WASHINGTON — The Biden administration backed off its threat to withhold pandemic aid money from Arizona after accusing the state earlier this year of misusing the funds to undercut school mask mandates.
A spokesman for Arizona Gov. Doug Ducey, a Republican, confirmed that the state had received its second payment of about $2.1 billion last month.
The retreat comes amid renewed focus on the $1.9 trillion relief package that Democrats passed last year, which has been blamed for helping fuel rapid inflation and prompted concerns about whether some of the money had been misused.
Arizona was awarded $4.2 billion as part of its share of the $350 billion slated for states and cities to help replace revenue that had been lost during the pandemic, support health initiatives and invest in water, sewer and broadband infrastructure projects. Arizona got its first $2.1 billion installment in 2021 but the Treasury Department, concerned that the state was using the funds to undermine public health efforts, warned Arizona officials that it might recoup $173 million that it had previously awarded or hold back the second tranche of funds.
Dayanara Ramirez, a Treasury spokeswoman, declined to explain why the funds had been released after the department threatened to withhold them.
“Treasury does not comment on matters in its compliance process,” Ms. Ramirez said.
Treasury said that the funds were disbursed through the standard process that the Office of Recovery Programs has established to make second-tranche payments.
The dispute over the funds began after Arizona’s Republican-controlled legislature banned school mask mandates in 2021, but some school districts imposed them anyway. Last August, Mr. Ducey announced that he was rolling out two education programs intended to undercut such requirements.
One of the programs, which received $163 million in federal funds, provided up to $1,800 in additional funding per pupil in public and charter schools that were in compliance with “all state laws” and open for…
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