WASHINGTON — The Biden administration withdrew its threat to withhold funds for pandemic aid to Arizona after it accused the state this year of misusing the funds to undermine school mask mandates.
A spokesman for Arizona Governor Doug Ducey, a Republican, confirmed that the state had received its second payment of approximately $2.1 billion last month.
The withdrawal comes amid renewed focus on the $1.9 trillion aid package Democrats passed last year, which has been blamed for fueling rapid inflation and raised concerns about whether some of the money had been misused.
Arizona received $4.2 billion as part of its share of the $350 billion planned for states and cities to help replace revenue lost during the pandemic, support health initiatives and invest in water, sewage, and broadband infrastructure projects. Arizona got its first $2.1 billion installment in 2021, but the Treasury Department, concerned that the state was using the funds to undermine public health efforts, warned Arizona officials it could save $173 million. recover it previously allocated or hold back the second tranche of funds.
Dayanara Ramirez, a spokeswoman for the Treasury Department, declined to explain why the money was released after the ministry threatened to withhold them.
“Treasury does not comment on matters in the compliance process,” said Ms. Ramirez.
The Treasury Department said the funds were disbursed through the standard process established by the Office of Recovery Programs to make second-tranche payments.
The dispute over the funds began after Arizona’s Republican-controlled legislature banned school mask mandates in 2021, but some school districts imposed them anyway. In August, Mr Ducey announced that he was rolling out two education programs designed to undermine such requirements.
One of the programs, which received $163 million in federal funds, provided up to $1,800 in additional funding per student in public and charter schools that were in compliance with “all state laws” and open to personal instruction. Schools that required face masks were not eligible.
A separate $10 million program funded vouchers worth up to $7,000 to help poor families move out of neighborhoods who required face coverings or imposed other Covid-related “restrictions.”
The Treasury Department first warned Arizona in October about using the funds, saying the state was undermining the law and public health guidelines. In January, the department threatened to start recovering funds if programs were not redesigned within 60 days. The Treasury also warned in January that it might not release the second payment because it believed Arizona had misused part of the first tranche of what are known as state and local tax recovery funds (SLFRF).
“Treasury may also withhold funds from the second tranche of Arizona’s SLFRF funds until Treasury has received information confirming that the issues described above have been adequately addressed,” wrote Kathleen B. Victorino, an official with the Office of Recovery Programs of the department.
But Arizona went ahead with the programs anyway, and Mr. Ducey sued the Biden administration to block all attempts to recover pandemic aid money.
“The Biden administration is trying to take Congressional appropriated funds hostage and trying to bully Arizona into complying with this coup,” Mr Ducey said at the time.
The Biden administration has asked for the case to be dropped. In a legal filing in May, Justice Department lawyers argued that Mr Ducey had no right to sue because the Treasury Department had not actually attempted to take the money back.
“Treasury has not initiated enforcement proceedings to recover misused funds from Arizona, so there is no imminent injury,” they wrote, adding that the department’s letters were not final agency actions.
Lawyers representing Arizona did not respond to requests for comment about their next steps in the lawsuit.
Understanding inflation and how it affects you
The Arizona case is one of the many obstacles the Treasury Department has faced in disbursing and overseeing the recovery fund.
A $4 billion debt relief program for black and other “socially disadvantaged” farmers that was part of the relief legislation has been frozen after lawsuits from groups of white farmers questioning whether the government could provide debt relief based on race.
A Treasury Department rule that states cannot use pandemic relief money to subsidize tax cuts has also stalled in the legal system after several states filed lawsuits alleging the rule violated their sovereignty. Four states have received injunctions blocking the department from enforcing the ordinance.
Many other states have found workarounds, and about three dozen have passed tax cuts this year, thanks in part to surpluses inflated by aid funds.
The Biden administration continues to deploy funds from the US bailout plan, more than a year after it was signed into law. On Thursday, the Treasury Department announced it is granting more than $350 million to Kansas, Maine, Maryland and Minnesota from an investment fund to expand broadband access.
With President Biden’s social safety net and climate spending proposals still bogged down in Congress, the Biden administration has been encouraging states and cities to use their pandemic relief money to invest in housing and workforce development initiatives, leading to would advance the government’s equality agenda.
Despite the large amount of stimulus funds overseen by the Treasury Department, the agency itself lacks resources to manage some programs. It is asking permission to divert administrative money from other programs so that it has more resources to oversee the state and local funds.
“While state and local funds have tremendous long-term potential to improve equity, the Treasury faces a shortage of funds to manage this program — so we’ve urged Congress to take action to address this issue.” and support the continued success of these projects. programs,” said Wally Adeyemo, the deputy finance minister, at an event sponsored by the Municipal Institute this week.
