Key Points:

• Gov. Katie Hobbs considers state law to disclose political gifts from companies seeking government contracts

• Hobbs previously vetoed similar legislation, calling it a “political stunt”

• Hobbs denies any personal involvement in the decision to raise rates for Sunshine Residential

Gov. Katie Hobbs said she is “looking at proposals” for laws that would ensure the disclosure of political gifts from companies seeking government contracts from Arizona’s 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.

The governor told Capitol Media Services that the proposal by the Coolidge Republican is “a political stunt, nothing more.”

But Shope said on Nov. 13 that his bill was in direct response to a report that Sunshine Residential Homes, which operates group homes for foster children, had been given an unusual rate increase after the company gave $100,000 to the inaugural fund set up by Hobbs. The company separately also gave $300,000 to the Arizona Democratic Party.

Shope told Capitol Media Services that he still believes legislation is needed and is willing to work with Hobbs, but to date he has yet to hear from the governor.

Hobbs’ claim also comes as both Attorney General Kris Mayes and Maricopa County Attorney Rachel Mitchell have opened “pay to play” investigations into the decision in 2023 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, and Shope said he is awaiting updates from both officials.

Despite her comments that Shope’s bill is a political stunt, Hobbs said her decision to work on transparency legislation is not a change of heart.

“I’ve always talked about more transparency,” she said. 

Moreover, the governor 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,” Hobbs said.

That’s not true.

State law does require candidates to list who has given donations to their political committees, but that information is useless without some knowledge of what those corporations are seeking in return.

More to the point, 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 actually set up one of those in the midst of her legal battles with Republican Kari Lake over the outcome of the 2022 gubernatorial race.

The only reason the fund even became public is that Pinnacle West Capital Corp., the parent of Arizona Public Service, was required by rules of the Arizona Corporation Commission to disclose that it had donated $100,000. And a spokesman for her campaign refused to disclose who else has given — or even the total amount collected.

Legal defense funds aside, there is nothing in state law requiring disclosure of the money governors collect for the 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. And the Arizona Republic reported that Hobbs personally called Simon Kottoor, the CEO of Sunshine Residential, shortly after winning the 2022 election asking him to be a gold-level sponsor of the event.

And while Hobbs collected $1.5 million in total for the inaugural costs, the event actually cost just $207,000. That left her with an excess that could be used for everything from gifts to visiting dignitaries to flipping control of the Arizona Legislature.

Hobbs deflected questions about her track record on transparency at a Nov. 13 press conference.

“I’m not going to get into details in legislation that we’re looking to propose this year,” Hobbs 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 without disclosing a list of donors to the public.

“I’m not going to talk about details,” Hobbs said.

There is no evidence that the governor was involved in the favorable rate hike for Sunshine Residential. 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 that it was a difficult decision because of Sunshine Residential’s political support for 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 had formerly been a Democratic state lawmaker. “It’s going to raise suspicions.”

Sunshine had sought rate increases in early 2023, but Matthew Stewart, who had been the governor’s first nominee to head DCS, denied them.

Agency spokesman Darren DaRonco said the decision by Lujan to grant the increase in May 2023 came after Sunshine Residential said it would be forced to use empty beds to house immigrant children for the federal government without more money. He said such a move — the feds were paying more than the state — would have meant fewer places for DCS to place its foster children.

And DaRonco said there was a particular need for the beds, especially since Sunshine had 70% of the beds the agency used to place siblings together.

At a press conference and celebration for the 50th anniversary of the Apache helicopter, which is produced in Arizona by Boeing, Hobbs said she doesn’t believe that accepting large donations from corporations puts any state employee in an uncomfortable position regarding state contracts.

“I have always put Arizonans first in every single decision I make,” Hobbs 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 that the governor now says she is interested in addressing the issue. And he’s willing to work with her office — if she wants.

“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 also said, call or not, he is already working with legislative staff to draft a financial disclosure bill he believes Hobbs will sign.