PPP Loan Program Extended
President Trump recently signed a bill to extend the deadline to apply for forgivable small-business aid through a key coronavirus relief program. The legislation extends the deadline to request Paycheck Protection Program loans to August 8, from June 30.
Congress created the program as part of the $2 trillion pandemic rescue package passed in March. It aims to help small businesses keep employees on payroll during closures designed to slow the outbreak.
The Trump administration has yet to distribute $130 billion in loan funds set aside for the program.
Considered a lifeline for small businesses, the PPP has morphed multiple times since its inception as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Congress has already relaxed eligibility rules and requirements for loan forgiveness. More than $510 billion has been distributed to date.
Although businesses claimed the initial $349 billion in PPP funds in less than two weeks, the second $310 billion round of funding has been met with less demand as concerns about eligibility and forgiveness deterred some from applying. Subsequent program clarifications and a recent easing of the loan forgiveness restrictions through the Paycheck Protection Flexibility Act were intended to ease the concerns of business owners.
Under the current rules, small-business owners can use 60 percent of their PPP funds on payroll – and they have up to 24 weeks to do so.
Roughly $12 billion in PPP loans were returned by the start of June, by both public companies who were met with criticism that they should turn to other sources and by small businesses who were concerned they wouldn’t qualify for loan forgiveness and didn’t want to be held liable to pay the funds back.
According to the U.S. Treasury, if a PPP loan received an SBA loan number on or after June 5, 2020, the loan has a five-year maturity. However, if a PPP loan received an SBA loan number before June 5, 2020, the loan has a two-year maturity, unless the borrower and lender mutually agree to extend the term of the loan to five years.
In addition, much of the focus on PPP loans has been on the forgivable nature of them if used for payroll, rent and utilities. However, for a significant portion of borrowers, not all of the loan will be forgiven. The unforgiven portion will be converted to an SBA loan at a rate of 1 percent.
Federal Reserve, U.S. Mint Team Up to Alleviate Coin Shortage
The coronavirus crisis has sparked a nationwide coin shortage that has left retailers scrambling, including some laundromat owners who have found themselves short of the quarters needed to replenish changers.
The Federal Reserve recently revealed that the pandemic had “significantly disrupted” the supply chain and circulation patterns for America’s metal money. The U.S. Mint has slowed production of coins due to measures meant to protect workers amid the crisis, while coin deposits from banks also have fallen in the past few months, according to the central bank.
On June 15, with demand for coins rising as states began to reopen, the Fed started limiting how many pennies, nickels, dimes and quarters it distributed to banks as part of its efforts to “mitigate the effects of low coin inventories.” Dollar coins are not subject to the coin allocation order, so they continue to be readily available to local banks.
Regarding the coin shortage, the U.S. Mint recently shared the following statement with PlanetLaundry:
Under normal circumstances, retail transactions and coin recyclers return a significant amount of coins to circulation on a daily basis. However, precautions taken throughout the nation to slow the spread of the virus have reduced retail sales activity and significantly decreased deposits from third-party coin processors, resulting in increased orders for newly minted coins produced by the United States Mint. Third-party coin processors and retail activity account for 80 percent of coins put into circulation each year, while the Mint contributes 20 percent via newly minted coins.
Throughout the public health challenge, the Mint has continued to meet its essential mission of manufacturing coins to facilitate national commerce. At the same time, the Mint continues to take all appropriate steps to safeguard the health and safety of our workforce. The Mint acted quickly and decisively during the early phases of the crisis to implement measures to mitigate the risk of employee exposure to COVID-19. These measures included temporarily reducing the number of employees per shift in order to enhance social distancing.
The Mint continues to take all appropriate steps to safeguard the health and safety of our workforce. Prior to taking these safeguarding measures, we were on track for producing coins in accordance with forecasted demand – 1 billion coins per month for the entirety of 2020. Due to COVID-19, our production was down 10 percent in April and 20 percent in May. We were able to fulfill the Federal Reserve’s May coin order by drawing down our coin inventory. We worked mandatory Saturday overtime in May in order to increase our production, and ramped up to full production by mid-June and implemented voluntary Sunday overtime, in addition to mandatory Saturday overtime. We will produce more than 1 billion coins in June, and are planning to produce more than 1.35 billion coins per month for the remainder of the year. We have increased production while still prioritizing the health and well-being of our employees and maintaining a reduced risk of their exposure to COVID-19 in the workplace.
The Mint is partnering with the Federal Reserve’s Cash Product Office, which manages coin supply and inventory from a national perspective, to minimize potential coin shortages and ensure the health of our nation’s circulating coin supply.
As always, and especially during this challenging time, the Mint is committed to supporting our nation’s economy and commerce through the production of circulating coinage.
Simply put, coins aren’t moving. Certainly not at the velocity and volume seen during pre-COVID times. Closed bank branches, limited visits to grocery stores and retail transactions slowed to a crawl during shutdown orders have all contributed to the shortage. Even the typical spike in loose coin redemption activity seen during times of increased unemployment haven’t materialized.
Although unwilling to speculate as to how long the shortage would last, the CPO recently told the Coin Laundry Association that the answer lies with the reigniting of retail transactions and a return to consumers’ normal coin redemption activity. The CPO did indicate that it was encouraging banks to consider removing impediments to redemption activity – namely, the fees charged for handling coin and/or the requirement to roll coins for deposit.
Fed chairman Jerome Powell recently told lawmakers that the shortage is most likely a temporary situation. Coin circulation was starting to improve as states eased lockdowns meant to control the virus, he said at a hearing of the House Financial Services Committee.
“Stores have been closed,” Powell told the committee, according to an Associated Press report. “The whole system of flow had come to a stop. As the economy reopens, we’re seeing coins begin to move around again.”
States Expand Worker Protection in the Wake of COVID-19 Outbreak
As legislatures return to governing in the wake of the COVID-19 pandemic, the focus of their work will clearly change in response to a changing world. In terms of employment and labor policy, all levels of government have begun considering expansion of worker benefits and protections that will have lasting impact long after the pandemic subsides. Here are some proposals that have already emerged, according to MultiState Associates, a government relations firm based in Alexandria, Va.:
Unemployment Insurance: As the country faces the worst levels of unemployment since the Great Depression, every state has acted to modify its unemployment insurance programs in a variety of ways, including:
- Expanding benefits.
- Waiving the “waiting week” to receive benefits.
- Waiving work search requirements.
- Authorizing work share programs, which allow underemployed individuals to collect UI benefits.
- Providing benefits to quarantined workers.
- Ensuring that employers’ UI experience ratings are not charged for COVID-19 related layoffs.
The most expansive changes have come from the federal level. Congress passed the CARES Act in March, which includes an additional $600 per week in benefits to unemployed individuals for up to four months, along with up to an additional 13 weeks of benefits when state benefits are no longer available, through December 31, 2020. It also provides federal funding for states that have short-time or shared work programs that allow employees who are underemployed or experiencing reduced hours to collect UI benefits.
Now that benefits have been expanded to different categories of workers, it may be difficult to roll back these protections or argue against permanently expanding them in the future.
Paid Sick Leave: Lawmakers across the country are likely to promote both paid sick and family leave programs as a result of the pandemic.
At the beginning of the outbreak, Congress quickly passed legislation requiring employers with fewer than 500 employees to provide employees with two weeks of paid sick leave for quarantined employees or those who are experiencing COVID-19 symptoms or seeking a medical diagnosis. The federal legislation also provides two weeks of partial paid sick leave when an employee is caring for a sick family member or a child whose school or child-care provider is closed. Workers employed for more than 30 days may also receive an additional 10 weeks of paid family and medical leave to care for a child whose school or child care provider has closed due to a public health emergency.
Thus far, state lawmakers have mostly engaged on this issue by expanding existing laws to provide additional benefits to employees. New Jersey has enacted legislation to allow the use of temporary disability insurance or family leave insurance for a “serious health condition,” which includes illnesses caused by an epidemic of a communicable disease, and to allow the use of family leave in the case of suspected exposure to a communicable disease.
In addition, New York lawmakers enacted legislation to provide varying amounts of paid sick leave based on the size of an employer to employees who are subject to a mandatory or precautionary order of quarantine related to COVID-19. The Colorado Department of Labor also issued emergency rules providing two weeks of paid sick leave at two-thirds pay to employees in certain industries who are being tested for COVID-19 or required to quarantine or isolate.
Currently, 14 states have mandatory paid sick leave laws.
Workers’ Compensation: Most recently, state lawmakers and governors have amended workers’ compensation laws to cover workers directly involved with combating the spread of COVID-19. In states where lawmakers have expanded workers’ compensation laws, certain essential workers are now eligible to receive claims for presumably contracting the COVID-19 on the job.
Minnesota Governor Tim Waltz signed the first piece of legislation expanding workers’ compensation coverage, though several other states have expanded coverage since then. The Illinois Workers’ Compensation Commission also issued emergency amendments, which were subsequently repealed, that created a rebuttable presumption that exposure to COVID-19 arose during the course of employment for first responders and frontline workers, shifting the burden of proof in these cases to employers.
Expanding Worker Protections: Several new policy trends are emerging that would expand worker protections. Legislation introduced in New York would establish an “essential workers’ bill of rights,” requiring that employers provide employees with personal protective equipment and inform workers of exposure to disease. The legislation would also require employers to provide essential employees with hazard payments. Legislation in Massachusetts and Minnesota would also require hazard pay for essential employees.
Also, lawmakers in Minnesota and New Jersey have introduced bills to mandate specific employee social distancing and sanitation procedures in the workplace. As states begin to reopen their economies, expect to see similar proposals across the country.
States to Decide How to Spend Coronavirus Relief Funds
As communities continue to address the economic impact of government-mandated stay-at-home orders put in place to contain the COVID-19 pandemic, states are discussing how to spend their portion of the $150 billion of federal aid that Congress allocated to states and local governments through the CARES Act. The aid program – called the Coronavirus Relief Fund (CRF) – provides states, territories, tribes and local governments with funds to cover various expenses incurred due to stopping the spread of the virus.
As of May 20, the U.S. Treasury Department had disbursed $144.3 billion of Coronavirus Relief Funds. Although most federal assistance program funds have already been doled out by the Treasury, states have yet to decide how those CRF funds will be spent, as state deficits could collectively reach hundreds of billions of dollars.
The challenge will be determining who – the governor or the legislature – has the final say over the money, according to MultiState Associates, a government relations firm based in Alexandria, Va.. Many state lawmakers insist that the legislature controls budget decisions, even though the CARES Act money was directed to governors.
In Minnesota, Governor Tim Walz and Republicans in the legislature are at odds over how the state should spend its share of CRF assistance. Similarly in Pennsylvania, $1 billion of the state’s $4.9 billion CRF money has been given to the state’s largest localities, while Governor Tom Wolf and the Republican-controlled legislature still need to decide how the rest of the funds will be distributed.
In states where one political party controls both the governorship and state legislature, governors appear to be taking the lead in how CRF money is spent. In Indiana, Governor Eric Holcomb appointed an “Economic Relief and Recovery Team” in April to make spending recommendations for the state’s $2.1 billion share of CRF money, while Iowa Governor Kim Reynolds unveiled how the state should use its funds to get businesses and farmers back up and running.
Local governments, also named as beneficiaries in the CARES Act, are asking states to transfer their share of federal aid. Local governments with populations over 500,000 received payments directly from the federal government. In April, the U.S. Treasury Department issued guidance on eligible expenditures of the Coronavirus Relief Funds, but did not clarify how states should transfer funds to localities with less than 500,000 residents. Only 18 states have directed federal assistance to local governments with 32 states withholding funds from localities, according to data compiled by the National League of Cities.
With states almost certain to face massive budget shortfalls, due to the lack of tax revenue generated during the pandemic shutdown, there will be added pressure on legislatures and governors to decide how funds will be spent. And, as states slowly reopen, state legislatures will likely begin discussions on what special sessions will look like and how these revenue shortfalls will be addressed.
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