Great thing for AZ to do.
The SUNY (State University of NY) system has had a similar program in place for years. Students can go to community colleges for 1 or 2 years, and/or go directly to a 2 year state school, then transfer ALL credits to an upper level state college or 4 year college or state university, ALL within the same system. Seamless! No change in tuition, which is critical to a scholarship student.
Starting in 1976, I did 3 years at a regular 4 year college, then I transferred to a university for my senior year. My degree came from the 4 year college, however at the university I was able to enroll in bonafide graduate courses as a visiting senior. All credits transferred back from a 4 credit/course system to a 3 credit/course system. I made out like a bandit.