TUSCALOOSA, Ala. — A federal court judge denied a motion brought by 13 states to stop the enforcement of the American Rescue Plan Act.
The ARPA prevents states from using federal money to replenish revenue losses from tax cuts. West Virginia Attorney General joined with 12 other state attorneys general in the lawsuit arguing that the ARP violates the spending clause and the 10th Amendment of the U.S. Constitution in a lawsuit filed in U.S. District Court for the Northern District of Alabama.
West Virginia joined with Alabama, Arkansas, Alaska, Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota and Utah in the lawsuit against the U.S. Department of Treasury, Treasury Secretary Janet Yellen and Treasury Inspector General Richard Delmar.
In his July 14 denial, U.S. District Judge L. Scott Coogler wrote that the preliminary relief that the states are seeking is not warranted and the motion for preliminary injunction is therefore denied.
"It goes without saying that the COVID-19 pandemic has caused ongoing economic harm to individuals, businesses, and state and local governments," Coogler wrote. "To ease the financial strain, in March 2020, Congress provided $150 billion in direct assistance for state, local, and Tribal governments under the Coronavirus Aid, Relief, and Economic Security Act. ... However, economic distress continued. Accordingly, on March 11, 2021, President Joseph Biden signed the ARPA, which appropriated approximately $1.9 trillion to provide relief to address the impact of the COVID-19 pandemic."
Coogler wrote that approximately $195.3 billion of the $1.9 trillion was tapped for the states, and those funds represent an average of about 25 percent of the 13 plaintiff states' annual budgets.
The states argue that the federal tax mandate is unconstitutional and sued for declaratory and injunctive relief in March.
Coogler wrote in the denial that the court cannot provide preliminary relief that would address the harm that the states allege they would suffer absent a preliminary injunction.
"As noted previously, the Plaintiff States claim that they are being harmed because they must soon make the decision whether to certify compliance with ARPA’s substantive provisions, meaning that they will have to promise to comply with an allegedly ambiguous unconstitutional condition or lose billions in federal aid," he wrote. "They also claim that they are being harmed in that their legislatures do not currently know if they can reduce the taxes of their constituents without suffering future recoupment of ARPA funds and thus may be forced to delay passing fiscal legislation until next year."
Coogler writes that whether the court grants or denies the motion for preliminary relief, the states will still have to take into consideration, when accepting the ARPA funds, that the funds are subject to possible recoupment if the court were to ultimately issue a merits decision declining to issue a permanent injunction.
"Thus, granting a preliminary injunction, in this case, does nothing to remedy the Plaintiff States’ alleged harm, which is that they are having to decide whether to certify participation in ARPA without clarity as to what the Federal Tax Mandate means," Coogler writes. "Indeed, the only difference stemming from whether this Court grants or denies the motion for a preliminary injunction is that, if the Court were to grant the motion, the Secretary could not recoup funds in between now and when the Court decides the ultimate issues in this case."
Coogler wrote that the case was well-suited for an expedited decision on the merits and if the parties agree that no discovery is warrantied, they are encouraged to submit a proposed briefing schedule that would help in quickly resolving the case.
U.S. District Court for the Northern District of Alabama case number: 7:21-cv-00465