Hobbs veto stalls tribal water, health funding

WINDOW ROCK

Gov. Katie Hobbs on May 5 vetoed all 17 bills that would have made up Arizona’s 2026-27 state budget, sending the $17.9 billion package back to the Republican-led Legislature and leaving tribes waiting on funding tied to water rights, health care, food aid, schools and wildfire response.

The vetoed bills, House Bills 4138 through 4153, include the main spending bill, a building and construction bill and 14 smaller budget measures covering health care, food aid, education, law enforcement and transportation.

Hobbs sent a letter the same day to House Speaker Steve Montenegro, R-Goodyear, calling the package “unbalanced and reckless.”

“This budget is unbalanced and reckless,” Hobbs wrote in her May 5 veto letter to Montenegro.

The package would have cut funding for Colorado River accounts tied to tribal water rights cases, reduced funding for most state agencies and imposed new Supplemental Nutrition Assistance Program verification requirements that could affect Navajo families on the Arizona side of the Navajo Nation.

The bills also did not renew two tribal health care investments approved in last year’s budget, including a $3 million grant for a dialysis center at Sage Memorial Hospital in Ganado and $100,000 in state funding that helped secure more than $222 million in federal Medicaid matching funds for traditional healing services.

Native Americans make up about 5.6% of Arizona’s population while tribal lands cover about 28% of the state, according to the Arizona Governor’s Office on Tribal Relations. Arizona has the country’s third-largest Native American population behind Oklahoma and California.

Water rights funding cut

Hobbs also criticized the budget package for providing no funding to the Colorado River Litigation Fund or a proposed Colorado River Protection Fund. The litigation fund pays for Arizona’s legal work in Lower Basin negotiations and tribal water rights cases. Lawmakers created it in last year’s environment budget bill. Hobbs had requested $30 million in one-time funding for the protection fund.

The cuts come as the Navajo Nation, Hopi Tribe and the San Juan Southern Paiute Tribe continue seeking congressional approval of the Northeastern Arizona Indian Water Rights Settlement Agreement. Hobbs signed the agreement in November 2024. The proposed settlement would provide the Navajo Nation about 48,300 acre-feet of Colorado River water in Arizona and the Hopi Tribe about 8,228 acre-feet. Congress did not pass the legislation last session, though Sens. Mark Kelly and Ruben Gallego reintroduced it this session.

President Buu Nygren previously said the stakes “could not be higher,” noting that one in three homes on the Navajo Nation still lacks running water.

Negotiations surrounding the settlement have stalled since tribal leaders traveled to Washington earlier this year to testify before Congress in support of the agreement.

Hobbs also signed the Yavapai-Apache Nation Water Rights Settlement Agreement in 2024, though Congress has not approved that settlement. Both agreements rely in part on continued state legal work funded through the Colorado River Litigation Fund.

SNAP rules could affect border communities

HB 4147, sponsored by Rep. David Livingston, would change how Arizona verifies SNAP eligibility. Under the proposal, the Arizona Department of Economic Security would review electronic benefit transfer card records each month. If recipients used their benefits only outside Arizona for 90 days, the agency would contact them to verify residency. Benefits would end within 30 days for recipients determined to no longer live in Arizona, and cases would be referred to the U.S. Attorney’s Office for the District of Arizona.

Republican lawmakers described the proposal as an anti-fraud measure, but the policy could affect Navajo families who routinely cross state lines for groceries and household goods.

Bashas’ Diné Market has stores in Tuba City, Piñon, Kayenta, Chinle, Dilkon, Crownpoint, Shiprock, Sanders and the Window Rock area. But many families in eastern Navajo communities also shop in Gallup and Farmington, New Mexico. Window Rock is about 25 miles from Gallup.

The bill also set a goal of reducing Arizona’s SNAP error rate from 8.84% to 3% or less by Dec. 30, 2030. According to staff for the Joint Legislative Budget Committee, Arizona could face about $139 million in federal penalties by fiscal 2028 if the state failed to meet requirements under the federal reconciliation law signed July 4, 2025, by President Donald Trump.

Hobbs also criticized a proposed $1.8 million reduction to SUN Bucks, a summer EBT program that provides $120 per child between school years. Hobbs said the reduction would leave about 640,000 Arizona children without summer benefits and cost the state $79 million in federal matching funds. The Inter Tribal Council of Arizona previously administered the Summer EBT program for Native households before DES took over in 2024.

Health care, schools face reductions

HB 4138, the main budget bill, proposed cutting $42 million annually from the Arizona Health Care Cost Containment System, Arizona’s Medicaid program, along with another $10.6 million in additional reductions. Medicaid provides enhanced federal matching funds for services delivered through the Indian Health Service and tribally operated hospitals, including Sage Memorial Hospital, Tséhootsooí Medical Center and Tuba City Regional Health Care Corporation.

The budget package also proposed reducing Arizona Department of Education K-12 formula funding by $92.1 million annually, cutting another $31.9 million in state aid for fiscal 2026 and delaying $800.7 million in school aid payments until July 2027. Charter schools and districts with fewer than 4,000 students would avoid the delay, but several Navajo Nation school districts exceed that threshold, including those in Window Rock, Chinle, Tuba City and Kayenta.

The package included some one-time education funding, including $37 million for free-and-reduced lunch support, $29 million for extra assistance payments and $2 million for school meal grants. Reservation districts often report free-and-reduced lunch eligibility rates above 80%.

HB 4138 also proposed reducing funding for the Arizona Department of Forestry and Fire Management by $2.2 million. Hobbs said the package failed to provide additional wildfire suppression funding as firefighting costs continue rising statewide.

The budget package also reduced funding for the Arizona Department of Water Resources, Northern Arizona University, the Arizona Housing Trust Fund and the Arizona Office of Tourism. Housing shortages remain a major issue in many Navajo communities, where tribal and state agencies regularly coordinate emergency housing assistance.

The Arizona House recessed until June 1 after passing the package May 5, while the Arizona Senate planned to meet May 11 before recessing for the remainder of the month. Arizona’s fiscal year ends June 30, leaving lawmakers several weeks to negotiate a new budget or temporary spending measure. Without a new agreement, parts of state government could shut down.

Hobbs has maintained a bill moratorium since April 13, vetoing nearly all non-budget legislation except limited public safety measures. Republicans hold majorities in both chambers but lack enough votes to override vetoes without Democratic support.

No Democrats voted with Republicans on May 4 or May 5.

In her veto letter, Hobbs said she remained willing to negotiate, while Montenegro and Senate President Warren Petersen said the governor needed to return to budget talks. Senate Minority Leader Priya Sundareshan criticized the Republican-backed package, saying it prioritized corporate tax cuts over public services.

Get instant access to this story by purchasing one of our many e-edition subscriptions HERE at our Navajo Times Store.

---