Arizona lawmakers are now investigating Governor Katie Hobbs after $339M apparently "disappeared” from the State budget. Hobbs's Director, of the Governor’s Office of Strategic Planning and Budgeting, Sarah Brown, mysteriously resigned on January 29th.
State Senator Alex Kolodin issued notice to Hobbs stating, "Imagine my shock when the Legislature was informed the State has several insolvent agencies and requires a $339 million bailout to close out the current Fiscal Year. Since your liaisons dedicated to briefing members of the Legislature failed to provide detail on how we got here, I am putting my request in writing: Arizonans deserve to know the details. Why did you mislead the legislature about the spending you intended to approve? In just two weeks' time, I've learned that the problem has worsened and that your office's request is now $350 million!" Kolodin also accused Hobbs of not accounting for known state liabilities, such as $60 million for Arizona schools.
Arizona faced a budget shortfall that was initially estimated to double from $850 million to $1.7 billion for the fiscal year 2025, according to reports from early 2024. However, by February 2025, the focus shifted to an immediate shortfall where state agencies were reportedly insolvent and required a $339 million bailout to close the fiscal year.
The controversy largely stemmed from an expansion of the Arizona Health Care Cost Containment System (AHCCS), the state's Medicaid agency, which was not disclosed during budget discussions. This unilateral action by Hobbs' administration was said to have led to significant financial shortfalls.
Another point of contention over the budget is Hobbs’ proposal to reduce funding for Arizona’s Empowerment Scholarship Accounts (ESAs). She wants to implement an income cap, gradually decreasing state funds for families earning over $100K annually, with a cutoff income of $200K.
Posts on X and various news outlets reported on the situation, with some accusing Hobbs of financial mismanagement or even corruption. The sentiment on social media was largely critical, with calls for further investigation and audits of Hobbs' administration.
House Appropriations Committee Chairman David Livingston expressed significant concerns about the proposed budget, stating, “The budget proposal you’ve presented does not add up.” Livingston pointed to an additional $864 million in expenses, $340 million in supplemental costs, and numerous mistakes. “As it stands, we’re nowhere near a realistic solution. At this rate, when July 1 arrives, state agencies will face shutdowns. The gap between the executive branch and legislative leadership is far too wide, and significant work is needed to bridge it.” he added.
House Speaker Steve Montenegro told the Arizona Globe, “I expressed my disappointment in this budget proposal. Now, every time I turn a page, more troubling issues emerge. This fundamentally flawed, bankrupt budget demonstrates a tremendous lack of leadership on the Governor’s part.”
State Representative Matt Gress told the Globe, “We’re in this situation because Governor Hobbs made unilateral decisions around contracts for a subset of services after being told to wait until the Legislature comes back into session to consider adjustments. As a result, she has now threatened government services for individuals with developmental disabilities and children who are in our care.”
”Arizona House Republicans are committed to delivering a responsible budget that Preserves the American Dream and prioritizes Arizona citizens - not reckless spending.” they posted on Twitter/X in response.
This
wasn't the first financial controversy associated with
Hobbs, who had previously been investigated
by both Democrats and Republicans for accepting significant donations from a
dark money group used for her 2023 inaugural events, which reportedly
influenced state contract decisions.