Judge overturns order on AZ opioid settlement funds

PHOENIX – The state now has the go-ahead to immediately take $115 million in funds from an opioid settlement to balance the budget.

And Attorney General Kris Mayes says she won’t fight it – at least not now.

Maricopa County Superior Court Judge John Hannah late Monday dissolved a temporary restraining order that Mayes had obtained just days ago barring Gov. Katie Hobbs and the state Legislature from diverting the funds. The judge said it is not clear that the attorney general has such a power to ignore the budgetary mandate which is state law.

Hannah acknowledged Mayes’ concerns that the state got the $1.14 million multi-year settlements as part of a deal with opioid manufacturers, distributors and pharmacies to deal with the damages caused by drug addiction. And he said there is language in those agreements that limit how those dollars can be spent.

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

Still, this isn’t the end of the issue.

Hannah said if it turns out that the cash is not spent in accordance with the agreements, then Mayes might have legal recourse to seek judicial action. And he said 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.

Even that, however, is not a sure thing.

“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. The terms of the agreement actually predate Mayes and go back to her predecessor, Mark Brnovich.

Mayes said after the hearing she still believes it was wrong for Hobbs and lawmakers to sweep the funds and continues to insist that what they did “puts at risk future settlement payments.’’ But, for the moment, the attorney general said she will not appeal, instead saying she will be in a wait-and-see mode.

“I will be closely monitoring each penny of spending by ADCRR,’’ the attorney general said, leaving the door open for possible future litigation.

All sides appear to agree that Arizona got the funds for itself and its cities and towns to deal with the effects of the opioid epidemic that it caused the state. She said the agreements – there are several – requires 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 Maricopa County Superior Court Commissioner late last week 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.

Brett Johnson, representing the Legislature, told the judge this isn’t a legal question for him to resolve.

“What we have here is a difference of opinion,’’ he said. “Attorney General Mayes wants the money spent in her way.’’

But Johnson said there are “other approved mechanisms’’ for the Legislature to decide how to spend the money “as part of the policy-making process and the governor then approves as part of the budgetary process.’’

“And the attorney general, underneath our constitution, has to abide by the different statutes,’’ he said.

“When there’s a policy difference between the attorney general ... she can advocate and lobby to the Legislature as how she wants that appropriation to go,’’ Johnson continued. “But once the Legislature and governor have come to terms, we all have to live with it, of course, within the confines of the law.’’

And he said the budget, adopted as law, does contain the legally sufficient language, in compliance with the settlement agreements, to allow legislators to decide to use the money as they want.

Ron Kilgard, one of the attorney representing Mayes, said all that ignores the terms of the settlements – and the possibility that spending the money in a way that doesn’t comply endangers future payments. There is still more than $1 billion owed to the state for the next 16 years.

That, in turn, goes to the other problem: What happens if a future court determines that Mayes was, in fact, right, and the Legislature spent the money in violation of the terms of the deals.

“Once it’s spent on paying salaries, then how do we get it back exactly?’’ Kilgard asked. He said this isn’t like someone collecting a debt who can get a court judgment and “take it down to the sheriff on a Friday afternoon.’’

Hannah, in issuing his order, 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 that, he said, still doesn’t give her the right to decide, unilaterally, how the funds should be spent.

The judge also took a separate swat at Mayes for how she got the restraining order in the first place: having her lawyers march into court last week and get Court Commissioner Mary Cronin to sign a prepared order, all without the ability for Cronin to hear from the governor or the Legislature.