Hogan taps rainy day fund for $250M for small businesses

ANNAPOLIS — Maryland will tap its rainy day fund for $250 million earmarked for another round of pandemic relief for small businesses.

The amount, which includes $150 million in immediate aid to mom and pop shops, restaurants and nonprofits, comes as Congress and President Donald Trump remain stalemated on federal aid and after weeks of calls by the Comptroller Peter Franchot for a much larger aid package. 

“Some of them are really struggling,” said Hogan, speaking of small businesses. “It’s a desperate situation and many businesses, especially some of the ones we’re trying to address really are hanging on by a thread and they may not make it another month or two.

The Office of the Comptroller estimates that as many as 30,000 businesses may have closed. Franchot, speaking Wednesday, said a failure to provide additional aid could cause another 20,000 to close by the end of the year.

“It’s not going to solve all their problems but it could help them stay alive until we get the vaccines or get the federal funding or our economy really starts to take off,” said Hogan.

The governor will tap the state’s $1.2 billion rainy day fund for the aid though not all of it will be distributed immediately.

“We didn’t think it was prudent to drain the rainy day fund or spend half a billion from the rainy day fund,” said Hogan.

The state, by law, is required to keep at least 5% of its general fund spending in a dedicated reserve account.

“This is the money that is in excess or over that amount so we’re keeping the traditional and recommended amount,” said Hogan. “We thought that it was the right amount of money that we could put into all these programs and get out to people to help.”

Hogan described the aid package as a doubling of what the state has already done.

“Our economy is doing better than almost all the other states, but it’s still really bad,” said Hogan. “It’s not a great situation for these hard-working, struggling folks.”

“Even though it’s a tremendous amount of money it is, we can’t do it alone,” said Hogan. “We still need that next stimulus package at the federal level.”

“For months, our restaurants, small retail shops and other businesses have had safe and phased reopening plans and our health metrics are well below required reopening levels and yet we have a few local leaders who are still refusing to allow them to open and to operate under the state’s reopening guidelines,” said Hogan. “Solving and slowing the spread of this virus and saving lives continues to be our most important priority. And with our health metrics continuing to remain low and stable, local jurisdictions should be focused on our economic health and well-being, as well.”

Hogan noted that Anne Arundel, Montgomery and Prince George’s counties and Baltimore city kept in phase two even though they have COVID-19 positivity rates lower than 3% and 4%, levels generally regarded as low.

“It’s hurting our business community, and we believe we’re doing a good job staying on top of the metrics on the health side,” said Hogan.

“From the beginning of this pandemic, the county executive and health officer have said that they will make decisions that are in the best interest of Prince Georgians,” said Gina Ford, a spokeswoman for Prince George’s County Executive Angela Alsobrooks. “Prince George’s County will move to phase three when our health professionals dictate it is safe to do so, taking into account a variety of factors. We know this pandemic has been difficult on our business community, which is why we have launched a number of recovery initiatives to assist local and small businesses.”

Chris Trumbauer, a spokesman for Anne Arundel County Executive Steuart Pittman, said the county is merely exercising the authority it has under the law to reopen at its own pace and mitigate the spread of the virus.

County Executive Pittman believes getting case numbers down and restoring consumer confidence is a key component of economic recovery,” said Trumbauer. “Like the state, Anne Arundel County is using CARES funding to give economic support to our local businesses, including small businesses, child care providers and local artists. Governor Hogan can call us out at his press conference, but we believe in the words of Dr. George Everly, a world-renown psychologist who specializes in disaster recovery: ‘Division delays recovery.’”

Franchot in recent weeks has called for an amount of aid for small business twice what Hogan announced Thursday.

“Today’s announcement by Governor Hogan is a good start, but it’s simply not enough,” Franchot said. “Nearly half of the $250 million is being set aside without explanation on how and when it will be used. Contrary to the governor’s analysis of our fiscal posture, we are in a position to do more without taking another penny from the rainy day fund.”

At least $100 million of the new funding will be set aside as a contingency fund for unexpected problems. Hogan said the money would provide the state with some flexibility to respond.

“The $100 million is really kind of a safety valve for the next thing that we might need,” he said.

In all, $150 million will go directly to businesses in the coming weeks under Hogan’s announced program.

Included in the package is $50 million for direct grants to small businesses through the Department of Commerce. Hogan said the amount is enough to fully fund the existing backlog of applications that were submitted earlier this year and have already been reviewed. The department did not have the money at the time to fund all of the grant requests.

Hogan said he will also release $50 million to local governments around the state for grants to restaurants. The money could be used to pay for equipment needed for outdoor dining in colder weather, online ordering upgrades, sanitation efforts and rent.

The governor called on local governments to dole out the funds immediately but no later than Dec. 31.

“If they don’t we’ll take it back,” said Hogan. “That’s what the agreement will be so they don’t sit on the money they either have to give it our or they lose it.”

Hogan said a large number of smaller counties that received more than $360 million in federal CARES Act funding had spent only one-third of it. He said the decision was made to send the aid for restaurants to local governments because officials there would be more familiar with local business needs.

Hogan said if the state takes the restaurant money back, other agencies would try to disburse it.

“If they’re not doing that then we’re certainly going to work with them and every agency to try to make sure that together we can do it,” said Hogan.

The Department of Housing and Community Development will be responsible for another $20 million that is earmarked for entertainment and main street recovery zones around the state.

The Department of Labor will distribute another $20 million in layoff aversion funding.

The governor also said he is setting aside $5 million for small and minority-owned businesses, $3 million for non profits, artists and performing artists, and $2 million for tourism. 

For many businesses, the news could provide a small amount of relief, according to Mike O’Halloran, state director of the National Federation of Independent Business.

“We are at a critical juncture seven months into this pandemic because the smallest businesses had little in the way of cash reserves, they have used up paycheck protection loans, and with such an uncertain future are wondering if they can stay open,” said O’Halloran. “We are hearing from some struggling businesses that decision day has arrived so the grants could buy a bit more time. In the longer term though, a looming crisis is forming with the state’s Unemployment Insurance Trust Fund and Maryland’s policymakers might not be able to wait for Washington to come to the rescue on that issue either.”

One comment

  1. is it $250B or $250M?