SALT LAKE CITY (March 27, 2020) — As the state’s response to COVID-19 begins to negatively impact the local economy, Governor Jon Huntsman is calling on state leaders to take immediate, bold steps to help small businesses and Utahns who are already feeling the effects.
“The state should play the role of an economic first responder,” said Governor Huntsman. “While funds from the federal stimulus package are on the way, the state should immediately infuse capital into our local economy by tapping reserve funds. Efforts should already be underway to triage the need among our business community because many businesses won’t survive without it, and tens of thousands of jobs hang in the balance.”
In the nearly two weeks since Gov. Huntsman outlined ten steps the state should immediately consider, unemployment benefit claims have risen to record levels. Utah businesses have begun laying off workers while growing unsure of how the state and national economies will survive a quarantine period.
Businesses need capital to survive and the more efficiently Utah can connect local business to capital, the fewer workers will become unemployed. As many small businesses find themselves essentially prohibited from generating revenue they rely on from customers during the quarantine, connecting them to other sources of capital that provide a lifeline during the crisis without jeopardizing their long term viability is critical.
“We are grinding to a dead stop; this has never been seen before,” said Governor Huntsman. “Businesses stay open when they make money and without it, they will have no choice but to terminate employees, cut production and shutter their doors. We have no choice but to act now.”
Governor Huntsman outlines three steps the state should take to grant small businesses access to the capital they need to survive while the government limits their ability to operate as normal:
Step 1: Fresh Capital
Local banks – With recent cuts in the prime lending interest rate by the Federal Reserve Bank, local bankers are now borrowing money at zero interest. That same offer can and should be extended to the small businesses desperate for a lifeline. State leaders should work with local banks to suspend restrictions that would delay any such action. These loans can also provide flexible repayment terms to match individual business models as revenue projections become clearer post-pandemic.
“By empowering local banks already operating throughout communities across the state, we can get money directly and efficiently to the entrepreneurs and small business owners who are the first to be impacted by the quarantine,” said Governor Huntsman. “Banks win by keeping their customers afloat and potentially establishing new relationships with other small businesses; businesses get access to money they need in the shortest amount of time possible; the entire state benefits by minimizing unemployment and keeping businesses in operation.”
Rainy Day Fund – The rainy day Utah has been saving for is here. A robust Rainy Day Fund provides peace of mind in good economic times but it exists to be utilized in times like these. The state should immediately utilize $300 million of the $932 million currently in reserve to offer similar interest-free loans to be repaid by businesses when economic recovery benchmarks are hit.
State officials have identified the industries being most impacted by the quarantine (food service, restaurants and bars; personal services and barbershops; entertainment venues including arena sports and arts) and loans should not only be targeted to that group, but the state should also begin outreach to ensure impacted businesses connect with relief funds as soon as possible. Ultimately, the state would get this money back to the Rainy Day Fund, while injecting money where it is needed most and most urgently.
Step 2: Federal Support
Even as Congress passes a massive stimulus plan, there will inevitably be a lag in getting the money to businesses that need it. State leaders should prepare on multiple fronts to ensure the money goes where it is needed most in the shortest amount of time possible.
Small business owners are not experts in navigating the federal bureaucracy. Training and increasing the number of state employees who can walk businesses through each step of the process of accessing funds likely to be block-granted to the state, while also proactively reaching out to small businesses to help them understand the criteria for receiving those monies, is essential.
“Nothing about the federal government is nimble and we must be prepared to move alone,” said Governor Huntsman. “Federal funds sent to the state do businesses no good until it actually gets into the hands of our entrepreneurs and private sector leaders. As a state, we should immediately stand up an organization to be prepared to deploy the federal funding that will be allocated to state and local governments.”
As details emerge on the final federal stimulus package, the state should also ensure a portion is used to keep current projects moving forward. Doing so will help avoid impacts on the construction industry, while projects continue to be completed as scheduled.
Step 3: State Resources
Tax Relief – While small businesses look for places to tighten their belts, it is in the collective interest to incentivize them to continue paying employees rather than cutting payroll to make other payments. Delaying the remittance of sales taxes in targeted industries will help businesses to avoid layoffs. Likewise, the state should identify areas where it can provide relief to local governments, including immediately suspending its share of the transient room tax to allow counties to aid businesses in hospitality industries.
Bonding Capacity – The same zero interest rates offered to banks are also available to a state, like Utah, with a AAA bond rating. It is wise to maintain some funds in reserve and not every dollar of the Rainy Day Fund is readily available for general relief. It may prove more prudent to bond for low-interest funds to supplement relief efforts, rather than depleting all Rainy Day Funds, should the economic recovery be prolonged.
“With diminished supply chains, quarantined customers and forced closures, small businesses, hourly workers and many other Utahns face an economic crisis along with this viral pandemic,” said Governor Huntsman. “Utah’s economic resilience has been demonstrated before but now, we are in uncharted territory and we need immediate solutions. Over the last few months, I’ve met with business leaders, entrepreneurs and farmers who are prepared to make Utah the Crossroads of the World as innovators, exporters and producers. We will not let this challenge stand in our way.”
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