On Friday, Arizona Treasurer Kimberly Yee sent a blistering response to Governor Katie Hobbs, taking exception “to the unprofessional and juvenile rhetoric used” by Hobbs’ staff in a letter to Yee.
The two leaders have been sparring over Hobbs’ decision to illegally circumvent Arizona law that outlines the protocols associated with the nomination process used for agency directorships.
“I am in receipt of a letter from your Interim Director of the Department of Administration dated September 28, 2023. While I take exception to the unprofessional and juvenile rhetoric used throughout the letter, I will not respond to it here, other than to say the complete lack of respect from a member of your administration towards a duly statewide elected official is appalling. Rather, this letter will serve to briefly explain why I, as Chair of the State Board of Investment (“BOI”), did not seat the Arizona Department of Administration (“ADOA”) or the Arizona Department of Insurance and Financial Institutions (“DIFI”) employees during the September 26, 2023, BOI meeting. As you will see, I did not make this decision for political reasons, as suggested by your staff, but rather out of an abundance of caution to ensure that the actions taken by the BOI during the September 26, 2023, meeting were legitimate and lawful,” wrote Yee to Hobbs.
On Tuesday, Yee announced she would not recognize Hobbs’ administration employees during the State Board of Investment meeting due to the Governor’s failure to comply with state law.
“Due to the recent actions of the Governor, I did not recognize employees from the Arizona Department of Administration or the Arizona Department of Insurance and Financial Institutions as legally participating members at today’s State Board of Investment meeting,” said Yee in a press release. “Yesterday’s decision by the Governor to pull the nominations of these cabinet-level positions has created chaos and confusion that is contrary to the orderly administration of government business. The absence of lawfully appointed directors of these two agencies creates legal uncertainty and jeopardizes the proceedings of the State Board of Investment.”
Treasurer Yee is correct. The Governor has appointed 13 Fake Directors. They are illegitimate and should not be recognized as credible.
The Senate process was working to confirm nominees. We approved 70 percent of her nominees. But we are not a rubber stamp. 1of2. https://t.co/BSWzIX4fmj
— Warren Petersen (@votewarren) September 26, 2023
Hobbs stunned both supporters and critics alike when she announced she would no longer be sending her nominees to lead agencies through the Senate’s statutorily prescribed nomination process.
Arizona law also requires Senate-confirmed directors to run state agencies and for agency powers to be exercised under the direction of a director.
A.R.S. 38-211 states “when it is provided by law that a state officer shall be appointed pursuant to this section, the governor shall nominate and with the consent of the Senate appoint such officer as prescribed in this section.” Additionally, “the Governor shall nominate a person who meets the requirements of law for such office and the nominee shall assume and discharge the duties of the office until rejection of the nomination or inaction of the Senate.”
“This move by the Executive Branch showcases another prime example of an elected official who believes they’re above the law and will go to extreme measures to bypass the requirements of the law when they don’t get their way,” said Petersen in a press release. “The law is very specific on who is to run our state agencies. Without directors fulfilling these obligations, the legality of every decision made by these state agencies is dubious, and litigation against the state would surely prevail.”
The Senate Committee has approved 70 percent of Hobbs’ nominees.
Yee letter in its entirety:
I am in receipt of a letter from your Interim Director of the Department of Administration dated September 28, 2023. While I take exception to the unprofessional and juvenile rhetoric used throughout the letter, I will not respond to it here, other than to say the complete lack of respect from a member of your administration towards a duly statewide elected official is appalling. Rather, this letter will serve to briefly explain why I, as Chair of the State Board of Investment (“BOI”), did not seat the Arizona Department of Administration (“ADOA”) or the Arizona Department of Insurance and Financial Institutions (“DIFI”) employees during the September 26, 2023, BOI meeting. As you will see, I did not make this decision for political reasons, as suggested by your staff, but rather out of an abundance of caution to ensure that the actions taken by the BOI during the September 26, 2023, meeting were legitimate and lawful.
First, the BOI had a good faith belief, grounded in Title 38, that the employees were not eligible to serve on the BOI during the September 26, 2023, meeting. It is my understanding that until September 25, 2023, there were Acting Directors for ADOA and DIFI. Although they both had been nominated by you as Governor, they had not yet been confirmed by the Senate as required by A.R.S. § 41-701(C). On September 25, 2023, your office announced that you “withdrew all director nominations that remain pending before the Senate,” including the nomination of the Acting Directors for ADOA and DIFI.
Upon your withdrawal of the nominations, the position of ADOA Director and DIFI Director were vacant. See A.R.S. § 38-291(11) (“An office shall be deemed vacant from and after the occurrence of any of the following events … [11] failure of a person to be elected or appointed to the office”). As these positions were vacant (at least to BOI’s knowledge), it follows that the employee designees of those previous Acting Directors could not serve on BOI as the “designees”. See A.R.S. § 38-461(B) (deputies and assistants must be appointed by “the officer or body to whom they are subordinate”). Given these developments, legal counsel for the BOI was rightly concerned as were members of the BOI that any actions it took with the two employees of ADOA and DIFI as voting members might later be deemed invalid. It was for this reason, and this reason alone, that I refused to seat them.
Your staff asserts in their letter that as of September 26, 2023, you had appointed Ben Henderson to serve as Interim ADOA Director and that, therefore, the BOI was required to seat Ms. Retsinas during the September 26 board meeting. This comes as a surprise. Neither I, nor any other BOI member, nor anyone in my office, have been informed by your staff of this appointment-and we certainly were not aware of this fact before the BOI meeting on September 26, 2023. We have also yet to receive any documents supporting the appointment of Mr. Henderson. Accordingly, and to ensure that Ms. Retsinas has been properly delegated by the ADOA to serve on the BOI in future meetings, please have your staff forward: (1) a signed Notice of Appointment and Loyalty oath of office, see A.R.S. § 38-231(F); (2) evidence that you have posted a $100,000 bond on behalf of the ADOA Director pursuant to A.R.S. § 38-251; (3) all other evidence of your appointment of Mr. Henderson to ADOA Director and DIFI Director.
Even assuming that these prerequisites have taken place, the BOI and I still have serious concerns about the legality of your “appointment” of the “Interim Director” of ADOA and DIFI. From what we have learned, it appears that Mr. Henderson was recently named as the interim “director” of several other State agencies for the sole purpose of immediately designating all powers of the director to an “executive deputy director” and then resigning. It appears some or all of the designees are individuals that were previously nominated by you to serve in the director position, including for ADOA and DIFI. While your staff has alleged that this conferral of power is valid under A.R.S. § 28-462 because deputies may perform all of her principal’ s duties, it ignores that deputies must have a principal to exercise those duties.
This appoint, designate, and resign maneuver is a transparent attempt to circumvent the Senate confirmation process, potentially in violation of A.R.S. § 38-211, A.R.S. § 41-701(C), and Article 5, Section 8, of the Arizona Constitution, among other things. See McCall v. Cull, 51 Ariz. 237, 245 (1938) (holding that a Governor’s “power to appoint is in conjunction with the Senate. The two must concur. The Governor cannot exercise the power alone.”). I also have serious concerns that by attempting to avoid the Senate confirmation process in this manner, you have potentially not “take[n] care that the laws be faithfully executed,” in violation of Article 5, Section 4, and has not “see[n] that all offices are filled and the duties performed” in violation of A.R.S. § 41-101(A)(2). As you and I are both former State Senators, we understand the importance of the confirmation process and understand that each Legislature has the authority to adopt rules as to how it conducts its business.
In short, until the BOI receives: (1) the above requested documentation and (2) legal authority supporting the appointments, I cannot in good conscience seat the ADOA and DIFI employees on the BOI moving forward. I look forward to your response on these points.
Second, I disagree with your staff’s position that my actions at the September 26, 2023, BOI meeting are invalid and must be re-added to next month’s agenda. To be valid, legal actions taken by a public body must occur during a “public meeting.” A.R.S. § 38-401.0l(A). A public meeting is “a quorum of the members of the public body at which they discuss, propose or take legal action, including any deliberations by a quorum with respect to that action.” A.R.S. § 38-431(4). The September 26, 2023, meeting was attended by a quorum of BOI members (myself, Harry Papp, and Beth Ford) and was therefore presumptively valid. Further, Ms. Retsinas attended the full meeting via WebEx as a member of the public and at no time informed the BOI, or Treasury staff, that she had been appointed by Mr. Henderson, as interim director of ADOA. If you have any contrary authority, please send it to us. With that said, we note that the only actions that BOI took during the September 26, 2023, meeting was the unanimous approval of a monthly report.
I hope that this letter alleviates the concerns of you and your staff. Please send us all documentation supporting your appointments as soon as practicable, so that we may ensure that the appropriate designees are seated on the BOI moving forward. If you have any questions, feel free to contact my office.