US Treasury threatens to claw back Arizona funds for anti-masking school grants

WASHINGTON, Jan 14 (Reuters) – The U.S. Treasury told Arizona officials on Friday it may claw back some of the state’s pandemic relief funds and withhold future disbursements unless the state stop or redefine education grant programs for schools without a mask mandate.

In a letter to Arizona Gov. Doug Ducey’s office, the Treasury said two programs, including a $163 million grant program for schools that comply with state laws banning mask mandates in public schools, are “ineligible uses” of state and local fiscal stimulus funds.

The $350 billion state and local funding package was signed into law last year as part of the US Rescue Plan COVID-19 relief act.

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Another $10 million program in Arizona deemed ineligible is offering $7,000 scholarships to families of students for alternative education if their school requires face coverings.

Treasury said Arizona must redesign programs to comply with Centers for Disease Control and Prevention guidelines on universal face coverings for students, teachers, staff and visitors to K-12 schools, or redirect funds to other eligible uses under Treasury rules.

“Failure to take either of these actions within 60 calendar days may result in the Treasury initiating action to recover SLFRF funds used in violation of eligible uses,” said Kathleen Victorino, Director Acting Treasury Compliance Assistant, in the letter.

The department added that it may also withhold the 2022 tranche of Arizona state and local relief funds until the Treasury confirms that education funding issues have been resolved. The Treasury first notified Arizona of the non-compliance of the programs in October.

Ducey, a Republican, said on Twitter that the Treasury letter “is the latest example of a president completely out of touch with the American people,” calling it a “rewrite” of funding rules that would cut funding for schools, especially in countries with low-income communities.

Ducey said the state “will respond to this letter and we will continue to focus on the things that matter to Arizonans.”

Arizona could face a holdback of up to $2.1 billion from the Treasury, with the second half of its $4.2 billion allocation of COVID-19 relief funds due to be disbursed in 2022.

In addition, Arizona cities and counties received separate allocations based on their size and unemployment rate that would not be affected by the state’s dispute with the Treasury, including $871 million for Maricopa County, $203 million for Pima County and $396 million for Phoenix.

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Reporting by David Lawder; edited by Jonathan Oatis and Richard Chang

Our standards: The Thomson Reuters Trust Principles.

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