With Federal Funding Uncertain, Aid to Small Business Falls Short in Connecticut

Since the start of the pandemic, Connecticut has used $50 million in federal relief funds to give $5,000 grants to 10,000 small businesses – no one thinks that’s enough.

“I applaud the DECD for that $5,000 small business grant program, but $5,000 is not going to help you survive,” State Rep. Holly Cheeseman, R-East Lyme said. “$5,000 may just pick up one month’s rent.” 

Gov. Ned Lamont announced Wednesday that another $25 million in small business grants would be made available from those federal funds. Republicans called for $50 million just for restaurants. Appropriations co-chair Sen.Cathy Osten, D-Sprague, said she has a longer list of needs, and there isn’t money for any of them.

All are waiting to see if Connecticut will receive more federal aid. Without it, significant aid to struggling businesses appears unlikely.

A proposal from Cheeseman and State Rep. Vincent Candelora, R-North Branford, would offer grants from $5,000 to $25,000 on a sliding scale tied to sales tax revenues for “mom and pop” restaurants that don’t have takeout windows and weren’t able to pivot away from indoor dining as easily as fast food chains, Candelora said on Wednesday.

Cheeseman said she was on a call on Tuesday with a restaurant owner who had just placed an order for $4,000 worth of food the day before the shutdown was ordered in March.

“They ended up distributing it to the two-thirds of their employees they were forced to furlough,” Cheeseman said. “They’re paying twice as much for gloves, they’re paying hugely increased costs for food – the basic commodities – because of the way the pandemic has affected our supply chain.”

Cheeseman said the restaurant industry employs 160,000 people in Connecticut and contributes close to $9 billion in sales tax revenue. Until there is widespread distribution of a vaccine, there may not be the public confidence needed to keep restaurants alive, she said.

Candelora said Republicans heard there was about $130 million remaining in federal Coronavirus Relief Funds, and said $50 million of that should be pledged to small businesses before the Dec. 30 deadline to appropriate those funds, which came from the $1.13 billion allocation to the state from the federal CARES Act.

“That certainly could be utilized. But going into next session, if nothing is done sooner, we would make this a budget priority,” Candelora said.

Lamont previously said Candelora’s call on Dec. 3 to use some of the remaining Coronavirus Relief Funds to bail out Connecticut’s unemployment insurance trust fund “seems like a pretty dumb idea” and said the federal funds were “pretty well allocated.” 

But on Wednesday, Lamont told the Middlesex Chamber of Commerce some of those federal funds would be used for a $25 million grant program for small businesses, on top of the $50 million grant program rolled out in October that will distribute $5,000 grants to 10,000 businesses in Connecticut. 

Unlike the Republican proposal, the second round of small business grants Lamont previewed  wouldn’t be restricted to restaurants.

“We’re gonna set that up, you know, within a week – and that’s not enough to take care of everybody,” Lamont said. “That takes care of those bigger businesses, those restaurants that are really struggling. And I hope it’s a bridge to the next rebound we get from the federal government of paycheck protection and what they need.”

Lamont spokesman Max Reiss said in an email Thursday morning that the second grant program was still being developed. He said the “vast majority” of the Coronavirus Relief Funds have been committed, and state officials are looking at where to come up with funds to provide relief to small businesses most impacted by the pandemic.

“The administration, in working with both (Department of Economic and Community Development) and (Office of Policy and Management) are identifying potential CRF dollars to assist small businesses through the pandemic,” Reiss wrote. “To date, the administration has already provided $75 million across direct relief and loan programs.”

State Sen. Cathy Osten, D-Sprague, co-chair of the Appropriations Committee, said she hadn’t seen the complete Republican proposal, but questioned where the funds for restaurant relief would come from.

“Are they expecting us to raise taxes for it?” she said.

Osten said that, to her knowledge, there isn’t federal money remaining for that kind of relief, at least not at the level the Republicans are talking about. Along with where the money comes from, Osten said she would have to see more details about how it would be distributed.

“We don’t get much money in eastern Connecticut,” she said.

Osten said restaurants aren’t the only industry suffering through the pandemic. Hotels are going out of business “left and right”

“We’ve got to stop sorting this out a little bit at a time to this group, and parsing it out a little bit at a time to that group,” Osten said. “I have 12,000 less jobs, year over year, in my neck of the woods. I have people that have closed their doors and locked up. It’s not just restaurants that have the problem.”

Department of Community and Economic Development spokesman Jim Watson said about 18,000 businesses applied to receive the first distribution of $5,000 grants. The department hasn’t yet determined which 10,000 restaurants will receive a grant from the $50 million pot of federal funds, he said.

While Candelora said it was “disappointing” that Congress appears close to passing a second stimulus package that doesn’t include any state or municipal aid, he said Connecticut is one of a few states that hasn’t put much money towards supporting businesses.

“To the extent that the federal government gives the state of Connecticut more dollars, I’m hoping that gets directed appropriately to industries that are really suffering, beyond healthcare,” Candelora said. 

Cheeseman said Massachusetts was giving grants up to $75,000 to small businesses, and Rhode Island was offering grants of up to $30,000.

Osten said the $5,000 grants wouldn’t cover payroll for a week, nevermind being enough to keep a business running. There needs to be a comprehensive plan for how to get consumer confidence back so people will go out and support businesses again.

“When I talked to the two largest businesses in the state, the two casinos, they just laid off workers because they don’t have enough people coming in,” Osten said. “They could open up 100 percent, they could open up everything, but they don’t have the consumer confidence where people feel comfortable to go to these places yet.”

The tribal nations that run the casinos “haven’t gotten a dime from anybody” and are huge employers, she said. Osten is hopeful that the Lamont administration will work on modernizing gaming so those businesses can be stabilized and more people can get back to work.

“The biggest driver for businesses in the hospitality, tourism and restaurant world, and the gaming world, is to get that consumer confidence, to make sure that people who want a vaccine get a vaccine, to make sure we’re driving that forward – and I think we’re getting there,” Osten said.

In addition to the restaurant grant program, Republicans called for a year-long suspension of liquor permits and food licensing fees, a 90-day delay of property tax payments, and for working with banks on low-cost loan programs for restaurants.

Candelora said the liquor permit fees generate about $11 million in revenue to the state, and food licenses are done locally, so suspending them would impact the local departments. If businesses close altogether, the state and local governments won’t see any revenue, he said.

Cheeseman said that all drivers’ licenses have been extended another year, which will have an impact on the renewal fees the state collects, but there wasn’t quibbling about that impact before the state decided to extend renewal periods.

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