Arizona just raised foster care pay rates by 50%. State still needs 1,046 more homes

The Arizona Department of Child Safety is increasing the amount of money families receive for taking care of the state’s foster children.

Gov. Katie Hobbs announced Thursday the department is increasing the daily rate for foster families by 50%. That amounts to an average increase of between $1,000 and $1,700 per child per month depending on the level of care they receive, according to the governor’s office.

The rate increase will affect licensed foster families that care for children 6 and older, including relatives caring for children in the foster system, also called kinship foster families.

According to the governor’s office, the pay increase comes as Arizona faces a shortage of foster care providers that will leave the state in need of an estimated 1,046 additional foster homes over the next 12 months.

Between 2017 and 2025, the number of licensed foster homes in Arizona decreased by 62% and the number of licensed beds fell 62%, according to a press release.

Family-like settings

The pay bump should also support the Hobbs administration’s stated goal of increasing the number of foster children placed in “family-like” settings versus group homes run by operators under contract with DCS.

In January, department officials told state lawmakers that the number of Arizona children in group homes has steadily declined for years. According to the department, that number dropped from 1,995 children in 2021 to 1,732 children in 2024.

The department estimated there would be 1,457 foster children in group homes by 2026.

But, despite that drop, lawmakers had to approve an emergency funds transfer last year to avoid a DCS budget shortfall driven by a jump in the cost of group home care.

The Legislature ultimately approved shifting millions of dollars in the agency’s budget to avoid that shortfall, including $6.5 million from the fund for programs that pay to place children with family members or in foster homes, because those programs were expected to come in under budget.

Group home controversies

Some of that shortfall was driven by a 2018 law that limits federal funding for children in congregate care to 14 days, legislative budget analysts and the department told lawmakers last year.

Before the law went into effect, the state received grant funding to cover 67% of those costs indefinitely, but now the state must cover 100% of the costs for children who remain in a group home for more than 15 days.

In 2021, the state received $45 million in federal reimbursements for children in foster care, some of whom were unaffected by the 2018 law because they were grandfathered in. In 2024, the state received just $5.3 million in reimbursements.

In March, Alex Ong, the deputy director of administration for DCS, also said the costs were driven up by renegotiated contracts that resulted in higher reimbursement rates for a group home provider.

The decision to award higher contract rates to one specific provider, Sunshine Residential Services, has come under greater scrutiny over the past year after the Arizona Republic reported the group home provider donated to Hobbs’ campaign in 2022 and later received substantial rate increases – which has led to ongoing investigations by both Democratic Attorney General Kris Mayes and Republican Maricopa County Attorney Rachel Mitchell.

The Hobbs administration has defended the decision, saying the state could not afford to lose a contract with the state’s largest provider of group home beds.

And the governor has long denied the donations influenced the decision to award the higher rates to Sunshine Residential.

“I did not even know these decisions were being made at the time that they were made,” Hobbs said.

But Republicans have continued to criticize Hobbs, arguing the situation is an example of "pay to play.” House Speaker Montenegro (R-Goodyear) indicated the House will conduct its own investigation, and Senate President Warren Petersen (R-Gilbert) said he supported impeaching the governor.

Meanwhile, Hobbs said she is considering new legislation that will require companies seeking government contracts to disclose political contributions after vetoing a bill last year that would have done that.