Treasury warns Ducey that federal funds cannot be to 'undermine' COVID mitigation

The U.S. Treasury Department has warned Gov. Doug Ducey that he cannot use federal funds intended to mitigate the spread of COVID-19 as leverage against school districts that implemented mask mandates.

The Treasury gave the governor 30 days to alter his policies, or face the loss of nearly $4.2 billion being granted to the state by the federal government.

In a letter to Ducey on Tuesday, Deputy Secretary of the Treasury Adewale Adeyemo said that the funding was designed to finance "evidence-based efforts to stop the spread of COVID-19," and federal officials were "concerned" that the governor established two programs in August aimed squarely at school districts that implemented mask mandates in spite of laws signed by Republican governor over the summer

The programs are funded through the American Rescue Plan, a $1.9 trillion bill signed by President Joe Biden in March. Intended to mitigate the spread of COVID-19 with extended unemployment benefits and new stimulus payments to individuals, the plan earmarked nearly $350 billion to help states, counties, cities and tribal governments manage the coronavirus outbreak.

In August, Ducey announced a carrot-and-stick approach by using some of the funding to create a grant system that would punish schools that required masks on campus, while also unveiling a program to give parents up to $7,000 to leave districts that implemented mask mandates, attempted to quarantine students exposed to COVID-19, or were forced to close because of outbreaks.

Dubbed the "Education Plus Up Grant," the funding doled out under Ducey's orders would send up to $163 million to districts and charter schools that follow "all state laws," and remain "open for in-person instruction," the governor said.

The move was part of a larger fight over Arizona's newly passed HB 2898, which "prohibits counties, cities, towns, schools, and school districts from requiring students or staff to wear a face-covering during school hours and on school property." Despite the law, more than a dozen school districts—including Tucson Unified School District—said they would require masks when schools opened for classes, arguing that the law could not be enforced until Sept. 29.

The law also blocked schools from requiring vaccinations against COVID-19 for students and staff, and would fine school districts and charter schools if they tried to enforce mandates. A similar version of the law also blocks the state's universities.

However, just days before the law was supposed to go into effect, a Maricopa County judge struck down the measure, ruling that state legislators violated Arizona's Constitution by engaging in "logrolling"—adding the unrelated bills into part of the state's $12.8 billion overall budget package.

While Ducey pushed against mask mandates, a CDC study in Maricopa and Pima counties found that schools that don't require face coverings to protect students from COVID-19 are 3.5 times more likely to experience an outbreak of the disease.

"A program or service that imposes conditions on participation or acceptance of the service that would undermine efforts to stop the spread of COVID-19 or discourage compliance with evidence-based solutions for stopping the spread of COVID-19 is not a permissible use of SLFRF funds," Adeyemo warned. "As you know, recipients of SLFRF funds are required to comply with the terms and conditions established by the American Rescue Plan Act for use of such funds." 

"Accordingly, Treasury requests that the state of Arizona provide a response describing how the state will remediate the issues identified with the two programs described above," he wrote. "Failure to respond or remediate may result in administrative or other action," he added.

The governor's office did not respond to a request for comment or questions about the Treasury's letter.

Catalina Foothills, which found itself at loggerheads with Ducey's office over a plan to quarantine students who had "close-contact" with an infected person in July, said they were owed $4.5 million.

"We are following the science regarding the importance of keeping our students and staff safe by requiring masks indoors," said Mary Kamerzell, the superintendent of Catalina Foothills School District.

"We are eligible for $4.5 million of these federal grant dollars and look forward to them being released by the governor’s office. Their use will go a long way towards strengthening our Covid mitigation strategies," she said.