For the second straight year, Arizonans with developmental disabilities and their families are caught in the middle of a budget fight at the state Capitol.
Democratic Gov. Katie Hobbs is asking lawmakers to approve $128 million in emergency funding for the Division of Developmental Disabilities, a state Medicaid program that pays for services those families rely on, including caregivers and therapy.
Without that new funding, the program will go bankrupt at some point between April and June, Ben Henderson, Hobbs’ budget director, told lawmakers.
If that warning sounds familiar, it is because Hobbs and lawmakers fought for months over a similar emergency funding request in 2025.
After an intense lobbying effort by the families that rely on the program, Democrats and Republicans reached a compromise last year that tied emergency funding to a set of reforms designed to prevent cost overruns in the future.
New year, same budget crisis
The governor’s office blames the current cost overruns on a higher-than-anticipated increase in care costs and the number of people eligible for coverage, citing a 1,000% increase in qualifying autism diagnoses since 2006.
Hobbs’ proposed budget also cites an increase in the capitation rate, or a fixed amount paid in advance to pay for services.
“I wouldn't use the term bankrupt, but working families, especially those with individual disabilities, have high needs. They do. A lot of families in Arizona are struggling,” Henderson told lawmakers.
But Rep. David Livingston (R-Peoria), who chairs the House committee that considers budget bills, said he is not going to rubber stamp the emergency funding request in the meantime.
“So at this time running that committee, I'm not prepared to move those forward until I understand where we are in the budget,” he said. “I understand the need. I understand the actuary behind it. It just appears that we've had just incredible costs over normal inflation.”
He pointed out that the state’s budget for the program went up by over $600 million in the last budget, and Hobbs is asking for an additional $300 million in next year’s budget. That comes in addition to hundreds of millions in federal matching dollars that also flow into DDD.
“It’s a multibillion-dollar increases that we're trying to help disabled families, but it has to make sure the biggest needs of those families are being met, not all their needs,” Livingston said.
The governor’s explanation, pinning costs on increased enrolment and costs of care, is similar to the explanation her staff gave last year.
For instance, a program that pays parents who act as caregivers for their children dominated that debate.
The program is popular amongst many families who qualify for coverage who have faced problems finding care for their loved ones due to a statewide caregiver shortage
Some advocates argued the shortage had artificially driven down costs, by saving the state money because many families simply couldn’t find someone to care for their loved ones. They said the paid parent program then caused the program’s costs to go back up, because those Arizonans were finally being compensated for the care they were entitled to the whole time.
Next steps
Last year’s compromise included reforms designed to get some of those costs under control, including placing a 40-hour-per-week limit on the paid parent program and banning payments for activities a parent would normally perform anyway, such as laundry or meal preparation.
Part of the deal also required the state to create a new tool to assess children’s eligibility and the services they should receive.
Last fall, Hobbs said AHCCCS, the state’s Medicaid agency, was working with Attorney General Kris Mayes to expedite the rulemaking process required by state law to implement new rules, including the assessment tool.
Henderson said the tool should be in use by the end of June.
Livingston accused the Hobbs administration of slowwalking the process.
“But they could have asked for rulemaking last year during the negotiations a year ago, and they waited until after the session was over, they started implementing it, and then they finally did it,” he said. “So they are way behind in cost cutting.”
The governor’s office denied those allegations, saying AHCCCS is actively seeking approval from the federal Centers for Medicare and Medicaid Services to make cost-saving changes.
“AHCCCS is implementing common sense guardrails to the DDD program while listening to the voices of affected parents, advocates, and providers to save taxpayer dollars while ensuring every member of the DDD program can obtain the health care that they need,” said Hobbs’ spokesman Christian Slater, who accused Livingston of trying to cut critical services for disabled Arizonans.
Hobbs and lawmakers have only a few months to resolve their disagreement before the agency runs out of money.
Rep. Julie Willoughby (R-Chandler), who played a pivotal role in brokering a deal last year, declined to comment on the impasse, saying she is waiting to see more numbers and gather information about the current issue.
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