Arizona’s great big rate increase for a group home provider: State officials deny it was pay-for-play; but their own explanation is nearly as bad.

Shortly after taking office as Governor of Arizona, Katie Hobbs announced what could have been a breakthrough: She named a real reformer, Matthew Stewart, to run the state family police agency, the Department of Child Safety. For the first time in decades, the agency would have a leader who understood that the root of Arizona’s child welfare problems was the fact that it tears apart families at a rate well above the national average. That’s compounded by Arizona’s obsession with institutionalizing the children it takes. 

  National Average                      Arizona
                  Source: U.S. Deparrtment of Health and Human Services AFCARS Dashboard               

Indeed, the culture of child removal runs so deep that workers in one office thought they would get away with wearing t-shirts that said: “Professional Kidnapper.” 

Right after the governor named Stewart, I wrote a column for the Arizona Republic praising her decision. “Stewart will need ongoing support from the governor,” I wrote. “It looks like he’s going to get it.” 

Boy, did I ever get that wrong! Just weeks after he was nominated, while on the job but still awaiting a confirmation vote from the State Senate, Hobbs withdrew the nomination and replaced him with David Lujan. 

It’s never been clear why. But one possible explanation has emerged, thanks to some great investigative reporting by the Republic. 

The story recounts this chain of events: 

● Sunshine Residential, an Arizona for-profit operator of group homes, run by Simon Kottoor, donates $300,000 to Hobbs’ campaign and another $100,000 to her inaugural – the latter in response to a personal request from Hobbs herself.

● Sunshine Residential asks for a 30% rate increase. They threaten to refuse children from DCS, claiming they got a better offer from the federal government to house migrant children. Three other providers also seek increases.

● Matthew Stewart says no.

● Stuart is replaced by David Lujan.

● Lujan says yes – to Sunshine Residential.

From the story: 

“We are weak, no leadership, perfect time to get what they want,” Alex Ong, then the head of contracts and procurement at DCS, wrote about the requests from group homes. He wrote to then-Deputy Director Robert Navarro in late January 2023 that it wasn’t the time to approve higher rates. 

“I agree...But when simon gives money to the gov...it can make magic happen,” Navarro responded. 

Later, the Republic reports 

Ong would make an eyebrow-raising comment in May 2023. 

"We gotta pay to play now," he wrote. 

DCS spokesman Darren DaRonco said that comment was not related to group homes but made during a conversation about contracts for supervised visitation in DCS cases. 

Lujan says contributions had nothing to do with the rate increase.  But his own explanation isn’t much better. He says DCS needed the beds that Kottoor was threatening to take away. 

Lujan said Sunshine Residential is one of Arizona’s better group home providers.  As the story explains:

Their work was well-regarded by DCS officials, though the company has also faced scrutiny and is named in an ongoing lawsuit over the death of a 9-year-old boy. The boy, Jakob Blodgett, was allowed to refuse diabetes medication before his death. Earlier this year, pregnant 16-year-old Zariah Finley Dodd was murdered shortly after leaving her placement at a group home run by Sunshine Residential. 

And, using the sleazy argument agencies always use to institutionalize children, Lujan said Sunshine Residential's beds were needed to keep siblings together.

In fact, DCS doesn’t need those beds – from Sunshine Residential or anyone else. Rather, DCS still takes away children at a rate well above the national average, even when rates of family poverty are factored in. Children are more likely, by far, to be torn from their parents in Phoenix than any other of America’s ten largest cities and their surrounding counties when rates of child poverty are factored in. 

And no, that’s not because Arizona is a cesspool of depravity with vastly more child abuse.  

Of all the children torn from their families and thrown into foster care in Arizona in 2024, 89% did not involve even an allegation of physical or sexual abuse. In 59% of cases, there was not involve even an allegation of any form of drug abuse.  Far more common are cases in which family poverty is confused with “neglect.” 

But even more damning than the high rate of needless removal is where the children end up. DCS is obsessed with stashing away the children it takes in so-called “congregate care” – group homes and institutions.  Nationwide, on average, 15% of children taken in 2024 were placed in such settings. In Arizona, it was 41%! 

Stop doing that, and there will be plenty of room in family foster homes for the children who really need them - including sibling groups.

Perhaps Matthew Stewart understood that was the real problem. And perhaps that’s why his tenure was so brief.