Here are some details of Arizona's 529 plans and tax incentives (source: www.azhighered.gov/az529/pdf/AZTaxIncentive.pdf)

• The Arizona Legislature in the 2007 legislative session passed a new incentive offering a tax deduction to Arizona taxpayers contributing to a 529 college savings plan. What does this mean for Arizona families? The bill, revived by Speaker of the Arizona House of Representatives, James Weiers, offers an income tax deduction to Arizonans who contribute to a 529 college savings plan. This allows contributions to a 529 plan to be deducted annually from Arizona State Income Taxes. Eligible individuals who are single and/or designated as ‘head of household’ can deduct up to $750 annually while married individuals filing jointly can deduct up to $1,500 annual deduction. Arizona families can begin taking advantage of this starting January 1, 2008.
• Participating institutions include Fidelity Investments, Waddell & Reed, and College Savings Bank.

I would definitely encourage you to start a 529 savings account for your child - after you have made sure that you're contributing enough towards your retirement.*  If you don't think you have enough money to do this, think again - with the Fidelity plan, you can start with a minimum investment of $50, or you can contribute as little as $15 per month with an automatic investment plan.  Note: there is no annual account fee with Fidelity, but there are management and administration fees associated with the funds.