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U.S. Treasury threatens to claw back Arizona funds over anti-masking school grants

Kitco News

WASHINGTON, Jan 14 (Reuters) - The U.S. Treasury on Friday said it told Arizona officials the state's proposed COVID-19 education assistance programs targeted at schools without mask mandates violate usage rules for federal aid money to state and local governments, and the department may claw back funding.

In a letter to Arizona Governor Doug Ducey's office, the Treasury said that two programs, including a $163 million grant program for schools that follow state laws banning public school mask mandates, are "ineligible uses" of State and Local Fiscal Recovery Funds.

The $350 billion state and local funding program was enacted last year as part of the American Rescue Plan COVID-19 aid law.

Another Arizona program deemed ineligible offers $7,000 education grants to families of students for alternative instruction if their school requires face coverings.

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

"Failure to take either step within 60 calendar days may result in Treasury initiating an action to recoup SLFRF funds used in violation of the eligible uses," the Treasury's acting deputy chief compliance officer, Kathleen Victorino, said in the letter.

The department added that it also may withhold Arizona's 2022 installment of state and local aid funds until the Treasury confirms the education funding issues have been resolved.

The state of Arizona was allocated $4.2 billion in State and Local Recovery Funds based on its unemployment rate, receiving $2.1 billion last year with the remainder due in 2022.

In addition, cities and counties in Arizona received separate allocations unaffected by the Treasury's demand, including $871 million for Maricopa County, $203 million for Pima County and $396 million for Phoenix.

Reporting by David Lawder; editing by Jonathan Oatis
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