Dunleavy administration announces illegal plan to expand state COVID-19 grant program

The Dunleavy administration is proposing an illegal expansion for the $290 million COVID-19 grant program for small businesses, ignoring a state law that explicitly prohibits giving a grant to any business that received any other federal assistance from the bailout bill.

The law approved by the Legislature last month says that businesses that have received any CARES Act funding “do not qualify” for the state grant program.

There is no argument about the meaning of “do not qualify.”

But Attorney General Kevin Clarkson has signed off on an illegal plan that says businesses can qualify because a couple of legislators made offhand comments during a committee meeting several weeks ago.

This is straight from the “Better Call Saul” school of jurisprudence, where the motto is, “I can make it legal!”

It is revealing that the Dunleavy administration has not put the legal justification in writing. Assistant Attorney General Bill Milks, who must have drawn the short straw, told legislators Wednesday that the state can ignore “do not qualify” because it depends on what the meaning of the word “is” is.

No, he didn’t say that.

What he said was that the Dunleavy administration has concluded that, despite the law, it can give up to $5,000 in grants to businesses that have received other forms of assistance. Why $5,000?

“Basically we saw in the legislative record that that sum of money had been mentioned at the LB&A committees, of not penalizing businesses that received up to $5,000. So we saw that referenced by a couple legislators. Or pretty close to that $5,000 number,” Milks said. “And we also thought that is a number that’s beneath the program itself is providing funding to businesses, I believe it’s from $5,000 and up to the cap. So that’s, that’s how we concluded that the $5,000 number seemed to be reasonable and consistent with the purpose of this RPL, purpose of the program.”

The grant program provides from $5,000 to $100,000 to small businesses hurt by the pandemic.

A lot of businesses in Alaska received a few thousand from other parts of the federal bailout program and could really use this money right now. But the rationalization put forward by the attorney general is illegal. It’s an invitation to another lawsuit.

No one in the Dunleavy administration is taking responsibility for the rigid rules it gave to legislators or admitting a mistake. But the plan was repeatedly described as one that was only open to businesses that were left out of other programs. The Dunleavy administration didn’t pay attention to the language.

The state should find a legal way to fix this that doesn’t treat the law as a joke.

Two months ago, the state came up with this grant program the day after abandoning a $300 million loan program. The feds said the money had to be given out as grants.

Neil Steininger, director of the Dunleavy budget office, told legislators on April 24 that the money would 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.

But it wasn’t until May 11, hours before a meeting of the Legislative Budget and Audit Committee, that the Dunleavy administration agreed to the $290 million grant program. This was to win votes at the LBA meeting.

One sign of mistakes made in haste is that the documents submitted to the Legislature had not been fully edited to remove the references to loans and replace them with references to grants. The paperwork was clear about businesses being excluded if they collected any other bailout money, however.

The LBA action led to an immediate court challenge, which led to an immediate gathering of legislators to approve the Dunleavy plan.

As I wrote here on May 12, “The grants of from $5,000 to $100,000 are to be given first-come, first-served to businesses with less than 50 employees that have not gotten other financial aid through the federal bailout. The businesses have to demonstrate that they’ve been harmed by the pandemic, which is not hard to do.”

So far, Alaska businesses have received $1.22 billion in the so-called PPP loans, $252 million in economic disaster loans, and $26.3 million in small grants.

The $290 million state program for businesses with fewer than 50 employees was supposed to hand out $150 million per month in amounts ranging from $5,000 to $100,000.

But Credit Union 1, the contractor hired by the state, has only approved 83 grants for a total of $2.5 million. More than 1,500 businesses have applied, most within the first few days of June.