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.

Arizona Gov. Katie Hobbs

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. 

UPDATE:Arizona group home industry tries to take advantage of ouster of the first Black director of the state’s “child welfare” agency.

Hobbs doesn’t go as far as they want, but, for an agency in desperate need of radical change, she chooses someone who promises NOT to do “anything radical.”

Arizona Gov. Katie Hobbs (Photo by Gage Skidmore)

The recap:

 In a previous post to this blog, I wrote about a huge cave-in by Arizona’s Democratic Gov. Katie Hobbs.  She apparently surrenderedto pressure from an extremist Republican legislator, State Sen. Jake Hoffman, and fired Matthew Stewart.  Stewart was, very briefly, the first Black director of the state family police agency, the Department of Child Safety.  Hobbs fired him less than two months after appointing him. 

Stewart had not been confirmed, and Hoffman chairs the committee that would have held the confirmation hearing. 

I wrote about how this was not only a political failure but also a media failure. Arizona media cut-and-pasted Hoffman’s false allegations against Stewart, with no context for either what was alleged or who was alleging it.  The allegations came from a legislator so extreme he was banned from some social media spaces for running a “troll factory.”  Oh, and he’s an election denier – he refuses to even acknowledge that Hobbs is really the governor!  I only know this because ProPublica published a story with the context Arizona media left out.

 Here's what’s new, part one:

 While still failing to provide this context, the Arizona Republic did advance the story a little on Thursday.  They published a story raising questions about whether Stewart was the victim of a campaign by the state’s group home industry.

 The Republic reports that three days after Hobbs fired Stewart, she received a letter from “numerous group home operators” urging her to reinstate Mike Faust, who ran DCS under former Republican Gov. Doug Ducey. Hoffman promptly echoed that call, citing the group home industry letter.

 It’s no wonder they’re so fond of Faust.  Congregate care – group homes and institutions -- is, by far, the worst option for children.  Among all forms of foster care group homes and institutions have the worst record for abusing children in their“care.”  As the Republic story points out: “Under [Faust’s] watch, there were safety issues at several group homes, including last fall, when a foster youth was fatally shot.”  I wrote about another example of Arizona group home failure just last month.

 But even when residents are not physically or sexually abused, group home and institutional care is so inherently harmful that pressure has been growing across the country to get rid of them.  But Arizona lags way behind. The state institutionalizes children at a rate 50% above the national average.  So clearly, the Arizona group home industry had a lot to lose when Hobbs named Stewart, a reformer dedicated to doing more to keep families together, to run DCS.

 The letter from the group home industry came three days after Stewart was fired, so we don’t know if they were urging Hoffman to attack Stewart all along, or if they just saw their opportunity and they took it.

 Responding to Hoffman’s call to bring back Faust, a spokesman for Gov. Hobbs declared that "We won't be taking direction from Hoffman.”  That would be a lot more convincing if they had never thrown Matthew Stewart under the bus in the first place.

Here's what’s new, part two:

While Hobbs did not go as far as the group home industry wanted, she has now made a choice to head the agency that almost guarantees no real change.  Indeed, her choice to run DCS has already promised as much.

Hobbs chose David Lujan, the current head of a group that did an enormous amount to create the current crisis in Arizona child welfare – the so-called “Children’s Action Alliance.”   Even though Arizona tears apart families at a rate 75% above the national average and has one of the nation’s worst records for racial bias, Lujan told the Arizona Republic he plans to assure lawmakers that “I'm not looking to do anything radical at this agency.”

That’s not surprising.

To understand just how much harm the Children’s Action Alliance has done, we need to go back a long way, to another failure by an Arizona governor.  As I explained in what turned out to be a way-too-optimistic op-ed column for the Arizona Republic:  It was January 2003.  High-profile child abuse deaths in cases “known-to-the-system” were front-page news and the new governor, Janet Napolitano, had fallen for the Big Lie of American child welfare: that child removal equals child safety. So within days of taking office, she was greeted with wild applause when she told a child welfare conference, “Err on the side of protecting the child, and we’ll sort it out later.”

Speaker after speaker echoed her call.  They set off a foster-care panic, a sharp sudden increase in children torn from their homes.  But Arizona still hasn’t sorted it out.  The panic has never stopped.

I bring this up now because the 2003 conference in question was organized by the Children’s Action Alliance.  Like many such groups, they do good work on issues like education, health care, etc.  But when it comes to “child welfare,” they have long been the leading voice for a take-the-child-and-run approach.

In Arizona, year after year, CAA threw gasoline on the fires of foster-care panic.  Do a search for “Children’s Action Alliance” in our 2007 report on Arizona child welfare, and you’ll find one inflammatory quote after another.

CAA has never apologized, never taken responsibility for the chaos it helped to unleash and the families it helped to destroy.  Instead, it is one more group engaging in reputation laundering.  So their current child welfare agenda uses what has become the standard buzz phrase that once had real meaning but now has been co-opted to the point that it tells you when a group doesn’t really want to change anything: “child and family well-being system.”  That means: go through the performance art of pretending to consult communities, add on a few more “preventive services” – but call for nothing that would actually curb the power of the family police.

And sure enough, CAA’s child welfare agenda has not one specific proposal to curb entries into care, and nothing that would curb the vast power of DCS.  Mostly their agenda involves “fixing” foster care.  So when Lujan promises not to do anything radical, we can all take him at his word.

So can we expect change when David Lujan starts running DCS?  Sure.  Caseworkers will have to keep their “professional kidnapper” T-shirts hidden.

A postscript

Arizona media continue to disappoint: The three stories I read about Lujan's appointment all repeat the allegations against Stewart, none includes his response and the other context provided by ProPublica.