Analysis: Federal Stimulus Bill Could Help Louisiana, but May Not Enough

Restaurant Owner Standing In His Empty Restaurant.

BATON ROUGE – Congress on Friday approved a $2 trillion-plus aid and stimulus package that may soften the economic blow caused by the COVID-19 pandemic and response, though it still might not be enough to protect state finances and get the economy back on track.

“This legislation is the lifeline that small businesses desperately need in this unprecedented time of crisis,” said Stephen Waguespack, president of the Louisiana Association of Business and Industry. “But we can’t just stop there – small businesses are looking to our elected leaders to continue to embrace the bold solutions that will be needed to get our economy going again.”

The CARES Act allocates $349 billion for the U.S. Small Business Administration’s 7(a) loan program. Businesses with 500 employees or less will be eligible for loans of up to $10 million.

The federal government will back the SBA loans and no collateral will be necessary. Portions spent on certain actions during the first eight weeks after getting the loan, such as maintaining payroll and paying necessary bills, would be forgivable.

While waiting for their SBA loan application to go through, a business owner also can apply for a $10,000 emergency advance to address immediate needs like payroll, sick leave and debt obligations.

“Ten thousand dollars can go a long way in some cases,” said Dawn Starns, who directs the Louisiana chapter of the National Federation of Independent Business.

Starns hopes state government will set up a “rapid response fund” to further help small businesses. She is worried about the federal bill’s provision adding $600 a week to each state’s unemployment benefits through the end of June, meaning some low-paid workers might make a little more from unemployment than they would be working.

In Louisiana, where benefits are by some measures the lowest in the country, recipients typically receive $247 a week at most.

“It’s kind of an incentive not to work,” Starns said. “Getting qualified workers is our No. 1 problem in small business. We don’t need the labor force incentivized to stay home” when they are able to come back to work.

But for Jan Moller, who directs the Louisiana Budget Project, the unemployment benefit enhancements are perhaps the most encouraging aspect of the entire bill. His organization monitors and reports on how government policy affects low- and moderate-income families.

“The most important thing in the stimulus bill was putting money in people’s pockets, and particularly directing it to those who need it the most,” Moller said.

Moller supports the $1,200 grants for individuals but said some would be going to people who don’t particularly need the money. He also likes that some workers will receive more in unemployment benefits than they would have gotten in wages.

“That’s why we call it a stimulus,” he said. “If you want to stimulate the economy, you give money to people who are going to spend it in the economy.”

Moller’s second-biggest concern is the economic downturn’s impact on the state’s budget. State finances are highly dependent on sales taxes, the state’s heavily taxed casino industry currently is shut down, and oil prices are low, to name only three troubling red flags for state revenue.  

Meanwhile, participation in Medicaid and other taxpayer-funded benefit programs could increase dramatically. And when the economy is sluggish, Moller notes, many people go back to school, which means public colleges and universities could see an enrollment spike.

The bill dedicates $150 billion to help pay for state and local responses to the pandemic. Based on its population, Louisiana could receive an estimated share of $1.8 billion; local benefits will flow through state government. Hospitals nationwide would split another $100 billion.

Gov. John Bel Edwards said Friday that he expected to be able to have access to the $1.8 billion within 30 days. Right now, the federal government already is paying 75 percent of the state’s effort to battle the new coronavirus, so the new money will help cover the other 25 percent, he said.

“We are trying to figure out exactly what flexibility we have with that funding,” Edwards said. “To one degree or another, we know that it’s going to have to be spent on those things that are related to this COVID-19 public health emergency. But just about everything state government is doing these days is related to this emergency.”

Though Louisiana’s unemployment insurance trust fund contains more than $1 billion and generally is considered to be reasonably well-funded, Louisiana Workforce Commission officials don’t want to speculate about whether it can stay solvent given the unprecedented demand. More than 72,000 Louisiana residents signed up for benefits for the week that ended March 21; in a typical week, the total is closer to 2,000.

After the Hurricane Katrina disaster, Louisiana’s unemployment fund got a $400 million infusion from the federal government. States across the country likely will need federal help to keep their funds afloat, says Jared Walczak, director of State Tax Policy at the Washington D.C.-based Tax Foundation.

Waguespack, the state business lobby president, expects more federal legislation related to the COVID-19 fallout. Insurers are telling business owners their business interruption insurance doesn’t cover pandemics, and Waguespack hopes Congress does something about it, though he isn’t sure how best to address the problem.

State lawmakers have suspended their legislative session. Current plans are to return Tuesday, read in the remainder of the bills lawmakers have filed, then adjourn again until at least April 13.

Louisiana’s regular session is scheduled to end June 1. Legislators are constitutionally required to approve spending plans before the next fiscal year begins July 1, and it is unknown how much time they will have to discuss anything beyond a limited number of “must pass” bills.

“The last thing they should do is just come in, quickly pass a budget and go home,” Waguespack said. “I think they’re going to have to do some work to jump-start this economy.”

 

By David Jacobs of the Center Square

Categories: Alerts, COVID-19, Politics, Today’s Business News

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