Attorney General Derek Schmidt joins legal fight over COVID-19 relief restrictions

Andrew Bahl
Topeka Capital-Journal
Attorney General Derek Schmidt joined a dozen other state attorneys general Thursday in challenging restrictions on how federal COVID-19 relief funds can be used.

Attorney General Derek Schmidt joined a dozen other state attorneys general Thursday in challenging restrictions on federal COVID-19 relief funds, which Congress has barred from being used to offset tax cuts — including legislation being considered in Kansas.

The move comes just days after the legislature approved $280 million worth of tax relief, a slimmed-down version of a more sweeping bill considered earlier in the year.

More:Cheering slimmed-down costs, Kansas legislators send revised tax cuts to Gov. Laura Kelly

Legislators briefly weighed using the $1.6 billion in direct relief that Kansas is set to receive as part of the American Rescue Plan, signed into law by President Joe Biden last month. But Congress had other plans when they inserted a provision barring the aid from being used to underwrite tax relief.

In a lawsuit filed Wednesday, Schmidt and 11 other attorneys general maintain the move was "one of the most egregious power grabs by the federal government in the history of the United States."

Schmidt said in a statement the federal language was "vague" and could implicate any number of tax policies considered by the Legislature.

"We are concerned that the U.S. Treasury Department has not immediately and unequivocally made clear it will interpret this new federal law narrowly to avoid unlawfully encroaching on authority reserved to the states by our U.S. Constitution," Schmidt said.

The suit comes after Missouri Attorney General Eric Schmitt filed a similar legal challenge on Monday.

The U.S. Treasury Department has maintained that states can still pursue whatever tax policy they like, as long as they pay for it with state money, rather than the federal aid. Treasury Secretary Janet Yellen said last week that guidance would be forthcoming on how to proceed.

It is unclear if Kansas would use the relief dollars to pay for the newly passed tax bill, even if Schmidt and his counterparts notch a legal victory. 

The legal challenge comes as Schmidt embarks on a run for governor in 2022. His potential opponent, Gov. Laura Kelly, has not weighed in on whether she will sign the legislation in the coming days.

But Kelly has signaled her opposition to similar legislation in the past. The bill aims to help Kansas residents and businesses benefit from 2017 tax cuts championed by President Donald Trump, but Democrats have argued that it is too costly to the state's bottom line.

The retooled proposal does include some provisions Kelly might find appealing, including an increase to the standard deduction and a requirement that some out-of-state retailers collect sales tax for online purchases.