In 2007 (or was it 2008; it was the 48th 2nd regular session) the state of Arizona inserted a new law into the transportation code that specifcally prevents ADOT (“the department”) from issuing DLs or IDs (i.e. motor vehicle drivers licenses, or in the case of non-drivers, state issued identification cards) that complied with federal REAL ID requirements. HB2677
The bill created statute 28-336.
The upshot is Arizona issued DLs or IDs cannot be used as identification to enter certain federal facilities, any nuclear power plant, or fly on any commercial airliner — all being phased in. In particular the flying thing is bearing down on Arizonans; under current law, they will no longer be acceptable identification to fly beginning in 2016.
The Arizona legislature finally got moving towards a fix by passing SB1273 in 2015 (52nd 1st regular). Though the timetable isn’t clear.
This apparently was not (just) a right-wing fever swamp affair, rather it was more of a left-right bipartisan thing with left-wing civil rights/privacy types joining together and passing with large margins and signed by Democratic governor Janet Napolitano.
For some other identification-related issues, see Are Cyclists Required to Carry ID? Are Pedestrians?