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Hobbs vetoes bill that would have cut Arizona agencies' budgets for late financial reports

Gov. Katie Hobbs vetoed a bill that would have punished Arizona agencies that are late to file reports on how they spend federal funds.

Agencies are required to file that information with the Arizona Auditor General, which creates reports showing whether the state is complying with federal rules governing the use of money it sends to states.

Nicole Bartlett, an audit manager with the Auditor General’s Office, told lawmakers on the Joint Legislative Audit Committee in December that many agencies have yet to recover from reporting delays stemming from the COVID-19 pandemic, when government operations were interrupted and the federal government sent unprecedented amounts of COVID-19 relief money to states.

“The COVID-19 pandemic impacted the state in many ways, including providing additional monies and creating new programs that had to be administered in short time frames with limited or changing federal guidance and complexity, state agencies had not seen before,” Bartlett said.

According to the Auditor General’s records, the Arizona Department of Administration and other state agencies missed deadlines by as many as 300 days between 2020 and 2023.

Bartlett told lawmakers that the federal government extended reporting deadlines coming out of the pandemic but that it is ending that practice.

And Rep. Matt Gress (R-Phoenix), who served as budget director under former Gov. Doug Ducey, said continuing to miss those deadlines could affect the state’s credit rating and jeopardize federal funding.

Just under two months after that audit subcommittee meeting, Sen. Anthony Kern (R-Glendale) introduced a bill to impose financial penalties on state agencies that are late to file reports with the Auditor General. 

That bill — which would have deducted from an agency’s budget the equivalent of 1% of the amount of federal funds it received every year for every 30 days the agency is late — passed out of the Arizona Senate and House with only Republican votes. Kern said that bill is needed to prompt agencies to act faster to fix the problems.

“I think if we poke at their budget a little, they’ll care a little bit more,” Kern said during a committee meeting in February. 

Sen. Priya Sundareshan (D-Tucson) questioned the need for the bill in that meeting, saying agencies have a plan in place to correct the issue this year.

Hobbs, the Democratic governor, agreed.

In a veto letter, Hobbs blamed the delays on “a once in a generation influx of federal funding," and the prior administration under Ducey, a Republican.

"The reporting delays experienced in the single audit were inherited from the previous administration," Hobbs wrote. "Our agencies are working diligently to rectify the extended reporting timeline."

Here are all the bills Arizona Gov. Katie Hobbs vetoed in 2024

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Wayne Schutsky is a broadcast field correspondent covering Arizona politics on KJZZ. He has over a decade of experience as a journalist reporting on local communities in Arizona and the state Capitol.