As Louisiana figures out how to spend billions in coronavirus federal aid, a rift has emerged between Democratic Gov. John Bel Edwards and Republican legislative leaders over $811 million that the governor wants to give to local governments and lawmakers advancing a measure to take $300 million of the funds and deliver it instead to small businesses.
The money is part of the $1.8 billion sent to Louisiana through the $2 trillion stimulus passed by Congress. While the state is using nearly $1 billion of the funds to plug holes in the state budget, the governor has told local governments they’ll be able to tap into the other $811 million.
Edwards argues the “spirit” of the law that sent Louisiana the money is that the funding should go to help local governments, who have been hammered by millions in overtime costs for first responders – as well as severe losses in revenue, with which the funding can’t help. His administration plans to start accepting applications from locals to tap into the funds next week.
But House Appropriations Chairman Jerome “Zee” Zeringue, R-Houma, ushered legislation through the House Thursday that would take $300 million of that pot of funds and set up a grant program for small businesses, which have likewise been roiled by the virus. Businesses would qualify if they have fewer than 50 employees, were hurt by the coronavirus and are owned by Louisiana residents, among other requirements. Senate Bill 189 passed on a 72 to 26 vote and heads back to the Senate for approval of changes before it would go to the governor’s desk.
“It’s better to support and help our economy by helping our small businesses, which provide recurring money to state government,” Zeringue said. “It’s an investment in our economy.”
Businesses have been rocked by the coronavirus and shutdowns ordered by the state. For the week ending May 23, more than 320,000 Louisianans filed continued unemployment claims. By comparison, 14,640 people were receiving unemployment benefits during the week ending Feb. 22.
According to Edwards' administration, businesses had received more than $7.2 billion through the federal Paycheck Protection Program as of May 16, along with more than $167 million in Small Business Administration loans.
House Speaker Clay Schexnayder and Senate President Page Cortez – Republicans who have worked closely with one another since assuming their posts earlier this year – are backing the move. The two circulated a memo that slammed Edwards for promising the money to local governments, and pointing out the governor needs lawmakers to appropriate the money.
While Edwards’ administration is moving forward with its own program to send money to local governments, Commissioner of Administration Jay Dardenne has said he doesn’t expect local governments will be able to tap into the entire $811 million. The bill passed by the House Thursday would keep $511 million in place for local governments.
That’s because the legislation that gave the state the money – the Coronavirus Aid, Relief and Economic Security (CARES) Act – doesn’t allow the money to backfill lost revenue. Instead, local and state governments must have coronavirus-related expenses to tap into the money. The state has footed most of the bill on coronavirus response expenses.
Edwards on Wednesday pointed to a letter the state’s Congressional delegation sent him in early April about the $811 million, asking him to “prioritize this funding for our local governments.” While the law automatically gave larger cities across the U.S. much of the funding, Louisiana doesn’t have any cities large enough to qualify. Instead, it was left up to the state whether to give money to local cities and parishes, and Edwards decided he wants to set aside 45% for those locals.
New Orleans Mayor LaToya Cantrell slammed the vote, saying in a statement that local governments, especially in the New Orleans area, would lose "desperately-needed funds."
"We are in a crisis, and our people need and deserve all the help we can get," Cantrell said. "This is not the time for politics in the Legislature to get in the way of protecting the residents we were all elected to serve."
The governor said the state should wait before sending a large chunk of the money to businesses, even if it’s unclear local governments will be able to use it all. He argued businesses might be better-served by putting more funding into the unemployment trust fund, to help businesses avoid a mandatory tax increase if the trust fund dips too low. And he noted Congress could revise the law to allow local governments to tap the funds for lost revenue. If the state had already sent the money to business, those locals could be left out to dry, he said.
“I just don't think now is the right time to do that and i want to abide by the spirit of the CARES act legislation as expressed by the congressional delegation,” Edwards said.
The legislation that passed the House was initially a bill from Sen. Bodi White, chair of the Senate Finance Committee. Zeringue amended the bill to make the changes to the coronavirus funds, setting up the small business fund that would be handled by Republican Treasurer John Schroder – not the governor’s administration.
Under the legislation, if there was money left in the fund that was not being used by small businesses or local governments after September 30th, it could be transferred to the other part of the account.
Democrats in the House questioned whether the legislation would put businesses in a bind if they received grant money from the program as well as the Paycheck Protection Program or others. Rep. Chad Brown, D-Plaquemine, noted the treasurer could get $24 million of the money to administer the program.
Republicans were largely supportive of the move, pointing to the Edwards administration’s comments that local governments won’t even be able to use all the money. Zeringue pointed to a similar system in Mississippi.
"Small business was told to shut down by government," said state Rep. Lance Harris, R-Alexandria. "They shut down. They’re in dire straits ... We have to do what we can to get them back on track.”
Voting to divert some federal money destined for local governments to small businesses (73): Speaker Schexnayder, Reps Amedee, Bacala, Bagley, Beaullieu, Bishop, Bourriaque, Butler, G. Carter, Coussan, Crews, Davis, Deshotel, DeVillier, DuBuisson, Duplessis, Dwight, Echols, Edmonds, Edmonston, Emerson, Farnum, Firment, Fontenot, Freeman, Freiberg, Frieman, Gadberry, Garofalo, Goudeau, Harris, Hilferty, Hollis, Horton, Hughes, Huval, Illg, M. Johnson, Kerner, Lyons, Mack, Magee, Marino, McCormick, McFarland, McKnight, McMahen, Miguez, G. Miller, Mincey, Moore, Muscarello, Nelson, C. Owen, R. Owen, Pressly, Riser, Romero, Schamerhorn, Seabaugh, St. Blanc, Stagni, Stefanski, Tarver, Thomas, Thompson, Turner, Villio, Wheat, White, Willard, Wright and Zeringue.
Voting against SB189 (25): Reps Adams, Brass, Brown, Bryant, Carpenter, Carrier, R. Carter, W. Carter, Cormier, Cox, Green, Henry, James, Jefferson, Jenkins, T. Johnson, Jones, Jordan, LaCombe, Landry, Larvadain, Marcelle, Phelps, Pierre and Selders.
Not Voting (6): Reps Gaines, Glover, Hodges, Ivey, D. Miller and Newell.