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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
capital outlay; appropriations; 2026-2027.
Purpose
Makes session law changes relating to capital outlay necessary to implement the FY 2027 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. 1849 contains the budget reconciliation provisions for changes relating to capital outlay.
Provisions
Building Renewal
|
Agency |
Fund Source |
Amount |
|
Arizona Department of Administration (ADOA) |
state General Fund (state GF) |
$10,000,000 |
|
Capital Outlay Stabilization Fund (COSF) |
$4,600,000 |
|
|
Arizona State Hospital Land Fund |
$554,000 |
|
|
Arizona Department of Corrections, Rehabilitation and Reentry (ADCRR) |
ADCRR Building Renewal Fund |
$15,652,200 |
|
Arizona Game and Fish Department (AZGFD) |
AZGFD Fund |
$1,932,900 |
|
Arizona State Lottery Commission |
State Lottery Fund |
$100,000 |
|
Arizona Department of Transportation (ADOT) |
State Highway Fund (SHF) |
$24,158,500 |
|
State Aviation Fund |
$415,600 |
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 $4,600,000 appropriation.
4. Allows ADOA to use monies appropriated for building renewal in FY 2027 for building projects related to retrofitting facilities for space consolidation initiatives.
5. Prohibits ADCRR from spending any of the FY 2027 appropriation for building renewal on personal services or overhead expenses related to managing funded projects.
6. Allows ADCRR to spend up to $4,570,000 of the monies appropriated for building renewal in FY 2027 to construct new facilities to address capital needs as required by the court in the Jensen v. Thornell inmate health care litigation.
Individual Projects
7. Appropriates the following amounts in FY 2027 to the following state agencies and boards from the specified funds for individual capital projects:
|
Agency |
Purpose |
Fund |
Amount |
|
Arizona Exposition and State Fair Board (AESF) |
Capital improvements |
AESF Fund |
$3,905,900 |
|
AZGFD |
Dam maintenance |
Capital Improvement Fund |
$150,000 |
|
AZGFD |
Hatchery maintenance |
Capital Improvement Fund |
$400,000 |
|
AZGFD |
Hatchery repairs |
AZGFD Fund |
$11,000,000 |
|
Arizona State Parks Board (ASPB) |
Capital improvements |
State Parks Revenue Fund |
$3,552,200 |
|
ASPB |
Develop a monitoring plan and install markers at Tonto National Bridge State Park |
State Parks Revenue Fund |
$200,000 |
|
Arizona Pioneers' Home |
Capital improvements |
Miners' Hospital for Miners with Disabilities Land Fund |
$482,000 |
|
ADOT |
Construct new materials lab in Kingman |
SHF |
$5,038,000 |
|
Agency |
Purpose |
Fund |
Amount |
|
ADOT |
Replace vehicle fueling facilities in Payson, Phoenix and Mesa |
SHF |
$4,944,000 |
|
ADOT |
Design the renovation of the traffic signal and lighting warehouse in Phoenix |
SHF |
$611,000 |
Statewide Highway Construction
8. Appropriates $432,663,000 in FY 2027 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.
9. Exempts the $432,663,000 appropriation to ADOT from review by the Joint Committee on Capital Review (JCCR).
10. Appropriates balances and collections in the SHF that exceed the specific amounts appropriated by the FY 2027 General Appropriations Act and Capital Outlay BRB to ADOT for authorized purposes.
11. Requires ADOT, by November 1, 2026, 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 2026, 2027 and 2028; and
c) ADOT's estimated outstanding debt principal balance at the end of FY 2028 and the estimated debt service payment amounts for each of FYs 2028 through 2031.
12. Requires ADOT's highway construction expenses report 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 the prior year unless the Directors of JLBC and OSPB have approved modifications to the format.
13. Requires ADOT's reported capital outlay information to be in the same format as tables two, three and seven of ADOT's capital outlay estimates in the FY 2026 Appropriations Report.
14. Requires ADOT's report on estimated outstanding debt principal balance and service payments to:
a) include SHF statewide construction bonds, 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 reported for ADOT in the FY 2026 Appropriations Report.
15. Specifies that the FY 2021, FY 2023, FY 2024, FY 2026 and FY 2028 appropriations for improving State Route (SR) 347 are for design, right of way acquisition, utility relocation, natural resource recovery and construction to improve SR 347, including:
a) improving the intersection on SR 347 at Casa Blanca Road and Cement Plant Access; and
b) to construct an overpass at Riggs Road and SR 347.
Airport Planning and Development
16. Appropriates $29,048,900 from the State Aviation Fund in FY 2027 to ADOT to plan, construct, develop and improve state, county, city or town airports, as determined by the State Transportation Board.
17. Exempts the $29,048,900 appropriation to ADOT from JCCR review.
18. Appropriates any balances and collections in the State Aviation Fund that exceed the specific amounts appropriated by the FY 2027 General Appropriations Act and Capital Outlay BRB to ADOT in FY 2027 for authorized purposes.
19. Requires ADOT, by December 31, 2026, to report to the JLBC Staff on the status of all aviation grant awards and distributions.
20. Requires the report on aviation grants to delineate projects by individual airport and fiscal year, including any future-year commitments.
Appropriation Reductions and Fund Balance Transfers
21. Reduces appropriations made to ADOT in the outlined previous fiscal years for the specified projects as follows:
|
Purpose |
Fiscal Year |
Fund Source |
Amount |
|
Repave SR 69 in Prescott Valley |
2021 |
state GF |
($116,200) |
|
Repave SR 69 in Prescott Valley |
2023 |
SHF |
($1,819,000) |
|
Repave SR 95 in Mohave County |
2021 |
state GF |
($1,734,300) |
|
Purpose |
Fiscal Year |
Fund Source |
Amount |
|
Repave SR 95 in Mohave County |
2023 |
SHF |
($6,052,200) |
|
Repair SR 186 and State Business Route 10 in Wilcox |
2021 |
state GF |
($93,100) |
|
Repair SR 186 and State Business Route 10 in Wilcox |
2023 |
SHF |
($765,600) |
|
U.S. Route 89 |
2023 |
state GF |
($1,052,600) |
|
Rehabilitate pavement along U.S. Route 191 between Armory Road and East Safford |
2023 |
SHF |
($1,615,500) |
|
Design and construct a screen wall along the east side of Loop 101 near 16th Street |
2023 |
SHF |
($885,000) |
|
Install lighting on the Sentinel exit in Gila Bend |
2023 |
SHF |
($322,500) |
|
Rehabilitate pavement along U.S. Route 191 between mile post 163 and mile post 173 |
2023 |
SHF |
($5,912,100) |
22. Transfers, between July 2, 2026, and June 30, 2027, the reduced appropriations totaling $17,371,900 from the SHF to the state GF to provide adequate support and maintenance for state agencies.
23. Transfers, by June 30, 2026, the FY 2026 reduction of $2,500,000 made to the appropriation for the rehabilitation of pavement along U.S. Route 191 between Armory Road and East Safford from the SHF to the state GF for the support and maintenance of state agencies.
24. Specifies that the outlined transfers of $17,371,900 and $2,500,000, from the SHF to the state GF, reflect a portion of revenues derived from the transaction privilege tax that were previously transferred to the SHF in FY 2023.
25. Removes the FY 2024 appropriation of $5,000,000 from the state GF to ADOT for electric vehicle charging and advance fuel infrastructure at ADOT fleet facilities.
Miscellaneous
26. Appropriates $25,000,000 from the state GF in FY 2029, rather than FY 2028, to ADVS to construct and establish a veterans' home facility in the northwestern portion of Arizona.
27. Delays, from June 30, 2026, to June 30, 2028, the date on which the FY 2026 appropriation of $850,300 from the State Aviation Fund to ADOT for the renovation of the Grand Canyon airport terminal reverts to the State Aviation Fund, if ADOT does not receive a Federal Aviation Administration Grant for the project.
28. Delays, from June 30, 2026, to June 30, 2027, the date on which the FY 2026 appropriation of $2,400,000 from the state GF to the Arizona Department of Veterans' Services (ADVS) for replacement of the HVAC at the Tucson veterans' home reverts to the state GF, if ADVS is not awarded a federal grant for the project.
29. 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.
30. Prohibits ADOA from spending any other capital outlay appropriations:
a) on personal services or employee-related expenditures; or
b) for maintenance contracts on building components and equipment without JCCR review.
31. 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.
32. Exempts, from lapsing, the FY 2026, FY 2027 and FY 2028 appropriations to ADOT, for the design and construction of additional vehicle lanes on Interstate 10 between SR 85 and Citrus Road.
33. Makes conforming changes.
34. Becomes effective on signature of the Governor.
Prepared by Senate Research
June 9, 2026
LMM/KS/hk