Arizona Attorney General Mayes Weighs Lawsuit Against Governor Hobbs Over $150 Million in Opioid Settlement Funds Diverted to Prisons

A Statehouse Battle Over Who Controls $1.14 Billion

Attorney General Kris Mayes says she is "very actively looking" at filing a new lawsuit against Governor Katie Hobbs and the Republican-controlled Arizona Legislature over what she calls an illegal diversion of opioid settlement funds.

The dispute centers on $150 million in money from a nationwide settlement with opioid manufacturers and distributors. That money was supposed to help abate the opioid epidemic. Instead, Mayes says it was used to backfill the state budget deficit.

The Audit That Changes Everything

Mayes first sued the governor and lawmakers in 2024 to stop the transfer of opioid settlement funds to the Department of Corrections, Rehabilitation and Reentry. A Maricopa County Superior Court judge dismissed the case, saying Mayes had no evidence the funds were being spent in violation of the settlement agreement.

That changed this week.

Auditor General Lindsay Perry released a new audit finding that the prison system spent $50.9 million of opioid settlement money in 2024 but "lacks records supporting they were spent for approved purposes."

"Told you so," Mayes said.

The audit warns that Arizona risks being found non-compliant with the 2021 nationwide settlement. That could force the state to forfeit more than $1 billion in future payments.

The Governor's Defense

The Governor's Office maintains the transfer is legal. Press aide Christian Slater said the prison system used the funds to treat inmates for Hepatitis C, which he said is a permitted use under the settlement.

Slater said the audit's real concern was a need for "higher level of documentation" of how the money was spent. He said the agency is now updating its policies and implementing "regular internal audits of opioid-related transactions."

Mayes Says the Treatment Claim Falls Short

Richie Taylor, spokesman for Mayes, did not dispute that the settlement allows funds for Hepatitis C treatment. But he said the treatment must be tied to intravenous drug use 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 went further. She said the transfer was never about treating opioid users.

"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," Mayes said.

The Stakes for Mesa and Arizona Communities

Mayes said the diversion has real consequences for Arizonans struggling with addiction. She pointed to communities desperate for detox centers, more Narcan distribution, and expanded treatment options.

"People are losing their lives over the opioid crisis and fentanyl," Mayes said.

She noted that Arizona's overdose deaths are still rising while the rest of the country sees declines.

"Unlike most states, Arizona's deaths from overdoses are actually still going up," she said.

Another $40 Million on the Table

The dispute is not just about past spending. Mayes said the budgets proposed by both the governor and Republican lawmakers for the new fiscal year include another $40 million in opioid settlement funds for the prison system.

That would bring the total diverted to approximately $150 million.

No Response From Legislative Leaders

There was no immediate response from Senate President Warren Petersen or House Speaker Steve Montenegro to Mayes' claims about the diversion of funds.

The Legal Question Remains

Even with the audit report, it is unclear whether Mayes can convince a judge to block the governor and lawmakers from using opioid settlement funds in the state budget.

In the 2024 lawsuit, Judge Richard Hannah acknowledged Mayes' concerns about how the money was spent. But he said the settlement does not give the attorney general veto power over how the governor and Legislature allocate state funds.

Mayes says she will "do everything in my power" to ensure the opioid settlement money is spent to repair the damage done to Arizona.

The $1.14 billion settlement came from companies including Purdue Pharma, Cardinal Health, and CVS. Each was sued for its role in fueling the opioid crisis through marketing, distribution, and prescription practices.

Mayes' next move could reshape how Arizona handles opioid recovery funding for years to come.