Arizona Gov. Katie Hobbs under investigation for alleged 'pay-to-play' scheme

Arizona Gov. Katie Hobbs is being investigated for an alleged “pay-for-play” scheme after a report revealed a group home business that looks after vulnerable children was approved for a rate hike after it donated to her inauguration and the Arizona Democratic Party.

Arizona Attorney General Kris Mayes, a Democrat, said her office has launched a probe into the matter after receiving a request from state Sen. T.J. Shope, a Republican who is also the Arizona Senate president pro tempore.

The request came after a report in The Arizona Republic showed Sunshine Residential Homes, the operator of group homes for foster kids, was approved for a nearly 60% increase in taxpayer funds via the Arizona Department of Child Safety (DCS) after previously being denied an increase.

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The approval came after the private company donated around $400,000 to Hobbs, including to her campaign and inauguration, as well as to the state Democratic Party, according to the report. 

The publication reported that, since July 2022, group home providers have asked the department at least a dozen times to increase the rate for a standard bed. 

One provider, Ohana Homes, received an increase to $155 a day in September 2022, before Hobbs took office, and then Ohana’s contract was not renewed this year.

Sunshine Residential Homes sought a 20% rate increase in December 2022, to $179 per day, but DCS refused on Feb. 6, 2023, according to records provided by the department cited by The Arizona Republic. 

Then, on Feb. 9, 2023, a $100,000 check from Sunshine was credited to Hobbs’ inaugural campaign. And in May 2023, it secured a rate increase, netting Sunshine Residential $234 per day for standard group home services. It is far higher than the average $169 for other group homes. However, a spokesperson for Hobbs told the publication the payment was made Dec. 15, 2022.

The increase means Sunshine is receiving the most out of dozens of home providers operating in the state, The Arizona Republic reported, citing DCS and state contract records it reviewed.

The publication also reported that no other group home provider has been approved for a rate increase during Hobbs’ tenure. Sunshine requested the increase due to financial hardships amid the COVID-19 pandemic and inflation, according to The Arizona Republic.

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Shope, meanwhile, also sent the letter to Maricopa County Attorney Rachel Mitchell. He says it’s now it’s up to investigators to determine what happened.

“We were talking about millions of dollars, and to know that not many, if any at all, have seen rate increases that large, it was definitely troubling,” Shope said, according to Fox 10 Phoenix. 

The firm’s CEO was on the Hobbs’ inauguration committee.

“I have to believe that they, at the very least, see the allegations the same way that I do, which is troubling at best and possibly worse,” Shope said.

Nick Klingerman, chief counsel of the criminal division in Mayes’ office, said they are obligated to investigate the matter after being notified.

“The Criminal Division of the Attorney General’s Office is statutorily authorized to investigate the allegations and offenses outlined in your letter. To that end, the Attorney General’s Office will be opening an investigation,” he wrote.

A spokesperson for Hobbs’ office denied the accusations in a statement and said the governor’s office played no role in the DCS decision on Sunshine’s pay.

“Just like past investigations instigated by radical and partisan legislators, the administration will be cleared of wrongdoing,” the statement said. “Governor Hobbs is a social worker who has been a champion for Arizona families and kids. It is outrageous to suggest her administration would not do what’s right for children in foster care.”

The move to approve a rate increase to Sunshine Residential Homes came at a time when the state is looking to reduce the use of group homes and move vulnerable children into family settings. For instance, the DCS has denied pay increases to home operators and cut ties of 16 providers during the contract renewal process, The Arizona Republic reported.

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