Arizona Attorney General Kris Mayes announced Friday that state prosecutors will not file criminal charges against Governor Katie Hobbs over allegations of a pay-to-play scheme involving a group home company. The investigation centered on claims that Sunshine Residential Homes received a rate increase after contributing $100,000 to Hobbs' inaugural celebration.
Mayes stated that the investigation did not uncover evidence of the necessary quid pro quo to support a bribery charge. While declining to pursue criminal charges, Mayes indicated that the situation highlights a need for legislative reform regarding the transparency of political donations from state contractors, urging Hobbs and the Legislature to implement improvements.
Hobbs, a Democrat, has denied any wrongdoing, asserting she was not involved in the decision to grant the rate increase. The allegations emerged after The Arizona Republic reported that Sunshine Residential Homes received a 30% payment increase, while only one other company received an increase during the 2022-2023 contracting period.
According to records, Sunshine Residential Homes contributed $200,000 to the state Democratic Party in the months before Hobbs' November 2022 election. After her victory, the company donated another $100,000 to Hobbs' inaugural fund shortly before she took office in 2023, and an additional $100,000 to the party in August 2023. The company's founder and his wife also made individual contributions to Hobbs' gubernatorial campaigns.
Sunshine initially sought a rate increase in 2022 but was denied. The company reapplied and was approved in May 2023, raising its rate from $149 to $195 per bed. The Arizona Department of Child Safety stated that Sunshine had indicated it would reduce its bed capacity if the rate increase was not approved, and instead would house unaccompanied immigrant children for the federal government, which was offering nearly double the state's reimbursement rate for such services.
The potential loss of Sunshine's approximately 290 beds across 28 homes was a significant concern for the state's child welfare system, particularly its ability to place children and keep siblings together. The agency noted that the then-DCS Director David Lujan approved the increase, and that the governor and her staff were not involved. All providers with existing contracts received rate increases in a subsequent round of contracts in 2024, when Sunshine's rate increased again to $234 per bed.
The group home company had also come under scrutiny related to the care of a 9-year-old boy who died in a Sunshine home in December 2022. A lawsuit alleges negligence by child welfare authorities and Sunshine in managing the child's Type 1 diabetes, which led to his death. The county attorney's office has an ongoing criminal investigation into the boy's death, but no charges have been filed.
Mayes, a Democrat, initiated her office's investigation, and a separate inquiry by Republican Maricopa County Attorney Rachel Mitchell and the state auditor general is reportedly ongoing. It remains unclear how these investigations differ or when they will conclude.