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Maryland work group questions how COVID-19 pandemic aid was parceled out

Comptroller Peter Franchot, shown in a 2019 photo, questioned why law firms received initial aid out of proportion to actual job losses. (Bryan P. Sears)

Comptroller Peter Franchot, shown in a 2019 photo, questioned why law firms received initial aid out of proportion to actual job losses. (Bryan P. Sears)

Law firms and other professional services received pandemic aid disproportionate to the number of jobs actually lost in those professions, state officials said during an oversight hearing Wednesday.

A work group led by Comptroller Peter Franchot Wednesday raised questions about how hundreds of millions of dollars were handed out to businesses in the early days of the pandemic. The panel, while generally complementary of the efforts of the Maryland Department of Commerce, raised similar concerns about how much money was sent to the state’s 24 political subdivisions and what lessons were learned to improve future efforts.

“I think that there’s an underlying concern about the disbursement per jurisdiction because, although the initial explanation makes sense, the actual application of dollars, I think, is just something that we need to take a look at,” said Franchot.

Law firms received 13% of all funds in that first round of disbursements last year, according to a review by the Office of the Comptroller cited by Franchot. The sector accounted for just 3% of jobs lost.

Meanwhile, the food services industry, which accounted for one-third of all jobs lost at the time, received 17% of the grants, according to Franchot.

The state distributed roughly $184 million in federal aid and another $195 million in state funding. Sarah Sheppard, director of education and workforce at the Department of Commerce,  said the distribution of dollars will likely change over the coming months as state dollars are converted to federal CARES Act funding.

In all the department received nearly 17,900 completed applications for grants. Of those, nearly 14,300 were funded. In the early days, grants were funded through a first-in, first-out process, Sheppard said.

“It seems overly simplistic,” Franchot said of the early policy, saying it was ripe for abuse and leaving out hard-hit but less well-connected businesses.

“I’m just trying to think if the vaccine program had been first come, first served, and how that would have looked like and what we would have regretted looking back,” he said.

“With the vaccine program, we knew that was coming and we had longer times to figure out how to spread it out among groups of people,” Sheppard said. “We had a whole road map and plan. This we didn’t see coming, at least not as long as we did the vaccine”

The state also received more than 8,600 applications for pandemic relief loans, of which agencies were able to fund 1,654.

Sheppard said the first round of grants in March 2020 were not handed out to specific industries.

“The grants, we funded every business that was qualified to be funded,” said Sheppard. “Every business, including law firms, was suffering.”

Later rounds of assistance were more targeted and handed out proportional to the size of jurisdictions.

“Hopefully, we’ll never have another pandemic and have to do this again,” said Sheppard. “But we have figured out lessons learned.”

Andrew Schaufele, director of the Bureau of Revenue Estimates, said lessons learned in distributing pandemic aid will likely ultimately affect how state and federal agencies respond to other economic crises.

“I do think, to your point, that we never have to use these lessons learned,” said Schaufele. “This is a once-in-a-century issue but I do think this is going to change the way that government responds forever to any kind of recession. So, I do think that we’re going to end up using these types of programs. I think this is going to be the new normal for this kind of response.”

Franchot expressed concerns about a disparity in funding for businesses by jurisdiction, noting that some large jurisdictions such as Prince George’s County initially received smaller amounts than would be expected based on population and compared to neighboring counties.

Roughly $13.3 million in pandemic relief payments sent out by the state went to Prince George’s County. Baltimore city received $16 million. Montgomery and Baltimore counties received $28 and $24 million respectively, according to Franchot, whose agency sent out the payments.

“We’re concerned about those trends, particularly because Prince George’s County and Baltimore city, two majority-minority jurisdictions, have really borne the brunt of the health and economic consequences of the pandemic. So, we have something that makes sense perhaps then but looks in retrospect as if it was a disbursement that should have been made otherwise.”

Sheppard said the agency pulled together the initial policy just prior to the program being announced publicly by Gov. Larry Hogan.

“Some of these policies were really broad strokes to get the first in, first out because we all agreed everyone was suffering at the time,” said Sheppard, noting that these policies changed months later as more state and federal funding became available.

“I think had we been given more notice we might have been able to break that down better, but our main goal was to help as many businesses as possible,” she said.

 


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