Gov. Katie Hobbs says she is “looking at proposals’’ to enact state law to ensure disclosure when companies seeking government contracts give political gifts to her and future governors.
The move comes six months after she vetoed legislation crafted by Sen. T.J. Shope designed to do exactly that. Senate Bill 1612 would have required anyone submitting a bid to also disclose anything of value that the company and its officers or directors donated in the past five years to the governor or any of the governor’s funds, for elections or other purposes.
Explaining her veto at the time, Hobbs said Shope’s proposal was “a political stunt, nothing more.’’
But Shope said Thursday his bill was in direct response to reporting that Sunshine Residential Homes, which operates group homes for foster children, was granted an unusual rate increase after the company gave $100,000 to an inaugural fund set up by Hobbs. The company separately also gave $300,000 to the Arizona Democratic Party.
Shope, a Coolidge Republican, told Capitol Media Services he still believes legislation is needed and he’s willing to work with the Democratic governor. But he said he has yet to hear from Hobbs.
Hobbs’ claim also comes as both Democratic Attorney General Kris Mayes and Republican Maricopa County Attorney Rachel Mitchell have opened “pay to play’’ investigations into the 2023 decision by the Department of Child Safety, headed by a gubernatorial appointee, to increase its payments to Sunshine to an amount that was nearly 40% higher than the average for other group homes.
Both investigations are ongoing. Shope said he wants an update from both officials.
Despite her comments about Shope’s bill being a political stunt, Hobbs said Thursday that her decision to work on legislation for better financial disclosure is not a change of heart.
Gov. Katie Hobbs gives remarks Thursday at a ceremony to celebrate the 50th year of the Apache Helicopter made in Mesa by Boeing.
“I’ve always talked about more transparency,’’ she said.
She also insisted that what was in Shope’s bill is unnecessary. “It didn’t do anything new that’s not already done,’’ Hobbs said. “All these contributions are already required to be disclosed.”
That’s not true. State law does require candidates to list who has given donations to their political committees. But that is useless without some knowledge that those corporations or owners are pursuing government contracts and who are the officers.
There is no legal requirement for candidates to list who is giving money to any separate “legal defense fund.’’ Nor are there any limits to the size of those donations.
Hobbs set up a legal defense fund in the midst of her legal battles with Republican Kari Lake over the outcome of the 2022 race for governor.
The only reason that fund became public knowledge is because Pinnacle West Capital Corp., the parent of Arizona Public Service, was required by Arizona Corporation Commission rules to disclose it had donated $100,000. A spokesman for Hobbs’ campaign refused to disclose who else donated — or even the total amount collected.
Legal defense funds aside, there is also nothing in state law requiring disclosure of money that governors collect for costs of inauguration, including parties. It was only after the governor’s campaign voluntarily gave Capitol Media Services a list of donors for the 2023 event that the $100,000 from Sunshine Residential was disclosed.
That turned out to be the second-largest donation to the fund, dwarfed only by $250,000 from Pinnacle West. The Arizona Republic reported that Hobbs personally called Simon Kottoor, the CEO of Sunshine Residential, shortly after she won the 2022 election, asking him to be a gold-level sponsor of her inauguration.
Of particular note is that while Hobbs collected $1.5 million in total for the inaugural costs, the event cost just $207,000. That left her with a bunch of money she can spend on everything from gifts to visiting dignitaries to trying to flip control of the Arizona Legislature to the Democrats.
Hobbs deflected questions Thursday about why she says there already is transparency, given the exceptions.
“I’m not going to get into details in legislation that we’re looking to propose this year,’’ she said. “But I can say we’re in support of transparency in government. And we’re going to put forward a package that does that.’’
Nor would the governor say whether she believes that she and other politicians should be able to collect contributions without limits for a legal defense fund and then shield the list of donors from the public.
“I’m not going to talk about details,’’ Hobbs said.
There is no evidence that the governor herself got involved in giving Sunshine Residential a special increase in how much it can charge the state for caring for foster children. That decision was made by David Lujan, who at the time was the director of the Department of Child Safety.
“I did not even know these decisions were being made at the time that they were made,’’ Hobbs said.
But Lujan told The Arizona Republic it was a difficult decision because of Sunshine Residential’s political support of Hobbs.
“It puts, I think, state agency directors, state employees in an uncomfortable position,’’ he said.
“I really tried to make the decision based on what was best for our agency and the children, but of course you’re going to get second-guessed when you have campaign contributions involved,’’ said Lujan, who was formerly a Democratic state lawmaker. “It’s going to raise suspicions.’’
Sunshine had sought rate increases in early 2023, but those were denied by Matthew Stewart, who had been the governor’s first nominee to head DCS.
Agency spokesman Darren DaRonco said the decision by Lujan to grant the increase in May 2023 came after Sunshine said that unless it got more money, it would make more of its beds available to the federal government, which was looking for places for immigrant children. He said such a move — the feds were paying more than the state — would have meant fewer places for DCS to place foster children.
DaRonco said there was a particular need for the beds, especially since Sunshine had 70% of the beds available for placing siblings together.
Hobbs, in Mesa Thursday for the 50th anniversary of the Apache helicopter produced there by Boeing, was asked by reporters about the issue. She said she doesn’t believe that her taking large donations from corporations and their officers puts any state employee in a bad position when it comes to making decisions on state contracts.
“I have always put Arizonans first in every single decision I make,’’ she said. “I expect that from every state employee.’’
Still, the governor acknowledged that her decisions to take large contributions could make some state employees who have to make these decisions uncomfortable.
“Certainly,’’ she said. “That is why we’re looking at a proposal for this next legislative session that will help to address even the perception of undue influence.’’
Shope, for his part, said he is heartened by the fact that Hobbs now says she is interested in doing something to address the issue.
“I will eagerly sit by my phone and await their call on what that something looks like to see if it’s workable,’’ he said. But Shope said, call or not, he already is working with legislative staff to come up with a financial disclosure bill he believes Hobbs will sign.
