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Ducey sends $400M of CARES money to state agencies – Arizona Capitol Times

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Gov. Doug Ducey is utilizing lots of of hundreds of thousands of {dollars} in federal funds earmarked for COVID-19 aid to pay for state operations, equivalent to salaries, which some say contravenes the intention of Congress.

Ducey, who controls practically $1.9 billion of federal coronavirus aid cash, funneled practically 1 / 4 of it to state businesses, which, in flip, plan to ship parts of their authentic funds allocations again to the state.

The Governor’s Workplace touted his transfer for instance of prudent budgeting that’s serving to the state elude a dire fiscal crunch, however observers argue that Arizona may very well be stretching, if not outright breaking, guidelines on how states can use funds they acquired beneath the Coronavirus Support, Aid, and Financial Safety Act, and that the state is likely to be compelled to pay again the federal authorities.

Congress didn’t permit states to make use of CARES Act cash to switch income misplaced due to the pandemic. All the roughly $150 billion divided amongst states have to be used straight to handle the consequences of the virus, and any unspent cash reverts again to the federal authorities on the finish of the yr. However Arizona successfully allotted practically $400 million to state coffers through the use of the federal funds to pay for already-budgeted salaries and another bills throughout a number of state businesses.

The businesses, in flip, plan to return cash initially allotted to them by the Legislature again to the state treasury.

Ducey’s workplace is assured that it used the cash correctly, mentioned Matt Gress, the governor’s funds director.

“There’s all the time an opportunity that the auditors come again and say, ‘We’d like somewhat bit extra clarification on X, Y and Z,’” Gress mentioned. “However I don’t see a state of affairs during which they are saying, ‘Return this cash,’ as a result of we adopted the steering as clearly as we may.”

Arizona acquired greater than $4 billion from the CARES Act, and Ducey holds extensive latitude in tips on how to spend $1.86 billion of it. As of November 18, he has allotted $1.48 billion, in accordance with the newest date for which legislative funds analysts have updates on CARES Act spending.

About $396 million of that was used for “state company public well being and public security bills,” in accordance with monitoring paperwork. Eleven businesses — the departments of Agriculture, Corrections, Financial Safety, Well being Providers, Insurance coverage and Monetary Establishments, Juvenile Corrections, Liquor Licenses and Management, Public Security, Income and Transportation, in addition to Arizona Parks & Trails — that acquired CARES Act funding will deposit $300 million again into the state’s Common Fund and $96 million into different funds.

Some businesses, just like the Division of Well being Providers, have a transparent connection to the pandemic. For others, Ducey’s workplace relied on steering from the U.S. Treasury Division that claims payroll for public well being and public security workers may very well be presumed to be associated to the pandemic and subsequently eligible to be funded by the CARES Act.

Ducey’s workplace decided that each one state staff who’re licensed peace officers may rely as public security workers for the needs of utilizing CARES Act funds to pay their salaries.

The Division of Liquor Licenses and Management, as an example, plans to switch a complete of $126,738 again to the state’s Common Fund. In his FY2022 funds request, company director John Cocca wrote that the CARES Act funds have been used to pay for working bills within the fourth quarter of FY2020.

Cocca, like a number of different company heads, praised the governor in explaining why his company is returning money to the state treasury.

“The Division of Liquor Licenses and Management acknowledges that the Governor is targeted on sustaining the fiscal integrity of the State’s Common Fund in gentle of the COVID-19 Public Well being Pandemic,” he wrote. “Additional, the Governor is uniquely positioned to collaborate throughout all departments, figuring out and crafting the most effective resolution that’s acceptable for every.”

Utilizing federal cash to pay for bills that in any other case would have been coated by the state boosts Arizona’s state coffers. Ducey spokesman Patrick Ptak mentioned it has helped stabilize the state’s funds so Arizona doesn’t have to chop spending from key applications, equivalent to schooling and public security.

“I might add that we all know the pandemic isn’t simply concerning the public well being response,” Ptak mentioned. “It’s concerning the long-term restoration and the selections we’re making with these {dollars}, whereas prioritizing public well being, will assist us in years to return to keep away from the robust selections that many different states are going by means of proper now.”

Arizona’s revenues seem like in fine condition. Legislative forecasters went from anticipating a possible deficit of $1.1 billion to predicting the state may have as a lot as $800 million further within the financial institution by July 2022, as higher-than-expected gross sales tax income, lottery gross sales and job losses concentrated in lower-wage fields abated considerations about an prolonged financial downturn.

Whereas the CARES Act offers states broad parameters during which to spend their share, it requires spending to be straight associated to the general public well being emergency brought on by COVID-19 and just for bills that “weren’t accounted for within the funds most not too long ago permitted as of the date of enactment” of the CARES Act on March 27. The federal funding should even be spent between March 1 and December 30.

Ducey waited to signal the FY2021 funds, which lawmakers handed on March 23 and which contained $50 million in state funding to assist with the response to COVID-19, till March 28, guaranteeing that he may use federal cash earlier than dipping into the state’s personal allocations.

There isn’t any full centralized report of how states are utilizing their CARES Act funds, however incomplete databases maintained by organizations, such because the Nationwide Convention of State Legislatures, present that Arizona’s strategy of reimbursing the Common Fund is rare.

Throughout the nation, a lot of the cash has been spent on coronavirus assessments, medical tools and aid for small companies and renters who may face chapter or eviction due to the pandemic. Many states, together with Arizona, additionally arrange applications to supply grants to cities and cities which might be too small to qualify for direct funding beneath the CARES Act.

Some states have chosen to liberally interpret the steering supplied by the U.S. Treasury Division, mentioned Jared Walczak, vice chairman of state initiatives on the Tax Basis’s Heart for State Tax Coverage

A handful used hundreds of thousands of {dollars} to spend money on broadband infrastructure, reasoning that it’s an vital financial improvement as many workers and college students are anticipated to work remotely. West Virginia, for instance, deliberate to make use of about $50 million to restore rural roads it designated as “medical entry highways.”

“Most states have averted what is likely to be interpreted as straight disregarding the steering, however many have been versatile within the interpretation of that steering in hopes that finally the Treasury might be equally versatile within the accountability requirements,” Walczak mentioned. “Nonetheless, what’s being proposed in Arizona is a really aggressive interpretation.”

States are on the hook for paying again federal cash if audits subsequent yr present that they spent it in a way that doesn’t align with the regulation. In Idaho, fears of an audit prompted a number of cities to say no their governor’s affords of CARES Act cash to pay cops’ salaries.

States that weren’t hit onerous early by the pandemic have struggled with tips on how to use their share of the federal cash as a result of they could be barred from utilizing it in areas the place the cash may very well be most helpful, Walczak mentioned.

“Many states have extra money than they know what to do with within the coronavirus aid fund, however on the identical time they’re taking a look at shortfalls of their working funds,” he mentioned. “It’s very tempting to achieve into this one pot to fill a gap in one other, however that’s not what the cash’s for. Getting too inventive may create a worse scenario down the street the place the cash has already been spent, and now it is advisable to reimburse the federal authorities.”

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