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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
VETOED
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.
H.B. 2954 contains the budget reconciliation provisions for changes relating to higher education.
Provisions
Students Not Lawfully Present in the United States Tuition and Fees
1. Requires the Arizona Board of Regents (ABOR) to prohibit each public university from using public or private monies to subsidize, offset, reduce or mitigate the tuition and fees charged to any student who is not lawfully present in the United States.
2. Determines that a student is not lawfully present in the United States if the student is:
a) present in the United States without authorization under federal law;
b) a foreign national who has been paroled into the United States by the U.S. Department of Homeland Security; or
c) a foreign national who has applied or intends to apply for asylum in the United States if the application has not yet been approved.
Resident Undergraduate Student Tuition Rates (Repeals on January 1, 2029)
3. Requires ABOR, for FYs 2026, 2027 and 2028, to fix each public university's tuition rate for resident undergraduate students at a rate that is 2.5 percent lower than the tuition rates established for FY 2025.
4. Prohibits ABOR and each public university from requiring a student to pay any charge, including a tuition surcharge or fee, as a result of the reduced tuition rates.
ABOR Lease-to-Own and Bond Transactions
5. 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.
6. 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).
7. 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.
8. 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.
9. 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.
Arizona Teachers Academy
10. Authorizes a degree-granting private postsecondary educational institution (private postsecondary institution) in Arizona that offers postbaccalaureate teacher preparation programs that lead to teacher certification to participate in the Arizona Teachers Academy (Academy) and receive Academy Fund monies.
11. Caps the reimbursement for an Academy scholarship that a private postsecondary institution provides to a student at the remainder of the average in-state tuition and fees charged by Arizona public universities, minus all other financial aid.
12. Expands the definition of eligible postsecondary institution to include an Arizona private postsecondary institution that opts to participate in the Academy.
Tuition Scholarship Funds
13. Requires, retroactive to July 1, 2025, and on notice from ABOR, the State 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.
14. Requires, retroactive to July 1, 2025, and on notice from ABOR, the State Treasurer to invest and divest monies in the Spouses of Military Veterans Tuition Scholarship Fund (Military Scholarship Fund) and credit monies earned from investment to the Military Scholarship Fund.
15. Delays, from July 1, 2025, to July 1, 2027, the repeal sate of the Spouses and Dependents of Law Enforcement Officers Tuition Scholarship Fund (LEO Scholarship Fund).
16. Adds, to the eligibility requirements to qualify for a tuition scholarship from the LEO Scholarship Fund, 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.
17. Redefines law enforcement officer as an individual who is an Arizona resident and is currently employed as an Arizona peace officer or correctional officer.
18. Determines that, retroactive to July 1, 2025, if there are unexpended and unencumbered monies remaining in the Military Scholarship Fund after tuition scholarships are awarded to all eligible applicants, remaining Military Scholarship Fund monies must be deposited in the Academy Fund.
19. Directs ABOR in FYs 2026 and 2027, if there are unexpended and unencumbered monies remaining in the Military Scholarship Fund after tuition scholarships are awarded to all eligible applicants, to deposit the remaining Military Scholarship Fund monies as follows:
a) $2,000,000 in the LEO Scholarship Fund; and
b) all remaining monies in the Academy Fund.
20. Repeals the requirement for ABOR to deposit Military Scholarship Fund monies in FYs 2026 and 2027 as prescribed on July 1, 2027.
Miscellaneous
21. 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.
22. Specifies that operating state aid for community college districts (CCDs) in FY 2026 is as prescribed in the FY 2026 General Appropriations Act.
23. 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.
24. Makes technical and conforming changes.
25. Becomes effective on the general effective date, with retroactive provisions as noted.
Governor's Veto Message
The Governor indicates in her veto message that H.B. 2954, 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
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