State House Speaker Steve Montenegro (R-Glendale) issued a response from House Republicans Thursday to allegations that Governor Katie Hobbs mismanaged $350 million of taxpayers’ money on a program for disabled children, causing it to run out of money.
The State House voted overwhelmingly, with bipartisan support, on Wednesday to address the troubled Developmental Disabilities (DD) program with HB 2945, which transfers funds to the “Parents as Paid Caregivers” (PPC) program before it goes bankrupt.
Montenegro said in a press release, “The House has overwhelmingly approved a responsible and effective plan to fully fund Arizona’s Developmental Disabilities program and ensure services continue for the families of 60,000 vulnerable adults and minors who rely on this vital safety net. This legislation also includes responsible, commonsense guardrails to provide greater transparency and prevent future funding shortfalls.”
Arizona’s PPC program compensates parents for providing in-home care to their children with disabilities. A federal program was initiated during the COVID-19 pandemic to address the shortage of caregivers available to care for these children.
However, when the program ended in March 2024, Hobbs continued spending as if the state was still receiving federal money.
The state’s welfare system, known as the Arizona Health Care Cost Containment System (AHCCCS), applied for a waiver from the federal government to make the temporary program permanent. It was granted, but the terms were changed, including capping the hours at 40 hours per week per child.
Although Hobbs agreed to the terms from the U.S. Centers for Medicare and Medicaid Services, which included cutting back the reimbursable hours, she failed to comply and did not involve the Arizona Legislature in her decision. The Arizona Constitution states in Article IX, Section 5, “No money shall be paid out of the state treasury, except in the manner provided by law.”
State Representative Matt Gress (R-Phoenix) held a hearing earlier this month to discuss the problem in the committee he chairs, the House Ad Hoc Committee on Executive Budget Mismanagement. Testimony provided revealed that the continued spending led to a $122 million shortfall in the state budget, 10 percent over budget, which Gress labeled “an alarming number in state government.”
He said, “The problem extends beyond this year; the cost of the DD program is projected to double between fiscal year 2023 and fiscal year 2026, reaching an estimated $4 billion.” Further testimony revealed that the state is facing a $350 million total budget shortfall due to alleged mismanagement.
Gress reviewed the background leading up to the crisis, which involved the state’s Department of Economic Security (DES).
“We were informed in January that DES needs $109 million for the DD program and another $14 million for high cost clients just to make it through June 30. This ad hoc committee was convened because both House and Senate requested meetings with expert agency staff to discuss this fiscal emergency,” he said. “Yet we were told that such meetings were unnecessary. This is not just frustrating, it is a continued pattern of disregard to the legislative process.”
He went on, addressing Hobbs. “Well, Madam governor, legislative oversight is not a political circus. It is a constitutional function that this house will discharge. So while you may be hiding your agencies to protect the governor from a rebuke for her policies that resulted in a $122 million shortfall, you will not be able to protect your administration from the oversight of this legislature, it will happen.”
A representative from the Arizona Legislature’s Joint Legislative Budget Committee (JLBC) provided statistics to the legislators, revealing how the number of children in the program dramatically increased after COVID, even though COVID had ended, so the shortage of caregivers should have also ended. State Representative Nickolas Copper (R-Yuma) asked him, “Would you say it seems odd that the percentage of children who would qualify for something like this has only increased less than 1 percent in a 15 year period, but in an 18 month period … [increased] 100 percent? Is that an odd correlation with what — is that an odd jump of percentage?”
The JLBC representative responded, “It’s just difficult to say whether it matches up.”
State Representative Nick Cupper (R-Yuma) said he has a developmentally disabled child and uses those services. He expressed his disappointment that the agencies didn’t show up for the hearing, as instructed by Hobbs not to attend.
State Representative Neal Carter (R-Maricopa) emphasized the enormous extra cost.
“But when you look at these overall, and you look at the federal match, the total cost for fiscal year 2026 is about four and a half billion dollars, which of course, represents almost … a quarter of this state’s entire budget,” he said.
Gress pointed out that DES will implement the 40-hour cap on July 1. He said it could have been implemented as of October 1 last year. He said the number of children receiving authorized hours increased from 10 percent to 40 percent after the COVID-19 pandemic ended.
State Representative Justin Olson (R-Mesa) said, “I think it’s critical for us to recognize that the governor spent funds that were not authorized. The legislature did not appropriate funds to cover this program that was previously funded by federal dollars. … She agreed to the negotiated budget that did not include that fund, and now she continued to expand the funds that were not appropriated on this program. … Now I think that the funds and that program should be better by directing those that fill the needs of this critical agency that the governor has bankrupted because of her decision, funds that were incorporated on a program that was not authorized.”
Sean McCarthy, director of Fiscal Policy for the State House, said the program grew from 17,000 members in 1999 to 59,000 members today. He said the growth was almost all for children with autism or at risk. He said the increase in autistic children participating was 200 percent. He said the numbers are “on track to north of $4 billion next year,” and with growth could be over $5 million.
Gress added, looking at one of the charts presented, “This is the end of 2023 and through the period of 2024, the calendar year 2024 is when you see the growth of the PPC program go from about 3,500 members to over 7,000 members.”
McCarthy said about the charts, “It shows that the attendant care hours in fiscal year 2018 were 862,000, and today are at 6.9 million. …There’s 6,400 parents roughly in PPC providing services to 7,424 EDD members with 17 percent, or about 1,000 receiving more than 40 hours. And again, this, this data is from essentially fall of last year.”
State Representative Michael Way (R-Queen Creek) said the governor telling people not to show up for the hearing was “a slap in the face.”
Gress concluded the meeting with a vote on findings offered by Olson regarding the mismanagement, which passed. “There will be accountability for Governor Hobbs and her administration,” he said.
Prosecutors are currently investigating other allegations of mismanagement by Hobbs involving an alleged pay-to-play scheme. Â She significantly increased the rate paid to just one group home provider for foster children, Sunshine Residential Homes, after the provider made a $100,000 donation to her inauguration festivities.
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Rachel Alexander is a reporter at The Arizona Sun Times and The Star News Network. Follow Rachel on Twitter / X. Email tips to [email protected].
Photo “Katie Hobbs” by Gage Skidmore. CC BY-SA 2.0.
