Disparity found in how state shares aid
Smaller communities receive less per person
When Congress passed the Coronavirus Aid, Relief and Economic Security, or CARES Act in late March, it was intended to prop up state and local governments slammed by the COVID-19 pandemic. Battling the disease forced an economic shutdown, spiking unemployment and tanking tax revenues.
The economic impact has hit urban and rural counties, and cities and small communities alike, as COVID-19 has killed more than 1,000 Arizonans and sickened many times more. But the federal aid to address it hasn’t been equally shared.
The federal government made direct CARES payments equaling more than $174 per resident to the state’s three largest cities — Mesa, Phoenix and Tucson. Maricopa and Pima counties got even more in direct federal payments for residents who live in unincorporated areas: $1,197 and $237 per person, respectively.
But the legislation tasked governors with distributing the rest of the CARES funds to smaller cities and counties. And Gov. Doug Ducey distributed significantly less than the three biggest cities received and less than was recommended by U.S. Treasury guidelines, according to an Arizona Republic analysis.
Ducey gave smaller cities and communities about $115 per resident, compared with the $174 that Mesa, Phoenix and Tucson received.
The reason: Ducey held back $395 million of CARES funding to backfill the state general fund.
That money would otherwise have gone to 88 smalland mid-sized cities and the 13 less-populated counties had he strictly followed federal recommendations, records show. The lost funding ranges from tens of thousands for tiny communities such as Winkelman in Gila County, to many millions of dollars for suburban cities in Maricopa County, such as Chandler and Gilbert, records show.
Critics contend Ducey’s decision to withhold the federal dollars from smaller cities and communities could force layoffs of police officers and firefighters in some communities, stall the recovery of small businesses and leave homeless shelters without adequate funding.
Pinal County is considering a lawsuit to force disbursement of the rest of the money, so their share equals the $174 per-resident Phoenix, Mesa and Tucson received.
Pinal was shorted at least $14 million in CARES funding, according to The Republic analysis.
“A lawsuit may be viable,” said Kent Volkmer, Pinal County attorney. “We are still exploring all of our legal options. We just want to be treated equally.
“It’s a slap in the face…There is a continual pattern that urban people are more valuable than rural people,” he said.
Tolleson Mayor Anna Tovar called the funding her community received a “good start” but added that “it’s not enough.”
The West Valley community was shorted at least $440,000, the analysis showed.
“Cities and towns across Arizona are trying to respond and provide vital services to keep people safe and prevent the spread of COVID-19,” she said. “We definitely need the money.”
Some Arizona mayors said they have lobbied Arizona’s congressional delegation, asking that the Treasury distribute any new federal stimulus directly to the cities instead of using the state to distribute the money.
Rep. Ruben Gallego, a Democrat whose congressional district includes communities affected by the unequal distribution, including Tolleson, Glendale and Guadalupe, said states are “supposed to be a pass through” and not hold back money for their own use.
“Everyone is concerned about defunding police, but it looks like Gov. Ducey is going to defund police in these small communities by not giving them their money,” Gallego said.
Fair distribution
Patrick Ptak, a Ducey spokesman, said the governor quickly and fairly distributed the federal dollars.
State government needed more money to address a potential shortfall in the current fiscal year that ends June 30, and the fiscal year that begins July 1, he said.
“We took a very thoughtful look at how to distribute these dollars,” Ptak said. “We met with mayors and local leaders on what their priorities were in constructing this.”
On Thursday, after receiving questions about the money from The Republic, the Governor’s Office issued a news release that said 50% of all CARES Act allocations in Arizona are going to city and county governments, the highest percentage of any state in the country.
However, that is only because the federal government made direct payments of nearly $1 billion to Phoenix, Mesa, Tucson and Maricopa and Pima counties. And federal government gave Maricopa County 10 times more in per-resident funding than Ducey gave Arizona’s smaller cities and counties.
Ptak also said the state may need to replenish the unemployment insurance trust fund, and it’s not viable to ask businesses to contribute more in payroll taxes when they have been hard hit by the pandemic.
“We are still determining the best use for other CARES Act dollars. We only get to spend these dollars once, and we want to ensure we are doing it wisely and responsibly,” Ptak said.
Tovar and other mayors noted the state has a $1 billion rainy-day fund, so cities and counties should not have to shoulder the burden of a potential shortfall in Arizona’s general fund, which largely funds public education.
Meanwhile, the state’s unemployment insurance trust fund on May 29, stood at $1 billion, according to records obtained by The Republic. It has lost 8.5% of its value since April 3, records show.
A U.S. Treasury spokesman confirmed The Republic used its guidelines correctly in calculating the amount of CARES funding that Arizona’s smaller cities and communities were shorted. The League of Arizona Cities and Towns, which has lobbied Ducey for a larger share of the money for its members, also confirmed the accuracy of The Republic’s analysis.
“Every single local government has an idea of what they would want to do with the money,” said Nick Ponder, the league’s legislative director. “Many are not going to be able to run the same robust small-business program or robust homeless program.”
Winslow Mayor Tom McCauley said, “I don’t understand his rationale for taking the money from small towns. We should all get the same amount per capita.”
Slicing the funding pie
Arizona’s total COVID-19 aid allocation was $2.8 billion for the state’s almost 7.3 million residents, federal records show.
The CARES Act provided direct federal payments to communities with more than a half million people. That means Phoenix, Mesa, Tucson as well as Maricopa and Pima counties received their funding from the U.S. Treasury with no middle man.
The Cares Act allows governors to distribute the remaining dollars to local governments with fewer than 500,000 residents or to state coffers.
With the three biggest cities and two large counties receiving almost $1 billion and Ducey giving the smaller communities and counties $441 million, that leaves $1.2 billion that the state kept. That figure includes $150 million for FEMA reimbursements.
On May 28 — the day after Ducey distributed the money to the smaller communities — the U.S. Treasury published a 10-page update on how states should allocate CARES dollars.
Among the guidelines was for states to use “as a benchmark the per capital allocation formula that governs payments to larger local governments. This approach will ensure equitable treatment among local governments of all sizes.”
Ponder notes large U.S. counties, like Maricopa, were the biggest winners in the CARES Act, as Maricopa County received nearly $399 million — the largest share of any local government in Arizona. Maricopa County got so much money that supervisors on Monday decided to set aside $175 for “future needs.”
The per-resident amount provided to Arizona’s three largest cities was known in early May. Still, Ducey elected to give smaller communities about two-thirds that amount.
Ptak declined to say how the Ducey administration determined the figure for smaller communities.
Had the $174-per-resident funding ratio been used for the smaller cities and the 13 counties, they would have shared an additional $229 million. Had the governor followed the federal guidelines, they would have shared an additional $395 million.
‘Less resources than bigger cities’
But Volkmer, the Pinal County attorney, and several small-town mayors told The Republic they don’t necessarily want Ducey to strictly follow the federal guidelines. They said that would be unfair to Phoenix, Mesa and Tucson, who then would receive less in per-resident funding.
Flagstaff’s Coral Evans said there’s a simple solution: Give every city the same per-resident amount.
“To give us 66 cents on the dollar is very short sighted, especially when you look at our lack of revenues,” Evans said. “We pay taxes in rural Arizona just like everyone else.”
Under Ducey’s distribution, Flagstaff received $8.6 million. It would receive another $4.4 million under an equal funding formula.
Evans said those additional millions of dollars would go a long way in helping the city’s lone food bank, one homeless shelter and numerous other needs.
“We have less resources than bigger cities,” Evan said. “Why would it be that the smaller cities and towns in Arizona would have to carry the burden when the larger claims of unemployment come from the metro areas?…It would have been more appropriate to give us our money so we could allocate it where it’s needed the most.”
Win-win for region
Some community leaders are just fine with the smaller payments.
When Ducey announced distribution of the money to smaller cities and counties, his office issued a news release with statements from seven mayors and a county supervisor who praised the governor’s decision. They represent Chandler, Gilbert, Kingman, Maricopa, Peoria, Prescott, Sahuarita and Yuma County.
Those communities would have shared an additional $54 million had the governor used a funding formula similar to the large cities.
One of those mayors is Chandler’s Kevin Hartke, whose city received nearly $30 million from Ducey. It would have received another $15.5 million had its percapita funding equaled its neighbor, Mesa.
Hartke said the payments can’t be compared because the big cities’ money came directly from the federal government, and the money distributed to Chandler was from the state.
“I see that as apples and oranges,” Hartke said. “It’s a different source and different money, and we will use it for the best of our community.”
Gilbert’s Jenn Daniels also was quoted thanking Ducey in the news release for “ensuring that AZCares Funds lift all Arizona communities directly and with a focus on a safe and strong Arizona future.”
Her town received $29.1 million, but would have received another $15 million had its funding been similar to the biggest cities.
She told The Republic that she didn’t want to get into a comparison game.
“Our problems are not the same as Mesa or Phoenix,” Daniels said. “I see this as a win-win for all of us in the region.”
But Volkmer, the Pinal County attorney, said he’s not satisfied getting less.
“We are at a greater disadvantage than the urban communities,” Volkmer said. “Yet we are the most disrespected and given the smallest piece of the pie.”