House Speaker Steve Montenegro, R-Goodyear, announces his plan to form an ad hoc committee on Executive Budget Mismanagement, while flanked by other House Republicans during a March 17, 2025 press conference at the Capitol in Phoenix. Photo by Caitlin Sievers | Arizona Mirror
In another battle over funding for critical services, legislative Republicans have accused Arizona’s Democratic governor of “financial malfeasance.” In response, Gov. Katie Hobbs alleged that GOP leaders lied to reporters about a standard budgeting transfer to take attention away from their plans to cut services to people with disabilities.
During a press conference on Monday, Steve Montenegro, the speaker of the state House of Representatives, told reporters that the Department of Child Safety would go bankrupt next month without a bailout. He blamed Hobbs for the funding shortfall.
Montenegro said that the legislature would force Hobbs to cover the shortfall with funds from her own budget and announced the creation of a special Committee on Executive Budget Mismanagement to investigate what Republicans claimed was her mismanagement of funds for DCS and the Division of Developmental Disabilities, which is also on the verge of running out of money.
“This financial mismanagement threatens the most vulnerable children in our state, and House Republicans will not let this stand,” Montenegro, a Republican from Goodyear, said. “Once again, we are here being told that we have to clean up Governor Hobbs’ mess.”
But in response, Christian Slater, a spokesman for Hobbs, accused House Republicans of mischaracterizing a routine request to shift funds within DCS to divert attention from their own plan to cut funding for DDD. He said that Republicans were lying about DCS running out of money next week.
“Instead of preening for the press for political gain, legislative Republicans should stop lying to their constituents, fund services for Arizonans with autism, Down syndrome and cerebral palsy and own up to the pain they want to cause the people of Arizona by presenting their budget proposal,” Slater said in an emailed statement. “Anything short of that is cowardly and a complete and total dereliction of duty.”
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The trading of public accusations stemmed from a request from DCS to transfer $6.5 million from surplus funds for kinship care and foster home placement to pay for a shortfall in the budget for congregate care, the formal name for group homes for foster children.
Without that funding, DCS claims that it wouldn’t have the funds to pay those group homes and the children staying in them would be kicked out, possibly having to bunk in the DCS office, causing additional trauma and disruption to their lives.
The $6.5 million would cover the state’s payments to residential care facilities that house children who are in DCS custody but haven’t been placed in a foster home or with a family member through April 24, according to the letter from DCS to the Joint Legislative Budget Committee.
Slater pointed out that DCS had made similar transfer requests each year dating back to 2016, in several cases more millions of dollars, and Republicans had never called a press conference about it until Monday.
“Who waits until 19 days before bankruptcy to tell anybody about it?” Montenegro asked during the press conference.
In an emailed statement to the Arizona Mirror, Cynthia Weiss, a spokesperson for DCS, refuted Montenegro’s claim that DCS and Hobbs waited until the last minute to inform legislative leaders that congregate care funding was running out.
Weiss told the Mirror that the department has projected an upcoming shortfall in the congregate care budget in its monthly report to legislative leaders and JLBC since August 2024. The fiscal year began in July 2024.
Weiss characterized appropriation transfers between line items in the DCS budget as “common and necessary.”
But House Republicans tied the budget shortfall in the congregate care budget to increased payments to congregate care provider Sunshine Residential Homes, and its owners, who have made more than $400,000 in political contributions to Hobbs and the Arizona Democratic Party since 2022, according to The Arizona Republic.
Sunshine Residential and Hobbs are at the center of investigations by Democratic Attorney General Kris Mayes and Republican Maricopa County Attorney Rachel Mitchell for accusations of a “pay-to-play” scheme.
Weiss said that increased congregate care payments stemmed from a re-solicitation of the congregate care contract in 2024, which was past its five-year term and was overdue to be rebid.
This is the second publicly fought budgeting battle between the Hobbs administration and legislative Republicans in the past couple of months. In February, Hobbs requested an additional $122 million for services provided through the Division of Developmental Disabilities, which is expected to run out of money in May. The state’s fiscal year ends June 30.
Legislative Republicans and Hobbs have blamed one another for the funding lapse, caused in part by increased spending in the Parents as Paid Caregiver Program. The Republicans who control the legislature had denied increased funding for the program in this year’s budget, and accused Hobbs of going forward with spending on it anyway.
If the legislature doesn’t approve additional funding by the end of April, DDD won’t be able to pay its providers and tens of thousands of Arizonans with disabilities will lose access to vital medical services, help with daily living and physical and occupational therapies.
Advocates, people with disabilities and their families came together last month to put pressure on the state government to fund DDD, and in response a group of Republican senators last week promised to ensure that DDD services continue. But beyond their expectation that the Hobbs administration and the Department of Economic Security, of which the DDD is a part, be held accountable for the situation and help to create a funding solution, the senators didn’t explain how they would make that happen.
Rep. David Livingston, the Peoria Republican who is chairman of the House Appropriations Committee, said in January that the Parents as Paid Caregivers program would have to face cuts — possibly upwards of 50% — to balance next year’s budget.
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