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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
VETOED
environment; FY2026
Purpose
Makes statutory and session law changes relating to the environment 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. 2965 contains the budget reconciliation provisions for changes relating to the environment.
Provisions
1. Continues to authorize the Arizona Water Protection Fund Commission to grant up to $336,000 of unobligated monies in the Arizona Water Protection Fund in FY 2026 to the Arizona Department of Water Resources (ADWR) to pay for AWDR’s FY 2026 administrative costs.
2. Continues to authorize the Arizona Department of Environmental Quality (ADEQ) to use up to $6,531,000 from the Underground Storage Tank Revolving Fund in FY 2026 for administrative costs and remediating sewage discharge issues in Naco, Arizona and other border areas of Arizona.
3. Continues to include legal fees as an authorized use of Arizona Water Banking Fund monies appropriated to the Arizona Navigable Stream Adjudication Commission in FY 2026.
4. Prohibits the appropriation from the state General Fund to the Water Quality Assurance Revolving Fund from exceeding $15,000,000.
5. Requires the Director of ADEQ, in FY 2026, to reduce fees for tests conducted in area A so that vehicle emissions testing fee revenues collected from area A are reduced by five percent of the FY 2024 area A collections.
6. Exempts ADEQ from the rulemaking requirements relating to administrative procedure until July 1, 2026, for the purpose of establishing vehicle emissions testing fees.
7. Allows, for FY 2026, the Director of the Arizona Department of Agriculture (AZDA), subject to the review of the AZDA Advisory Council, to lower existing fees for any funds held in trust by the AZDA.
8. Requires the AZDA to adopt emergency rules, through July 1, 2026, and in conjunction with the industry, to modify fees deposited in the Dangerous Plants, Pests and Diseases Trust Fund.
9. Requires the outlined rules to be reviewed by the AZDA Advisory Council.
10. Defines area A.
11. Becomes effective on the general effective date.
Governor's Veto Message
The Governor indicates in her veto message that H.B. 2965, and this version of the FY 2026 budget as a whole, does not provide adequate funding for first responder pay raises, childcare, infrastructure, K-12 schools and higher education and removes efforts to combat veteran homelessness. The Governor encourages working in a productive fashion to deliver a bipartisan solution for Arizonans.
House Action Senate Action
APPROP 6/24/25 DP 11-6-0-2 3rd Read 6/25/25 16-11-3
3rd Read 6/24/25 31-25-4
Vetoed by the Governor 6/25/25
Prepared by Senate Research
June 26, 2025
SB/slp