Hobbs, Horne dispute could cost Arizona federal money for schools

A blame game between two top state officials threatens to cost Arizona more than $22 million in federal COVID relief money for education.

An assistant to Republican state Superintendent of Public Instruction Tom Horne sent letters accusing Democratic Gov. Katie Hobbs of removing his department's authority to administer Emergency Assistance to Non-Public School grants.

"This means that the Arizona Department of Education no longer has the ability to draw EANS funds from the U.S. Department of Education's system to make payments under your contract with us,'' wrote Steven Paulson, chief procurement officer in Horne's department.

Paulson told recipients to contact the Governor's Office and ask how it intends to fulfill the requirements of the grant.

But Hobbs, in a letter Friday to Horne, said it was the U.S. Department of Education that lifted the authority of Horne's agency to administer the funds after it failed to meet certain deadlines. That moved the money over to her office, she said.

Hobbs said her Office of Strategic Planning and Budgeting can't disburse the money, however, because Horne's office hasn't provided the necessary details about what grants have been awarded. She is asking Horne to sign an agreement to have them work together to fulfill the grants.

Paying the existing obligations is only part of the problem.

The state Department of Education says it had so far been unable to allocate the bulk of the funds because no one had applied for them. Now, with the governor taking control, there is no way for the agency to find a way to give them out, Horne's office says.

Time is running out: Hobbs said $6 million of the total will be taken back by the feds if not allocated by the end of the month; Horne's office pegs the amount immediately at risk at $13.9 million.

Horne has a different take than Hobbs on the whole thing.

"Every word in the governor’s letter is a lie, including 'the' and 'and,' '' he said in his own statement Friday about her letter to him.

Nor does Horne intend to sign any agreement.

"Due to her own actions, the governor now needs to take care of this problem, and not pass the buck to the Department of Education,'' he said.

"She arranged for the federal government to change the fiscal agent from the (state) Department of Education to the governor,'' Horne said. "The Arizona Department of Education has no ability to pay anyone for work done, or to authorize further work, because the governor has now become the fiscal agent.''

The money in question was specifically earmarked for non-public schools, with a focus on those with at least 20% of their students from low-income families said to be most impacted by the pandemic.

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Only nonprofit schools that existed prior to March 13, 2020 are eligible. The schools also cannot have sought loans under the Paycheck Protection Program.

Eligible expenses include everything from personal protection equipment and sanitizing supplies to paying reasonable transportation costs and maintaining remote or hybrid instruction. Money could go directly to schools or to private contractors to provide the services.

According to Hobbs, Arizona got nearly $109 million, with $22.3 million still unallocated.

There's a Sept. 30 deadline to allocate what Horne's office says is nearly $14 million of that — $6 million according to Hobbs — or forfeit it. The balance has to be used by Sept. 30, 2024.

"If you fail to fulfill your duties as superintendent by cooperating with my office, money that should be spent in Arizona to educate our children will be distributed to other states,'' Hobbs wrote to Horne.

Horne's aides, however, said such an agreement is a moot point. They said once the Governor's Office took back the money, it became the fiscal agent solely responsible for distributing it.

Hobbs is painting all of this as political, accusing Horne in a separate statement of "a gross dereliction of duties.''

"For months, Superintendent Horne has played political games while my administration has fought to deliver millions of dollars of funding to Arizona schools,'' the governor said. "This must end. Horne needs to put his partisan politics aside and do what's right for the education of Arizona's children.''

Hobbs said that Horne is not following federal law and "is sending a clear message that he believes his politics are more important than giving every Arizona student the education they need to thrive.''

Complicating the matter is that while the federal law gives the dollars to the state through the Governor's Office, the state Department of Education is supposed to be the fiscal agent. That requires a certain degree of cooperation between the two, cooperation that both sides say has been missing.

Horne called the governor's statement about the need to spend the money to educate children "hypocritical.''

He pointed out that early in her administration, Hobbs canceled about $210 million in COVID grants that Doug Ducey, her Republican predecessor, had awarded in his last days in office at the end of 2022. That included $75 million to continue a summer school program for a second year.

Horne said those dollars would have helped students improve reading and math.

But Hobbs said at the time the money was awarded illegally, without competitive bidding, and she later reallocated the funds.