Assigned to APPROP AS PASSED BY COMMITTEE
ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
AMENDED
FACT SHEET FOR S.B. 1734
developmental disabilities; appropriations; waivers.
Purpose
An emergency measure that appropriates $122,300,300 from various state funds and
$403,000,000 in Medicaid Expenditure Authority in FY 2025 to the Department of Economic
Security (DES) for the developmental disabilities Medicaid program. Prescribes requirements for
the Arizona Health Care Cost Containment System (AHCCCS) relating to DES's developmental
disabilities Medicaid program.
Background
The Division of Developmental Disabilities (DDD) is the division of DES that empowers
individuals with intellectual and developmental disabilities to lead self-directed, healthy and
meaningful lives. DDD provides supports and services for eligible Arizonans diagnosed with one
of the following developmental disabilities: 1) autism; 2) cerebral palsy; 3) epilepsy; 4) cognitive
or intellectual disability; 5) Down syndrome; or 6) are under the age of six and at risk of having a
developmental disability. DDD serves more than 50,000 people with developmental disabilities
and their families throughout Arizona each year (DDD).
Section 1115 of the federal Social Security Act gives the U.S. Secretary of Health and
Human Services the authority to approve experimental, pilot or demonstration projects that assist
in promoting the objective of the Medicaid program. The purpose of the demonstration that gives
states additional flexibility to design and improve their programs is to demonstrate and evaluate
state-specific policy approaches to better serve Medicaid populations (Medicaid).
On April 6, 2020, AHCCCS received temporary authority from the U.S. Centers for
Medicare and Medicaid Services (CMS) to allow parents of minor children with disabilities to be
paid caregivers during the COVID-19 Public Health Emergency. On September 27, 2023,
AHCCCS submitted an 1115 Waiver amendment to CMS to request making the authority
permanent. On February 16, 2024, AHCCCS received approval from CMS to permanently allow
parents of minor children with disabilities to be paid caregivers (DES).
A capitation rate is a mode of payment in which the program contractor receives a fixed
rate per person notwithstanding the amount of services provided to a member for the delivery of
services (A.R.S. § 36-2931). Capitation rate adjustments, set by AHCCCS, must be limited to
utilization of existing services and inflation unless policy changes, including program creation or
expansion, have been approved by the Legislature or are specifically required by federal law or
court mandate (A.R.S. § 36-2901.06). FACT SHEET – Amended
S.B. 1734
Page 2
The Prescription Drug Rebate Fund consists of prescription drug rebate collections, interest
from prescription drug rebate late payments and federal monies for the operation of the AHCCCS
prescription drug rebate program (A.R.S. § 36-2930).
The Housing Trust Fund is administered by the Director of the Arizona Department of
Housing and consists of monies from unclaimed property, monies transferred from the Arizona
Industrial Development Authority, investment earnings and legislative appropriations. Housing
Trust Fund monies may be spent on constructing or renovating facilities and on housing assistance,
including support services, for persons that have been determined to be seriously mentally ill and
chronically resistant to treatment (A.R.S. § 41-3955).
The Arizona Competes Fund consists of: 1) withholding tax revenues allocated from the
job creation withholdings clearing account; 2) any other amounts dedicated by law; 3) gifts, grants
and other donations; and 4) any available monies received from the U.S. government, including
monies from the American Recovery and Reinvestment Act of 2009 (A.R.S. § 41-1545.01).
S.B. 1734 appropriates a total of $122,300,300 from state funds and $403,000,000 in
Medicaid Expenditure Authority in FY 2025 to DES.
Provisions
1. Appropriates the following amounts in FY 2025 to DES for developmental disabilities
Medicaid program expenses:
a) $10,000,000 from the Arizona Competes Fund;
b) $38,000,000 from the Housing Trust Fund;
c) $61,200,300 from the Prescription Drug Rebate Fund; and
d) $403,000,000 from the developmental disabilities Medicaid Expenditure Authority.
2. Appropriates $13,100,000 from the Prescription Drug Rebate Fund in FY 2025 to DES for
developmental disabilities cost effectiveness study-client services.
3. Requires capitation rate adjustments for the succeeding fiscal year for DES, for persons with
developmental disabilities, and AHCCCS to be specified in the annual general appropriations
act.
4. Prohibits AHCCCS from submitting to CMS, or its successor agency, a new request, renewal
request or termination request for any waiver or waiver amendment without first obtaining
legislative approval in the form of a statute authorizing the proposed waiver or waiver
amendment.
5. Requires AHCCCS and DES, beginning July 1, 2025, to implement the 40-hour per week per
child care services limit pursuant to the Parents as Paid Caregivers Program amendment
approval by CMS to the state's section 1115(a) demonstration waiver dated February 16, 2024.
6. Requires AHCCCS, by October 1, 2025, to submit a waiver amendment request to CMS to
reduce the Parents as Paid Caregivers Program care services limit to 20 hours per week per
child beginning July 1, 2026. FACT SHEET – Amended
S.B. 1734
Page 3
7. Specifies that the waiver amendment does not limit the total direct care service hours available
to an eligible member.
8. Requires the Director of the Governor's Office of Strategic Planning and Budgeting (Director),
by September 1 of each year or with the submission of each budget unit's budget estimates, to
report to the Joint Legislative Budget Committee (JLBC) Staff on the use of federal monies by
any state agency that receives or anticipates receiving federal monies or that administers a
program supported by federal monies, except for universities under Arizona Board of Regents
jurisdiction.
9. Requires each state agency's report on federal monies to:
a) delineate the federal monies received for the preceding fiscal year;
b) delineate the federal monies to be used by the state agency for the current and upcoming
fiscal year, including any programs supported by federal monies in which the loss of federal
monies may impact the continuity or delivery of services;
c) identify the date, if known, that federal monies are set to expire;
d) identify any obligations, agreements, joint exercise of powers agreements, maintenance of
efforts agreements or memoranda of understanding that may be impacted by federal or
state decisions regarding federal receipts, including state matching requirements; and
e) calculate the percentage of federal monies from the total monies available for the state
agency for the fiscal year.
10. Requires the Director's report to JLBC Staff, if any state agency received notice of a reduction
in federal monies from a specific federal grant of 50 percent or more from the previous fiscal
year's funding, to identify the plan to reduce or eliminate the services provided through the
grant or to continue services without any increase to any state resources.
11. Requires a university under Arizona Board of Regents jurisdiction to submit an audited
schedule of federal award spending for the preceding fiscal year to JLBC Staff.
12. Removes the requirement for the Director to report to the Legislature at each regular session
on the following:
a) the total amount of federal grants-in-aid received by state agencies during the prior fiscal
year;
b) the total amount of federal grants-in-aid available to state agencies during the prior fiscal
year and the reasons for any differences between the number of monies available to the
amount accepted by state agencies; and
c) the adequacy of grant-in-aid programs in the state.
13. Defines terms.
14. Makes technical and conforming changes.
15. Becomes effective on signature of the Governor, if the emergency clause is enacted.
Amendments Adopted by Committee
1. Adds beginning date of July 1, 2026, for the Parents as Paid Caregivers Program care services
limit of 20 hours per week per child. FACT SHEET – Amended
S.B. 1734
Page 4
2. Adds, to AHCCCS's required waiver amendment request, a July 1, 2026, start date for the
20-hour per week per child care services limit.
Senate Action
APPROP 4/15/25 DPA 6-4-0
Prepared by Senate Research
April 16, 2025
LMM/ci