Gov. Doug Ducey cannot deny COVID-19 relief dollars to schools that impose mask mandates or give vouchers to parents so they can remove their children from those schools, a federal judge has concluded.
In a new ruling, Judge Steven Logan rejected the governor’s argument that there is nothing in federal law that requires him to spend money from the American Rescue Plan Act only in ways that the federal agency and Treasury Secretary Janet Yellen say conform with ways the Centers for Disease Prevention and Control say will fight the virus.
And the judge had no more sympathy for the governor’s argument that the rules the Treasury wrote for use of the dollars exceeded the agency’s authority.
The immediate effects of the ruling are unclear.
In a January letter, Kathleen Victorino, the deputy chief compliance officer of the U.S. Treasury Office of Recovery Programs, warned that it is illegal for Ducey to dole out the cash Arizona is getting from the State and Local Fiscal Recovery Fund only to public schools that do not mandate that students and staff wear face coverings. If Ducey did not rescind his policies the state faced having to forfeit the cash, Victorino said.
It was that letter that led Ducey to take the preemptive action of filing suit to block any funds from being withheld — the lawsuit that Logan decided in favor of Yellen and the Treasury.
But Ducey press aide C.J. Karamargin said Arizona actually received its second payment of ARPA cash of about $2.1 billion last month.
There was no immediate comment from the federal agency about its earlier decision to send the dollars to Arizona anyway, about the new court ruling — and whether it would now seek reimbursement.
The governor’s staff was still studying the decision and had no comment, Karamargin said.
The fight actually started in 2021 when the Republican-controlled legislature voted to bar schools from imposing mask mandates.
That law was subsequently overturned by the Arizona Supreme Court which concluded it had been improperly enacted by being lumped into a single piece of legislation with unrelated issues. As a result, some districts kept their masking requirements in place.
What Ducey sought to do was replace that now-voided law with a financial carrot of those federal ARPA dollars.
The first cash came from a program that divided up $163 million among Arizona school districts and charter schools that had received less than $1,800 per student under prior COVID-19 relief programs.
Only thing is, the governor said those schools that require the use of face coverings during instruction hours would not get a share of that cash.
And there was something else. Ducey set aside another $10 million in grants to parents whose schools continue to require masks.
Those funds, up to $7,000 per child, can be used for everything from online tutoring and child care to tuition to attend private and parochial schools. Any family below 350% of the federal poverty level — about $92,750 a year for a family of four — is eligible.
That resulted in the letter from Victorino, followed quickly by Ducey’s lawsuit.
The heart of Ducey’s claim is that the federal statute allocating the funds permits states to use the money “to respond to the public health emergency with respect to COVID-19 or its negative economic impacts.”
Anni Foster, the governor’s legal counsel, said that gives states broad latitude. She argued that Treasury impermissibly elevated public-health issues over all others.
Logan, however, said that “narrow” reading of just those words ignores the larger underlying purpose of the entire law: protect public health. And he said it’s clear that the funds “may not be used for programs with conditions that undermine public-health guidance, as such programs would exacerbate rather than mitigate the pandemic’s fiscal effects.’’
Put simply, Logan said, any program that has conditions that would promote the spread of the virus — in this case, encouraging schools to scrap mask requirements in exchange for more cash — by definition “prolongs the pandemic and its resulting fiscal effects” and therefore fails to mitigate either the health or the financial impacts of the virus.
He also pointed out that Treasury put an even sharper point on that with its rules saying that federal dollars could not be used in ways that would “undermine efforts to stop the spread of COVID-19 or discourage compliance with (CDC) recommendations and guidelines.”
Foster also argued, unsuccessfully, that the governor’s use of the funds really does address the negative economic impact of COVID-19. She said that’s because it would mean less remote or hybrid learning which “disproportionately affected low-income and minority students.”
“The programs empower parents and students to exercise their freedom to make informed decisions regarding their health and educational needs,” Foster said.
The restrictions Ducey placed on the use of the money — the schools that are eligible and the cash to send students to schools without masks — fits squarely within the legitimate use of the dollars, she said.
“For parents who prioritize their child’s social, emotional, and mental health needs and believe a mask mandate would adversely impact their child, the program offers these parents the freedom and funding to enroll their students in a different program absent a mask mandate,” Foster said. And she dismissed any argument that the only way to stop the spread of virus is through masks, pointing out the state offers free testing for all residents.
“Schools have every ability to encourage practices recommended by the CDC and students were not prohibited from doing so,” she wrote.
Logan, however, wasn’t buying it. Nor did he accept some other contentions by Foster that the law and Treasury’s rules were flawed.
For example, she acknowledged that Congress does have the power to impose conditions on how the states spend federal money. But Foster said that has to be done “unambiguously” to allow states to decide whether to accept the cash and the strings attached.
In this case, though, she said there is nothing in the law authorizing the program that alerts states to the possibility that the funds might be rescinded based on the changing guidelines from the Centers for Disease Prevention and Control about how to prevent the spread of COVID.
Separately, Foster contended that even if Congress agreed to empower Treasury to set rules on the use of the funds — she contends it did not — it was illegal for federal lawmakers to delegate that power to an agency.
