$270K missing from Gov. Katie Hobbs' disclosure of inauguration sponsors

Following weeks of public pressure, Arizona Gov. Katie Hobbs last month released details about how much money businesses and special interest groups paid to sponsor her inauguration ceremony.

But the accounting was far from complete: Campaign finance reports show at least $270,000 more than Hobbs disclosed was donated through additional accounts, according to an analysis by The Arizona Republic, with more than $1.9 million raised for the event.

And the final tally is likely much more than that: About 70 businesses, lobbying firms, special interest groups and individuals listed as sponsors of the event were not documented in available records, meaning how much they donated remains unknown.

The piecemeal accounting of inaugural fundraising, and Hobbs' reticence to release details of her financial backers, has emerged as an early political issue in the halls of the state Capitol. Leaders of the Republican-majority Legislature have tried to exert influence over what the Democratic governor does with unspent money from the celebration, and other GOP lawmakers are considering a measure to require disclosure.

In the meantime, the public does not have a full ledger of what was raised, and spent, for the event.

“That just shows there isn’t any genuine transparency going on here," said Craig Holman, a lobbyist for the left-leaning Public Citizen, a Washington, D.C., organization that advocates for government transparency and studies corporate influence on public policy. "It's inconsistent. That leaves the press and the public not knowing what to believe. That is not transparency.” 

Knowing those details can help gauge who is pursuing a "guaranteed avenue for buying favor with the governor," he said.

Hobbs said in a recent interview she believed there was sufficient transparency as it relates to the money. She hasn't committed to how she will spend the excess funds — but the governor has long held a goal of ousting Republican majorities from the Arizona Legislature.

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Initial disclosure lacked over 100 donors

Hobbs' campaign aides on Jan. 17 released a list of 120 donors for the inauguration, whose contributions to a nonprofit organization created by Hobbs' campaign manager tallied over $1.5 million. The cost of putting on the event came in at $207,000, leaving behind a war chest with few restrictions on its use.

But that list of donors differed from the sponsors named on the inaugural website and an 8-page program distributed at the Jan. 5 ceremony on the grounds of Arizona's Capitol complex.

Using the three lists, The Republic identified about 235 unique inauguration sponsors.

There are the 120 who donated to the nonprofit and were disclosed last month, and another 10 who contributed or pledged to contribute a combined $115,000 to the State Inaugural Fund, a state account in the governor's control, according to records released by the Governor's Office.

From that larger list of 235, about 35 donors were listed in public campaign finance filings. The remaining 70 could not be found. They include lobbying firms and lobbyists, credit unions, healthcare companies, and major companies and corporations like Boeing, PayPal and Anheuser-Busch.

At least three apparently were listed in error. When contacted by The Republic, they denied making donations.

Pressure from GOP lawmakers on use of funds

House Speaker Ben Toma, R-Glendale, and Senate President Warren Petersen, R-Gilbert, last week sent Hobbs a single-page letter urging her to put unspent money into the "protocol fund," a state bank account the governor controls and that's used for "promoting the interests of the state or to promote and encourage citizen public service to the state."

In an interview, Petersen said the letter meant to sound an alarm.

"We want to make sure there's no confusion out there," he said. "It's clear to us that she used government resources to raise money for the inauguration. There just is an appearance already where she might be using that for political purposes, and we just want to get ahead of it and let her know that would be inappropriate if she chooses to do that."

The letter cites state law that says public resources should not be used to influence an election and notes that Hobbs' inauguration website was a state website. That website, inauguration.az.gov, sold $150 tickets to the inaugural ball — a Saturday night soiree at Scottsdale's Talking Stick Resort that featured an electric violin quartet, cocktails and bouquets of white roses — and included contact information for anyone who wanted to sponsor the inauguration ceremony.

The letter states that prior governors have used the protocol fund for their inauguration surpluses, and Hobbs should, too. Republican Arizona Gov. Doug Ducey shifted money raised during his 2015 transition into the protocol fund, and his predecessor, GOP Gov. Jan Brewer, used excess money to renovate the Governor's Office, including buying new carpet. Both governors took money from businesses and special interest groups for their inauguration festivities, too.

An adviser to Hobbs' campaign declined to comment on the letter from Toma and Petersen.

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How will Hobbs spend the additional money?

In a wide-ranging interview Jan. 24, before the letter was sent, Hobbs said she did not know how the extra money would get used. Her spokesperson Murphy Hebert directed questions of a political and campaign nature to Nicole DeMont, Hobbs' campaign manager and director of the inaugural fund. But asked who was making decisions about how to spend the extra money, Hobbs confirmed her role.

"I'll just say this, there's money leftover," the governor said. "Nicole and I have not had a conversation about what is happening with that. And would I have say in that? Of course, but I don't know the answer at this point."

Because of how DeMont registered the nonprofit, the money could go for political purposes — such as attempting to oust the GOP majorities in the Legislature that Democrats have chipped away at for decades.

That's already a stated goal of Arizona's new governor, who as a lawmaker helped launch the Arizona Democratic Legislative Campaign Committee, an effort to recruit and train candidates and give the party control of the Legislature.

Asked if he feared the money would get used against him and the Republicans' majority, Petersen said his "first concern would just be that somebody is doing something illegal in the highest office in the state."

Meanwhile, state Sen. T.J. Shope, R-Coolidge, said GOP lawmakers were considering writing a bill that would require public reporting on the money raised and spent for inaugurations, which he argued are public events even if they are privately funded.

"I don't think taxpayers should be on the hook for an inauguration ceremony if we can raise private sector funds for it, so I'm not trying to shut it down," he said. "I just think that we ought to know."

Hobbs said she could support changes to require public reporting.

"Everything that was raised and spent was done legally and disclosed legally," she said. "So if they want to increase the disclosure or whatever, then that's fine."

What is known about the inauguration money

Donations to Hobbs' inauguration events were collected in at least four accounts.

Most went to the Katie Hobbs Inaugural Fund, the nonprofit created by DeMont. The so-called social welfare nonprofit is not required by law to disclose its donors, and there is no limit on how much an individual, business or union could donate. DeMont registered the fund with the Arizona Corporation Commission on Dec. 13, while she was still on the payroll for Hobb's campaign.

Such groups that engage in politics without disclosing their donors are often referred to as "dark money" organizations, entities Hobbs said on the campaign trail should have to publicly report their contributions.

Arizona Public Service Co., the state's largest electric utility, was the single largest donor to the nonprofit, kicking in $250,000, according to the list released by Hobbs' campaign.

When The Republic asked why that list didn't match sponsors named on the inauguration website or program, Hobbs campaign senior adviser Joe Wolf confirmed two other accounts were used to accept donations for the inauguration after Election Day.

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Those other donations went to the Arizona Democratic Party, which has no limits on contributions, or Hobbs' candidate campaign, which has more restrictions about who can donate and in many circumstances caps contributions at $5,300. Morgan Dick, a spokesperson for the party, did not respond to a request for an interview about how the party handled the money.

Hobbs said those public reports filed by her campaign and the party provide sufficient transparency when it comes to total fundraising for her inaugural ceremony.

Certain political action committees can double that donation to a campaign, and at least one did. Pinnacle West PAC, which is funded by contributions from employees at APS and its parent company Pinnacle West Capital Corp., gave Hobbs' campaign account another $10,600, the maximum, on Dec. 9, records show. APS spokeswoman Jill Hanks said the group is employee-led and not directed by Pinnacle West or APS.

The final fund where money was donated was the State Inaugural Fund, which received contributions and pledges of about $115,000. The Governor's Office released records for that account that show expenses like $675 to reimburse the Arizona Department of Administration for holiday and overtime pay.

Megan Rose, spokesperson for the Department of Administration, said the reimbursement covered a state employee who worked overtime for the inauguration ceremony and another who worked on Jan. 2, an observed holiday for New Year's Day. Hobbs and other statewide elected officials were sworn in at a private ceremony Jan. 2.

A spokesperson for the governor said any leftover money in the State Inaugural Fund would get transferred to the protocol fund.

What is still unknown about the money

The Hobbs camp provided several reasons why some 70 donors would not yet show up in public campaign finance records.

Three of those sponsors denied making any contributions. That includes CoreCivic, the for-profit company that operates prisons in Arizona and across the nation. It is listed as a donor on the inaugural program, but spokespeople for Hobbs and the company said no donation was made. American Medical Response, the ambulance company, and the Arizona Charter Schools Association are listed as sponsors, but spokespeople for each organization said they did not make a financial donation to the inauguration.

DeMont did not respond to a request for an interview for this article. She said in an emailed statement that an unknown number of groups could be listed as sponsors under a name that appears differently in campaign finance reports. The Republic identified several of those, and removed them from the total, but DeMont and Wolf declined to identify other possible duplicates.

DeMont's statement also says that campaign finance records may not show some donations because they were received after the Dec. 31 reporting period had ended. Other donations were pledged and were not yet received, she said.

Because of campaign finance reporting deadlines set in Arizona law, those donations won't be publicly documented for months or as many as three years, depending on which account they went to — unless Hobbs chooses to disclose the full inauguration financing herself.

Reach reporter Stacey Barchenger at stacey.barchenger@arizonarepublic.com or 480-416-5669. Follow her on Twitter @sbarchenger.