Hobbs and GOP Leaders Clash Over Funding Crisis for Group Homes

In a contentious battle over funding for essential services in Arizona, legislative Republicans have accused Governor Katie Hobbs of “financial malfeasance.” Hobbs fired back, alleging that GOP leaders mischaracterized a standard budget transfer to distract from their plans to reduce services for individuals with disabilities.

At a press conference on Monday, Steve Montenegro, the House Speaker, warned that the Department of Child Safety (DCS) could face bankruptcy within the month unless it receives a financial bailout. He attributed this impending crisis to Hobbs’ management of the budget.

Montenegro announced plans for a special Committee on Executive Budget Mismanagement dedicated to investigating what he termed Hobbs’ inept handling of funds for both the DCS and the Division of Developmental Disabilities (DDD), both of which are reportedly nearing fiscal collapse.

“This financial mismanagement threatens the most vulnerable children in our state, and House Republicans will not let this stand,” said Montenegro. “Once again, we are here being told that we have to clean up Governor Hobbs’ mess.”

Responding to the accusations, Christian Slater, a spokesperson for Hobbs, countered that House Republicans distorted a routine funding transfer to shift blame from their own intentions to cut DDD funding. He characterized the claims about DCS nearing insolvency as false.

“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,” Slater wrote in an email statement.

The conflict arose from a proposal by DCS to shift $6.5 million from surplus funds designated for kinship care to resolve a shortfall in congregate care funding, which is essential for group homes catering to foster children. DCS warned that without this transfer, children might face housing disruptions, risking trauma.

The $6.5 million would be used to maintain payment to residential facilities until April 24, according to DCS communications with the Joint Legislative Budget Committee. Slater noted that similar funding transfers had been requested annually since 2016 without previous GOP outcry.

Montenegro responded, questioning the timing of DCS’s announcement regarding its financial woes. “Who waits until 19 days before bankruptcy to tell anybody about it?” he asked.

Cynthia Weiss, a DCS spokesperson, asserted that the department had been transparent about the impending budget shortfall. Weiss highlighted that projections had been communicated in monthly reports to lawmakers since August 2024.

House Republicans have linked DCS’s budget distress to increased payments to Sunshine Residential Homes, whose owners have reportedly made significant political contributions to Hobbs and the Arizona Democratic Party. Both Sunshine Residential and Hobbs are under scrutiny for allegations of a “pay-to-play” scheme.

Weiss clarified that the increased payments were necessary due to the overdue re-bidding of the congregate care contract, which was past its five-year term.

This marks the second major fiscal dispute between the Hobbs administration and legislative Republicans in recent months. In February, Hobbs requested an additional $122 million for DDD services, expected to run out of funds by May. The state’s fiscal year concludes on June 30.

Both sides have traded blame for the funding shortfall, partially attributed to rising costs in the Parents as Paid Caregiver Program. Republican lawmakers accused Hobbs of proceeding with expenditures despite rejecting additional funding for the program in the state budget.

If no funding is approved by late April, DDD could fail to compensate its providers, jeopardizing access to crucial services for thousands of Arizonans with disabilities. Advocates and affected families have rallied for financial support, leading some Republican senators to pledge action on ensuring DDD services continue, though specifics on these plans remain unclear. Representative David Livingston indicated in January that substantial cuts, potentially up to 50%, may be necessary for the program to align with the next year’s budget.