The state ceased imposing mandatory guardrails for parent caregiver payouts nearly a year ago.
The year of potentially runaway spending may have wasted nearly half a billion dollars, a new report from the auditor general revealed.
The audit found that the Arizona Health Care Cost Containment System (AHCCCS) and the Department of Economic Security (DES) had failed to implement cost-control requirements to the Arizona Long Term Care Services (ALTCS) program, within which is one of the biggest program costs: the Parents as Paid Caregivers (PPC) service delivery model.
PPC was established during COVID with substantial funding from the federal government, initially with the intent of being a temporary program. However, stakeholders desired permanence for the program when those pandemic dollars ran out. Gov. Katie Hobbs received approval from the Biden administration to make PPC permanent in 2024, which required Arizona to cover more than a third of the costs.
According to the audit, AHCCCS and DES leadership acted contrary to state law in order to implement laws how and when they saw fit, not how and when it was required of them.
One of the main cost-control requirements the agencies failed to implement was the standardized assessment tool.
AHCCCS suspended the tool in mid-October 2025, 16 days after initiating it according to state law. Those assessments made between Oct. 1 and 16, 2025, were reversed.
As a consequence, the auditor general estimated that the agency failed to realize between $133 million and $493 million in potential cost reduction “risking additional cost increases and shortfalls.”
DES was forced to request $83 million in supplemental appropriation from the state legislature for fiscal year 2026 as a consequence.
The threat of legal action reportedly prompted the agency to buck state law.
“AHCCCS reported that it halted implementation due to the threat of litigation and instead of implementing the policies it created it decided to engage in emergency rulemaking,” reported the audit.
The auditor general did assess that the tool lacked the ability to contain costs in the long term, and suggested legislative changes and federal approval.
The audit also reported that AHCCCS and DES failed to fully implement other cost-control measures, including executing processes to ensure parents reside in the state for at least six months prior to becoming paid caregivers, and prohibiting payments for parent-provided services between 10 p.m. and 6 a.m. and when the child isn’t home.
Further, AHCCCS and DES were found to have not enforced the 40-hour limit on parent-provided care until April of this year. The agencies were required to implement that limit back in July 2025. The audit found this delay caused DES to overpay some parents.
AHCCCS and DES ignored the law by delaying the limit for 10 months to avoid penalizing parents.
“[D]espite lacking the authority to do so, [the agencies] delayed enforcing the requirement because [they] sought to increase compliance through an educational and not punitive approach,” stated the audit.
The audit also found that DES was inconsistent about maintaining member records and ensuring the accuracy of member assessments. The auditor general warned that the former could result in unsupported service authorizations and impair payment oversight, and the latter could result in incorrect payments, waste, and mismatched service authorizations.
The auditor general issued 11 recommendations:
Implement the required standardized assessment tool
Continue developing a formally documented Extraordinary Care Review process
Develop and implement a procedure to seek legal counsel prior to programmatic changes
Develop and implement all required cost controls and oversight processes to ensure functionality
Update monitoring processes to ensure timely oversight of compliance with contractual and statutory obligations related to ALTCS and PPCG
Require provision of timely access to utilization and vendor payment records
Develop and implement regular assessments of the 40-hour limit
Establish corrective action requirements for lack of enforcement concerning 40-hour limit
Conduct an analysis to identify additional cost-control measures to improve ALTCS finances
Implement any additional cost controls for ALTCS as discovered with aid of governor’s office and CMS
Notify the legislature of analysis results and plan of action
Roberta Harrison, AHCCCS interim director, responded that she disagreed with the auditor general’s findings but promised to implement the 11 recommendations. Harrison cited federal Medicaid requirements, legal and procedural considerations, data limitations, and implementation timelines as hindering agency compliance.
DES agreed with one of the findings, that required cost-control measures weren’t fully implemented, and disagreed with the other three. DES agreed to implement all but five of the 20 recommendations.
The auditor general’s office plans to follow up with AHCCCS and DES in six months’ time.
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Gov. Katie Hobbs vetoed legislation that would have established financial transparency requirements tied to an alleged pay-to-play scandal involving her administration.
Hobbs called the legislation, SB 1186, a “political stunt” against her in a veto letter. The governor issued her veto last Friday as part of her office’s regular legislative action updates.
The governor also claimed that her proposed amendment to the financial disclosure reform bill — carried by Senate Minority Leader Priya Sundareshan (D-LD18) — was superior to what was vetoed by her.
“As I have made clear, this proposal is a political stunt that applies only to one elected official, when what we really need is real transparency and accountability for all elected officials, campaigns, and affiliated political committees,” said Hobbs. “Transparency and accountability are priorities I have acted on from day one.”
The Hobbs-Sundareshan amendment would have restricted lawmakers from receiving donations from state contract bidders.
Senate President Pro Tempore T.J. Shope (R-LD16), the bill sponsor, explained to Capitol Media Services that the governor’s office, not the legislature, handles procurement, and that the amendment would have weakened the legislation.
SB 1186 would have required companies holding or seeking state contracts and certain grants to disclose anything of value provided in the preceding five years to the governor or the governor’s campaign-related entities, inaugural funds, joint fundraising committees, and organizations supporting the governor or opposing the governor’s political opponents.
The bill also would have prohibited state agencies and employees from destroying contract proposal evaluation notes. Contracts tied to improperly destroyed records would be subject to resolicitation.
Multiple entities are investigating Hobbs for the alleged pay-to-play scheme, which involved $400,000 in campaign donations from group home operator Sunshine Residential Homes and a unique, multibillion-dollar rate increase contract nearly 40 percent above the average for other peer contractors, as awarded by the Arizona Health Care Cost Containment System (AHCCCS).
Hobbs was also the only Arizona candidate to receive contributions from Sunshine Residential Homes CEO Simon Kottoor and his wife, Elizabeth Kottoor, during the 2022 and 2024 election cycles.
Several investigations into this alleged scheme are occurring simultaneously: one by Attorney General Kris Mayes, one by Maricopa County Attorney Rachel Mitchell and Auditor General Lindsey Perry, and one by an advisory team within the Arizona House.
The agency told Capitol Media Services that the contract occurred because Sunshine Residential Homes threatened to increase intake of migrant children at the expense of the state’s foster children if it didn’t receive additional funding.
The Arizona Senate GOP stated in a press release that Hobbs had rejected essential safeguards to prevent government officials from rewarding financial supporters with taxpayer-funded contracts.
Shope accused Hobbs of denying Arizona taxpayers the right to transparency from their elected leaders.
“Arizona families work hard for every dollar they send to the government. They have every right to know whether companies seeking millions or even billions of taxpayer dollars have financial or political ties to the Governor’s inner circle before contracts are awarded, not after another scandal makes headlines,” said Shope. “If state contracting decisions are truly being made fairly and on merit alone, transparency should not be controversial.”
AZ Free News is your #1 source for Arizona news and politics. You can send us news tips using this link.
Arizona lawmakers have approved legislation sponsored by Senator Hildy Angius (R-LD30) aimed at strengthening care for individuals living with serious mental illness while improving public safety and long-term stability across the state.
Senate Bill 1630, the Seriously Mentally Ill Enhanced Residential Treatment Pilot Program, passed the Arizona Senate by a bipartisan vote of 28-1 and cleared the House on a 42-13 vote. The legislation was transmitted to Governor Katie Hobbs on June 12.
The bill establishes a three-year pilot program designed to provide enhanced residential treatment options for adults with severe and persistent mental illness who require a higher level of care than traditional outpatient services can provide.
The program seeks to address a longstanding gap in Arizona’s behavioral health system by offering structured support to individuals at risk of repeated psychiatric crises, hospitalization, incarceration, and homelessness.
Under the legislation, the Arizona Health Care Cost Containment System (AHCCCS) would administer the pilot program, subject to approval by the federal Centers for Medicare and Medicaid Services (CMS). The program would initially serve up to 60 eligible participants statewide, with the possibility of future expansion if data demonstrates reduced utilization of high-cost services and overall cost savings.
🚨FOR IMMEDIATE RELEASE: Senator Angius Advances Bipartisan Health Care Reform Legislation to the Governor
“For too long, Arizona has lacked adequate options for some of our most vulnerable seriously mentally ill individuals who need more support than traditional outpatient services can provide but do not belong cycling endlessly between emergency rooms, jails, homelessness, and crisis facilities,” stated Senator Angius. “These are often individuals whose conditions have become so severe that they cannot safely care for themselves, maintain stable housing, manage complex medications, or consistently participate in treatment without significant support.”
The legislation creates a new category of licensed facilities known as Enhanced Residential Treatment Facilities. These facilities would provide behavioral health treatment, health-related services, and around-the-clock structured support for individuals who have been determined to be seriously mentally ill under Arizona law.
Services available through the facilities would include continuous supervision, medication administration and monitoring, crisis intervention, case management, treatment planning, social skills development, budgeting assistance, and other support services designed to help residents maintain stability and improve long-term outcomes.
Eligibility for the pilot program would be limited to Arizona adults who have been designated as seriously mentally ill and meet specific clinical and financial requirements. Priority would be given to individuals experiencing the most significant challenges, including those under court-ordered treatment, those under legal guardianship due to psychiatric incapacity, individuals recently released from correctional or behavioral health facilities individuals experiencing homelessness or at risk of homelessness, and those with repeated psychiatric hospitalizations or crisis episodes.
The legislation also requires comprehensive service planning, annual medical necessity reviews, stakeholder input during implementation, and annual reporting to state leaders on outcomes such as housing stability, hospitalization rates, crisis service utilization, emergency department visits, jail involvement, and fiscal impacts.
Providers would be required to document behavioral interventions and develop transition and discharge plans before releasing participants from treatment, helping prevent individuals from being discharged into unstable or unsafe situations.
If approved by Governor Hobbs, the pilot program would take effect for three years following federal approval, with enrollment beginning no later than one year after federal authorization is granted.
“SB 1630 creates a pathway for enhanced residential treatment that focuses on stability, accountability, and longterm recovery,” said Angius. “Just as importantly, it helps prevent dangerous situations where individuals experiencing severe psychiatric crises are released back into the community without the structure and services necessary to protect themselves and those around them. This legislation is about compassion, public safety, and finally addressing a gap in Arizona’s behavioral health system that families, caregivers, law enforcement, and providers have been struggling with for years.”
Ethan Faverino is a reporter for AZ Free News. You can send him news tips using this link.
A bipartisan bill aimed at reducing overlapping health care regulations and establishing statewide standards for behavioral health technicians is headed to Gov. Katie Hobbs after clearing the Arizona Legislature with broad support.
SB 1162, sponsored by Sen. Hildy Angius (R-LD30), would require the Arizona Department of Health Services (ADHS) and the Arizona Health Care Cost Containment System (AHCCCS) to review duplicative licensing, compliance, inspection, auditing, and reporting requirements affecting health care institutions.
SB 1162 passed the Senate on final reading Tuesday in a 28-1 vote after previously passing the House in April by a 49-8 vote. The bill was transmitted to the governor on Wednesday.
🚨FOR IMMEDIATE RELEASE: Senator Angius Advances Bipartisan Health Care Reform Legislation to the Governor
Angius said the measure is intended to reduce duplicative regulation while maintaining oversight and patient safety.
“Government works best when it focuses on protecting people, not creating layers of unnecessary bureaucracy,” Angius said in a statement. “SB 1162 takes a commonsense approach by identifying regulatory overlap between state agencies and reducing administrative burdens that pull health care providers away from patient care.”
Under the bill, ADHS and AHCCCS would be required to review areas of overlap involving licensing, certification, enrollment requirements, on-site surveys, inspections, audits, compliance activities, data collection, reporting requirements, corrective action processes, and enforcement procedures applicable to health care institutions.
The legislation directs the two agencies to identify opportunities to eliminate or reduce duplicative, redundant, or inconsistent requirements while maintaining patient safety and regulatory oversight. It also requires the agencies to coordinate or align policies, procedures, and operational practices to minimize administrative burdens on health care institutions.
The bill states that nothing in the measure requires action inconsistent with federal Medicaid conditions of participation, conditions of payment, or other applicable federal requirements.
SB 1162 would also require ADHS to submit a written report to the House and Senate Health and Human Services committees by Dec. 31, 2026, and every four years thereafter. The report must summarize the review’s findings, identify any duplication or overlap, and include recommendations for statutory, regulatory, or administrative changes.
The measure also adds a new article to state law governing behavioral health technicians. Under the bill, a behavioral health technician must be at least 18 years old, possess a high school diploma or equivalent, and successfully complete required background checks before serving in the role.
Before providing supervised direct services, behavioral health technicians would be required to complete training covering behavioral health system orientation, confidentiality and compliance, professional boundaries and ethics, crisis response and de-escalation, and trauma-informed and recovery-oriented care.
The bill defines a behavioral health technician as a person employed by a behavioral health facility or a hospital authorized to provide psychiatric services who provides behavioral health services under the supervision or clinical oversight of a licensed behavioral health professional or a registered nurse working within the nurse’s scope of practice.
The legislation also limits behavioral health technicians to delegated clinical and support functions consistent with their demonstrated training and competence, as well as the policies and procedures of the employing behavioral health facility or hospital.
The House summary of the bill states that a behavioral health technician would not be authorized to diagnose medical or behavioral health conditions, prescribe medications, or provide services beyond those delegated and supervised by a licensed behavioral health professional or licensed registered nurse.
“At the same time, this legislation strengthens standards for behavioral health technicians who play a critical role in serving some of Arizona’s most vulnerable individuals,” Angius said. “Patients deserve qualified professionals, clear accountability, and a behavioral health system that puts care first.”
SB 1162 was first introduced in January and received unanimous support in the Senate Health and Human Services Committee. It passed the Senate in March on a 29-0 vote before being amended in the House. After the House approved the amended bill, the Senate concurred with the changes on Tuesday.
Sen. Angius’ bill now awaits action from Gov. Hobbs.
Arizona Senate Republicans announced on Monday that they passed a $17.9 billion budget for fiscal year 2027 that includes $1.45 billion in tax relief over four years and spends approximately $800 million less than Governor Katie Hobbs’ proposal.
The budget, approved by the Legislature and sent to Hobbs, is based on updated April revenue projections that showed a $200 million decrease in available resources.
According to Senate Republicans, the plan includes a series of tax changes intended to provide cost-of-living relief, including eliminating state taxes on tips and overtime pay, increasing the standard deduction, allowing full deductions for child-care expenses, increasing the dependent tax credit by $25, and creating a $6,000 deduction for seniors age 60 and older with retirement or pension income.
🚨FOR IMMEDIATE RELEASE: Senate Republicans Pass Historic $1.45 Billion Tax Relief Budget- Delivering Permanent Affordability for Families, Workers and Seniors While Protecting Core Services
The proposal also includes conformity with federal tax policy changes associated with Donald Trump’s tax cuts, which the Senate said would ensure Arizona taxpayers do not need to refile their 2025 state tax returns.
“This is a serious, disciplined budget that puts Arizona families first,” Senate President Warren Petersen (R-LD14) said in a statement. “We cut taxes, protect essential services, and base every decision on real April revenue projections — not wishful thinking.”
He added, “In divided government, we faced the math, eliminated waste through targeted reforms, and delivered real results without raising taxes or growing government.”
The budget maintains current funding levels for K-12 education and public safety, preserves the voter-protected K-12 State Land Trust, and limits overall spending growth to 1.9 percent.
To address the projected shortfall, Senate Republicans said the plan includes policy changes aimed at reducing spending, including enhanced eligibility verification in public assistance programs such as the Arizona Health Care Cost Containment System (AHCCCS) and the Supplemental Nutrition Assistance Program (SNAP), a 5% reduction in agency operating budgets excluding public safety and child welfare agencies, and the repeal of certain tax credits and subsidies, including solar incentives.
The budget does not reduce base pay for Arizona Department of Public Safety troopers or firefighters and does not modify existing data center incentives previously signed into law.
The plan also includes $4.75 million in emergency funding for the Department of Public Safety, which Senate Republicans said the agency had requested and that the governor had previously vetoed as a standalone bill.
The Arizona Senate Republican Caucus said the budget reflects the constraints of divided government and relies on no new taxes or fees.
“This budget reflects the reality of divided government,” Petersen said. “While Democrats were on the floor today saying we need to raise taxes, we are instead delivering historic tax relief without burdening taxpayers. Your business and your wallet are on the ballot this fall. Vote wisely.”
The proposal now awaits Hobbs’ action.
House Speaker Steve Montenegro (R-LD29), Petersen, and other legislative Republican leaders are scheduled to hold a press conference on Tuesday at 1 p.m., according to a media advisory, to highlight the budget and urge Hobbs to sign the legislation.
