While Idaho inches its way way to reopening its economy, no one in the U.S. is expecting any sort of a quick rebound in the wake of thepandemic.
"It's going to take much longer to thaw the economy than it took to freeze it," economist Diane Swonk told The New York Times.
The latest COVID-19 federal relief package totals $484 billion, yet doesn't include any direct relief to states or localities.
Morning Edition George Prentice host spoke with Alejandra Cerna Rios, director of the nonpartisan think tank Idaho Center for Fiscal Policyabout the center's most recent analysis of the relief, how many Idaho small businesses have been hindered by a first-come, first-served application process, and why it's time for Idaho policy makers and lawmakers to step up local efforts to assist small business owners.
“The prospect of the state facing a bankruptcy … well, it puts us – every Idaho community and every Idahoans – in a really tough spot.”
Read the full transcript below:
GEORGE PRENTICE: It's Morning Edition on Boise State Public Radio News. Good morning. I am George Prentice. The Idaho Center for Fiscal Policy is out with an early analysis of the first rounds of financial aid for small businesses crippled by the pandemic. Alejandra Cerna Rios is the director of the Idaho Center for Fiscal Policy, and she joins us live via Zoom this morning. Alejandra, good morning.
ALEJANDRA CERNA RIOS: Good morning, George. Thanks for having me.
PRENTICE: We learned that the first-come, first-served approach hindered small businesses needing relief the most … yes?
CERNA RIOS: That's right. So the first come, first served approach with the federal Paycheck Protection Program and another lesser known program that extended disaster loans, that approach didn't guarantee that the small businesses that presumably needed relief the most were the ones able to access resources. The program was intended to aid small businesses, and it's important to step back and acknowledge that small businesses by definition have relatively modest earnings. They employ smaller pools of stuff. And generally, compared with larger businesses, have less access to capital markets and business networks that could help them get through these tough times.
There were a couple of issues with how the federal aid programs were designed. For example, a wide eligibility criteria. Originally, from what we understand, lawmakers were looking at restricting access to businesses that have 500 or fewer employees. When the bill came out and was passed, that was expanded to include businesses that had 500 or fewer employees per location, and that resulted in some national restaurant chains in particular moving in on that relief aid, a couple of very prominent restaurant chains, Ruth's Chris Steakhouse, Potbelly Sandwich Shops applied and received those loans.
One of the unintended consequences of essentially setting you parameters that favored some larger businesses was that small business owners of color were also effectively shut out of these programs. Traditional banking doesn't reach small business owners of color as much as other businesses. And secondly, female-owned businesses were at a disadvantage as well because they tend to operate even smaller micro businesses in areas that were harder hit. So you can think of retail, food, service, and those kinds of things, so I think there were a lot of gaps with how this small business aid was designed.
PRENTICE: Is it your sense that the additional aid that is now making its way from Congress … will that backfill programs like PPP, so that those small businesses that hit a wall and didn't access the funds because the funds ran out won’t have to reapply?
CERNA RIOS: That's right. Congress authorized an infusion for the relief programs for small businesses. They did make a couple of broad changes to that money, so allocating some of those funds specifically to businesses run by person of color to address some of the issues in terms of access to the funds and equity.
PRENTICE: I don't want to bury the lead here in that I'd like to read a sentence from the analysis:
"In order to most appropriately and adequately address the needs of Idaho's unique businesses, it may be necessary for Idaho lawmakers to explore state programs to help ensure their future."
Can you speak to that and the possibility or the need for Idaho policymakers to step in where federal aid cannot or has not yet?
CERNA RIOS: So Idaho has a unique landscape of small businesses that sort of run the gamete in terms of size, in terms of the types of businesses. There's certainly a lot of diversity in that and I think that state policymakers are in the best position to understand those differences and understand some of the barriers that they could address through some state-level actions.
Some of the good news that came out of the federal coronavirus relief packages was that a large pot of money that was sent to states to address costs related to the pandemic, we now understand can be used in the provision of grants to small businesses to be able to address some of the gaps. So it's very early in the process in terms of Idaho has been allocated $1.25 billion in pandemic response, but there is the potential there for state lawmakers on the state level with these federal grants, start to address some of those gaps.
PRENTICE: That said, the latest round does not include funding for states or localities, and Senate Majority Leader Mitch McConnell has advocated for the possibility of states declaring bankruptcy. Can I assume that you think that's a bad idea?
CERNA RIOS: So Idaho has taken some really important steps since the last recession to be prepared for an impending recession. Nonetheless, this pandemic is posing some really serious questions about whether the state is going to be able to meet all the commitments in its upcoming budget year, regardless of that strong financial position. At the Center for Fiscal Policy, we ran a calculation of what that might look like and saw that the state could be facing a shortfall in the range of $600 million, and that's applying the effects of the last recession in this situation, which may not reflect all of the factors, obviously, it being so unprecedented.
Regardless of that, every Idahoan relies on core public services that we use every day. Public schools, for example, roads and bridges that keeps communities able to bring goods to market and engage with other communities. Although higher education investment has been declining, there is still a portion that we support through our tax responsibility. And so, the prospect of the state facing a bankruptcy… well, it puts us - every Idaho community and every Idahoan - in a really tough spot.
PRENTICE: The name of the report is Understanding Federal COVID-19 Small Business Aid in Idaho. It is a must-read, and she is Alejandra Cerna Rios, director of the Idaho Center for Fiscal Policy. Stay safe. Stay healthy. Thank you so very much.
CERNA RIOS: Thank you, George. Take care.
Find reporter George Prentice on Twitter @georgepren
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