JLAC Review Links Land Policy to Housing Costs, Education Gaps

Arizona’s mounting housing affordability challenges and ongoing debates over school funding now have a new focal point: how the state manages its trust lands. At a special hearing this week, the Joint Legislative Audit Committee (JLAC) reviewed findings from a recent Performance Audit and Sunset Review of the Arizona State Land Department—and lawmakers say the evidence paints a troubling picture.

The audit and testimony presented to JLAC suggest that under Governor Katie Hobbs’ administration, land-use decisions are actively restricting housing development, sidelining long-established trust revenue sources, and weakening a system designed to fund Arizona’s public schools.

Trust Lands Exist for One Purpose

Arizona’s trust lands were established with a clear mandate: generate revenue for beneficiaries, primarily K–12 public education. That mission was front and center during the hearing, as lawmakers scrutinized how current policies align—or fail to align—with statutory obligations.

JLAC Co-Chair Representative Matt Gress raised concerns that large segments of developable trust land are being held idle, despite demand for housing and revenue.

“Arizona’s trust lands exist for one purpose: to generate revenue for our public schools,” Gress said. “Instead of putting these lands to economic use, the Governor is letting them sit idle. In her view, the ‘highest and best use’ of land is no use at all.”

According to committee testimony, the State Land Department has delayed or declined to move forward with land auctions near urban centers—land that could otherwise support over 200,000 housing units. As Arizona remains one of the fastest-growing states in the nation, lawmakers argue that removing large swaths of land from productive use directly tightens housing supply and drives prices higher.

Audit Findings Highlight Systemic Failures

The July 2025 Performance Audit and Sunset Review by the Arizona Auditor General identified serious operational and compliance issues within the State Land Department. Among them were missing invoices, returned checks, application backlogs, inadequate inspections of mineral-related land use, and deliberate decisions not to develop long-range plans.

The audit produced 51 recommendations, prompting legislators to request additional information from the Department. Lawmakers say the lack of long-term planning makes it difficult to demonstrate whether land sales and leasing decisions serve trust beneficiaries, a core requirement of trust management law.

Without comprehensive development plans, legislators warned the Department is exposed to legal risk, reduced revenues, and diminished accountability—all while education funding remains under strain.

Legacy Industries Pushed Aside

Representative Michele Peña, Vice Chair of the House Land, Agriculture and Water Committee, told members that the Hobbs administration’s land-use philosophy has weakened historically reliable funding streams.

“Mining and agriculture have helped fund our schools for more than a century,” Peña said.

Testimony indicated that numerous agricultural leases were canceled or allowed to lapse without replacement tenants, while hundreds of mineral lease applications remain in indefinite limbo. Lawmakers argue that these delays are not administrative oversights but reflect deliberate resistance to industries long permitted—and relied upon—on trust land.

Peña warned the cumulative effect is fewer royalties, less rental income, and fewer dollars flowing to K–12 classrooms.

Housing Policy Echoes Water Policy

Speaker Pro Tempore Neal Carter drew parallels between land-use decisions and the Governor’s broader approach to growth management.

“As with the Governor’s water policies, her land-use policies directly conflict with the state’s housing needs and the need to fund education,” Carter said.

Carter and others pointed to previous legislative hearings on groundwater and housing, where testimony showed that artificial growth boundaries around metro Phoenix reduced housing availability and raised home prices. Lawmakers argue land-use restrictions are amplifying the same outcome—limiting supply and slowing economic growth.

They also emphasized that housing development and school funding are not separate issues. New construction expands the tax base, creates jobs, and generates trust revenue, while prolonged land idleness produces none of those benefits.

Oversight Committee Signals Next Steps

JLAC members stressed that the Legislature’s role is not to set land policy but to ensure state agencies comply with the law and protect trust beneficiaries. The Committee retains authority to monitor compliance with audit recommendations and schedule future hearings if progress stalls.

For lawmakers at the hearing, the conclusion was stark: land intended to support Arizona students is instead being constrained by policy choices that ripple through housing markets and education budgets alike.

Whether the Land Department adjusts course remains to be seen. But legislators made clear that continued inaction will not escape further scrutiny—and that trust lands, by law, must serve Arizona’s future, not sit unused while costs rise statewide.