State promises fixes that may not be legal to bungled business relief program

The state’s small business relief program is a mess.

Nearly three weeks in and a program that’s expected to serve as many as 6,000 business has approved a total of 83 grants to small businesses, paid out 68 and denied another 26 because, according to how Gov. Mike Dunleavy’s administration wrote the hastily assembled program, they had already received any amount of federal relief money.

A combination of the strict parameters set by the administration on the program, which was rushed through without the normal legislative process, and technical challenges have created a confusing, ineffective mess that’s causing additional pain for Alaska businesses on the brink.

One of the biggest problems that as written by the Dunleavy administration, businesses that have received any amount of federal relief aid do not qualify for the program. That means businesses that had received as little as $1,000 would be barred from receiving between $5,000 and $100,000 in cash from the state.

State officials on Wednesday promised legislators swift fixes that would allow some new flexibility in the program. The changes would allow businesses that have received less than $5,000 in federal aid to apply to the program, wouldn’t penalize programs for taking part in local relief programs that are funded by the feds and would let businesses return federal relief money in favor of the state grant program.

The state also said it’s working on bringing on additional grant processors alongside Credit Union 1, which has been handling the grant program so far. State officials acknowledged that many of the 1,500 businesses in line for the grants haven’t heard anything back from CU1 and pledged that would also change.

Many businesses and business groups told legislators they appreciated the changes but some said they likely wouldn’t go far enough to meaningfully help businesses that may have already spent the federal relief money or are too busy to navigate the increasingly confusing process.

“Restrictions are causing more harm than help,” Shirley Marquardt, the executive director of the Southwest Alaska Municipal Conference, told the committee. “As a cautionary note on the $5,000, from what I’m hearing from the businesses in my community, the $5,000 limit to previous federal funding will leave a great majority of those businesses in the exact same position they are now.”

When legislators asked Department of Commerce Community and Economic Development Commissioner about the process for refunding money to the feds, she said some of the details were still being worked out.

The relief program was mired in legal challenges from the start. The Dunleavy administration chose to use the Legislature’s RPL process, which is typically reserved for when the Legislature is not in session and to increase federal spending for existing federally funded programs, to create wholly new spending while the Legislature was still in session.

Despite warnings from Democrats that the process didn’t meet legal muster, legislative leadership and Dunleavy pushed ahead with the process and were met with a lawsuit for their efforts. That prompted the hasty return to session where the Legislature ultimately ratified the changes, but that meant the typical process of reviewing and amending the program was not possible.

At a hearing last week, legislators wondered if a new RPL or a special session would be needed to provide a legally defensible update to the program, but the state has refused such help. Instead, Assistant Attorney General Bill Milks told the committee on Wednesday that they have reinterpreted the law despite it clearly saying businesses cannot qualify if they received any federal funds.

“You gotta look at the underlying legal basis for the program and then try to sort out how much flexibility, where the flexibility is,” he said. “In reviewing that issue, could that be loosened in any way? We though that the approach the commissioner described was reasonable and within the agency’s discretion.”

The justification for the $5,000 threshold? Well, said Milks, it was mentioned a few times during legislative hearings.

Legislative Legal Services Director Megan Wallace, who had warned about the original lawsuit, told legislators that the new reading could also face legal challenges but admitted that “We’re in uncharted waters” and the state may also prevail if the program was challenged.

“The RPL was pretty plain that an applicant would be excluded if they had obtained some other federal funding but I suppose that if a court is looking at this in terms of determining how much discretion to give a department to execute this program, it might look at the minimum threshold loan amount, which is $5,000, and determine that it has that flexibility,” she said. “There is some risk that that interpretation conflicts with the eligibility criteria in the RPL.”

Some Democrats are wary about the state’s plan, arguing the best thing to do would be for the Legislature to return and pass a legally sound replacement.

“Good idea, bad approach,” wrote Juneau Sen. Jesse Kiehl on Twitter after the hearing. “This is the *exact opposite* of what the (governor) put in writing. Don’t pretend $5,000 = $0 and draw more lawsuit delays. Call a quick special session so the (Legislature) can make it happen legally!”

As for the attorney behind the lawsuit that brought legislators back to Juneau, Joe Geldhof was unimpressed by the legal gymnastics.

“So now we’re going with ‘legislative intent’ of an unconstitutional allocation?” he told the Anchorage Daily News by text message. “There is no end of dippy thinking in the governor’s office and apparently the attorney general’s office.”

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1 Comment on "State promises fixes that may not be legal to bungled business relief program"

  1. Ronald B Lind | June 18, 2020 at 9:47 am | Reply

    Good. The legislature and executive branch both tried to take an illegal method to address these funds. No hearings, no public testimony, should have required passage of a bill for legislTion and separate appropriation by regular process.

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