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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
VETOED
capital outlay; appropriations; 2025-2026
Purpose
Makes session law changes relating to capital outlay 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.
H.B. 2949 contains the budget reconciliation provisions for changes relating to capital outlay.
Provisions
Building Renewal
1. Appropriates the following amounts in FY 2026 to the following state agencies from the specified funds for major maintenance and repair activities for state buildings:
|
Agency |
Fund Source |
Amount |
% of Formula |
|
Arizona Department of Administration (ADOA) |
Capital Outlay Stabilization Fund (COSF) |
$19,000,000 |
100% |
|
Arizona Department of Corrections, Rehabilitation and Reentry (ADCRR) |
ADCRR Building Renewal Fund |
$5,864,300 |
100% |
|
Arizona Department of Transportation (ADOT) |
State Highway Fund (SHF) |
$22,990,400 |
98.25% |
|
State Aviation Fund |
$394,900 |
1.75% |
|
|
Arizona Game and Fish Department (AZGFD) |
AZGFD Fund |
$1,815,700 |
100% |
|
Arizona State Lottery Commission |
State Lottery Fund |
$218,200 |
100% |
2. Requires ADOA to allocate appropriated monies to state agencies for necessary building renewal.
3. Reduces the ADOA appropriation for building renewal by the difference between the appropriated monies and the balance in the COSF, if monies in the COSF are insufficient to fund the $19,000,000 appropriation.
4. Allows ADOA to use monies appropriated for building renewal in FY 2026 for building projects related to retrofitting facilities for space consolidation initiatives.
5. Prohibits ADCRR from spending any of the FY 2026 appropriation for building renewal on personal services or overhead expenses related to managing funded projects.
Individual Projects
6. Appropriates the following amounts in FY 2026 to the following state agencies and boards from the specified funds for individual capital projects:
|
Agency |
Purpose |
Fund |
Amount |
|
ADCRR |
Replace fire, life alarm and suppression system at the Yuma State Prison |
state GF |
$8,500,000 |
|
Arizona Exposition and State Fair (AESF) Board |
Capital improvements |
EASF Fund |
$3,815,100 |
|
Arizona Game and Fish Department (AZGFD) |
Dam maintenance |
Capital Improvement Fund |
$150,000 |
|
AZGFD |
Hatchery maintenance |
Capital Improvement Fund |
$400,000 |
|
AZGFD |
Property maintenance |
Capital Improvement Fund |
$300,000 |
|
AZGFD |
Dam repairs at Black Canyon Lake and Fool Hollow Lake |
AZGFD Fund |
$6,850,000 |
|
AZGFD |
Hatchery repairs |
AZGFD Fund |
$4,700,000 |
|
Department of Health Services (DHS) |
Arizona State Hospital (ASH) isolation valve installation |
ASH Land Fund |
$160,000 |
|
DHS |
ASH anti-ligature renovations |
ASH Land Fund |
$695,000 |
|
DHS |
ASH perimeter detection system replacement |
ASH Land Fund |
$83,000 |
|
Arizona Department of Juvenile Corrections (ADJC) |
Fire line booster pumps replacement |
Criminal Justice Enhancement Fund |
$417,900 |
|
ADJC Local Cost Sharing Fund |
$118,700 |
||
|
ADJC |
Door and lock replacements at Adobe Mountain School |
Criminal Justice Enhancement Fund |
$303,000 |
|
ADJC |
Kitchen air unit replacements at Adobe Mountain School |
Criminal Justice Enhancement Fund |
$641,000 |
|
Arizona State Parks Board (ASPB) |
Capital improvements |
State Parks Revenue Fund |
$3,633,300
|
|
Arizona Pioneers’ Home |
Capital improvements |
Miners' Hospital for Miners with Disabilities Land Fund |
$470,400 |
|
Arizona Pioneers’ Home |
Facility window and door replacements |
Miners' Hospital for Miners with Disabilities Land Fund |
$1,515,000 |
|
Department of Public Safety (DPS) |
Replace office buildings in Payson and Sanders |
state GF |
$2,000,000 |
|
DPS |
Upgrade electrical system at DPS headquarters in Phoenix |
state GF |
$11,227,100 |
|
ADOT |
Improvements to vehicle repair shop in Avondale |
SHF |
$6,951,000 |
|
ADOT |
Construct new maintenance offices in Little Antelope and Gray Mountain |
SHF |
$6,861,000 |
|
ADOT |
Renovate Grand Canyon Airport terminal |
State Aviation Fund |
$850,300 |
|
Arizona Department of Veterans' Services |
Replace HVAC at veterans' home in Tucson |
state GF |
$2,400,000 |
7. Requires the ASPB, by September 1, 2025, to submit a report to the Joint Committee on Capital Review (JCCR) delineating which projects approved by JCCR in July 2022 ASPB plans to prioritize in FY 2026 and the proposed FY 2026 funding level for each of those projects.
8. Reverts the $850,300 appropriation to renovate the Grand Canyon Airport terminal to the State Aviation Fund on June 30, 2026, if ADOT does not secure a Federal Aviation Administration grant for the project.
ADOT Statewide Highway Construction
9. Appropriates the following amounts in FY 2026 from the state GF to ADOT for the following highway projects:
|
Project |
Amount |
|
Construct an additional right-hand turn lane on northbound State Route 87 and State Route 260 near Payson |
$3,400,000 |
|
Design improvements along State Route 24 |
$500,000 |
|
Design the repaving of Olga Frontage Road between mile post 366 and mile post 379 |
$800,000 |
|
Design traffic interchange and connecting arterial roadways at State Route 303 and 155th Avenue |
$3,400,000 |
|
Distribute to the city of Flagstaff to construct a traffic light signal at the intersection of Woody Mountain Road and US Route 66 |
$500,000 |
|
Distribute to the city of Glendale for the 75th Avenue reconstruction project |
$3,000,000 |
|
Distribute to the City of Show Low for the Woolford Road extension project |
$6,000,000 |
|
Distribute to Yuma County for bridge replacement project on Somerton Avenue between West County 10th Street and West County 11th Street |
$1,300,000 |
|
Install traffic control systems along State Route 389 near Colorado City |
$1,500,000 |
|
Restripe lanes along the interchange ramp from eastbound State Route 24 to State Route 202 |
$50,000 |
10. Requires the following appropriations for the specified projects to be distributed by November 1, 2025:
a) $500,000 to the City of Flagstaff to design and construct a traffic light signal at the intersection of Woody Mountain Road and US Route 66;
b) $6,000,000 to the City of Show Low for the Woolford Road extension project;
c) $1,300,000 to Yuma County for bridge replacement project on Somerton Avenue between West County 10th Street and West County 11th Street; and
d) $3,000,000 to the city of Glendale for the 75th Avenue reconstruction project.
11. Declares the Legislatures intent that the specified entities contribute the following amounts to the project to design traffic interchange and connecting arterial roadways at State Route 303 and 155th Avenue:
a) $3,000,000 from the City of Surprise; and
b) at least $3,000,000 from the Maricopa Association of Government from sources other than the State of Arizona.
12. Allows the Town of Patagonia to use the FY 2024 appropriation of $1,500,000 for McKeown Avenue reconstruction between Third Avenue West and SR 82, in addition to reconstruction between Fourth Avenue West and SR 82.
13. Appropriates $458,770,000 in FY 2026 from the SHF to ADOT to:
a) plan and construct state highways, including the national system of interstate highways within the state, the state primary or secondary system, the county primary or secondary system and urban rural routes;
b) acquire rights-of-way; and
c) provide for the cost of contracted field administration and engineering on construction projects and debt service payments on bonds issued for highway construction.
14. Exempts the $458,770,000 appropriation from review by the JCCR.
15. Requires ADOT, by November 1, 2025, to report to the Directors of the Joint Legislative Budget Committee (JLBC) and the Governor's Office of Strategic Planning and Budgeting (OSPB) on:
a) ADOT's actual prior year, estimated current year and upcoming budget year highway construction expenses from all fund sources;
b) capital outlay information for FYs 2025, 2026 and 2027; and
c) ADOT's estimated outstanding debt principal balance at the end of FY 2027 and the estimated debt service payment amount for each of FYs 2027 through 2030.
16. Requires ADOT's report on highway construction expenses to:
a) include fund sources from bond proceeds and appropriated, federal, local agency, state highway and regional area road monies; and
b) be in the same format as in the prior year unless the Directors of JLBC and OSPB have approved modifications.
17. Requires ADOT's reported capital outlay information to appear in the same format as tables three, four and seven of the FY 2025 Appropriations Report.
18. Requires ADOT's report on estimated outstanding debt principal balance and service payments to:
a) include SHF statewide construction bonds, Arizona Highway User Revenue Fund bonds, Maricopa and Pima Associations of Governments controlled access bonds, Maricopa Regional Area Road Fund bonds and grant anticipation notes; and
b) be comparable to the information in the FY 2025 Appropriations Report.
19. Appropriates balances and collections in the SHF that exceed the specific amounts appropriated by the FY 2026 General Appropriations Act and Capital Outlay BRB to ADOT for authorized purposes.
ADOT Airport Planning and Development
20. Appropriates $44,340,700 from the State Aviation Fund in FY 2026 to ADOT to plan, construct, develop and improve state, county, city or town airports as determined by the State Transportation Board.
21. Exempts the $44,340,700 appropriation from JCCR review.
22. Appropriates any balances and collections in the State Aviation Fund that exceed the specific amounts appropriated by the FY 2026 General Appropriations Act and Capital Outlay BRB to ADOT in FY 2026 for authorized purposes.
23. Requires ADOT, by December 31, 2025, to report to the JLBC staff on the status of all aviation grant awards and distributions.
24. Requires ADOT's report on aviation grants to delineate projects by individual airport and fiscal year, including any future-year commitments.
Appropriation Reductions and Fund Balance Transfers
25. Appropriates a total of $41,400,000 from the state GF to ADOT to construct an overpass at Riggs Road and SR 347 as follows:
a) $12,300,000 in FY 2026 for right-of-way acquisition, utility relocation and natural resource recovery; and
b) $29,100,000 in FY 2027.
26. Stipulates that the FY 2028 appropriation of $49,000,000 from the state GF in FY to ADOT to construct an overpass at Riggs Road and SR 347 must be allocated and available to ADOT in the first quarter of FY 2028.
27. Increases the following appropriations by a total of $25,000,000 to design and construct additional vehicle lanes, separated by a lighted median, on the I-10 between State Route 85 and Citrus Road by appropriating from the state GF to ADOT:
a) $40 million in FY 2026, rather than $30 million in FY 2027; and
b) $93 million in FY 2027, rather than $78 million in FY 2028.
28. Stipulates that ADOT must procure construction bids that incorporate the A+B method to expedite construction and ensure completion of the project to design and construct additional vehicle lanes on the I-10 in a timely manner.
29. Reverts a total of $22,666,333 to the State Parks Revenue Fund by reducing the following amounts from monies appropriated from the Fund to the ASPB:
|
Purpose |
FY |
Amount |
|
Dead Horse Ranch state park amphitheater |
2023 |
($210,000) |
|
Red Rock renovation |
2025 |
($4,000,000) |
|
San Rafael renovation |
2025 |
($1,500,000 |
|
Southern construction services relocation |
2023 |
($2,000,000) |
|
Statewide campground improvements |
- |
($4,100,000) |
|
Statewide sunshade structures |
- |
($2,233,333) |
|
Statewide water conservation |
2023 |
($1,339,000) |
|
2025 |
($1,339,000) |
|
|
Yuma territorial prison renovation |
2025 |
($5,945,000) |
Miscellaneous
30. Deems the following projects as having been favorably reviewed by JCCR:
a) $1,200,000 for Arizona Exposition and State Fair Board capital projects to replace the Arizona Veterans Memorial Coliseum's asphalt in the north parking lot and sundeck walking surface;
b) $2,458,000 for AGFD capital projects to:
i. replace the sewer system at the Ben Avery Shooting Facility;
ii. construct new bison-proof fencing in the House Rock Wildlife Area near the north rim of the Grand Canyon in Coconino County;
iii. construct a well to irrigate fields that grow feed for wildlife at the Quigley-Achee Wildlife Area near Roll in Yuma County;
iv. replace water heaters with tankless systems at Horseshoe Ranch; and
v. upgrade the electrical circuits at the Horseshoe Ranch barn; and
c) $1,409,000 to ADOT for a transfer from the following projects to fund a project shortfall for construction of a roundabout at the intersection of SR 69 and SR 169 in Prescott Valley:
i. $500,000 from an interchange design at the SR 303 and Interstate 17 project; and
ii. $909,700 from construction of a screen wall along the Loop 101 near 16th Street project.
31. Allows ADOA to spend up to five percent of all capital outlay appropriations, excluding distributions to nonstate agencies, for expenditures for project management of building renewal and capital projects.
32. Prohibits ADOA from spending capital outlay appropriations for:
a) personal services or employee-related expenditures; or
b) maintenance contracts on building components and equipment without JCCR review.
33. Prohibits any capital outlay appropriations from being spent for personal services or employee-related expenditures of state employees, excluding services provided as part of the Inmate Construction Program for correctional facilities.
34. Exempts, from lapsing until June 30, 2027, the FY 2022 appropriation of $1,800,000 to ADOT to replace vehicle fueling facilities in Flagstaff, Holbrook and Kingman.
35. Makes technical and conforming changes.
36. Becomes effective on signature of the Governor.
Governor's Veto Message
The Governor indicates in her veto message that H.B. 2949, and this version of the FY 2026 budget as a whole, does not provide adequate funding for health care coverage and K-12 education and inadequately addresses priorities such as childcare affordability, veteran homelessness and public safety. The Governor encourages working in a productive fashion to deliver a bipartisan solution for Arizonans.
House Action Senate Action
APPROP 6/12/25 DP 11-7-0-0 3rd Read 6/25/25 16-11-3
3rd Read 6/13/25 31-0-29
Vetoed by the Governor 6/25/25
Prepared by Senate Research
June 26, 2025
KJA/ci