for such purposes.
3. Specifies that ABOR must allocate between 25 and 45 percent of the outlined monies to each public university for authorized lease-to-own and bond transactions in FYs 2026 and 2027.
4. Clarifies that ABOR must deposit Spouses of Military Veterans Tuition Scholarship Fund monies as outlined only after scholarships are awarded and surplus monies are distributed for prescribed purposes.
5. Adds eligibility requirements relating to residency for an individual to qualify for a Spouses and Dependents of Law Enforcement Officers Tuition Scholarship.
6. Redefines law enforcement officer for the purposes of a Spouses and Dependents of Law Enforcement Officers Tuition Scholarship.
7. Makes technical and conforming changes.
Senate Action
APPROP 6/17/25 DP 9-1-0
Prepared by Senate Research
June 19, 2025
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