Arizona AG considers suing governor, lawmakers over diversion of opioid funds

Mayes said a new report proves what she charged two years ago: A decision to give the money to the state Department of Corrections, Rehabilitation and Reentry violates the terms of the deal that entitles the state to $1.14 billion. That deal requires the state to use its share of the funds to help abate the opioid epidemic, with a majority restricted to programs to prevent future abuse.

Mayes' first lawsuit against the Democratic governor and Republican-controlled Legislature in 2024 to void the transfer to the prison system ended with a judge saying she had no evidence the transferred funds were being used in a way that violates the agreement.

But the new audit concludes the prison system in 2024 spent $50.9 million of opioid settlement money, but lacks records supporting they were spent for approved purposes.'' According to Arizona Auditor General Lindsay Perry, that increases the risk the state will be found to be out of compliance with the 2021 settlement and forced to forfeit the more than $1 billion to be paid to the state in future years.

"Told you so,'' the Democratic attorney general said.

Mayes also said that, despite the finding, the state budget proposals for the new fiscal year from Republican lawmakers and Hobbs both include taking another $40 million in settlement funds. That new transfer would bring the funds diverted so far to about $150 million, she said.

All that, Mayes said, provides the proof the trial judge, in refusing in 2024 to order Hobbs and lawmakers to restore the funds to her office, said she was missing at the time.

Mayes said she is now "very actively looking'' at going back to court, this time armed with the audit.

Despite the report, gubernatorial press aide Christian Slater said the funds are being used by the prison system to fund treatment of inmates for Hepatitis C. He said that is one of the permitted uses under the nationwide settlement.

He said the problem, to the extent there is one, is that the audit says there must be a "higher level of documentation'' of how the money has been spent. Slater said that is now being done, with the corrections department updating its policies and procedures and implementing "regular internal audits of opioid-related transactions.''

Richie Taylor, spokesman for Mayes, did not dispute that the settlement allows funds for Hepatitis C treatment. But he said it must be tied back to intravenous drug use — the way the disease is spread — by opioid users.

"The auditor general's report shows the documentation does not exist,'' Taylor said. "So there is no way for the public to know if this would be an approved purpose or how much of it would be.''

Mayes put a sharper point on all that. She said the transfer was never about providing treatment for opioid users, but instead about "backfilling the budget deficit.''

Put another way, Mayes said Hobbs and lawmakers needed a way to balance the state's budget. They did it by raiding the opioid settlement funds.

"We now have a report from the Legislature's own auditor general that she was not able to find any proof that they have properly spent the opioid funding,'' Mayes said, even as she said there is a plan to "seize another $40 million.''

Even if treating inmates for Hepatitis C is a permissible expense, Taylor said that doesn't mean the transfer was proper.

"What the AG took issue with is spending so much of the state's (settlement) money on an issue that is already the responsibility of the state,'' he said, as Hepatitis C treatment is something the Department of Corrections, Rehabilitation and Reentry was already doing. That took money away from other opioid treatment programs, Taylor said.

Mayes said this is more than just a turf fight over who gets to control the money.

"People are losing their lives over the opioid crisis and fentanyl,'' she said, calling the problem particularly acute here.

"Unlike most states, Arizona's deaths from overdoses are actually still going up,'' she said. "Across the rest of the country, opioid overdoses and deaths are going down.''

Mayes is willing to point a finger. "I believe it is because the state Legislature ... decided to sweep that money to backfill a budget deficit instead of properly spending it in communities that desperately need it,'' she said.

"They stole the state's share of the opioid funding and they dumped it in the prison system,'' Mayes said. "That is an affront to every Arizonan, and it needs to come to an end.''

There was no immediate response from either Senate President Warren Petersen or House Speaker Steve Montenegro to Mayes' claims about the diversion of the funds or any allegations of harm that it caused.

Mayes insists the dollars could be better used elsewhere.

"I have talked to communities that are desperate for detox centers, they're desperate for more Narcan, they're desperate for more treatment options that they can't provide,'' Mayes said.

Mayes said the dollars awarded to the state are coming from companies that were sued for their role in creating and exacerbating the opioid crisis in the first place.

One of them was Purdue Pharma, which faced multiple lawsuits over its marketing of OxyContin, a high-potency form of opioid that carried a high risk of addiction and misuse.

Another singled out by Mayes, and paying into the settlement, is Cardinal Health, a major pharmaceutical distributor that was named in a lawsuit for allegedly failing to detect and report suspicious opioid orders. Also settling was CVS, which was accused of properly overseeing and flagging suspicious opioid prescriptions filled at its local stores.

"I am going to do everything in my power as the attorney general of this state to save people's lives and to make sure that this opioid funding ... is properly spent to repair the damage that they did to the state of Arizona,'' Mayes said.

In the 2024 lawsuit, Maricopa County Superior Court Judge Richard Hannah acknowledged Mayes' concerns that the state, under Republican then-Attorney General Mark Brnovich, her predecessor, got the $1.14 million multi-year settlements as part of an agreement to deal with the damages caused by drug addiction.

Hannah also said he agreed that much of what Mayes was arguing makes sense from the perspective of ensuring the money is spent as the agreement requires: to remediate the opioid crisis that was caused by companies that agreed to the settlement.

But the judge said that does necessarily mean the agreement, despite its terms, gives whoever is the attorney general the veto power over diversion of the funds by the governor and lawmakers.