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.”
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As Sunshine Residential Homes remains at the center of an ongoing investigation into alleged “pay-to-play” conduct involving Gov. Katie Hobbs, public records link founder and CEO Simon Kottoor to a Paradise Valley residence that Zillow estimates is worth nearly $10 million. The property has drawn renewed attention amid scrutiny of Sunshine’s political donations and subsequent state-approved rate increases.
Arizona campaign finance records reviewed by AZ Free News show that Gov. Katie Hobbs was the only Arizona candidate to receive contributions from Simon and Elizabeth Kottoor during the 2022 and 2024 election cycles. Simon Kottoor’s only other recorded contribution to a political candidate was a 2023 donation to New York Democratic congressional candidate Kevin Thomas.
Simon Kottoor founded Sunshine Residential Homes (formerly Sunshine Group Homes) in 1996, according to the company’s website. Sunshine says it provides congregate foster placements for Arizona children, has served more than 25,000 children since its founding, and currently has more than 300 children in care with approximately 200 employees.
Maricopa County property records reviewed by AZ Free News list the residence under the Kottoor Family Trust, with Simon M. Kottoor and Elizabeth Kottoor named as trustees. AZ Free News has withheld the street address from publication.
Zillow describes the property as a 7,719-square-foot, five-bedroom, six-bathroom home on 1.08 acres and estimates its value at approximately $9.53 million. Realtor.com estimates the property’s value at about $8.71 million and reports it last sold for $1.55 million in 2020.
Sunshine Residential Homes and Kottoor have faced scrutiny over political donations connected to Hobbs and subsequent state-approved rate increases. The Arizona Republic reported in June 2024 that Sunshine Residential Homes received a large rate hike from the Arizona Department of Child Safety (DCS) after making six-figure contributions to Hobbs’ inauguration fund and the Arizona Democratic Party. The outlet reported that Sunshine applied for a rate increase in December 2022, was denied in February 2023, then applied again in May 2023 and was approved, citing DCS records.
The Republicreported in July 2024 that both the Kottoors’ and Sunshine Residential Homes’ donations to Hobbs and the Arizona Democratic Party amounted to approximately $420,000 from 2022-2024.
According to the Arizona Capitol Times, Sunshine Residential Homes gave $100,000 to Hobbs’ inaugural fund and separately gave $300,000 to the Arizona Democratic Party. The outlet also reported that the Arizona Republic found Hobbs personally called Kottoor shortly after winning the 2022 election and asked him to serve as a gold-level sponsor of her inauguration. The same report said the Department of Child Safety later increased payments to Sunshine in 2023 to nearly 40 percent above the average for other group homes.
Kottoor was also on Hobbs’ inaugural committee, and he and his wife made maximum contributions to Hobbs’ campaign, according to reporting cited by Governing. That report also noted that Hobbs attended a private event at the Kottoor’s Paradise Valley residence.
Calls for investigation from Arizona lawmakers followed within days of the initial reporting.
From @GovernorHobbs spokesperson: "Like every other 'investigation' launched by this chaotic and radical legislature, this is another desperate, partisan stunt. It will do nothing but show the administration put the best interest of Arizona first." https://t.co/taQAZTmb52
The Arizona Attorney General’s Office opened an investigation into the Sunshine Residential matter in June 2024. The office’s public records archive lists communications and records related to the Sunshine Residential Homes investigation, including correspondence with Maricopa County Attorney Rachel Mitchell and Auditor General Lindsey Perry, as well as a criminal referral.
I requested an investigation by the Maricopa County Attorney into Governor Hobbs' alleged "pay to play" scheme. Arizona taxpayers deserve financial accountability. Giving state dollars to political donors is a grave misuse of public funds.
— Arizona Treasurer Kimberly Yee (@AZTreasurerYee) June 10, 2024
Hobbs’ office has denied wrongdoing. Axios reported that Hobbs spokesman Christian Slater said the administration would be “cleared of wrongdoing” and called the allegations partisan. Slater and DCS spokesman Darren DaRonco told Axios that Hobbs and her office had no involvement in agency decisions regarding Sunshine Residential Homes. Sunshine told the Arizona Republic that it remained committed to cooperating with any inquiry, Axios reported.
The investigation remains a prominent political issue in Arizona well into 2026. In April, KJZZ reported that Mayes’ team had asked Hobbs for an interview as part of the investigation and that Hobbs would not publicly commit to sitting for one. KJZZ reported that Hobbs continued to deny wrongdoing.
Republican lawmakers have cited the Sunshine controversy as they advance legislation requiring more disclosure from companies seeking state contracts. The Arizona Senate Republican Caucus announced last week that SB 1186, sponsored by Arizona Senate President Pro-Tempore T.J. Shope (R-LD16), had been sent to Hobbs’ desk. The bill would require companies seeking taxpayer-funded contracts and grants to disclose political donations, gifts, and other things of value connected to the governor and affiliated political organizations. A House summary of SB 1186 states that the measure establishes disclosure requirements for the request-for-proposal and grant-application processes.
Hobbs announced her own ethics reform proposal in February, calling it a sweeping transparency package intended to strengthen public trust in government. According to the Governor’s Office, the proposal includes a public transparency and disclosure database, contracting reforms, and a lobbyist gift ban.
The Sunshine Residential Homes matter remains under investigation, and no public finding of wrongdoing by Hobbs, Kottoor, or Sunshine Residential Homes has been announced.
Republican lawmakers in the Arizona House are continuing their investigation into Gov. Katie Hobbs over an alleged pay-to-play scheme.
On Monday, House Speaker Steve Montenegro (R-LD29) announced the House advisory team obtained outside counsel from out of state to investigate the connection between Hobbs and a Glendale group home, Sunshine Residential Homes, independently.
Montenegro said in a statement that the connection between the governor and the group home constituted special treatment derived directly from political donations. The lawmaker said that the addition of outside counsel was necessary to achieve the full independence an investigation of this significance needed.
“The advisory team has done serious, disciplined work, and their recommendation to bring in independent counsel is the right next step,” said Montenegro. “The House will not look the other way when taxpayer dollars and vulnerable children may have been used as leverage in a political scheme. We will follow the facts, consider the findings, and ensure transparency and accountability in state government. Arizonans deserve nothing less.”
The outside counsel is Justin Smith with the Missouri-based James Otis Law Group. The law group was founded by Trump’s solicitor general, D. John Sauer.
Smith is the listed counsel in President Donald Trump’s lawsuit against a woman, E. Jean Carroll, alleging battery and defamation. Carroll sued Trump for defamation after he publicly denied her 2019 claims of him sexually assaulting her in the 1990s.
According to Montenegro, Smith will conduct records review and interviews. All findings will go directly to the advisory team and House leadership.
Advisory team members are State Reps. Selina Bliss (R-LD1), David Livingston (R-LD28), Matt Gress (R-LD4), Quang Nguyen (R-LD1), and Neal Carter (R-LD15).
Last November, that advisory team was created to follow up on 2024 media reporting alleging the pay-to-play scheme within the Arizona Department of Child Safety under Hobbs’ direction.
In the summer of 2024, the Arizona Republic reported that Sunshine Residential Homes received a unique 30% rate increase following a donation exceeding $400,000 to Hobbs and the Arizona Democratic Party.
Much of 2024 was spent attempting to determine who, if anyone, was fit to conduct an investigation into the allegations against the governor.
One of the earliest requests came from Republican State Sen. T.J. Shope, who asked Attorney General Kris Mayes to investigate. Mayes complied initially, but was immediately hit with other Republican lawmakers and state leaders asking her to recuse herself due to an alleged conflict of interest.
State Rep. Matt Gress asked Maricopa County Attorney Rachel Mitchell and Auditor General Lindsey Perry to investigate.
All three leaders are investigating. Mitchell and Perry are coordinating on one investigation, while Mayes will conduct her own investigation.
As reported last November, the work of the House’s advisory team will coordinate with these parallel investigations by the auditor general and county attorney, and the attorney general.
In February 2024, Sunshine Residential Homes owners Elizabeth and Simon Kottoor maxed out their donations to Hobbs’ reelection campaign. Each gave the maximum $5,400 contribution amount.
In October 2022, the Kottoors gave Hobbs’ initial gubernatorial campaign $10,000.
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