Gov. Mike Dunleavy’s administration had hoped to distribute $150 million in emergency grants to small businesses in June, drawing on money from the federal COVID-19 bailout bill.
The goal was to follow that up with $140 million more in grants in July. This schedule struck me as an impossible dream when the state announced it in the spring.
As it happened, the emergency grant program has been more of a nightmare than a dream.
Instead of giving out $150 million in June, Credit Union 1, the state contractor hired to process the applications, distributed only $6.4 million in grants. At this rate, it will take two years to give out $150 million.
But businesses on the verge of collapse don’t have two years or two months. Plus, the federal government has set a clear deadline for using the money.
At this rate, Alaska will be forced into doing the unthinkable—giving back $200 million or more to the federal government.
Time is going to run out on those COVID-19 funds before many Alaska businesses fighting to survive another day see a dime of these grants.
Something needs to change. Right now.
Dunleavy should have already called a special session in Anchorage to get this fixed.
That he hasn’t done so is the latest in a series of mistakes with this program. The session can be in Anchorage and it won’t take more than a few days. It should focus entirely on resurrecting this program so that the $290 million can help Alaska businesses.
I’ve heard that Attorney General Kevin Clarkson may be thinking that the program can be fixed without legislative action, but that is another invitation to a court suit and many businesses can’t afford more delay. They will soon have to close their doors.
Most of the small businesses seeking these grants, which are to range from $5,000 to $100,000, are waiting to hear back from Credit Union 1. But even if all applications so far are approved, the state will not come close to using up the $290 million.
The main problem is that the Dunleavy administration created this program in a hurry with rules that disqualify thousands of struggling small Alaska businesses that have received small amounts from other elements in the federal assistance bill.
“Unless we plan on returning over $200 million to the federal government, we need to make these suggested changes now,” Tim Dillon, executive director of the Kenai Peninsula Economic Development District, told House legislators. He outlined several simple changes that legislators could make in a short session.
“I need to remind everybody that no one is getting rich with this money. No one is being made whole with this money,” Dillon said.
Dillon said the problem is “no one’s fault. It’s just that the rules don’t match up with the needs.”
In fact, the fault lies with the inflexible rules created by the Dunleavy administration.
Dunleavy made numerous complaints about the Legislature being too slow to approve his plan to distribute the $1.25 billion from the federal government, including the hundreds of millions for small businesses.
“Alaskans need help NOW,” Dunleavy or his publicity office said in a Tweet on May 7. “Not tomorrow or next week. NOW. What will history say? Did #akleg fail the people in their time of need.”
The Legislature approved the Dunleavy plan shortly thereafter, including a rule that said all applicants have to have a business license. “But commercial fishermen don’t have a business license. They have a permit,” Dillon told legislators last week.
Fishermen don’t qualify for the program on that basis alone. That’s a mistake.
The rules from the administration also prohibit giving grants to businesses that received any help from any part of the federal bailout fund.
This is the biggest mistake in the state grant program.
A total of 9,516 Alaska businesses had received Payroll Protection Program loans/grants of less than $150,000 by the end of June.
Thousands of those businesses received relatively small amounts. More than 4,000 of them received $20,000 or less. Nearly 1,000 businesses received $5,000 or less.
The Dunleavy administration has said that despite a rule banning grants to those who received any federal assistance, it wants to allow grants to businesses that received up to $5,000 from one of the other programs. This is legally suspect.
There is an ongoing court case that threatens to derail the plan, which is the last thing small businesses need right now.
Given the scale of the economic damage and the resources available, the limit should be raised—perhaps to $10,000 or $20,000.
Clearing the legal questions will take action by the Legislature at a quick special session that should have already been called by Dunleavy. Struggling small businesses can’t wait.
Dunleavy should follow his own advice in that Tweet from May 7: “Alaskans need help NOW. Not tomorrow or next week. NOW. What will history say?”