A new battle may be brewing between President Joe Biden’s administration and Arizona over a pair of school fundings plan that may divert funds away from districts that require students to wear a mask to attend.

On Friday, the Treasury Department threatened to claw back up to $173 million, or redirect the money toward “eligible uses,” in a letter sent to the office of Governor Doug Ducey. The funds in dispute come from the Coronavirus State and Local Fiscal Recovery Funds program, or SLFRF, a $350 billion fund from the $1.9 trillion American Rescue Plan that was passed last year.

The funds are intended “to mitigate the fiscal effects stemming from the COVID-19 public health emergency, including by supporting efforts to stop the spread of the virus, according to the letter sent by the Treasury. Kathleen B. Victorino, a top compliance officer at the agency, said in the letter that Arizona may also delay a second tranche of relief funds that would be released to Arizona from the ARP.

By discouraging families and school districts from following this guidance, the conditions referenced above undermine efforts to stop the spread of COVID-19,” the Treasury Department wrote. “Accordingly, these school programs as currently structured are ineligible uses of the [SLFRF].”

There are two programs in question that have drawn scrutiny from the Treasury. Both programs are meant to help schools and students but that direct funding away from jurisdictions with mask requirements. Under Arizona's Education Plus-Up Grant Program, schools would have access to $163 million in funding, but districts that require masks for attendance would be deemed ineligible to access this money.

Arizona, like a number of Republican-led states, has been opposed to initiating any state-wide mask mandates in schools as a way to hinder the spread of COVID-19.

In September, a state judge ruled that a ban on mask mandates at Arizona schools was unconstitutional, preventing it from going into effect. The ruling was upheld in November by an appellate court after it was appealed by the Arizona Attorney General's office.

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