Dunleavy FINALLY proposes critical change to CARES Act program months after businesses demanded fixes

Gov. Mike Dunleavy on Thursday announced he was proposing fixes to the state’s federally funded small business relief program, finally delivering on fixes that small businesses, business leaders and legislators have been demanding for months.

The state’s CARES Act program has been snarled by tightly written regulations, extremely slow processing times and a lawsuit that attempted to force the governor and Legislature into action to fix it from the beginning. The latest change would open the program to businesses who’ve previously received any amount of federal funding and requires legislative approval.

The program has, as of a week ago, disbursed just $26.2 million during the two-and-a-half months that it’s been underway as several businesses testified that despite the immediate need, they had gone as much as a month without any communication from the state program.

Small businesses are eligible to receive between $5,000 and $100,000 in a state grant to cover unexpected expenses due to the COVID-19 pandemic.

Democratic legislators held several hearings on the program, giving businesses and economic development leaders the opportunity to propose an array of fixes from the get-go, which included lifting the restrictions on how much federal funding businesses could have received. As originally written by the Dunleavy administration, the program barred businesses that had received any federal funding from accessing the state program and later lifted that to $5,000.

The state has been inexplicably slow to fix the program after the governor put an immense amount of pressure on the Legislature to approve the program without the regular oversight.

Several legislators warned that such a route could lead to unintended consequences and pushed for a more thorough review of the program. Anchorage Democratic Rep. Ivy Spohnholz was one of those legislators and said at one of the hearings that the program has “been botched at every point.”  

The state encouraged businesses that had received more than $5,000 in federal funds to return the money to the feds—something that never had a clear process nor a guarantee that it would actually work—and apply to the state program. It’s unclear just how many businesses returned how much money because of this soon-to-be-defunct suggestion.

One business owner told us that such a suggestion was “wildly irresponsible” and could leave businesses in a spot where they had returned tens of thousands of dollars in federal money with no guarantee that there would be money available in the state program.

The governor’s proposal will now go to the Legislative Budget and Audit Committee in the form of an RPL request. The changes can be implemented as soon as the committee meets or within 45 days without that approval.