Arizona Gov. Hobbs' attorneys say Ducey issued more than $210 million in ARPA grants illegally
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Attorneys for Gov. Katie Hobbs found that more than $210 million in American Rescue Plan grants issued at the end of the Ducey administration were done so illegally.
A total of 19 non-compete grants were obligated to 16 private organizations in the days after a waiver of the state’s competitive grant process expired, according to the Hobbs administration. Letters to all 16 organizations – including A for Arizona, the Arizona Chamber Foundation and the Arizona Science Center — were sent Feb. 14 notifying them of the error and the grants’ terminations.
“We didn’t have a choice in the matter,” said Sean Behrens, senior counsel to Hobbs. “In the Hobbs administration, we follow the law.”
Behrens attributed the error to the Ducey administration’s rush to spend ARPA dollars in the waning months and days of his term in office. Roughly $950 million in grants were issued in the final quarter of 2022, according to the Hobbs administration.
In most cases, grants funded to non-state, private organizations are subject to competitive solicitation requirements under state law.
But the Ducey administration waived those requirements for nearly a year by extending a waiver first issued during Gov. Doug Ducey’s public health emergency declaration. The initial waiver was extended twice after the emergency declaration ended in March 2022, and ran through Dec. 29.
In the next three days, Ducey’s staff administered $430 million in ARPA grants — some to government entities, which are always exempt from competitive solicitation — including the $210 million in grants at issue.
Behrens said the termination notices were sent in part to protect not just taxpayer dollars, but the organizations who received them — the U.S. Treasury Department could try to claw back those funds if an audit revealed they were illegally administered, he warned.
Hobbs staff promised to reimburse the organizations for any expenses already incurred under the grant.
But going forward, the private entities must reapply for the grants as part of a competitive bidding process — meaning there’s no guarantee that funds promised by Ducey will return.
“No. 1, we’re trying to make sure that there’s intervention on the illegally-executed contracts,” said Murphy Hebert, Hobbs’ director of communications. “And No. 2, we want to make sure that the purported grantees have an opportunity to apply under a legal grant-making program.”
Daniel Scarpinato, a one-time aide to Ducey authorized to speak on the former administration’s behalf, accused Hobbs of meddling with Ducey’s spending priorities.
“This is political. The fact is that the former Gov. Ducey and our team played it by the book with these dollars,” Scarpinato said. It’s disappointing the new governor has decided to use a number of good organizations and good causes … as a political football.”
They seem to have an agenda of wanting to end the contracts,” he added.
If an error was made when Ducey’s staff issued the grants, Scarpinato suggested the Hobbs administration should work with those private organizations to ensure they still receive funding, not pull the rug out from under them.
The development is the latest chapter in a dispute over Ducey’s handling of ARPA dollars. As first reported by the Arizona Agenda, the Ducey administration spent his final days in office rewriting dozens, perhaps hundreds, of contracts between the state and private companies in an effort to prevent Hobbs from canceling those contracts once she took office.
“It’s clear when you look at the amendments that were made by the Ducey administration at the 11th hour that they were trying to bind the hands of the Hobbs administration and prevent them from exercising responsible stewardship of taxpayer funds,” Behrens said. “And that is far short of sound grant-making procedure.”
However, Behrens said language left untouched in the contracts still allows the Hobbs administration to terminate contracts “that are legal but not in the best interest of the state.”
Behrens said staff is moving “as quickly as possible to review all of these contracts for eligibility under the ARPA statutes.”
Scarpinato defended the Ducey administration grants, and said all were administered according to ARPA guidelines.
