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State officials say the biggest challenge has been figuring out how to get the federal money out the door amid a complex set of spending rules that has yet to be finalized by the Treasury Department.
“It’s like the python that ate the rat,” Brad Whitehead, a nonresident senior fellow at the Brookings Metropolitan Policy Program, said of the struggle to shepherd so much federal money into state projects. “You need all those calories, but it’s hard to digest it all at once.”
The Treasury Department gave states broad discretion over how the stimulus money can be deployed, but imposed limits on using funds to shore up public pension programs and restricted states from using relief funds to subsidize tax cuts. The tax cut prohibition angered several Republican governors, who argued it infringed on state sovereignty, and has led to a thicket of lawsuits.
Among those challenging the restriction is Ohio, which was awarded nearly $5.4 billion of state aid through the American Rescue Plan. Gov. Mike DeWine, a Republican, opposed the entire package and, after it passed, his state took a leading role in litigation contending it was unlawful to put conditions on the relief money that prohibited states from using it to finance tax cuts.
The lawsuit is still making its way through the courts, but by June, Mr. DeWine
signed legislation to use more than $2 billion of the federal funds to replenish the state’s jobless benefits fund, to improve water and sewer quality and to improve pediatric behavioral health facilities.
Texas announced in October a raft of plans to start spending some of its nearly $16 billion in federal aid, unveiling major investments in broadband, rural hospitals and food banks. Yet the state, which received the second largest allotment of funds in the country, also said it was hoping to use some of the funds to slash property taxes and that, despite the prohibition against doing so, it was setting aside $3 billion for
“future tax relief.”
The most contentious use of federal funds this year has been in Arizona, where Republican Gov. Doug Ducey used relief money to roll out two education programs intended to undercut mask mandates that were imposed by some school districts. A
$163 million program provides up to $1,800 in additional funding per pupil in public and charter schools that are “following all state laws” and open for in-person instruction. Schools that required masks would not be eligible.
A separate $10 million program provides vouchers worth up to $7,000 to help poor families leave districts that require face coverings or impose other Covid-related “constraints.”
Gov. Doug Ducey of Arizona in Phoenix in 2020.Credit...David Wallace/The Arizona Republic, via Associated Press
The Treasury Department warned Mr. Ducey in October that the state could lose some of its $4.2 billion if it did not change the policy. Arizona rebuffed the request and a senior Treasury official said that an administrative process is now underway to claw back some of the funds.
A spokesman for Mr. Ducey did not respond to a request for comment.
White House officials said that despite some disagreements about the relief money, governors and their staffs have privately been working well with the Biden administration.
“I’ve had direct conversations with virtually all of the Republican governors or their top officials, and to the one, they have been constructive, nonpolitical, nuts and bolts conversations about how they can best use their American Rescue Plan funds for things like broadband, schools, water and work force development in a way that meets the needs of their state,” said Gene Sperling, who is Mr. Biden’s pandemic relief czar.
Other aspects of the relief package remain in limbo since it was enacted, including a $4 billion debt relief program aimed at helping minority farmers. That remains mired in litigation brought by some white farmers and conservative groups such as America First Legal, which is run by the former Trump administration official Stephen Miller. They argue that the program, which was a centerpiece to the Biden administration’s racial equity agenda,
unfairly excludes white farmers because of their race.
The debts of minority farmers, who faced years of discrimination by the Agriculture Department, have yet to be forgiven.
John W. Boyd Jr., the president of the nonprofit National Black Farmers Association, said he found it wrong that states like Texas, where the agriculture commissioner is suing to block the debt relief, are grappling with how to spend their relief money while Black farmers cannot access their aid funds and are facing foreclosure.
“I think it’s terribly unfair,” Mr. Boyd said. “But it’s a continuation of what we’ve endured in this country.