Minnesota businesses have received $ 17 billion in federal aid. Where did he go?
This is by far the largest injection of taxpayer money into the private sector in modern U.S. history and most of the money will not need to be returned. The money has saved an estimated 1.8 million jobs in Minnesota and countless more nationwide, according to the US Small Business Administration.
The money came mainly from three federal programs contained within coronavirus relief programs approved by Congress and Presidents Trump and Biden throughout the pandemic. In total, the federal government has sent over $ 700 billion to businesses across the country.
The programs include:
- The Paycheck Protection Program which sent about $ 16.6 billion to Minnesota companies in the form of low-interest loans so they can continue to pay their workers. Almost $ 10 billion of these loans have already been canceled.
- An additional $ 525 million went to restaurants in Minnesota through the Restaurant Revitalization Fund. The $ 28 billion federal program quickly ran out of money, and thousands of restaurants that applied lost.
- The Shuttered Venue Operator grant sent the state $ 165 million. It supports entertainment venues that have been forced to close. The venue and restaurant program money does not need to be refunded.
Together, these federal programs sent about $ 3,076 to Minnesota businesses for each of the state’s 5.6 million people, according to an analysis by Pioneer Press. While Hennepin County got the highest number per capita, the top 20 remaining beneficiaries by population size were all rural counties.
Aid was limited to small businesses with 500 or fewer employees. Nonetheless, the impact of federal dollars has been pervasive across the economic landscape.
“It was unlike any recession we had experienced in the last century,” said Doug Loon, president of the Minnesota Chamber of Commerce. “It was caused by a pandemic which was and is very unpredictable and knew no borders. Its impact on the economy, at least in modern times, has been felt in unusual ways. “
Without the federal money, not only would there have been more layoffs and businesses going bankrupt, but the state’s unemployment system could have been overwhelmed. Loon noted that the $ 216 million in state aid approved by the Minnesota Legislature last December, near the peak of the state’s worst case increase, was also very critical.
“It was an important bridge. It was about maintaining cash flow and keeping companies afloat as they went through multiple revisions to the business models they were forced to cope with, ”said Loon, referring to changing business models. stay-at-home requirements and other mitigation efforts.
Money sent to businesses across the country throughout the pandemic was intended to offset one of the largest and most widespread restrictions ever placed on economic activity in the United States.
Consumers were ordered to stay at home, businesses had to cut back or end their services altogether, there were shortages of some products and an overabundance of others. The government has been called upon to intervene to stabilize the waters.
“The problem we were facing was that we were shutting down the economy to fight the virus, but we wanted to make sure there was an economy on the other end,” said John Phelan, an economist at the Center of the American Experiment, a Golden Valley-based think tank. “What we were trying to do effectively is freeze the economy.”
Phelan added that while the PPP program and others were a large-scale government intervention, he felt they were effective.
“If the government shuts down your business and makes it impossible to operate, then the government has a duty to make sure you can survive this,” he said. “If I smash a baseball through the neighbor’s window, I’m responsible for paying for the neighbor’s window. “
Across the country, business leaders have pressured state lawmakers to cancel aid taxes. Ultimately, the divided Minnesota legislature agreed to spend more than $ 400 million to exempt P3 loans from tax.
A massive program to watch
There is general consensus that aid programs need to be put in place quickly to be effective, but this has made them less specific – more of a hammer than a scalpel. The range is also huge, which made monitoring tricky.
Out of millions of loans and billions of dollars, the Inspector General of the Small Business Administration of the United States reported in January that he discovered that about 55,000 loans were made to ineligible businesses and that 43 Another thousand received more money than they should have. The federal Department of Justice has filed fraud charges against hundreds of aid recipients, including a few in Minnesota.
In July, a Maple Grove man pleaded guilty to attempting to defraud nearly $ 10 million from the paycheck protection program. Aditya Raj Sharma, 47, ultimately received $ 1.7 million in P3s, which he spent badly, according to the Minneapolis prosecutor’s office and FBI investigators.
Yet the fraud that has been found so far is only a fraction of the money that has been approved.
Loon points out that nearly 60% of the money Minnesota businesses receive through P3 loans has already been canceled is proof that the money is being used for what it was intended for.
In order for a PPP loan to be canceled, companies must prove that it was used for things like payroll, mortgage payments, rent, and other business expenses.
“Minnesota businesses are basically rule-makers,” Loon said. “That the loans were canceled is what we expected.”
“It was brutal”
Without federal help, Jason Tschida, whose family operates DeGidio’s restaurant and bar in St. Paul, feared he would have to close a family business that has been in existence for more than 80 years.
“The first PPP was an unequivocal lifeline for us,” Tschida said. “I don’t know of anyone who would be able to do this without public support.”
Blockages, capacity limits and restrictions on collection have decimated much of his business. Federal aid helped him keep the workers and do as much business as he could.
Later, Tschida was one of the lucky ones who was able to get money from the Restaurant Revitalization Fund. He is now asking the federal government to invest more money in the program to help other restaurants that applied but were not approved before the funding expired.
One of these restaurateurs is Stephan Hesse, co-owner of Eclectic Culinary Concepts, which operates several restaurants in the Twin Cities. Hesse has received PPP funding, but has yet to receive the money for the revitalization of the restaurant.
“The PPP money was good,” Hesse said. “It helped us keep the staff when there were not a lot of people. It was brutal, but we got away with it.
Business picked up for most homeowners in the spring and early summer when coronavirus cases plummeted. But as inoculations slow down and the more contagious delta variant spreads, new concerns are emerging about how the pandemic will hurt the economy.
“When the news is bad, there is a drop in sales,” Hesse said. “We were successful thanks to the support of the guests who came. What everyone has done to help businesses has been great. “
It’s not just restaurants and storefronts that have been affected by stay-at-home orders and other mitigation efforts. Many places of entertainment are also fighting for their survival.
This includes the state-run Minnesota Zoo in Apple Valley. Zoo officials recently learned that they will receive more than $ 7 million from the closed site grant program.
“The dollars provided by this grant are critical to the zoo’s recovery from the challenges posed by the pandemic,” spokesman Zach Nugent said in an email. “The zoo will use these funds for critical recovery efforts. More information on these plans will be available in the coming months. “
A changed economy
Loon believes it will likely be years before economists and business leaders can confidently assess the state and federal response to what amounted to economic disaster caused by the pandemic.
One thing the Minnesota Chamber of Commerce chief says is already clear is that COVID-19 has changed the economy, in some ways permanently. In the future, companies are likely to face new challenges in recruiting workers, the dynamics of supply chains have been turned upside down, and e-commerce has become an even more powerful force in the global economy.
It’s hard to predict what these big challenges mean for businesses of all types, from restaurants and lounges to offices and malls.
But federal help received by businesses in Minnesota and across the country means there will be more businesses to tackle these challenges.
“The good news is the consumer is back,” Loon said. “The consumer is back, just in a different way.”