A Closer Look at the Voronavirus Stimulus Package
“Will $2 trillion be enough?” would have sounded like the opening line of a joke earlier this year, but that is hardly the case some two months into one of the most sobering periods in recent memory.
The federal government’s stimulus packages continue to pump huge amounts of money into the nation’s ailing economy, restricted and transformed by efforts to contain the COVID-19 pandemic. Yet, with record numbers of Americans out of work, entire industries shuttered or massively downsized, and the future of the outbreak unknown, the toll that this jolt will take remains an open question.
In the meantime, countless businesses and families who have seen their sense of security upended are left asking if they will be able to weather the storm without facing financial ruin. Likewise, schools, and a long list of other community non-profits that depend heavily on donations, face a daunting challenge. The task of institutions that serve social welfare roles is further imperiled by the fact that they are dealing with an unprecedented degree of demand at a time when charitable giving has been slashed.
Against the backdrop of this stormy sea, millions are looking to see if the stimulus’ various initiatives will indeed prove to be a life preserver.
The first phase of the Coronavirus Aid, Relief, and Economic Security Act (CARES) that passed in late March contained a wide range of initiatives to prop up individuals, businesses, state and local governments, and other bodies under unique stress from the pandemic. Since then, the legislation has received additional funding through two subsequent phases, and a fourth is currently making its way through Congress.
One of its unique features is direct payments to low- and middle-income citizens. Those who file individual returns with an annual income of $75,000 or less are eligible for a payment of $1,200, and both figures are doubled for those filing jointly. Additionally, payments of $500 per child are included in the package to families within the qualifying income brackets.
Rabbi Abba Cohen, Vice President for Government Affairs and Washington Director for Agudath Israel of America, said that the extent to which these payments will help varies not only based on a household’s finances, but also on geography.
“We heard from families in Brooklyn that it will hardly do anything for them. But a lot of people from other parts of the country were very eager to get the checks and were happy for the help it would offer,” he said. “No one part of the stimulus will save us, but they are all parts of the puzzle to offer a little assistance.”
Rabbi Cohen said that one of his many lobbying efforts on the stimulus was an attempt to raise the per-child payment and to procure additional amounts for dependents, but so far, neither has proven successful.
The other most significant initiative to individuals was legislation focused on unemployment benefits, giving states a massive infusion of earmarked funding, extending coverage from three to four months, expanding the program to include new categories such as the self-employed and independent contractors, and providing an additional stipend of $600 per week.
Avi Greenstein, CEO of the Boro Park Jewish Community Council, said that his organization’s staff has been fielding an unprecedented amount of calls for help applying for unemployment insurance as well as for other stimulus offers.
“Take a family with five children here in Boro Park ― the father works full time, the mother part time and until now they were doing OK, a little better than paycheck-to-paycheck. Now, all of a sudden, they are without a job. We have a very large percentage of the population that went from never thinking about taking a handout to struggling with questions like how they’re going to put meals on the table,” he said.
Mr. Greenstein said that once approved, unemployment benefits have been paid, but that the state department of Labor was initially very slow to process requests until pressure from his group and other similar organizations pushed Governor Andrew Cuomo to hire additional staff to service the huge increase in applications.
“There was a major overload of calls and [the state] was not getting back to us. People were left without information. It’s still moving along at a slower pace than usual, but it’s getting better,” he said. “Government offices always worked slowly, and now, with all the social distancing challenges, they have a good excuse for everything to work even slower.”
When You Want Uncle Sam to Mind Your Business
To stem these record levels of unemployment and to support small businesses stymied by the outbreak, Congress approved a number of measures, most universally applicable of them the Payroll Protection Program (PPP). The PPP offers businesses with fewer than 500 employees loans of up to two and half times their monthly payroll to cover salaries and some other basic operating expenses. Should employers continue to pay salaries through June 30, the loans are to be converted to grants and forgiven.
The billions of dollars earmarked for the program ran out quickly amid the flood of applications, but the pot has been replenished in successive phases by Congress. The money is delivered through the Small Business Association (SBA) to private banks, a system that has created barriers for many applicants.
“The banks looked at this and said that they had to find a way to make money on this, so they figured, ‘Why should we give to everyone if we can give it to our loyal customers?’ If Chase or Bank of America has a client with a line of credit or loans and they default, that will hurt the bank, so they pushed the bigger businesses that they had relationships with to the front of the line,” said Shulem Rosenbaum, manager for advisory services at Roth & Co accounting firm, based in Boro Park.
The phenomenon has been widespread, and many smaller businesses around the country have complained of being stonewalled by banks. Some noted that smaller banks had allotted the loans more fairly, but that staffing and infrastructure realities limited the number of applications they were able to process.
In subsequent rounds of congressional funding, more smaller-sized businesses reported that they were receiving loans. And last week, the SBA announced that it would begin prioritizing grants to community banks.
Mr. Rosenbaum said that his firm was very successful in helping to move a large number of applications for PPP loans through banks largely by preparing user-friendly applications for bankers, but that many companies still face impediments. Many business owners Mr. Greenstein had dealt with were still experiencing delays or rejections of their loan applications.
“The PPP loans are not coming through for a lot of companies, and even delays can be a problem if your business has gotten slashed and you’re trying to meet a payroll every two weeks,” he said.
As the outbreak coincided with the pre-Pesach shopping season, Mr. Rosenbaum said that Jewish community retailers have been especially hard hit, having stocked up for what is typically their busiest season only to see dismal sales amid limited means of reaching customers and a nervous public looking to cut down on expenses. However, he was still optimistic that PPPs could help businesses get through the coming months.
“Some businesses asked if they would be better off just furloughing employees and sending them on unemployment, but it’s not an approach I’ve been recommending,” he said. “It would be much better if businesses can find ways to keep generating some revenue so that when things pick back up it will be much easier for them to have the capital and the relationships with customers that they need to start playing catch-up. That might mean they have to be creative with their business models and modernize them a bit, but maybe that is something positive they can learn during this crisis.”
Helping the Helping Hands
Given the integral role of a plethora of shuls, schools, chessed organizations, and other non-profits essential to the Jewish community, ensuring that these institutions be supported by the stimulus packages has consistently been the priority of Orthodox advocacy groups.
While the goal of getting Congress to earmark $60 billion specifically for non-profits has not been achieved, it remains a goal for the fourth phase of legislation. For now, the institutions remain eligible for PPP loans, but find themselves competing against for-profit companies. The result has been many cases with challenges similar to those that business have encountered: Many banks are favoring larger and better-established non-profits.
Agudath Israel’s Rabbi Cohen said that it was a point he would like to see further addressed in guidance from the Treasury Department, which directs most of the funds distributed by the CARES Act.
“We’re not looking to introduce too much oversight which would slow things down and defeat the purpose of an emergency measure, but we do want accountability and transparency from banks,” he said.
Rabbi Cohen said that the Treasury’s guidance has been sensitive to the needs of faith communities. A significant regulatory victory was achieved two weeks ago, when the Department issued a statement that parsonage ― non-taxable wages for clergy ― could be calculated into a PPP application together with other salaries.
Recognizing the tremendous need, many barriers to entry by faith organizations, such as anti-discrimination clauses that could have threatened the beliefs and missions of religious groups, have been addressed in what Rabbi Cohen identified as a largely positive way in guidance from the Trump administration. In a similar vein, the Treasury has allowed houses of worship to fully participate in relevant stimulus initiatives.
“I think there’s a recognition that this is an unprecedented situation and that the priority is for the money to get to where it is needed most. The result is that in areas where we might have faced concerns, we are finding a lot more understanding on the part of the administration that non-profits, including religious ones, are being asked to play a key role in addressing this national emergency, so they’re open to helping in ways that they might not have considered under normal circumstances,” he said.
Mr. Nathan Diament, director of the Orthodox Union’s Washington, D.C. advocacy division, said that he was largely satisfied with the level of access to stimulus funding that religious organizations have been granted, and pointed to some 200 shuls and 100 schools that had received funds. He noted that while $30 billion earmarked to help schools cover pandemic-related costs has been opened to private schools, the money has yet to be delivered via the Department of Education (DOE), which is charged with distribution.
“We had stronger language to guarantee that private schools would get their fair share of the money, but it was taken out of the final bill,” he said. “What we wanted was a requirement that schools get according to the percentage of the student population in the district they serve.”
A clause that does remain says that non-public schools should receive an “equitable” share of funding. However, governors were given a great deal of discretion in terms of how money would be distributed. Dialogue is ongoing between the private school community and the DOE to ensure favorable terms for the schools they represent.
Mr. Diament also hoped to address accommodations that would allow PPP loans to reach larger non-profits whose staffs pass the 500-employee mark, pointing to the Yeshivah of Flatbush as one example of an institution that was closed out of the program.
Another effort to help non-profits in what is sure to be a difficult period for fundraising was a hike in the amount of tax-deductible income from charitable giving. The move partially undoes the cuts made in the 2017 tax overhaul, but non-profits are still seeking an even higher number in coming legislation.
Mr. Diament echoed the feelings of many in saying that the money appropriated to date, while substantial, would not be “nearly enough” to help society through the ongoing crisis, and how much more would be needed remains as unknown as the course of the outbreak itself. He added that for non-profits, the need was likely to last the longest.
“If you look at how charitable giving dropped in 2008, it took almost three years to get back to where it was before that. There’s always a drag till people make their money back and then get comfortable giving,” he said. “We don’t know how much longer the health crisis is going to continue, and the economic impact is likely to outlast it.”
A Lawyer Waits for His Bank’s Verdict
An attorney with a small firm that deals in real estate and corporate matters was one of millions waiting for a response to his application for a PPP loan to get his three employees through a rough patch.
“We’re all working remotely, but there are very few new real estate deals going on now, no one knows what their property is worth, and banks don’t want to lend. We have something like 75% less money coming into the firm since this all started,” he said.
The attorney, who employs two other lawyers and a secretary, applied the first day that Chase, the bank his firm is a client of, posted its portal. He found the registration process straightforward, requiring little more than uploading his most recent payroll tax forms. But information on his status was far less forthcoming.
“I got an email that they received it,” he said, “but then there was radio silence for two weeks. I called the banker I deal with but he said he did not know anything more than I did.”
Eventually the attorney got an email saying that the funds had run dry, but that if Congress appropriated more, his application would be considered. After the passage of the stimulus package’s second phase, he got another message that his filing was found satisfactory and that it was being forwarded to SBA, but with no timeline given.
“I give it no better than a 30% chance that I’ll get [the PPP], mostly because of the sheer volume of applications. If I get, I suspect it will only be partial,” he said. “I’m not throwing my guys out on the street; they’ve been good to me and I want to do the same for them. For now, I am paying them out of my own pocket, but that’s not something I can afford to do for five months.”
A School Waits for the Unknown
The administrator of a yeshivah elementary school in the New York area said that his mosad’s application for a PPP was filed toward the beginning of the process, but that no answer has been received from the bank. He said that the phenomenon was not uncommon, based on what he had heard from colleagues.
“Yeshivah payrolls take more time to calculate, like looking at amounts that are paid as parsonage. I have heard of girls’ schools that have already gotten. I presume because their payroll is simpler,” said the administrator.
So far, because tuition payments were still as up-to-date as in most years, the school has not encountered problems paying regular salaries, but, in an oft-heard refrain, the administrator was uncertain of what the future would hold.
“A lot of our parents work in jewelry and retail, which are both down. I already got an email from a parent telling me that he was out of work, asking to hold off on charging this month’s tuition to his credit card. For now, we’re OK to get through until the summer, but if after that I can’t collect tuition, getting the loan might be the difference between whether we can pay our staff or not.”