PHOENIX — The curtain rises Monday on Year two of divided government at the Arizona Capitol.
Democratic Gov. Katie Hobbs will deliver her second State of the State speech at 2 p.m. Monday to a joint session of the Legislature, highlighting her priorities for the new legislative session.
"What they'll hear from me, despite the challenges that we were up against last year, we had some big bipartisan wins for Arizonans," Hobbs said in an interview with 12News ahead of the speech.
"I continue to be optimistic that there's opportunity to do that. And I'm going to make the case for the areas where I think we can make that kind of compromise and deliver for Arizonans."
The top issues for the session are likely to pick up where the 2023 session left off -- the budget, water, housing, education, plus a new tamales bill.
The Legislature's Republican leadership is promoting a pragmatic approach to the session.
During last year's State of the State - Hobbs' first - a handful of GOP members turned their backs on Hobbs or walked out.
"The dynamic this year will be that if you are Republican, and you want to make sure that your legislation passes ... then you're going to have to craft it in a way that will get Democratic support," longtime Capitol reporter Mary Jo Pitzl said on this weekend's "Sunday Square Off."
"The hope is that there will be more bipartisan-supported legislation making it up to the governor's desk."
It could be a sign that Republicans are still smarting from Hobbs' record 143 vetoes last session.
The GOP's one-vote majority in both the Senate and the House means any significant legislation -- such as a deal on fixing a projected $800 million budget deficit over the next two years -- would require bipartisan support.
The legislative push and pull is going on against the backdrop of an election year.
Hobbs is amassing a financial war chest to arm Democrats for a Capitol takeover in November, a feat the party hasn't accomplished in decades.
Here's what to watch for Monday as the Legislature returns to work:
Priorities in Hobbs speech
Hobbs previewed her State of the State priorities ahead of the speech. Among them:
Education: Hobbs will reiterate the eight-point plan she announced last week to impose greater transparency and accountability to the fast-growing Empowerment Scholarship Account program.
The proposals include requiring educators to pass a fingerprint background check; giving the state auditor general the authority to report on how ESA voucher money is spent by private schools; bar private schools that receive taxpayer dollars from raising tuition and fees by more than the rate of inflation.
Hobbs said in an interview with 12News that her office will respond to a Republican proposal to renew Prop 123 in order to give teachers pay raises.
The voter-approved law increased the drawdown from the state Land Trust Fund that is dedicated to funding education. Prop 123 provides $300 million a year to schools.
The initiative, approved in 2016, expires in 2025. The Legislature would have to refer it to the November ballot in order to extend the larger drawdown.
Hobbs said her staff was reviewing how to provide more money to teachers, as well as other school employees, and whether the drawdown from the land trust fund could increase.
Water: Hobbs will call for bipartisan legislation to close build-to-rent and wildcat development loopholes. She might also rely on administrative action, rather than legislative means, to expand water options for housing in areas that don't have a sufficient 100-year supply of groundwater.
"I've made it clear, and I'll continue to make clear if the Legislature doesn't act, we'll use the administrative authority that we have," Hobbs said.
Housing: Hobbs will use $4 million from the state Housing Trust Fund to expand down-payment help and provide mortgage rate relief for families of four. In Phoenix, families earning $75,000 a year or less would qualify.
Fentanyl epidemic: A combined $10 million in funding for the Department of Public Safety and Department of Emergency and Military Affairs, which includes the Arizona National Guard, to combat drug trafficking across the southern border. Also: $2 million for the Department of Health Services to distribute naloxone to first responders, to reverse drug overdoses.
Hobbs also wants to toughen state regulation on sober-living homes and long-term care facilities, amid reports of fraud and mistreatment.
AZ skirmish in Israel-Hamas war
The state Capitol will be the newest battleground in Israel's war against Hamas.
Republican House Speaker Ben Toma plans to call a vote on a resolution condemning Hamas and standing with Israel.
A spokeswoman for Senate Republican leadership says that the chamber plans to vote on a similar resolution later this week.
Earlier in the day, at 8:30 a.m. Monday, the Council on American-Islamic Relations scheduled a news conference on the Capitol lawn with Palestinian advocacy organizations to respond to the resolution. In a news release, CAIR said the resolution shows "zero regard to the Palestinians that are being slaughtered."
School voucher rally
Ahead of the State of the State, Hobbs revived her criticism of the 2022 school voucher expansion with an eight-point plan to bring accountability and transparency to the program.
Hobbs' call for accountability was a siren call for school voucher advocates.
The advocates, led by Arizona State Board of Education member Jenny Clark, are planning a 10:30 a.m. Monday rally on the Capitol lawn.
In an interview with 12News, Hobbs made clear she was looking beyond the session to the fall elections.
"It's an uphill climb," she said of her reform proposal," but this is the case we need to make. And if the Legislature is not going to hear it, I think the voters will."
House Speaker Toma, who shepherded the expansion through the Legislature, isn't going to hear it.
"It's just talking points," said Toma, who's running for Congress in a solidly Republican West Valley district.
"It looks like a list of tweets, not anything serious in terms of that we can actually act on in some way."
Spending on the 72,500 students whose families have contracts with the state's ESA program will likely be a budget issue.
The total spending is hard to pin down.
Republican School Superintendent Tom Horne's ESA director said in late December the state would not spend "all that was budgeted for education in fiscal year 2023," leaving a $57 million surplus. (The current fiscal year is 2024.)
But an October projection by Horne's office put projected ESA spending at $900 million, about $250 million more than anticipated.
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