Over $200 million of the AK CARES Grant Program for Alaska small businesses remains unclaimed as of Wednesday, and the head of the Kenai Peninsula’s Economic Development District is calling on Alaska’s Legislature to fix some of the program’s eligibility requirements in order to get the rest of the money out.
“The rules don’t match up with the needs,” Tim Dillon, executive director of KPEDD, said during a hearing of the House Labor and Commerce Committee Wednesday. “Unless we plan on returning over $200 million to the federal government, we need to make changes now.”
As part of the money sent to the State of Alaska through the Federal Coronavirus Relief Package, $290 million was set aside specifically for small business relief grants.
These AK CARES grants are being processed through Credit Union One, and range from $5,000 to $100,000 depending on the expenses that the businesses have incurred since the start of the pandemic.
As of June 30, $6,394,154.54 of the $290 million has been distributed to businesses across Alaska, Dillon said. Just over $1.1. million of that has gone to 30 businesses on the Kenai Peninsula.
Credit Union One has more than 1,000 additional applications in hand, Dillon said, that add up to another $60 million in potential relief that could be sent out in the coming weeks. That still leaves more than $200 million in grant funds that currently have nowhere to go.
“We will be the only state in the Union that can’t figure out how to give out free money,” Dillon said. “And it’s not as if we don’t need it. These people need it, desperately.”
During his testimony and in an interview with the Clarion Wednesday, Dillon highlighted four major changes that he said need to be made to the state’s grant program in order to get the rest of the money out.
Commercial Fishing
The first change would be to allow the commercial fishing permits issued to commercial fishermen to work as business licenses for eligibility purposes. Currently, businesses can only apply for the AK CARES small business grant if they can show they had an active business license in Alaska on March 11, 2020. Dillon explained that commercial fishing operations are issued commercial permits to fish, but they are not required to have a business license to operate.
“That was something I just learned in the last month,” Dillon said. “I didn’t realize that their license is not a license, it’s a permit.”
Dillon said that he spoke with several commercial fishermen who specifically purchased business licenses so that they could apply for the state’s grant program, but because they didn’t purchase the license before March 11, they were rejected for the grant.
“That was a perfect example of why DCCED (Department of Commerce, Community and Economic Development) has to have the ability to make changes,” Dillon said.
501(c)(6) nonprofits
Dillon is also pushing for the Legislature to include 501(c)(6) organizations in the list of nonprofits that are eligible for AK CARES grant funds. This nonprofit classification includes chambers of commerce, Realtors associations and other similar trade or business leagues.
Dillon and others requested this change early in the program’s roll out, and during a House Finance Committee hearing on June 17, Julie Anderson, department of commerce commissioner, announced that this change would be implemented, although there is no effective date for this change.
Dillon said that the changes have to be made legislatively, which is why he urged legislators Wednesday to convene for a special session to address the problems with the program.
Cross-eligibility issues
Financial relief tied to the COVID-19 pandemic is being distributed through many avenues — federal programs, state agencies and local municipalities have all been allocated funds to address different aspects of the disease’s economic impact. This has led to issues for small businesses owners who have already acquired funds through the federal Paycheck Protection Program or an emergency disaster loan and who are now hoping to receive assistance from the state. Under current regulations, businesses who received funding through any federal programs are ineligible for the AK CARES Grant.
Dillon said this regulation was meant to prevent anyone from gaming the system or “double-dipping,” but the reality is that businesses can use all the funds they can get.
“When the PPP and EIDL were put together, everybody, including our congressional delegation, was saying ‘Hey, this is your federal government. Whether you think you need it or not, we don’t know how long this thing is going to last, so apply in the queue,’” Dillon said. “Nowhere did anybody think that that was going to make you ineligible for Alaska CARES.”
Doug Weaver, owner of Northern Superior Construction, said he was told conflicting information when the federal programs were first launched, and he initially chose not to apply for them after seeking advice from his banker and accountant. Later, a friend encouraged him to apply for the PPP funds, but during that process he was told to go for the state grant instead because he hadn’t used the PPP funds yet and was therefore still eligible for state assistance.
“I would have acted on the PPP money if it would have lasted longer,” Weaver told the Clarion Wednesday. “I’m glad that — with the fact that I couldn’t do both — I’m glad I’m still eligible for this.”
Dillon and KPEDD Programs Manager Caitlin Coreson were helping Weaver sort through boxes of paperwork at the KPEDD offices Wednesday, because the application for state assistance asks you to list and document all of the expenses incurred since March, as well as expected expenses for the next eight weeks.
Weaver said that, over the course of the pandemic, he has found himself purchasing items in much larger quantities than he normally would, simply out of an abundance of caution.
“I bought a lot of certain things because I know that I can’t be caught without them,” Weaver said. “Just like you can’t be caught without toilet paper, you have to have the essentials. I went into Home Depot two months ago and I bought every nail that they had on the floor. Hundreds of pounds of nails, and I went and put them on my truck. I’m still using them, and now I hear nails might be hard to get because they come from overseas.”
By what authority
The final recommendation Dillon addressed Wednesday was to give the department of commerce commissioner the authority to implement changes, such as the ones being proposed by Dillon now, without the need for the Legislature to reconvene and approve the changes.
“Especially when you’re talking about this virus right now, bringing people together and all, that’s the last thing you want to have to do,” Dillon said. “You have a commissioner, you have an executive director of AIDEA (Alaska Industrial Development and Export Authority). They’re very talented individuals. They know what they’re doing; give them the tools to get the job done.”
Dillon said that the members of the House Labor and Commerce Committee, as well as the local legislators that he’s spoken to, seem receptive of the changes and would be willing to reconvene. Labor and Commerce Committee Chair Rep. Ivy Sponholz, D-Anchorage, said during the hearing that the Legislature should act on these changes.
“I want to thank the dozens of Alaskans who testified about the need to remove bureaucratic barriers to AK CARES grant eligibility,” Sponholz said Wednesday.
“They made a clear case for the Legislature and governor to quickly make the AK CARES Grant Program work better for Alaskan businesses, nonprofits, trade associations, and commercial fishing operators hurt by the pandemic. We must act now.”
