HB2965 is an FY2026 environment appropriations and fee-adjustment bill that authorizes the use of existing balances in several environmental and water-related funds for specified purposes. It allows the Arizona Water Protection Fund Commission to grant up to $336,000 to the Department of Water Resources for administrative costs, permits the Department of Environmental Quality (DEQ) to use up to $6.531 million from the underground storage tank revolving fund for agency administration and sewage discharge remediation in Naco and other border areas, and allows Arizona Water Banking Fund monies appropriated to the Arizona Navigable Stream Adjudication Commission to be used for legal fees. It also caps the general fund appropriation to the Water Quality Assurance Revolving Fund at $15 million for FY2025-2026.
The bill further directs fee reductions and temporary rulemaking flexibility. DEQ must reduce vehicle emissions testing fees in Area A so that revenues fall by 5% compared with FY2023-2024 Area A collections, and it is exempt from standard rulemaking requirements through July 1, 2026 for implementing those fees. The Arizona Department of Agriculture is similarly authorized to lower certain trust-fund fees and must adopt emergency rules, in consultation with industry and subject to advisory council review, to modify fees in the dangerous plants, pests and diseases trust fund through July 1, 2026.
Impact
HB2965 temporarily changes how several dedicated environmental and water funds may be spent in FY2025-2026, expanding allowable uses for administrative expenses, legal fees, border-area sewage remediation, and fee reductions. It affects the Arizona Department of Water Resources, the Department of Environmental Quality, the Arizona Navigable Stream Adjudication Commission, and the Department of Agriculture, while also limiting the amount transferred from the general fund to the Water Quality Assurance Revolving Fund. The bill does not create permanent statutory changes so much as it overrides existing restrictions for one fiscal year and suspends or streamlines rulemaking requirements for fee-setting actions.
Sentiment
The bill appears to have received mixed but ultimately favorable treatment in the House and Senate, with passage through key votes despite notable opposition. It cleared the House Appropriations Committee 11-6 and the House Rules Committee 5-1, then passed House third reading 31-25 and Senate third reading 16-11, suggesting support from a majority but not broad bipartisan consensus. The emergency declaration motion indicates an effort to move the measure quickly as part of a larger FY2026 budget-related package.
Contention
The main points of contention are the use of dedicated fund balances for administrative costs and other purposes, the reduction of vehicle emissions testing fees, and the authority to change agriculture-related fees through emergency rulemaking. Opponents likely objected to diverting or repurposing restricted environmental and water funds, especially for agency operations rather than direct programmatic uses, and to bypassing normal rulemaking procedures. Supporters appear to have favored the bill as a practical budget measure that provides funding flexibility, addresses border-area sewage issues, and lowers certain fees for regulated parties.