$300 million loan program suddenly becomes $300 million business grant program

I wrote Wednesday about how $300 million from the federal bailout law would be directed to struggling Alaska businesses as loans for “small business relief.”

You can forget all about that.

The $300 million loan program has now become a plan to give $300 million in grants to struggling small businesses, pending legislative approval.

This sudden turn-around happened because of guidance issued by the Trump administration Wednesday, one day after the state proposed a loan approach, state budget director Neil Steininger told the House Finance Committee Friday.

He said the new rules from the federal government require that the money be in the form of grants, not loans. “The federal guidance that we’ve gotten is a lot more tailored towards grants to small businesses.”

On Tuesday, Gov. Mike Dunleavy governor asked that $300 million loan program be approved by lawmakers by next week along with other elements of the $1.25 billion bailout.

When it was still a loan program earlier this week, I wrote about the need for transparency and accountability to prevent this from becoming a boondoggle.

The need for transparency in this program became a far more urgent matter with the transition to a grant program. The selection of businesses for grants should be made in ways to avoid political favoritism. That is always a threat when money is distributed by political appointees with few rules.

Steininger said the Dunleavy administration plans to have the investments section of the commerce department as well as the Alaska Housing Finance Corp. and the Alaska Industrial Development and Export Authority give out the grants to businesses.

The money should go to “businesses that don’t really have the option or aren’t good fits for the other existing programs such as the Small Business Administration loans or the Payroll Protection Act,” he said.

The idea is to help “make sure that the money is allocated to the right sectors, to the right businesses that are most in need of relief.”

Given the deception that marked the Clark Penney no-bid contract of up to $441,000 and the refusal of officials at the commerce department and AIDEA to tell the truth about it, there is plenty of reason to be skeptical about how they will distribute $300 million. We are still waiting for the “deep dive” to address all the questions with the Penney contract, an exercise that should have taken an hour or two, that Dunleavy promised two months ago.

Applicants for grants from the $300 million fund should be public, as well as the amounts that the state plans to give each business. The Legislature has the duty to insist on public disclosure, which is the best way to build public trust in the process.

I also like the idea proposed by Fairbanks Rep. Bart LeBon to involve Alaska banks in this program, as they have first-hand knowledge and expertise of dealing with small businesses that state agencies don’t have. LeBon said the program should be open to all Alaska banks, not just the giant national organizations. The state should take steps to avoid squeezing out the smaller banks.

“There is room for flexibility in exactly how we spend this money, but we do know we need a significant amount of money allocated toward small business relief,” Steininger said.