Virus aid talks bleed into Thursday amid small-business funds lapse

Congressional leaders and the White House won't reach a deal quickly enough to keep small-business funds flowing, though negotiators cited progress

A rare small-business grand opening at the Call Your Mother deli on Capitol Hill Wednesday.  (Caroline Brehman/CQ Roll Call)
A rare small-business grand opening at the Call Your Mother deli on Capitol Hill Wednesday. (Caroline Brehman/CQ Roll Call)
Posted April 15, 2020 at 11:18am, Updated at 9:55pm

The forgivable loan program created just weeks ago to help small businesses through the COVID-19 pandemic is set to run out of money before Democrats and the Trump administration reach agreement on a new relief package.

Aides to Speaker Nancy Pelosi, D-Calif., and Senate Minority Leader Charles E. Schumer, D-N.Y., spoke with Treasury Secretary Steven Mnuchin and Treasury staff earlier Wednesday, but a senior Democratic aide said just after 9 p.m. that talks would continue tomorrow.

Top Republicans lambasted Democratic leaders for not simply agreeing to boost the program's funding from $349 billion to $600 billion, rather than hold out for additional aid to states and hospitals.

Senate Majority Leader Mitch McConnell of Kentucky and House Minority Leader Kevin McCarthy of California said late Wednesday they'd received word that the so-called Paycheck Protection Program "will exhaust its funding in a matter of hours" and have to stop processing loans.

"The notion that crucial help for working people is not appealing enough to Democrats without other additions sends a strange message about their priorities," the GOP leaders said in a joint statement. “The cost of continued Democratic obstruction will be pink slips and shuttered businesses."

The tough talk from Republican leaders came as top Democrats appeared to be making progress behind the scenes in their negotiations with Mnuchin, however.

Senate Small Business and Entrepreneurship Chairman Marco Rubio, R-Fla., told CQ Roll Call earlier Wednesday he thinks enough Republicans would go along with additional funds for states and localities suffering from steep budget shortfalls and hospitals reeling from a surge in COVID-19 patients.

“I think there's strong support for the idea of helping local communities,” Rubio said. “Every senator, including Republicans, have cities and hospitals, rural hospitals, in their state.”

New Small Business Administration data released Wednesday evening showed how quickly the new small-business fund, which started accepting applications April 3, was burning through cash. As of 9 p.m., just $25 billion out of the initial $349 billion allocation signed into law last month was left.

Rubio said the main stumbling block in talks on the broader relief package was how to ensure fairness for all states in the distribution of direct aid, as well as additional money for hospitals.

"I think senators are going to want to see how much their cities and hospitals can expect to get, what's the formula that will determine that distribution and so forth. I think that's one of the impediments,” Rubio said. "But I don't think there's any disagreement: We have to do something on that issue as well."

Aid for states, hospitals

Democrats are seeking another $150 billion in state and local assistance as well as $100 billion in direct payments to hospitals, same as in the earlier $2.3 trillion aid package that included the initial batch of PPP funds. But the allocation of those dollars, while just getting underway, has already encountered criticism from parts of the country that feel shortchanged.

Even the Democrats' new proposal floated last week has run into static with county governments, for instance, who say the money is tilted toward cities despite counties playing a prime role in the pandemic response.

Schumer spoke with Mnuchin by phone earlier Wednesday, a Schumer spokesman said. But it wasn't clear if lingering disagreements would be wrapped up in time for the Senate to take up a bipartisan agreement during its pro forma session scheduled for Thursday afternoon.

Rubio said given the immediate needs of the small-business program, it would be better to act first to provide additional funds for those programs while Mnuchin and Democrats figure out an acceptable distribution of aid to states and hospitals.

"If they can work that out before tomorrow, that'd be great," he said. "But I hope if they can't we’ll at least move forward with some funding to keep PPP moving in the interim because it's really starting to pick up steam now.”

Democrats agree on the need for small-business funds. But the dispute has centered around how to allocate the money as well as provide additional relief for state and local governments, hospitals and low-income households.

"I can’t guarantee we can get an agreement that we will pass on Friday, but that would be optimal if we could," House Majority Leader Steny H. Hoyer, D-Md., said on a call with reporters Wednesday.

The bipartisan talks Wednesday were the first real sign of progress since the White House sent Congress a request for an additional $251 billion in funding for the PPP last week.

The PPP is in such hot demand because it allows eligible firms to skip repayment on eight weeks' worth of their loans, which are equal to up to 250 percent of monthly payroll expenses.

Companies are only able to spend up to one-fourth of the money on other fixed costs like rent and utilities, however, so Democrats want to boost allowable loans to 300 percent of payroll to enable companies to meet their nonpayroll expenses.

The average loan has been for around $239,000, according to the SBA.

Democrats want to put an additional $65 billion into a related disaster loan program for up to $2 million in "economic injury" expenses, of which up to $10,000 in cash advances don't need to be repaid. That program has also proven immensely popular, to the point where SBA last week started rationing the maximum loan size down to a fraction of the total.

Dueling proposals

McConnell tried to pass a two-page bill simply boosting the existing PPP allocation to $600 billion by unanimous consent last week, but Democrats objected. That was after Republicans objected to Democrats' proposal to reallocate the small-business funds and add the other funds they are seeking.

Schumer and Pelosi have called for changes to the structure of the small business loan program, to ensure that at least half of the new funding, or $125 billion, would go to small businesses without traditional relationships with big banks. This would help women- and minority-owned businesses as well as people in rural areas and farmers access the funding, they said.

"We see no reason why we can't come to an agreement," Schumer told reporters Wednesday after his call with Mnuchin earlier in the day.

"We Democrats believe that we need more money for small business. But we need it to go to the people who are underbanked and underserved," he added. "Second, we think there's just as much need for our hospitals and health care workers. And for our police, our fire, our people in the local governance. Both of these, hospitals and state and local governments ... are in as big a crisis as small business and they need help immediately or we're going to have millions, millions really of people more out of work."

Until now, GOP lawmakers have resisted entering negotiations with Democrats, saying the PPP is the only program from the $2.3 trillion package about to run out of funding. Republicans have said that discussions over additional funding could wait until Congress begins work on the next COVID-19 aid package.

And even with apparent signs of progress in bipartisan talks, top Republicans sense they have the political upper hand by painting Democrats as standing in the way of aid to small businesses.

"Even though the small business relief fund will run dry today, liberal Democrats Nancy Pelosi and Chuck Schumer are still rejecting Senator McConnell’s legislation to immediately add $250 billion in aid to the small business loan program," read a McConnell campaign email blast earlier Wednesday.

Democrats have some leverage of their own given the 60-vote hurdle in the Senate and their party's control of the House. They also know if they let the small-business aid pass first, they might miss an opportunity to attach their own priorities.

"As has been clear since last week, Republicans’ bill which fails to address these critical issues cannot get unanimous consent in the House," Pelosi said in a statement Wednesday afternoon.

Even if bipartisan agreement is reached, the soonest a bill could clear Congress is Friday, following the Senate's Thursday session and a House meeting on Friday morning.

The absence of both chambers from Washington, however, means that any one lawmaker could slow down the process if they object to passing the bill through unanimous consent.

Lindsey McPherson, Chris Cioffi and Niels Lesniewski contributed to this report.