Treasurer: Feds changing stimulus rules to bully state

Arizona is having to borrow money because the U.S. Department of Education is imposing new requirements for the state to get stimulus funds, Treasurer Dean Martin is charging.

"What Arizona has received is endless bureaucratic red tape and constantly changing rules to delay access to funds," he said Wednesday. The result, said Martin, is Arizona doesn't have use of $433 million it should have had by now.

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That, he said, left Arizona without sufficient cash to pay the $317 million payment due K-12 schools Wednesday. So Martin said he had to borrow $130.9 million, money the state will need to repay with interest.

Paul Senseman, press aide to Gov. Jan Brewer, acknowledged Arizona has not yet received its first education stimulus payment.

But the governor's office is distancing itself from Martin: Senseman said Brewer and her staff have no evidence, in writing or otherwise, that the Department of Education has changed its rules or is purposely withholding any cash.

What the governor's office does know, Senseman said, is that federal officials want more information on the education funding in the state budget.

And Sandra Abrevaya, spokeswoman for the U.S. Department of Education, said Martin is flat wrong. She said the requirements have "remained unchanged throughout."

Abrevaya said her agency approved Arizona's request for funds last month.

She said, though, the state's request to actually start using the funds has been held up amid questions of whether the cash is actually going for education - the only legally permitted use - or for some other purpose.

"The department has been working with the governor's office to ensure that they can begin using the funds as quickly as possible and in a manner that is consistent with the law," she said.

Senseman said he cannot say whether Martin is being alarmist.

"I guess we won't know for certain until tomorrow," he said, referring to a scheduled conference call Thursday between the governor's budget aides and federal education officials. Senseman added, though, that Martin "did not discuss this release with us."

Arizona qualified for about $832 million in education cash under the American Recovery and Reinvestment Act. Senseman said the state, as required by law, applied for the first two-thirds of that in May and got a notice of grant award on June 4.

Of that $557 million, the state then sought a "draw" of $433 million to use in that fiscal year, the one that ended June 30. That request, Senseman said, resulted in the questions about how the state budget is "structured."

Martin, however, said he finds that all suspicious.

The key issue, he said, is the "maintenance of efforts" requirement in federal law. States must spend at least as much of its own cash for education now as it did prior to getting the stimulus money.

On Wednesday, though, Martin said he was told by the governor's office that federal officials now want the state to actually cut education funding. "Only then can Arizona apply for federal funds to replace those cuts," he said.

Senseman, however, said his office has no information to that effect.

That did not keep Martin, already planning a trip back East to help his sister move, from getting on a plane Wednesday for Washington. Martin said he intends to spend time in the next two days meeting with members of Arizona's congressional delegation talking about "the seriousness of the state's financial condition and the ineffectiveness of the federal aid to Arizona."

This isn't the first time Arizona has had to borrow money.

The state, financially strapped due to sagging tax receipts, has tapped the lending market in the past to meet certain payment deadlines. And Martin already had said he was anticipating some short-term borrowing in the future to deal with cash-flow issues.

But the issue of stimulus funding has become politicized.

Various cabinet secretaries have written Brewer in the wake of comments by Sen. Jon Kyl questioning the effectiveness of the stimulus program pushed through by President Barack Obama.

"Since even the president acknowledges the stimulus isn't working as well as he hoped, the administration should instead be willing to consider whether the unallocated stimulus money could be put to better use," Kyl said.

The letters to Brewer pointed out the money Arizona already has received and, in essence, asking if she believes, as does Kyl, Arizona should not get the rest of what it is owed. Martin said he sees the changes in education funding, along with those letters, as just another part of the pressure being brought on Arizona.

"It's becoming clear that the administration is holding education funding hostage to bully Arizona into submission," he said. "This is taxpayer money, not the administration's personal piggy bank."