A judge temporarily blocked the state from using funds obtained from settlements with pharmaceutical companies to balance the state budget after Attorney General Kris Mayes filed a lawsuit against Gov. Katie Hobbs’ administration.
According to the Attorney General’s Office, Arizonans are entitled to $1.14 billion from 10 settlements. That money will be distributed over the next 18 years, with 44% sent to the state and 56% sent to local governments.
Mayes and Hobbs, both Democrats, are at odds over sections of the budget that allocate over $115 million from those settlements to state agencies to offset a projected $1.4 billion budget deficit.
According to budget documents, most of that money would be sent to the Arizona Department of Corrections to pay for “for care, treatment, programs and other expenditures for individuals with opioid use disorder and any co-occurring substance use disorder or mental health conditions” or other uses approved in a court order or settlement agreements.
The budget also sends $3 million to the Department of Emergency and Military Affairs to assist local law enforcement with fentanyl interdiction and $1 million to the Department of Health Services’ “opioid remediation fund.”
The inclusion of that money in the budget caused a rift among Democratic officials.
“This is blood money,” said Sen. Christine Marsh (D-Phoenix), whose son died of a fentanyl overdose. “Whether it’s legal or not, using the money in this way is unethical.”
During the budget vote, Marsh made a failed attempt to replace the funding from opioid settlements with money from the state’s budget stabilization fund, also called the rainy-day fund, which has a balance of about $1.4 billion.
Shortly after budget documents became public last week, Mayes also said she was opposed to the move, arguing it would violate the terms of the settlement agreements between the state and the pharmaceutical companies, which spell out the specific ways the money can be spent to address the effects of the opioid crisis.
She said violating those terms could put those settlements in jeopardy and risk losing future dollars coming to the state and local governments.
“It is a blatantly obvious budgetary accounting gimmick to balance the State budget,” Mayes wrote in a court filing.
In a statement, the governor’s offense disputed Mayes’ characterization, saying the money will be used to address substance abuse issues within the prison population.
“The Attorney General is flatly wrong,” according to the statement from Hobbs’ spokesman Christian Slater. “Her characterization of these funds as ‘backfilling’ ADCRR would be more accurately described as funding vital opioid use disorder treatment for a population that is disproportionately impacted by the opioid epidemic. On her very own website, the Attorney General indicates the funds can be used for opioid treatment at ADCRR.”
Mayes agreed that some of the opioid settlement dollars should go toward addressing opioid addiction among the state’s prison population but wrote the budget sends a disproportionate amount to the prison system. Mayes said she “would not have directed $119,000,000 of the State’s portion of opioid funds to benefit a State agency to the exclusion of all other Arizonans.”
In legal filings, Mayes argued there is no guarantee the agencies receiving the dollars will actually use them for approved uses.
“Instead of spending it on opioid remediation, as required, from what little Plaintiff knows now, all $115 million could end up being spent on beans, bullhorns, and buses with barred windows, the daily grist of the DOC’s mill,” Mayes wrote.
But Slater, the governor’s spokesman, said that isn’t true, citing the language in the budget stating the money will be used to pay for past or current costs related to treatment for opioid use disorder.
“These are all uses that are allowed under the One Arizona Distribution of Settlement Funds Agreement,” Slater said.
Maricopa County Superior Court Commissioner Mary Cronin signed a temporary injunction blocking the state from transferring the $115 million to the Department of Corrections and set a hearing in the case before Judge Scott Minder on June 27. The injunction will expire on July 5.
Mayes said the Legislature and the governor lacked the authority to transfer those funds without her approval, citing court judgments stating “with the advice and consent of the Arizona Legislature … the Attorney General shall direct how and when these funds are used.”
Those judgments relied on a state law governing these types of settlements that declares, “The attorney general shall administer the subaccount.”
However, that law also states that “All monies deposited in the subaccount pursuant to opioid claims-related litigation or settlements are subject to legislative appropriation” – a clause cited by the governor’s office to defend the appropriation.
Senate President Warren Petersen (R-Gilbert) defended the use of the settlement funds.
"We're using the funds as they're intended to be used, to help victims of opioid abuse," he said in a statement. "Additionally, it's the Legislature's job to determine how these funds are disbursed. This bogus lawsuit is yet another example of Attorney General Kris Mayes thinking she's above the law."
Mayes said she sent lawmakers a plan to spend $72.1 million from the opioid settlements in the next fiscal year, which starts on July 1, and said that the budget plan approved by Hobbs and the legislature will not leave enough money in the account to carry out that plan.
