Governor proposes lifting state CARES grant restrictions
Lawmakers approved the Dunleavy administration's request to expand eligibility for the remaining AK CARES grant funds Thursday at a Legislative Budget and Audit Committee meeting in Anchorage.
The changes, which take effect Aug. 31, allow businesses that recieved any amount of aid from the federal Small Business Administration's Paycheck Protection or Economic Injury Disaster Loan programs to also recieve AK CARES support, which is federal CARES Act money passed through the state. Businesses that are the owner's secondary source of income are also now eligible for AK CARES grants.
Gov. Mike Dunleavy thanked committee members for approving the changes and said the adminsitration is working to quickly distribute the roughly $240 million that remains in the program in a statement from his office.
Committee chair Rep. Chris Tuck, D-Anchorage, said he believes the administration could have eased the eligibility requirements for the state's federally funded small business aid program without legislative approval, but all of the potential roadblocks are now cleared for more businesses to access the funds.
"It's been clear for months that the administration had the broad authority to get this relief to small businesses, but today's action eliminates any uncertainty," Tuck said.
On Wednesday, the Municiaplity of Anchorage announced a second round of pandemic aid grants is now available for many small businesses in the city. The $5 million infusion to the city's Small Business Stablization Fund follows $1 million in grants that awarded to eligible businesses earlier this year.
The latest round of grants are for businesses within the municipality that have been economically impacted by the COVID-19 pandemic, had less than $1 million in gross revenue in 2019 and had no more than 20 employees at any time last year. Eligible businesses generally must be the owner's primary source of income, according to criteria provided by Mayor Ethan Berkowitz's office.
Successful Small Business Stabilization Fund applicants will recieve a $10,000 grant to be used on payroll, benefits, utilities, rent and other normal business expenses.
Franchises, pawn shops, bars and marijuana shops are among the businesses not eligible for the grant funds.
The grants will be processed by Cook Inlet Lending Center and the Small Business Stabiliation Fund application is available on the center's website. Applications will be accepted through Sept. 12, according to a municipal spokesman.
With about four months left before all the Alaska CARES Act money has to be out the door and roughly $240 million left unspent, the state is moving to change the eligibility to include small businesses that have received other federal pandemic aid.
In a Revised Program Legislative noticed issued Aug. 20, the state notified the Legislature that it wants to open up the Alaska CARES pandemic relief funding to more businesses. Currently, small businesses that received more than $5,000 in Paycheck Protection Program funds or Economic Injury Disaster Loan funds are not eligible. The state estimates that more than 20,000 small businesses in the state received those funds and therefore couldn’t get any of the state funding.
Between that and other initial caveats, including making commercial fishermen ineligible, the state was left with way more pandemic relief money available than it was distributing. Regional economic development groups, known as the Alaska Regional Development Organizations, began advocating for major changes to the program in June to the Legislature.
In a press release issued Aug. 20, Gov. Mike Dunleavy said the state wants to provide businesses with tools to survive the ongoing impact of the pandemic.
“AK CARES was crafted with the finest mesh to help those businesses who fell between the cracks when the door closed on them to other federal relief efforts,” Dunleavy said in a statement. “We accomplished opening that door, and we are now expanding that relief to other small Alaska businesses in real need.”
The RPL letter and attachments can be found here.
The state’s revised RPL will go to the Legislative Budget and Audit Committee for review. The exact language is to allow the administration remove any additional state restrictions on businesses applying for the funding, including businesses that received those PPP or EIDL funds and businesses that are a secondary source of income. Companies based outside Alaska, companies with more than 50 employees would still be ineligible as will marijuana businesses, and amounts would still be limited to between $5,000 and $100,000.
Though businesses that received those PPP and EIDL funds would now be eligible, there’s a catch: they still wouldn’t be able to seek reimbursement for expenses already covered through another relief program.
The deadline may be extended federally, but the RPL would provide the Alaska Department of Commerce, Community, and Economic Development more flexibility in administering the funds, according to the RPL documents.
“This flexibility will allow DCCED to ensure AK CARES meets the needs of small businesses in the most effective and efficient manner possible,” the documents state. “This may include, but is not limited to, raising the number of full-time equivalent employees a business may have and still qualify for the program, disbursement processes, and allowable expenses. Accordingly, the DCCED will be able to adjust eligibility requirements and grant amounts as necessary to allow for full use of federal funds made available through the CARES Act to assist Alaska businesses.”
The Legislature now has 45 days to act.
No action would lead to automatic approval of the change. If the Legislative Budget and Audit Committee — scheduled to address the RPL’s at an Aug. 27 meeting — approves the change, it could go into effect immediately. If the committee doesn’t approve it, the administration could reassess, and if the reassessment shows that the change still benefits the state, could override the Legislature and put it into effect immediately. The Legislature’s recourse then would be to go into session and require a two-thirds majority vote to override it.
Legislators have by and large said they had wanted the administration to take action to ease the restrictions for small businesses to access the $290 million originally appropriated to the AK CARES program, but have not moved to make the changes themselves during campaign season.
The clock is ticking down on the availability of pandemic relief funds. The federal CARES Act stipulated that all the funds had to be distributed by December 30, 2020. Many municipalities around the state have been busy administering their own local programs, but the state program has been slow to get money out since opening applications on June 1. Besides the eligibility roadblocks, there has also been a bottleneck for processing applications, as Credit Union 1 was the only financial application that agreed to process the applications. Applicants have reported waiting for weeks to even hear back.
CU1 had distributed $32.3 million in AK CARES Grants with another $8.7 million in dispersals pending as of Aug. 21, according to spokeswoman Jessica Gallagher. The credit union had received 2,559 applications totaling roughly $115 million in requests since the program began in June.
Gallagher wrote via email that the decision by DCCED leaders to move the online application to a portal on the department’s website, which went live Aug. 6, allows state officials to more easily bring on additional AK CARES operators to increase the program’s grant processing capacity.
The credit union developed multiple resources, including tutorial videos for prospective applicants to review prior to submitting their documents but consistently found staff needed to assist applicants throughout the process because applying for grants isn’t something most small businesses do, she wrote. Gallagher added that each applicant is different and deserves their application to be reviewed carefully, which simply takes time, and CU1 officials welcome help from other entities.
“Credit Union 1 understands the significant challenges these small businesses are facing right now, so the more operators working toward helping the distribution of AK CARES funds, the better,” Gallagher wrote.
Alan Weitzner, executive director of the Alaska Industrial Development and Export Authority — the state development bank under DCCED tasked with finding AK CARES operators — said in an interview Aug. 25 that the state has partnered with the Juneau Economic Development Council for processing assistance and now has nearly 60 grant processors to CU1’s program staff of approximately 35.
CU1 staff are focusing on the applications the credit union received prior to the application change, according to Weitzner, who said they have done a great job focusing on the needs of Alaskans.
“It was never going to be fast enough” he said, given how many businesses are in need.
The added help has cut the time needed to process an application roughly in half over the past several weeks, he added, and state officials are looking at bringing on even more help in the near future.
The RPL notice issued Aug. 20 includes 12 items total. Of those, 11 are capital projects that total about $42 million in federal funds. This is around the time of year when federal receipt authority becomes active. The other 11 projects include money for the Alaska Department of Education and Early Development, the Department of Natural Resources, the Department of Fish and Game, the Department of Public Safety, and the Department of Environmental Conservation. The federal funds for those projects don’t require an appropriation of state match, according to the RPL documents.
Small businesses statewide have been collectively wringing their hands about what’s going to happen in the fall and winter. This summer already forced a lot of belt-tightening around the state due to the lack of tourists and limited economic activity even within communities, and the fall and winter usually bring low economic activity even in ordinary times.
Elwood Brehmer contributed to this report. Elizabeth Earl can be reached at [email protected].