State promises more fixes to small business relief program… eventually

The Dunleavy administration is pledging several fixes to get its badly underperforming small business relief program back on track but offered no timeline for when those fixes will be made.

The House Labor and Commerce Committee on Tuesday held its latest hearing on the Alaska CARES Program, a state-run program to distribute federal money as grants to help small businesses affected by the COVID-19 pandemic, to get an update following the state’s success in defending some of the proposed changes in court.

As of Tuesday, the state reported that it had approved 273 of more than 2,200 applications after six weeks and distributed around $11 million. The state had hoped to distribute as much as $150 million in the first month.

“We’re having problems,” said Rep. Ivy Spohnholz, the chair of the House Labor and Commerce Committee after giving an update on the numbers. “Today’s hearing is designed to help the committee and Legislature understand the barriers to accessing these funds and what fixes, if any, are needed to ensure that we can prevent unnecessary small business closures at this time.”

Among the many problems facing the program is its strict language—as drafted by the administration—that barred businesses that received any amount of federal relief from accessing the program. The state sought to lift that to $5,000, a move that Juneau Attorney Joe Geldhof argued was “lawless” without approval from the Legislature. A judge rejected the argument last week, finding that even if he had found the argument convincing the harm of waiting far outweighed any potential harm created by the expansion.

Department of Commerce, Community and Economic Development Commissioner Julie Anderson said they would soon be raising the threshold to $5,000 and making several other changes in response to requests from businesses, business leaders and legislators. Those changes were nearly identical to the changes requested by the committee two weeks ago and include:

• Allow businesses to apply if they have received less than $5,000 in federal aid
• Allow businesses that have received more than $5,000 in federal aid to return anything in excess of $5,000 and be able to apply (there’s no such process for federal Payment Protection Program loans)
• Allow businesses that have received federally funded aid from local governments to apply as long as they certify the state and local grants are covering different costs (no double-dipping)
• Allow local chambers of commerce and area economic development organizations to apply
• Allow commercial fishermen to use their existing permits to apply (they had been previously barred because the state program required business licenses)

Spohnholz, who’s supported a potential return to Juneau if needed, pressed both Wallace and Milks about the legal standing for the changes, noting that a change in law or action by the Legislative Budget and Audit Committee would be more defensible. She also noted that the $5,000 figure was arbitrarily decided by the administration while businesses have called for further changes.

Anderson said they would be open to considering further changes after they can judge how the pending changes play out.

Assistant Attorney General Bill Milks said he believed last week’s order gave the state broad flexibility to administer the program, going beyond the $5,000 threshold that was at issue in the lawsuit. Legislative Legal Director Megan Wallace was more cautious about her advice, noting anything short of a new law may be vulnerable to a challenge.

Also at issue with the program is its painfully slow rate of getting money out to business applicants, a process that has left some businesses without any input from the program for more than a month.

“All of us recognize the that the applications are not being processed quickly enough,” said Alaska Industrial Development and Export Authority Interim Director Alan Weitzner.

He said many businesses have submitted incomplete applications, requiring time-intensive efforts to collect the necessary documents and verify the planned expenditures. He said they plan on rolling out a simpler application and establishing a portal where all information related to the program can be found in one place.

Six weeks into the program, Weitzner said they’re now reaching out to other programs and look at best practices for how to implement the program. He noted that creating a portal will require a modification to their request for proposal, which has not yet been made. Asked if there was a timeline for the proposal, he said he didn’t have one.

“I’m unable to give you a definitive timeline. I have not had the opportunity to talk internally with the Department of Commerce or to define, now, the next steps on an RFP so unfortunately I’m unable to answer that,” he said, adding that the state may opt to set up its own portal to handle applications.

That the state seems to be caught flat-footed after its success in the courts, unable to quickly enact the changes, didn’t inspire much confidence in legislators that the program would be able to disburse the full $290 million to businesses before the end of the year.

House Speaker Bryce Edgmon, I-Dillingham, was particularly pointed in his criticism, worrying that the state’s inability to deliver on promised fixes would result in millions unspent while more and more businesses close their doors. He said the state has promised faster grant processing at several hearings—something that’s not been at issue in the legal challenges—but nothing seems to be faster.

“What continues to escape me is clarity in all of this. I feel like I’m hearing two versions, one today, as I’ve heard in previous committees, about optimism that this money is going to get out the door and then when I talk to people, particularly in (economic development) rings, I hear a completely different story,” he said. “I just have to sit here today wondering if we will be back in a week or two or perhaps even later, grappling with these same issues and hearing the same promise that you’re working on it and making progress.

“My level of confidence right now is not very high that we’re going where we need to go to get all this money out on the street,” he said.

Anderson replied that they’re doing their best to get it fixed.

“We believe these changes will result in a smoother process,” she said. “I hear your frustration, I would like to get these funds out the door tomorrow if I had capability but we’re trying to do this in a way that is responsible as we can to meet the intent of the program.”