State figures out how to parses out CARES Act funds
Last week, Alaska’s Department of Commerce, Community and Economic Development released a revision to the eligibility requirements of the AK CARES program, allowing small businesses that have already received $5,000 or less in federal pandemic relief to apply for state funding as well. The program uses part of Alaska’s allotment under the federal Coronavirus Aid, Relief, and Economic Security Act to provide grants for small businesses suffering economically from the COVID-19 pandemic.
The federal CARES Act was passed on March 25, and included some nationwide programs to help small businesses through the Small Business Administration. Licensed businesses with 50 or fewer employees could apply for a forgivable loan of up to $100,000 to cover payroll through the Paycheck Protection Program, PPP for short, or apply for an Economic Injury Disaster Loan, or EIDL, that came with an emergency advance of up to $10,000. The CARES Act also provided relief money to state governments, with Alaska receiving $1.5 billion.
On May 18, the state allocated $290 million of that to small business relief through the AK CARES program, funded through the DCCED and administered by the Alaska Industrial Development and Export Authority, or AIDEA.
Unlike the federal programs, AK CARES relief comes in the form of grants rather than forgivable loans, between $5,000 and $100,000 depending on the applicant’s expenses. At the program’s conception, only businesses that had received no federal relief were eligible to apply. This has changed.
While the measure aimed to cover those businesses that had fallen through the cracks of the federal programs and to prevent “double-dipping,” it also excluded many businesses that had received insufficient federal funding or were concerned about paying off federal relief loans. Many businesses that applied for federal relief loans would have been better off receiving grants from the state of Alaska, and some objected to the limitation.
In light of this, the DCCED released a revision on June 17 that expanded eligibility to small businesses that have received $5,000 or less in federal relief, in addition to some nonprofit organizations. The reason they capped it at $5,000 was a legal issue more than a policy one, according to Paul Labolle, chief of staff to state representative and co-chair of the house finance committee Neal Foster.
“There was a legal question of whether or not they could do that,” he told the Nugget, referring to the amendment of the AK CARES program after its ratification. Because the state received its $1.5 billion in CARES funding shortly before the legislature adjourned on May 20, it passed the program through a Revised Program Legislative (RPL) Process, in which the governor submits a budgetary plan and the legislature ratifies or rejects it. This process was completed just days before the legislature adjourned, and it was unclear whether it was legal to change the terms of the RPL after the legislature was no longer in session. “They thought the 5,000 was a low enough threshold to be more legally sound,” Labolle said.
Small businesses also have a number of other avenues through which to receive relief under the CARES act. In addition to the AK CARES program, more than $250 million will be distributed to Alaskan communities, with about $5.7 million allocated to Nome in three distinct payments over the next few months. As of June 19, the City of Nome has already received about $2.7 million of these funds, and cities have the option of allocating some of this money to small business relief.
Glenn Hoskinson, media contact for the DCCED, confirmed that businesses receiving relief funding from their local governments, regardless of the amount, are still eligible to apply for AK CARES grants as well.
Alaska also allocated approximately $750,000 to be divided among the Alaska Regional Development Organizations, ARDORs for short, in order to “provide technical assistance to regional businesses in applying for and obtaining access to funding,” according to the AK CARES document. The ARDOR for Nome and the surrounding area is the Bering Strait Development Council. The BSDC is a 18-member advisory Council that operates under the umbrella of Kawerak. Labolle told the Nugget that as of now, it is not clear how much money will go to each ARDOR or how it will be disbursed.
Additionally, the federal CARES Act established an $8 billion relief fund for “Tribal governments and Tribally-owned entities of those governments to use for expenditures incurred due to the COVID-19 public health emergency,” according to a statement from the Senate Committee on Indian Affairs. While the language of the bill originally included Alaska Native Corporations, a number of tribal leaders in both the Lower 48 and in Alaska have sued to prevent that money from going to ANCs, claiming that they represent for-profit corporations and do not have the same social responsibilities as “Tribal governments.” A federal judge has temporarily blocked ANCs from receiving relief from the tribal fund in response to the lawsuit. It remains to be seen when or if ANCs receive federal relief.
A number of other open questions remain regarding pandemic relief for Alaska’s small businesses. Currently, the state has contracted with Anchorage-based bank Credit Union 1 to evaluate grant applications and disburse funds, but Labolle said that businesses may be able to apply through other banks, such as Wells Fargo, in the future. The text of the AK CARES document also states the program “will give consideration to technological access limitations for rural communities,” but it remains to be seen what exactly this entails.
AK CARES funds will be distributed on a first-come, first-served basis, and the program also requires applicants to respond to inquiries about their applications within three days. While this may put rural businesses without reliable internet or phone connections at a disadvantage in the race to receive grants, Labolle pointed out that 20 percent of the funding has been set aside for rural businesses (in communities of 5,000 or smaller), which may help account for technological limitations. He also said that some other yet-undecided measures may be put in place to further help rural businesses access relief funding.
How businesses can continue to receive relief as the pandemic draws on is another open question. AK CARES will cover anticipated expenses up to eight weeks in the future, but is set to end on November 1, when the public health emergency ends, or when it runs out of funds, whichever comes first. After that, relief options for small businesses remain to be seen.