ARIZONA

Treasury Department escalates threat to strip Arizona of COVID-19 relief help over Ducey's school programs

Stacey Barchenger
Arizona Republic
Arizona Gov. Doug Ducey gives his final State of the State address at the Arizona Legislature on Jan. 10, 2022.

Federal officials are escalating their threat to withhold federal stimulus dollars from Arizona over Gov. Doug Ducey's refusal to make changes to two programs that provide funding to schools that do not implement recommended public health protocols.

In a Friday letter to Ducey's office, a U.S. Treasury official again warned that the two initiatives the governor unveiled in August appeared to prevent COVID-19 mitigation protocols, and more forcefully warned of the consequences of continuing the programs as-is.

Ducey must direct the funding to eligible uses or make changes to the two education programs within 60 days, or Treasury may begin to recoup funding, the letter states. 

"Treasury may also withhold funds from the state of Arizona’s second tranche installment of (American Rescue Plan) funds until Treasury receives information that confirms that the issues described above have been adequately addressed," the letter from Deputy Chief Compliance Officer Kathleen Victorino reads. Arizona and other states are slated to get their second share of American Rescue Plan funds this spring, with more than $2 billion on the way to the Grand Canyon State.

Ducey's two programs, the educational recovery benefit and education plus-up grant program, provided funding to families and schools that did not implement COVID-19 related mandates. The governor earmarked $163 million for both programs, and both have been subject of scrutiny.

The Arizona Republic found low participation rates during an examination of the recovery benefit program in November when just over 90 students were approved for funding. The Republic also found that money was allocated through both programs to schools and families that were ineligible.

At the time Ducey announced the programs, Arizona law prohibited such mandates, but the state Supreme Court has since overturned the law based on the procedure lawmakers used to pack unrelated issues into budget bills.

Ducey and his administration officials responded to Treasury's latest letter with a sweeping critique of the Biden administration, saying the president was out of touch with Americans and unwilling to work with state leaders on issues from education, to COVID-19 mandates to border security.

The governor has previously said, should the federal government claw back the funding, he would use state funds to support the programs, and his staff reiterated that message Friday.

"We do want to make sure that we're getting these dollars to the low-income schools, to the families, and we'll be working with the Legislature to make sure that happens," said Daniel Ruiz, Ducey's chief of staff. "We're going to attempt to fight the federal government at every turn."

Ruiz said the Governor's Office found out about the letter through news reports.

Congressman Greg Stanton, D-Ariz., in August asked U.S. Treasury to review Ducey's programs, and the federal agency responded in October by questioning the use of the funds and urging Ducey to make changes. Ducey's office responded in November by defending the programs as a way to keep low-income families from falling behind.

Treasury on Friday also questioned the Ducey administration's stance that the funding programs benefited those families, but did not outline specific concerns.

In the meantime, emboldened by what they saw as a lack of response from U.S. Treasury, Ducey's office created another program that could draw on the same American Rescue Plan funds. 

The newest program debuted last week and allocates $7,000 to families if they need to move their students should schools close. The $10 million program, called the Open for Learning Recovery Benefit, was largely a pre-emptive effort, because schools in Arizona remain open, though they are grappling with possible staff shortages as the omicron variant of the coronavirus swells in Arizona.

In a statement Friday that does not acknowledge Treasury's latest concerns, Ducey's office said families could now apply for the Open for Learning program, which can help pay for child care, transportation, tutoring, tuition or school supplies if a student's classroom switches to remote learning.

"We know parents are best equipped to make decisions around their child’s education — they’re the ones in the driver’s seat,” Ducey said in a statement.

Reach reporter Stacey Barchenger at stacey.barchenger@arizonarepublic.com or 480-416-5669. Follow her on Twitter @sbarchenger.

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