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JLBC: April forecast trims revenue; budget would shift tax conformity and repeal several credits
Summary
JLBC staff told the caucus that an April revenue update reduced expected growth and that the proposed budget would fully conform with HR 1 for the last filing year and adopt Senate Bill 1106 provisions prospectively, producing roughly $1.4 billion in four‑year costs offset partly by repeal of several tax credits.
Jack Brown of the Joint Legislative Budget Committee told members the JLBC April forecast trimmed projected revenue growth by roughly 0.2 percentage points over the next couple of fiscal years and that the budget proposal includes a major tax‑policy shift.
"The budget proposal would completely conform with HR 1," Jack Brown said, and he added that the proposal would switch the state’s prospective filing‑season conformity to the provisions in Senate Bill 1106. Brown outlined specific individual provisions the budget would change: it would remove a $6,000 senior deduction available to taxpayers 65 and older; roll back an expanded state and local tax (SALT) deduction increase; eliminate a deduction for auto‑loan interest; and create a new $6,000 deduction for retirement and pension distributions for taxpayers 60 and older. The plan would also create a state deduction for Roth IRA contributions up to $6,000, raise the dependent credit for children 17 and younger from $100 to $125, and allow a state subtraction for child‑and‑dependent‑care expenses after federal credits are taken.
Brown said the JLBC presentation shows the combined tax‑policy components listed on the packet would sum to about $1,400,000,000 across the four‑year window presented to members.
To offset part of that cost, Brown said the proposal repeals several existing tax credits and exemptions (lines 6–11 in the packet), which JLBC estimates would yield roughly $75,000,000 in additional annual revenue. The staff itemized the changes: repeal of the transaction privilege tax (TPT) exemption for residential solar (approximately $30,000,000 annually), repeal of the rooftop solar installation income tax credit (about $12,000,000 annually), repeal of a renewable energy production tax credit (about $13,000,000 annually), repeal of a new employment tax credit administered through the Arizona Commerce Authority (roughly $10,000,000 annually), repeal of a small refundable research‑and‑development credit targeted at firms with under 150 employees (about $7,500,000), and repeal of a pollution‑control device credit (roughly $1,700,000).
Brown also described a change to the Arizona Commerce Authority Competes Fund. The proposal would repeal the statutory distribution from lottery profits to the Competes Fund, remove current and future deposits to the fund, and redirect those amounts to the general fund; JLBC listed the Competes Fund receipt as about $1,800,000 in fiscal 2027 in current law.
Why it matters: the package rebalances tax benefits and introduces new deductions aimed at retirement and dependent care while rolling back several energy and business‑oriented incentives. JLBC framed the mix as a net cost under the conformity approach offset by credit repeals and other adjustments. The caucus did not take a formal vote on the presentation; members asked questions about programmatic impacts and spending assumptions during the Q&A.
Next steps: JLBC’s figures were presented as changes to the January baseline; lawmakers will consider the packet and amendments as the budget process continues.
