Gov. Tom Wolf proposed last week a spending plan for $1.7 billion in federal coronavirus relief money set aside for the state, including a second round of popular grants for small-business owners totaling $225 million.
The Democratic governor faces resistance from the majority-Republican legislature, which would have to approve the plan. Republican leaders in Harrisburg have slammed the proposal as developed “in a fiscal fantasy land where concern for future fiscal years apparently doesn’t exist.” Some critics of Wolf’s plan believe the money should remain stashed away in an emergency “rainy day fund.”
Pennsylvania was originally allocated some $7 billion in federal relief funds from the American Rescue Plan, signed by President Joe Biden last March. Just under $2.2 billion remain. Wolf argues the money is “sitting around” and should be disbursed to those hurt by the pandemic. The federal funds are disbursed separately from the state budget.
In addition, for the first time in years, Pennsylvania has a budget surplus, fiscal experts say. At the end of the last budget year, in June, Pennsylvania transferred $2.5 billion into its rainy day fund. Wolf is slated to unveil his proposed 2022-23 state budget this week.
“Pennsylvania should have a more robust rainy day fund, and this recent investment provides this funding,” noted Diana Polson with the Pennsylvania Budget and Policy Center, a think tank that endorsed the Wolf plan. “However, it is important to recognize that we are currently in the midst of a ‘rainy day.’ This … should be used to address our current crisis.”
As part of the $1.7 billion proposal, Wolf wants to again fund the COVID-19 Relief Statewide Small Business Assistance program, which provided grants ranging from $5,000 to $50,000 to small businesses.
Business owners used these grants to cover anything from operating expenses to technical assistance, including training to stabilize and relaunch their businesses. The program would prioritize women- and minority-owned businesses and rural communities.
Wolf proposed recapitalizing this program at $225 million to help 11,000 businesses — the number funded the last time.
“We think it will be very effective,” said Marc Stier, director of the Pennsylvania Budget and Policy Center, which is hosting a press conference on Monday to advocate for the second round of funding. Wolf’s plan also includes $500 million earmarked for child care, household, and job training relief, $204 million for property tax relief, $325 million for health-care systems, and $450 million in revitalization projects.
Like the first round, the state would allocate the $225 million through distribution to community development financial institutions, or CDFIs. Grants from $5,000 to $50,000 would again be available to eligible small businesses — those with less than $1 million in revenue and fewer than 25 employees — economically impacted by COVID-19.
The money would be dispensed by CDFIs, small local development organizations, credit unions, and even some banks, which act as middlemen or distributors for the federal money, said Susanne Svizeny, regional president of OceanFirst Bank.
Philadelphia was “really hit hard in the pandemic. But most of our businesses are cautiously optimistic,” said Svizeny.
In addition to lingering economic challenges, many small businesses are now grappling with a tight labor market, Svizeny said. “Small businesses were hit the hardest. Comparing it to 2020 and 2021, it’s even more challenging now because it’s harder to attract talent. Big companies have more resources to get key hires.”
State Sen. Vincent Hughes (D., Phila.) said the small business grant program targets “those barbershops, the salons, the car mechanics, the people who are in the neighborhood and are the lifeblood of the community. They buy T-shirts for the Little League teams. They buy Girl Scout cookies. They are small and fly under the radar.”
Over 50% of the grants from the first round were to women-owned businesses. Most of those businesses never qualified for the Paycheck Protection Program or other federal loan assistance, Hughes said. “Their pain has been the most lasting.”
For information on the grant program, visit the Department of Commerce website: https://dced.pa.gov/programs/covid-19-relief-statewide-small-business-assistance.