Arizona Gov. Hobbs vetoes a second FSTC opt-in bill (SB 1142)
On April 14, 2026, Arizona Governor Katie Hobbs vetoed SB 1142 — her second veto of a federal Scholarship Tax Credit (FSTC / ECCA / §25F) opt-in bill after rejecting SB 1106 in January. She again pointed to the lack of accountability guardrails and the absence of final federal guidance.
Arizona Governor Katie Hobbs vetoed SB 1142 on April 14, 2026, blocking a second legislative attempt to opt Arizona into the federal Scholarship Tax Credit (FSTC) — the program known to Congress as the Educational Choice for Children Act (ECCA) and codified at IRC §25F. The veto followed her January 16, 2026 veto of SB 1106, the legislature's first opt-in bill of the session.
In her veto message, Hobbs tied her objection to Arizona's experience with its own programs. “We have seen what happens when these types of programs lack accountability, transparency, and oversight,” she wrote, adding: “I hope the administration ensures any federal school choice program will have the much-needed guardrails Arizona's ESA program lacks.” As with her earlier veto, she emphasized that the federal government had not yet released final regulatory guidance.
Arizona's repeated vetoes are notable because the state operates one of the country's largest existing state-level scholarship and Empowerment Scholarship Account (ESA) programs and has well-developed Scholarship Granting Organization (SGO) infrastructure. For now, the vetoes mean Arizona families will not be eligible for FSTC scholarships when the federal program goes live on January 1, 2027, unless the legislature musters a veto override or a future governor reverses course.
The FSTC opt-in is an annual decision — a state submits its list of qualifying SGOs to the U.S. Treasury for each participating year. Arizona could revisit participation in a later year, particularly once the IRS finalizes the proposed regulations it signaled in Notice 2025-70. Arizona donors can still claim the federal §25F credit (up to $1,700 per tax return) by donating to SGOs in opted-in states, though those scholarships would fund students elsewhere.