By Howard Fischer
Mail | X: @azcapmedia

PHOENIX — Attorney General Kris Mayes is weighing a new legal fight with Gov. Katie Hobbs and the Legislature over how they are spending money the state got from an opioid settlement.

Mayes told Capitol Media Services Friday she has new evidence to support her allegation that $115 million allocated to the Department of Corrections, Rehabilitation and Reentry is being used in ways that violate the terms of as $1.14 billion settlement the state got from opioid manufacturers, distributors and pharmacies. That includes nearly $40 million of the funds being spent not to provide services for opioid-addicted inmates but instead to buy drugs to treat inmates with Hepatitis C, “which clearly is not an approved purpose.”

She said that backs her contention the dollars are being used for “a blatant budget backfill for the prison system.”

“What is so outrageous about this is people in Arizona are dying from fentanyl overdoses,” Mayes said. “This opioid money should have gone to address that critical issue.”

Mayes went to court earlier this year to stop the fund transfer. Maricopa County Superior Court Judge John Hannah agreed in June there is language in those agreements that limit how those dollars can be spent.

But the judge also concluded that, at least at that point, there was no evidence the plan in the budget to give the cash to the Department of Corrections, Rehabilitation and Reentry violates any of that.

Just this past week he ordered the Attorney General’s Office to pay close to $70,000 in legal fees spent by the governor, state agencies and the Legislature in defending the allocation.

But Mayes pointed out the judge said if it turns out that the cash is not spent in accordance with the agreements, then she might have legal recourse to seek judicial action. If the money was misspent, she even could ask the state agency to restore those dollars to the opioid fund — and perhaps even go to court to enforce it.

“We’re looking at all options,” Mayes said.

“The attorney general is flat-out wrong on the law,” countered gubernatorial press aide Christian Slater.

He pointed out that even documents on the website of the Attorney General’s Office say funds can be used for opioid treatment in the prison system.

Mayes press aide Richie Taylor said his boss doesn’t concede the funding for Hepatitis treatment fits within the permitted used. But even if it does, he said Mayes doesn’t think this is a wise use of $40 million.

“Funding the medical treatment of inmates, including Hepatitis C treatment, is already the responsibility of the state and not a good use of limited opioid settlement funds,” Taylor said.

Slater, however, said any thought by Mayes to go back to court to relitigate the matter is a bad idea.

“She’s threatening to block substance abuse treatment for Arizonans who have been devastated by the opioid epidemic,” he said. “This is important funding that will reduce recidivism, make Arizona communities safer, help break the cycle of fentanyl addiction, and lower costs for Arizona taxpayers.”

All sides appear to agree with the basic statement that Arizona got the funds from the settlement for itself and its cities and towns to deal with the effects of the opioid epidemic the manufacturers, distributors and pharmacies caused the state. Mayes said the agreements — there are several — require the funds “must be used for specified abatement purposes, not for the ordinary operation of government agencies.”

Strictly speaking, the budget adopted by lawmakers and signed by the governor transferring the money to the prison system does say the dollars have to be used for past and current costs for care, treatment, programs and other expenditures for those with opioid-related issues.

And the language says any spending would be “as prescribed” in the settlement agreements or any court orders.

Mayes, however, said that disguises the move by lawmakers to deal with a budget shortfall by replacing funds the agency already was spending with the opioid dollars, a maneuver that freed up the cash to be used elsewhere to balance the budget.

She won the first round by getting a Maricopa County Superior Court commissioner to sign a temporary restraining order barring the Department of Administration, the agency charged with moving the funds, from going forward. The governor and lawmakers responded by asking Hannah to intercede — and quickly.

Hannah, in issuing his order allowing the funds to go to the prison system, agreed that much of what Mayes was arguing makes sense — from the perspective of ensuring the money is spent to remediate the opioid crisis that was caused by the manufacturers, distributors and pharmacies. But he questioned whether that gives Mayes carte blanche to decide where the dollars go.

“As a judge, I cannot agree with the proposition that the attorney general can enter a litigation settlement ... that the attorney general can give himself in that settlement the authority to determine how state money is spent,” Hannah said, without taking into account the desires of the governor and lawmakers. But he did say in his June ruling she can come back if she has new information that the dollars are being spent in a way that violates the terms of the settlement.

Mayes said she now has that evidence and is weighing whether to go back to court.

Even if she is right, the attorney general acknowledged getting the already spent money back may be another matter.

“Obviously, it’s hard to recoup money when it’s already been spent,” she said, zeroing in on that $40 million for Hepatitis C treatment.

Still, the attorney general said, the new report shows there is still more than $23.2 million out of this year’s $75 million allocation that is listed as “remaining cash.” Plus that $115 million at the heart of the fight includes $40 million for the budget year that doesn’t begin until July 1, 2025.

“I would love to put that money to use in other places in Arizona,” Mayes said.

For example, she said a state lawmaker called her recently looking for money for a nonprofit organization that treats babies with opioid addiction.

“I would love to be able to save babies from fentanyl addiction rather than wasting this money on Hep-C treatment in the prison system,” Mayes said.

Prior to lawmakers and the governor taking the funds, the attorney general had developed her own spending plan.

That included $10 million for “medication assisted treatment” which she said could legally go to provide treatment to those behind bars. But it also included other priorities which Mayes said are now not being funded with this year’s dollars because of the diversion of the funds by the governor and Legislature.

On that list was $15 million for rural detox centers, an identical amount to train school counselors in opioid prevention, $5 million in grants to organizations that treat opioid use disorder in veterans, and $5 million in grants to university organizations doing research on things like new treatments.