Arizona sues White House in battle over use of COVID-19 funding

Carson McCullough

Courthouse News Service

Republican Governor Doug Ducey of Arizona sued the Biden administration on Friday after the federal government demanded changes to state programs that send relief money to school districts without a mask mandate.

The dispute began last October, when federal officials challenged two new funding programs created by the governor. The programs, which relied on $173 million in U.S. bailout aid, created an additional education grant that distributed funds to school districts that did not have a mask mandate, as well as a recovery benefit that gave families $7,000 per student if they removed their child from a district that had a mandate.

According to an Arizona Republic review, 98 school districts in the state had received the increased grant in October and only 93 students received the recovery benefit the following month.

As the programs were pushed back and the funding-related law banning COVID-19 mask mandates in schools was later thrown out in state court, the governor has made it clear he still supports the programs.

“In Arizona, our top priority is to catch up with kids, and we’re using a wide range of resources to do that — including federal dollars allocated to our state,” Ducey said Friday. “Make no mistake, we will always support families and children, while protecting their right to choose an education that best suits their needs.

The feds don’t seem to be backing down either. Last week, the Treasury Department sent a letter to the state warning it had 60 days to remove anti-masking provisions or risk a recapture of funds. The ministry also threatened to withhold the next wave of funding if the request fell on deaf ears.

Ducey responded with a 24-page complaint alleging that the Treasury Department imposed illegal restrictions on how the state can use American Rescue Plan Act (ARPA) funds without proper authorization.

“Nothing in this underlying statute authorizes the Treasury to condition the use of ARPA funds on the following measures which, in the opinion of the Treasury, stop the spread of COVID-19,” the lawsuit states. “If Congress had really intended to give the Treasury the power to issue public health orders to the states and to recover or withhold (funds) … it would have spoken clearly on the matter. He does not have.”

Ducey says the relief law contains only two prohibitions on how the money could be used: lowering taxes and paying pensions. He says the feds are overstepping their authority in their requests to Arizona and alleging violations of the Administrative Procedure Act.

In January, the Treasury announced that new, final rules on how states can use their COVID-19 funds are set to take effect in April, but Ducey argues those rules cannot be applied retroactively.

The state wants a judge to declare the Treasury rules illegal and block any attempt to enforce the department’s demands.

“The goals of the lawsuit are for the Treasury to understand that it doesn’t have the power to go as far as it does and to back down,” said Anni L. Foster, attorney for the governor’s office, during a telephone interview. “But if they don’t, we hope the court will stand by our argument and say ‘No Treasury, you’ve overstepped your bounds here.'”

Foster also noted that the rules the Treasury Department is relying on don’t go into effect until April 1, while the programs at the heart of the dispute are still ongoing. “We have no intention of stopping these programs at this time.”

Treasury Department officials did not respond to request for comment by press time Friday.

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