Committee advances SB1734 to fund developmental‑disability services, adds 20‑hour cap proposal and budget conditions

The House Appropriations Committee advanced Senate Bill 1734 on April 11, 2025, recommending the measure as amended to fund a supplemental for the Department of Economic Security’s Developmental Disabilities (DDD) program and adding limits on the “parents as paid caregivers” program. Committee members voted 6–4 to send the bill forward after adopting two floor amendments.

The bill, as summarized by nonpartisan staff, “appropriates a total of $22,300,300 from various state funds and $403,000,000 in Medicaid expenditure authority in FY 2025 to the Department of Economic Security for the Developmental Disabilities Program,” and would require that capitation‑rate adjustments be specified in the Annual General Appropriations Act. It also would require the state’s Medicaid contractor (Access) to seek legislative approval before submitting certain waiver amendments to the Centers for Medicare & Medicaid Services (CMS) and asks Access to submit a waiver amendment to reduce the parents‑as‑paid‑caregivers cap to 20 hours per week per child (with language in a Kavanaugh amendment specifying an effective date of July 1, 2026, if CMS approves).

Why it matters: Members and dozens of families who testified said the supplemental is urgent to avoid service disruptions for roughly the 56,000 DDD beneficiaries referenced in committee testimony. Opponents said the bill would shift complex operational authority — including federally reviewed capitation‑rate setting and waiver negotiation — from agency experts to the legislature in ways that could delay payments, create federal compliance risk and worsen an existing workforce shortage.

Policy and fiscal details

- Funding and scope: Staff told the committee the bill provides about $22.3 million from state funds plus $403 million in Medicaid expenditure authority for FY 2025, and that capitation rates for DDD and other Access‑covered populations would be specified in the general appropriations act. The bill also states that Access may not submit certain waiver requests to CMS without legislative approval.

- Amendments adopted: The committee adopted a four‑page amendment in the name of Senator Cuby (04/11/2025, 12:29 p.m.) that removed most substantive policy language from the original draft and changed the supplemental’s funding sources from the prescription drug rebate fund, the housing trust fund and an Arizona CAPES fund to the state general fund. The committee also adopted a Kavanaugh amendment (04/11/2025, 10:41 a.m.) that clarifies the effective date for the proposed 20‑hour cap in any CMS waiver amendment (July 1, 2026).

Debate and oversight concerns

Committee debate focused on three technical issues: (1) who sets capitation rates and how mid‑year changes occur; (2) whether requiring legislative approval for CMS waiver amendments could delay needed technical fixes and risk federal noncompliance; and (3) workforce capacity to replace parent caregivers if hours were reduced.

- On capitation rates, JLBC staff Chandler Koiner and Jack Brown explained that capitation rates are actuarially set and federally reviewed; they said the state commonly budgets an estimated capitation change during the regular appropriations process but the actual rates are often finalized around the federal fiscal year start (October 1). Chandler Koiner noted the most recent mid‑year adjustment moved rates to an 11% increase after an initially budgeted 4% and said actuaries reopen rates in response to large utilization or cost shifts.

- Beth Koehler of the Arizona Association of Health Plans told the committee the bill “upends” the established actuarial process by making rate changes a legislative function and warned that federal rules require actuarial soundness and could reject rates not developed according to federal guidance.

- Disability Rights Arizona and provider representatives urged the committee to approve the supplemental but warned that cuts or abrupt policy changes could push people into costly institutional care. Assin Dietrich of Disability Rights Arizona said DDD services “allow individuals to live in the community rather than institutions.” Stuart Goodman of the Arizona Association of Providers for People with Disabilities urged a balanced approach that preserves continuity of care while adding accountability.

Family testimony

Dozens of parents and self‑advocates described intensive daily medical and behavioral care and said parent caregivers are often the only available option — especially in rural areas — to meet assessed service plans. Representative quotes include:

- “DDD is our lifeline. These services don't make life easy. They make it possible for us,” parent Callie Walling told the committee.

- “This bill blatantly misses the mark by granting the legislature far‑reaching power to amend, change, dismantle, and even disfund partial or all waiver service delivery,” Cindy Mittelstaedt said, describing the care her adult daughter requires.

- Disability advocate Brandy Kuhn said the bill “risks destabilizing the entire system … Handing this authority to a legislative body, no matter how well intentioned, would jeopardize provider payments, care continuity, and ultimately members' lives.”

Committee action and next steps

- The committee adopted the Cuby 4‑page amendment (04/11/2025 12:29 p.m.) and the Kavanaugh 4‑page amendment (04/11/2025 10:41 a.m.).

- The committee voted to give SB1734 a due‑pass recommendation as amended, 6 ayes to 4 nays. Chair Kavanaugh and others said they will hold additional stakeholder meetings and negotiate possible guardrails and technical language before the bill reaches the floor and any committee of the whole consideration.

What the bill does not resolve

The committee hearing left several open technical questions: whether specifying capitation adjustments in the budget will satisfy federal actuarial requirements, how quickly the legislature could act on needed waiver changes if the agencies seek mid‑year technical amendments, and whether a 20‑hour cap can be implemented without acceptable workforce alternatives for the families who rely on parent caregivers.

The bill will move to the next legislative stage with a due‑pass recommendation; sponsors and committee leadership said they expect more stakeholder work before a final floor vote.