Legislative panel gives green light to big federal aid package, but legal challenge looms

A state legislative panel gave the green light for hundreds of millions of dollars of federal COVID-19 relief money but there is now a legal challenge that could cloud the action.

Juneau attorney Joe Gelhof filed a lawsuit Wednesday in a state superior court. Gelhof is representing Eric Forrer, a former University of Alaska regent.

Legislators went against the advice of their attorneys in voting for release of funds. Legal staff of the Legislative Affairs Agency said the procedure used by the Legislature’s Budget and Audit Committee to approve the money may run afoul of the state Constitution, which requires a vote by the full Legislature on an appropriation.

Facing heavy pressure to get the money moving, the budget and audit committee opted to roll the dice on the chance that a citizen lawsuit won’t be filed. However, that has now happened.

Gelhof hasn’t yet asked for a court injunction to stop the money but said he plans to do so.

If an injunction is ordered, the Legislature could meet in an emergency special session to pass the appropriation.

This is likely to happen anyway in January when lawmakers meet for the 2021 regular session.

At that time the Legislature could pass a retroactive appropriation to ensure the legality of the funding.

The money includes:

• $568.6 million to help communities and local governments impacted by COVID-19. The money is being paid in two separate appropriations: one for $257.6 million and another for $311 million. Money for communities is being distributed using two formulas, one a traditional Community Assistance Program formula used for years and is largely based on population; the second is a new formula developed by the state Office of Management and Budget that relies on economic data such as tax receipts.

Municipal mayors and administrators are worried about ambiguities in federal guidelines for the CARES act money. The overall requirement is that expenditures are connected with efforts to fight the coronavirus, such as staffing for health and public agencies and related expenses, but federal money cannot be used to compensate communities for lost revenues due to closures ordered by the government.

The U.S. Treasury Department will audit how funds are spent and if expenditures are challenged the state may have to repay the federal government and then turn to local communities for repayment. The Alaska Municipal League is urging municipal officials to keep good record on expenditures.

There is also $290 million for relief to Alaska small businesses impacted by COVID-19, mainly through shutdowns. The money will be distributed through grants through the Department of Commerce, Community and Economic Development and the Alaska Industrial Development and Export Authority. The department estimates this funding will help 10,000 small businesses that were unable to obtain loans through the federal Small Business Administration’s Paycheck Protection Program.

In a significant development, lawmakers persuaded Gov. Mike Dunleavy to distribute the $290 million as grants to small businesses than loans. Business groups had pushed for small business relief as grants program to get liquidity quickly to small businesses who are quickly running out of cash, they told legislators Friday at a meeting of the House Labor and Commerce Committee. Loan programs would require time to process and for borrowers to arrange collateral, but there now am urgency with much of the state’s economy still shut down.

There were other parts to the funding package approved Monday:

• $100 million in economic stimulus for Alaska fisheries, which will help a wide variety of individuals and entities that rely on fishing and will be impacted by the substantial reduction in revenue associated with diminished opportunities to fish commercially or operate charters and guided fishing tours.

• $51.6 million directed in the federal CARES Act to be used for rural airports and other programs managed by the Alaska Department of Transportation, money which will go toward improvement of the statewide aviation and rural airport systems where additional needs have occurred due to COVID-19, as well as funds for the Whittier Tunnel.

• $45 million to help stabilize K-12 classrooms impacted by COVID-19.

• $42 million for child nutrition programs that serve children forced out of school by the pandemic.

• $29 million to address rural transportation costs, including the Alaska Marine Highway System.

• $10 million for the Alaska Housing Finance Corporation to help prevent homelessness. By helping people make mortgage and rent payments, Alaskans will be less likely to become homeless. According to the Centers for Disease Control and Prevention, some people experiencing homelessness are at higher risk of moderate to severe symptoms of COVID-19.

• $5 million for direct financial aid grants to help University of Alaska students, and to help minimize systemic impacts of COVID-19 on the university system.

• $3.6 million in critical funding for state, local, and tribal governments to provide a range of programs including law enforcement, prosecution, indigent defense, courts, crime prevention and education, corrections, drug treatment and enforcement, and more.

Meanwhile, the gradual reopening of the state’s economy is going slowly, and rough spots have dappeared. One is that some firms are having trouble getting their employees back as the economy gradually reopens. With generous Unemployment Insurance Compensation, or UIC, benefits being paid many former workers in industries like retail or food service receive more by staying home than coming back to work.

The state’s average UIC benefit of $275 a week (among the lowest in the nation) coupled with the federal supplement of $600 a week creates a monthly income equal to a $60,000-a-year job, legislative finance analysts have said.

One Fairbanks business reported being unable to get half of its employees back because of the high unemployment benefits, according to Marisa Sharrah, president of the Fairbanks Chamber of Commerce, who spoke Friday at the House committee hearing. There are other factors, Sharrah said, such as difficulties for employees in obtaining childcare.

Others at the hearing pointed to employees’ worries about health risks at the workplace when not all employers are requiring, or even allowing, employees to wear face masks. Some retailers, like Costco, are requiring customers as well as employees to be masked. (State health mandates only ‘encourage,’ but do not require, use of facemasks.)

Generally, the reopening has been slow. Jonathan White, owner of SteamDot, an Anchorage coffee shop chain, said his revenues are still at 30 percent of normal even after 10 days of the retail reopening. Many small businesses like White’s were able to get one of the Small Business Administration Payroll Protection Program loans. However, White told the House committee, “if revenues don’t pick up by June we’ll be right back where we started,” having to lay off employees again after the loan funds are exhausted.