Government Budget,” Frankie Leon

By voice vote on Tuesday afternoon, the US Senate approved a $484-billlion bill designed to boost the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed last month. Two Republican Senators, Mike Lee of Utah and Rand Paul of Kentucky, voiced opposition to the bill on the floor of the Senate but let it go forward without objection. A vote by the US House of Representatives is expected tomorrow.

The new 25-page bill is actually not a standalone bill, but instead it amends last month’s 841-page CARES Act, which leads to some odd language in places. For instance, on page one is the following sentence: “Title I of division A of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116–136) is amended in section 1102(b)(1), by striking ‘$349,000,000,000’ and inserting ‘$659,000,000,000’.”This, by the way, is the provision that adds $310 billion to the Paycheck Protection Program. It’s not every day that nearly $1,000 per capita is spent in a single sentence!

Two weeks ago, US Treasury Secretary Steven Mnuchin attempted to pass a simple bill that would have allocated an additional $250 billion to the Paycheck Protection Program and nothing more. However, Democrats wanted the bill to also fund hospitals, coronavirus testing, food stamps, and state and local governments. In essence, the Democrats won on the first two and lost on the last two. The Democrats did also succeed in expanding small business funding, creating a carve-out for smaller lenders.

Specifically, the new legislation, or CARES patch—called “CARES 1.5” by some—includes the following:

  • $310 billion in replenished funds for the Paycheck Protection Program (PPP), the main vehicle for providing assistance to nonprofits and businesses with 500 employees or fewer to get forgivable loans to cover payroll costs for an eight-week period.
  • $12 billion for PPP administrative costs
  • $50 billion for the SBA’s Economic Injury Disaster Loan program
  • $10 billion for the SBA’s Emergency Economic Injury Grant program
  • $2 billion for SBA salaries and expenses
  • $75 billion in emergency money for our health system
  • $25 billion to increase testing and contact tracing capabilities

The following details some of the key implications of the legislation’s provisions.

Paycheck Protection Program

Although the program has only been in existence for a few weeks, the Paycheck Protection Program, including its many travails, is well known by now. Of more than 6 million eligible nonprofits and small businesses with employees, only an estimated 1.7 million got funded. It is worth recalling that the first $349 billion was claimed within two weeks of the funds being made available.

Adding $310 billion to the $349 billion program will help reach many of the over four million nonprofits and small businesses not funded in round one, but it still may not be enough. Some bankers estimate that as much as $1 trillion total (i.e., another $350 billion above what was just passed) might be needed to cover all qualified applicants.

That said, the new bill does add an important new signifying twist to the program. While $250 billion of the $310 billion will be disbursed the exact same way as in round one, the other $60 billion will be allocated, as Sen. Chuck Schumer (D-NY) explains in a “dear colleague letter,” by small lenders and community-based financial institution. Half of this $60 billion is set aside for mid-size institutions with assets between $10 and $60 billion, and the other $30 billion is reserved for community development financial institutions and other credit unions and banks with under $10 billion in assets. The goal behind these rules, Schumer says, is “to serve the needs of unbanked and underserved small businesses and nonprofits” with a focus on rural businesses and business owned by women and people of color.

Please see the advice given in yesterday’s feature on preparing to apply for this program, including our suggestion that nonprofits find a friendly small lender.

Economic Injury Disaster Loan (EIDL) Program

If the PPP rollout was poor, the EIDL program rollout was, if this is possible, even worse. As Tim Delaney of the National Council on Nonprofits explained in NPQ, the EIDL program was designed to allow for emergency $10,000 cash grants. But unlike the PPP, the EIDL program can be used by contractors, like artists. Alas, that $10,000, once US Small Business Administration officials did the math, became $1,000. The new bill doubles the cash grant budget from $10 billion to $20 billion, which probably doesn’t get you back to $10,000, but maybe $2,000? There is also a $50 billion infusion of loan capital, which could leverage loans of up to $300 billion.

Hospitals and Testing

The original CARES bill, one might recall, included $100 billion for hospitals. But this has proved insufficient. One irony of COVID-19 is that while the pandemic has obviously increased demand for hospital services (and in some places has completely overwhelmed hospitals), it has dramatically reduced demand for the most profitable parts of the hospital business—namely, elective surgery. As FierceHealthcare observes, “Major hospital systems have been forced to furlough and lay off workers due to low patient volume and the cancellation of elective procedures.”

The testing procedures—funded at $25 billion—are the least expensive portion of the bill, yet description of the rules behind this new program take up nearly half of the entire bill’s length, which tells anyone paying attention that this was the most fiercely contested part of the bill. As a result, the bill goes into considerable detail as to how that $25 billion is to be spent, mandating where about two-thirds of the money will be spent, with minimum expenditure levels set as follows:

  • $11 billion for states, localities, territories, tribes, tribal organizations, urban Indian health organizations, or health service providers to tribes for necessary expenses to develop, purchase, administer, process, and analyze COVID–19 tests
  • $1 billion for Centers for Disease Control and Prevention—CDC-Wide Activities and Program Support
  • $1 billion for the ‘National Institutes of Health—Office of the Director
  • $1 billion for the Biomedical Advanced Research and Development Authority
  • $825 million for community health centers
  • $1 billion for COVID-19 tests for the uninsured
  • $306 million for National Institutes of Health—National Cancer Institute
  • $500 million for National Institutes of Health—National Institute of Biomedical Imaging and Bioengineering

What’s Next?

Call it CARES 2.0 or Phase 4—the most important thing to understand about the current bill is simple: this is not it. But CARES 2.0 does still seem to be coming—with both parties calling the current bill an “interim” bill—albeit not until May, with Congress expected to reconvene after May 4th. Among the topics likely to be on the agenda is an expected proposal to provide as much as $500 billion in funding to keep states and localities from being forced into austerity at a time when spending is needed.

Additional items that remain as potential topics for a CARES 2.0 bill include food stamps, an item Schumer, along with support for the states, mentions in his “dear colleague” letter; support for mail-ballot elections; hazard pay for frontline workers; bailout oversight; a rent freeze; additional rounds of stimulus checks; and extension of unemployment payments beyond the four-month period established by CARES.

Nonprofits have also indicated issues of sectoral interest. Earlier this month, NPQ covered key elements that a group of 200 nonprofit organizations jointly arrived at. Among these priorities were the following:

  • Strengthen Charitable Giving Incentives to encourage all Americans to help their communities through charitable donations during these challenging times by making donations on and after March 13 (date of national emergency declaration) and before July 16 to claim the deductions on their 2019 tax filings (applicable to itemized and above-the-line deductions) and improving the Above-the-Line Deduction in CARES Act Section 2204.
  • Treat Self-Funded Nonprofits Fairly by increasing the federal unemployment insurance reimbursement for self-funded nonprofits to 100 percent of costs in CARES Act Section 2103.
  • Increase Emergency Funding by appropriating funds for targeted state formula grants and programs that can provide a rapid infusion of cash to nonprofit organizations that are partnering with state and local governments to protect vulnerable families and frontline responders.

Taking stock of the current bill and looking to the future, Delaney tells NPQ that the National Council on Nonprofits is “glad more funding is being made available for the PPP and EIDL programs. Many nonprofits needing access to these funds were shut out of the first round of funding. It’s a big deal that the bill carves out $60 billion for small lenders that were the success story for nonprofits during of the first round. These are the lenders that, like nonprofits, put community ahead of profits or privilege.”

Still, Delaney adds, “with attention already turning to the next phase of legislation, more must to be done to ensure nonprofits have the resources they need as people in communities are turning to their local nonprofits even more.”

And, we add, there is much more civil society must do to lay the groundwork for truly transformative change. Of course, short-term stimulus bills are not necessarily the best vehicle to create the better world that we envision. Yet this pandemic is teaching us, if we dare to pay attention. At NPQ, we’ve called attention to some core principles emerging from our crisis­­—among them, the need for universal healthcare, universal basic income, and freedom from debt financing of higher education. To this list, one can add many other things, including universal childcare, the end of mass incarceration, support for a caring economy, and reparations, just to name a few.

Earlier this week, Chris Benner and Manuel Pastor observed in NPQ that we “need to think about the long term.” In their article, they set forth a strategy that’s based on power building and concrete policy proposals but fundamentally rooted in a vision that “social connections are fundamental to economic vibrancy.” And in these days of tumult, forging that vision is crucial. As NPQ’s Cyndi Suarez aptly reminds us, even as we “hope and pray that there is enough time for us to learn and react appropriately to COVID and to the larger ecological collapse, let’s also imagine and create the conditions where we can shift enough to lead the change.”