Arizona Attorney General Kris Mayes announced Friday that state prosecutors will not file criminal charges against Governor Katie Hobbs (D) following an investigation into allegations of a "pay-to-play" scheme. The inquiry focused on whether a group home company received a state rate increase in exchange for political contributions. Mayes stated that the investigation did not uncover evidence of the necessary "quid pro quo" to support a bribery charge.
The allegations surfaced after reporting by the Arizona Republic showed that Sunshine Residential Homes received a 30% payment increase from the state after contributing $100,000 to the governor's inaugural celebration. The company also contributed to the Arizona Democratic Party and Hobbs’ gubernatorial campaigns. While Mayes declined to file charges, she noted that the situation highlighted a need for legislative reform regarding the transparency of political donations.
Governor Hobbs has denied wrongdoing, stating she was not involved in the decision to grant the rate increase. The Arizona Department of Child Safety (DCS) stated that its then-director, David Lujan, approved the increase independently. According to the agency, Sunshine had requested the increase because the federal government was offering higher reimbursement rates for housing unaccompanied immigrant children, and the state risked losing Sunshine's 290 beds if the rate remained at $149 per bed.
A separate investigation into the matter by Maricopa County Attorney Rachel Mitchell (R) and the state auditor general is still ongoing. In addition to the financial allegations, Republican state Sen. T.J. Shope noted that Sunshine has faced scrutiny regarding the 2022 death of a 9-year-old boy in its care. A lawsuit alleging negligence in that case is currently active, though no criminal charges have been filed in relation to the child's death.
For the residents of Arizona, the scale of the financial transactions involved include $400,000 in total contributions from Sunshine Residential Homes to the governor’s inaugural fund and the state Democratic Party between late 2022 and August 2023. The company’s founder and his wife also contributed $10,000 to Hobbs' campaigns. In turn, the state increased the company's daily rate from $149 to $195 per bed, a $46 increase per bed per day for a provider that manages approximately 290 beds. This rate rose again to $234 per bed in 2024.
The outcome of these investigations and any resulting legislative reforms could change how political donations are reported and how state contracts are awarded in Arizona. For families in the foster care system, the case highlights the operational pressures on group homes, which provide 70% of sibling beds in metropolitan Phoenix. The DCS stated that failing to grant the rate increase would have led to the separation of siblings in the welfare system. Future updates are expected when the Maricopa County Attorney completes her separate review.