Ivey was responding this morning to a comment made by a state legislator, Patricia Todd, who is the only out lawmaker in Alabama.
"I was reminded of how broke we are", Dawson said of the discovery, noting that the state has a lack of funds, said during the speech.
Ivey called the claims a "disgusting lie".
"This is a disgusting lie being pushed by a paid liberal political hack".
"There is absolutely no truth to it", Hancock added.
Todd's tweet was a reaction to an Alabama Media Group story about Birmingham evangelist Scott Dawson, one of Ivey's opponents in next month's GOP gubernatorial primary. The statement specified that Free2Be had received grants since 2014 under the Victims of Crime Act, which specified at least 10 percent of the grant dollars must be given to agencies that provide services to underserved populations, including a requirement for those to extend to orgs providing victim services to the LGBTQ community.
"The Ivey Administration has betrayed Alabama values, by giving almost $1 million dollars, taxpayer dollars to Free2Be, an activist organization that promotes transgenderism and alternative lifestyles to Alabama children", Dawson said.
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The money calls into question what else Ivey has kept from the public since she took over as governor following Robert Bentley's resignation.
"It's an identity issue", she said.
The closure of Free2Be offices in Alabama comes after state officials found out the LGBTQ advocacy group owed the IRS payroll taxes, state officials said Tuesday. The outspoken Todd might be remembered by LGBT Alabamans for her attempt to revise the state's archaic sex ed guidelines that include lessons on homosexuality being socially unacceptable.
"This most recent personal attack against me is beyond disgraceful", said Ivey.
Bottom line: Alabama Governor Kay Ivey denies that she is a closeted lesbian. I don't want anyone to think I'm against standing up to bullying, but this is not about bullying.
The rumours come ahead of November's election for the governorship, where Ivey will face off against an as-yet unselected Democratic candidate.