PHOENIX (AP) — A judge has dismissed Arizona Gov. Doug Ducey’s lawsuit challenging the Biden administration’s demands that the state stop sending millions in federal COVID-19 relief money to schools that don’t have mask requirements or that close due to COVID-19 outbreaks.

The state filed the lawsuit earlier this year after the U.S. Treasury Department demanded that Ducey either restructure the $163 million program to eliminate restrictions it says undermine public health recommendations or face a repayment demand.

The Treasury Department also wanted changes to a $10 million program Ducey created that gives private school tuition money to parents if their children’s schools have mask mandates.

In a ruling earlier this week, U.S. District Judge Steven Logan concluded it was reasonable for the Biden administration to say that the money couldn’t be spent on efforts that would undermine compliance with COVID-19 prevention guidelines. The judge said a program that requires noncompliance with guidelines may worsen the pandemic and create more negative effects, which goes against the purpose of the relief fund.

While Ducey claimed the the American Rescue Plan Act wasn’t clear in the conditions it imposed on using the relief money, the judge agreed with the Biden administration’s argument that the permissible uses for the funds under the law — and its authorization for the Treasury Department to issue appropriate regulations — put the state on notice about the conditions associated with accepting the money.

Ducey’s lawyers have said in court records that the governor is appealing the ruling. Ducey spokesman C.J. Karamargin said on Saturday that the governor’s office was reviewing the decision.

The lawsuit said the Treasury Department created restrictions on spending the money Arizona receives under the American Rescue Plan Act on its own and without legal authority. It asked a court to declare that the Treasury Department’s rules are illegal and permanently block enforcement and any demands that it pay back the money spent on the two programs.

The Treasury Department started demanding that Ducey change the programs in October. It was part of a concerted effort to force Arizona and some other Republican-led states that have opposed mask mandates or were using pandemic funding to advance their own agendas to end those practices.

Ducey rejected Treasury’s request the following month, and the Biden administration followed up with a formal demand that it cease using the money for the disputed programs or face either repayment demands or withholding of additional money it is set to receive under Biden’s COVID-19 relief bill.

At issue are two state programs the Republican governor created last summer meant to help schools and students.

Arizona’s Education Plus-Up Grant Program provides $163 million in funding to schools in higher-income areas that received less than $1,800 per student in federal virus aid. Districts that require face coverings or that have closed due to virus outbreaks are ineligible.

Another called the COVID-19 Educational Recovery Benefit Program provides for up to $7,000 for parents if their child’s school requires face coverings or quarantines after exposure. It lets parents use the money for private school tuition or other education costs and its design mirrors the state’s existing school voucher program.

Ducey created the programs in part to up the pressure on school districts that had mask mandates or other COVID-19 restrictions, saying they were hurting children and parents who had endured more than a year of school shutdowns, remote learning and other restrictions.

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