The federal government has made $5.6 billion available to Alaska to deal with the economic impacts of COVID-19, but there’s a chance not all of it will be spent by the end of year. That’s the deadline set for some of the grant programs.

Alaska may have to send some of money back. Federal rules now require unspent money to be returned to the treasury, although that could change if Congress passes a new stimulus bill, which is uncertain.

One program where money is being spent slowly is in a half-billion grant program for municipalities. As of Oct. 1, total distributions under the CARES act municipal grant program totaled $384 million of $568.7 million made available, according to data from the Department of Commerce, Community and Economic Development, or DCCED, the state agency administering the program. That means $185 million has yet to go out.

Sixty-one small communities have not even signed agreements with the state needed to receive the grants, which means this money is not yet requested officially, said Glenn Hoskinson, spokesperson for the state commerce department. Almost all of these are small and the grant amounts are mostly the minimum $75,000, but more than $10 million is at risk.

The Division of Community and Regional Affairs, which is a part of the DCCED, “has reached out to every community that has not yet accepted their funds more than three times to see if they have questions and to ensure they know the funds are available,” Hoskinson said.

Alexei Painter, director of the Legislative Finance Division, said some state agencies that have received federal COVID-19 impact funds through the state Department of Health and Social Services have yet to spend the money. Painter spoke before the House Finance Committee in an Oct. 2 hearing.

There’s a little under three months left to get the remaining $185 million on the street. One snag for communities and local governments is that they must follow federal guidelines in using the money, and much of it can only be spent to cover direct COVID-19 expenses that must be documented.

That is where many communities, particularly smaller ones, facing challenges, although the Alaska Municipal League and state agencies are providing advice and help. “For a community to receive their second and third payments (after an initial distribution in June) they must submit monthly reporting forms to the state and (show they have) have used or designated at least 80 percent of the previous payment(s),” Hoskinson said in the email.

Federal rules also limit the ability of local governments to use federal grants to offset indirect expenses, such as lost revenues from city services that are closed due to the virus but which ordinarily would generate fees to cover costs. Even though public facilities like libraries and recreation centers are not open, the expenses for utilities, maintenance and insurance must be covered.

Some municipalities are using the grant funds to offset lost revenues and cover these costs anyway, but there is a risk that auditors may later disallow the expenses and require that the money be repaid.

Meanwhile, a separate program providing grants to small businesses and nonprofits is now functioning smoothly after a troubled start on June 1. As of Oct. 6, of over 6,500 applications received, 3,587 have been approved by state officials for $155.2 million, and $129.2 million has been disbursed to the applicants, Hoskinson said.

The state DCCED is administering this program through the Alaska Industrial Development and Export Authority, the state development finance corporation. Credit Union 1 and the Juneau Economic Development Council have been contracted by AIDEA to receive and process grants.

The startup for this program was difficult because of an initial requirement that any applicant receiving funds under another federal program, such as the federal Payroll Protection Program or Small Business Administration emergency disaster loans or grants, would be ineligible. This disqualified several hundred Alaskans from the state-administered grant program, according to estimates.

Recognizing the problem, state commerce commissioner Julie Anderson worked to develop new rules that would allow these applicants to also qualify for the state program. Also, the people processing applications were overwhelmed at first by the sheer number of them. AIDEA developed an internet-based application process that eased the problems initially encountered.

This program is now “over-subscribed,” meaning more money is being requested than is available, but it is possible that the Legislature may be able to use a between-session procedure, done through the interim Budget and Audit Committee, later this year to reallocate unspent funds. For example, unspent municipal grant funds, if there are any, could be shifted to the municipal/community grant program to allow more of those grant applications to be funded.

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