Republican lawmakers have proposed a bill to provide needed emergency funding for a state Medicaid program for disabled Arizonans that faces stiff opposition from Democrats and the very families served by the program.
The Department of Economic Security’s Division of Developmental Disabilities needs a $122 million cash infusion to avoid running out of money by May. The division administers the Medicaid program that pays for services for Arizonans with disabilities who need long-term care.
While Republicans and Democrats both agreed they should approve that funding to avoid insolvency at a program that serves over 40,000 Arizonans, they have argued for months over the finer points of that deal.
Republicans, who have long said any new funding should include guardrails to curb future spending, released a plan that includes significant cuts to a program that pays parents who act as caregivers for their children.
Republicans argue that the program, which was started during the COVID-19 pandemic, is the primary culprit behind the DDD financial crisis. And legislative budget analysts agreed, saying temporary 100% federal funding for the parents-as-paid-caregivers program expired in March. That is driving up costs, because the state is now responsible for paying about 30% of the program’s expenses.
Cost overruns were also due to higher higher-than-anticipated enrollment and cost of services for the state’s long-term care program, analysts found.
A Republican bill to provide $122 million in emergency funding to DDD would also require Gov. Katie Hobbs’ administration to start the process to limit the payments in the parents-as-paid-caregivers program to 20 hours per child per week in October.
“This crisis didn’t happen overnight. The Hobbs administration expanded programs in DDD without legislative approval and delayed or ignored key program limitations,” House Speaker Steve Montenegro (R-Goodyear) said in a statement. “They now want taxpayers to bail them out — without a plan to fix it. Republicans won’t do that.”
Parents who use the program say that change could be devastating as they try to balance the need to earn income with caring for their children, even though the Republican bill does still allow families to seek additional care from non-parent caregivers.
“If it was cut in half to 20, essentially we would obviously struggle financially,” said Regan Larson, whose daughter requires full-time care.
There is currently no per week limit, but the administration is in the process of implementing a 40 hour per week limit starting on July 1 that was required by the federal Medicaid officials when they gave Hobbs permission in 2024 to make the parent caregivers option permanent.
Right now, Larson’s husband is paid 40 hours per week for the care he provides to their daughter, and Larson is not sure how they will make up that difference due to a shortage of qualified caregivers in the state.
“We’ve also been on the waitlist — I’ve been looking for somebody for years,” Larson said.
Her story is not unique.
“They need to do something about trying to get more providers,” parent Rachel Lack said in response to the Republican bill. “They're not out there. I've looked. My son is 13. We’ve got habilitation hours and we can't find anyone. It's been three months and we can't find anyone to take those habilitation hours.”
House Republicans did not respond to questions about how they developed the 20-hour cap or whether they consulted with families who use the program.
Many parents and advocates have joined Democratic lawmakers in calling for a so-called “clean” funding bill, or sending the money to the Division of Developmental Disabilities without strings attached.
“It’s offensive to these families that have to have this lifeline funding,” said House Minority Leader Nancy Gutierrez (D-Tucson), who sponsored a “clean” supplemental funding bill opposed by Republicans.
But Republicans have long said any supplemental funding package must include spending guardrails, alleging the DDD issue was the result of mismanagement by the Hobbs administration. They say Hobbs continued the parent-as-paid-caregivers program last year even though the legislature did not include funding for it in the budget.
“What we’re doing today is stepping up with a responsible, fully funded solution that protects families, restores order, and keeps this from happening again,” Montenegro said in a statement. “We’re bringing compassion and common sense back into the process. Families deserve stability – not budget chaos and political excuses.”
In addition to the 20-hour limit on the parents-as-paid-caregivers program, House Bill 2945 would require the governor to seek legislative approval before asking federal officials to renew it when the initial approval expires in 2027. And it would require state agencies to gain legislative approval for similar waivers in the future.
It would also require all state agencies to report on their use of federal funds to the legislature, with plans for what they will do if that funding is cut.
The bill also makes good on a Republican promise to make Hobbs fill the DDD funding gap by diverting money away from her other priorities.
The bill would send $122 million to the Division of Developmental Disabilities by redirecting money allocated to other programs, including $74 million from the prescription drug rebate fund and $38 million from the housing trust fund, which helps pay for housing assistance programs and efforts to increase the state’s housing supply. The bill would also pull $10 million from a fund used to attract businesses to Arizona.
Gutierrez, the Democratic lawmaker, said she disagreed with taking the money away from other programs to fill the DDD gap.
“I have a huge issue with robbing poor families that need [the] Housing Trust Fund or that need help with their prescription drugs to then fund this,” she said.
Republicans control both chambers at the Arizona Legislature, so they don’t need Democratic support to pass it.
But the proposal must win the support of at least one Democrat: Hobbs.
A spokesman for the governor did not say whether she would sign the legislation if it makes it to her desk.
“We are still examining the bill,” spokesman Christian Slater said.
He said the governor’s office is holding a listening session with individuals who participate in the parents-as-paid-caregivers program.
“While Republican lawmakers listen to out-of-state politicians instead of their own constituents, the governor values and appreciates hearing from Arizonans before making decisions that will have dramatic impacts on their lives,” Slater said.
