Government

Judge rejects Arizona attempt to declare federal fund block on tax cuts as unconstitutional

Attorney general argued restriction Congress' block was illegal

Posted 7/25/21

PHOENIX — A federal judge has thrown out a bid by Attorney General Mark Brnovich to void provisions in a COVID-19 federal relief package that preclude any of the cash being used for tax …

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Government

Judge rejects Arizona attempt to declare federal fund block on tax cuts as unconstitutional

Attorney general argued restriction Congress' block was illegal

Posted

PHOENIX — A federal judge has thrown out a bid by Attorney General Mark Brnovich to void provisions in a COVID-19 federal relief package that preclude any of the cash being used for tax cuts.

In an extensive ruling, U.S. District Court Judge Diane Humetewa said neither Brnovich nor the state has any legal right to challenge the provisions of the American Rescue Plan Act approved earlier this year by Congress. The $1.9 trillion plan, the latest in a series of measures designed to deal with the pandemic, includes $350 billion for state and local governments, with $4.7 billion of that for Arizona.

Only thing is, Congress put a significant string on that: States cannot use the money to then turn around and reduce taxes.

Brnovich challenged that as unconstitutional.

If nothing else, he argued, the conditions are so ambiguous as to leave Arizona unsure of what would cause it to forfeit any of that federal cash. And that, Brnovich said, illegally prevents the state from lowering its net tax collections in any way.

But Humetewa, in a 10-page ruling, said there’s a huge flaw in that argument.

She pointed out that Brnovich claims the “ambiguity” in the federal law puts legislators in an uncertain position about how to comply with the law. Only thing is, Humetewa noted, none of that kept Arizona lawmakers from just approving $1.9 billion in tax cuts.

“There is no evidence that the lawmakers’ decision was influenced by the restriction,” the judge said, saying all Brnovich offered were “conjectural and hypothetical injuries.”

Humetewa was no more impressed by arguments that the rules about the conditions of getting the money — including the ban on using them directly or indirectly for tax cuts — were too ambiguous to be enforce.

“Congress is not required to make known every way in which states may violate a condition on the receipt of the funds,” she wrote. The judge said the only requirement is that the statute “provide clear notice to states that they, by accepting funds under the Act, would indeed be obligated to comply with the conditions.”

And then there’s the practical side.

“Explaining every possible way in which a condition might be violated ... would prove too onerous, and perhaps, impossible,” she said.

But Humetewa said that, in this case, there was no gray area.

“Congress ... made the existence of the condition upon which Arizona could accept funds explicitly obvious,” she said.

“That Arizona was unsure of every factual instance of possible noncompliance does not amount to a violation of Congress’ duty.”

Humetewa also rejected Brnovich’s contention that the sheer size of the proffered funds from the feds — that $4.7 billion — amounted to illegal coercion given that the state’s total annual budget is only about $12.4 billion.

She conceded that theory might have some merit in some states that have been financially strained by the pandemic.

“But Arizona has not alleged facts showing that it has undergone financial strain,” the judge wrote. “To the contrary, Arizona has alleged that its revenues from taxes in fiscal year 2021 (the one that ended June 30) brought in $1 billion over estimates.”

The judge also pointed out that there is no claim that Treasury Secretary Janet Yellen currently is trying to get back any of that $4.7 billion based on the state’s noncompliance. Nor is the state admitting that it has directly or indirectly used any of that cash for the $1.9 billion in tax cuts.

And then there’s the fact Arizona waited for more than two months after ARPA was enacted and four days after Yellen published rules about the restrictions on the dollars before accepting the cash — and certifying that it would comply with those rules.

“Such delay does not evidence coercive pressure,” Humetewa wrote.

In a prepared statement, Brnovich press aide Katie Conner did not address the specific findings in the ruling. Instead she said that her boss, who has filed a series of lawsuits against the Biden administration and also is running for U.S. Senate, will appeal the ruling “and will continue to fight for Arizona taxpayers and push back against federal overreach.”

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