REPORT: May 7 Member Meeting
Small Business Recovery
Patrice Frey
President and CEO
Main Street America
As the nation’s small businesses struggle from the impact of the COVID-19 pandemic, the Senate Presidents’ Forum explored how state leaders can support business recovery and stability, and how federal dollars from the American Rescue Plan Act (ARP) and other relief funds can be most effectively invested. The discussion was initiated by Patrice Frey, President and CEO of Main Street America, who reported on key areas of need as expressed by small business owners across the country.
Introduction
There are many paths and aspects to small business recovery, including access to capital, payroll protection programs, workforce development, and technical assistance, Ms. Frey advised the Forum. Her organization, the non-profit Main Street America, started in 1980 as a program of the National Trust for Historic Preservation and has helped over 2,000 communities across the country bring economic vitality back to their downtown areas.
Small Business: Still in Peril
Small businesses are defined as independently owned and having fewer than 500 employees, according to the Small Business Administration’s Office of Advocacy. They have accounted for 60% of net new jobs since the end of the last recession. Almost 80% of small businesses are sole proprietorships.
More than 60% of small businesses have failed during
the pandemic and one-fourth of the survivors face imminent closure.
As shuttered shops and “For Sale” signs across America’s Main Streets indicate, the pandemic has decimated many small businesses. More than 60% of small businesses have failed during the pandemic; one-fourth of the survivors face imminent closure; and total small business revenue has decreased by 29.3% compared to January 2020, Ms. Frey reported, quoting data from Opportunity Insights, a Harvard University research group.
The Opportunity Insights’ interactive website can track your state’s small business revenue at the zip code level. See https://tracktherecovery.org/
E-Commerce Challenges
During the pandemic, 20% of spending moved online, and small businesses that had or could create an online presence had a chance to survive. However, two out of three small businesses have no online presence and lack the technical knowledge or resources to create them, Ms. Frey reported. This is a significant opportunity for states to invest American Rescue Plan funding and help small businesses with the technical support they need to add e-commerce.
Hiring is Hard
Despite “We’re hiring” signs appearing in Main Street windows, small businesses are finding it difficult to find new employees. Lingering concerns about virus exposure continue to keep people out of the workforce, and parents who want to work are still faced with challenges to find safe, healthy child care options or to answer the demands of remote schooling. Moroever, a significant factor currently making hiring difficult is the lure of unemployment benefits, especially for lower-wage jobs. Many workers are receiving more through federal and state relief programs than they can earn from working. The programs, while meeting urgent basic needs, may also be a disincentive for returning to work.
Entrepreneurship
One of the more optimistic responses to the pandemic has been the growth of entrepreneurship, which is growing at the highest rate in a decade. As workers saw their livelihoods being threatened by layoffs, some sought to launch their own projects. The ability to work from home, additionally, allowed ideas for remote-based businesses to flourish.
Supporting entrepreneurship with grants is a major opportunity to accelerate economic recovery and spur future growth, Ms. Frey noted. Successful entrepreneurial ecosystems depend on cross-sector partnerships and collaboration, including the strategic alignment of public and private efforts — including government policies, funding and finance, human capital, and regulatory frameworks — to provide necessary financial, social, and human capital to foster entrepreneurship in innovative and creative ways, according to Main Street reports.
Place
Additionally, Ms. Frey stressed the importance of “place,” noting that 70% of new business growth comes from within the community, requiring on-the-ground local assistance. While many consumers have moved their dollars to online shopping, there is still an appetite for the personalized, walkable, experiential shopping available in business districts that have the character, building stock, and human scale to attract traffic.
70% of new business growth comes from within
the community.
Ms. Frey noted that the pandemic caused many local community support agencies to close or downsize. Directing ARP funds to local Main Street businesses, improving infrastructure, and providing technical assistance at the local level can bring new life to these districts.
Successful Models
The Main Street America organization has seen significant success with activities such as direct grants to small businesses, public-private partnerships for technical assistance, small business networking, training, and education. Making a wide range of grants accessible and easily administered is key to supporting small businesses, Ms. Frey said. A selection of success stories are described on the group’s website here.
Discussion
Moderated by
Tom Finneran
Sen. Stuart Adams
President of the Senate, Utah
A Special Session of Utah’s legislature in May will determine how to allocate ARP funds; however, we are in a good position. Utah is the fastest growing state in the U.S. and has the #1 economy. Previously, $1 billion of pandemic relief funds were allocated for infrastructure improvements and teachers received bonuses, among other investments. Now, we are looking at the multigenerational effects of our program investments.
Sen. Peter Micciche
President of the Senate, Alaska
Two issues stand out in Alaska: One is the decline in tourism during the pandemic, but a more challenging issue is that “hiring people is impossible.” Unemployment payments are a disincentive for people to get back to work. Some Alaska companies have unsuccessfully offered $5,000 bonuses to attract workers. The unemployment benefits must change.
Sen. Hannah Gallo
Senate President Pro Tempore, Rhode Island
Like other states, Rhode Island is starting to open up, especially as tourist season advances. However, even though restaurants are operating at 80% capacity, they are finding it difficult to hire employees. But the attitude in the state is positive.
Sen. Jeremy Miller
President of the Senate, Minnesota
Despite the fact that the state’s legislature is split politically, a bipartisan effort has evolved to wrest control of the federal ARP dollars from the Governor. To date he has had sole authority to allocate the pandemic funding. In June 2020, $60 million in small business grants for COVID relief were allocated across metro and rural areas. Now the state is opening up, and a Special Session may be required to allocate ARP funds. Meanwhile, we need to incentivize people to go back to work.
Unemployment InsuranceA consistent theme in the forum was that federal unemployment benefits and stimulus funds were disincentivizing people from working, making it hard for businesses to fill open jobs.During our discussion, state leaders from South Carolina, South Dakota, and Utah indicated their states are terminating participation in federal, pandemic-related unemployment benefit programs.
Sen. Robert Stivers
President of the Senate, Kentucky
In the last legislative session, we focused on broad-based policies and put money into the unemployment fund to avoid increasing unemployment taxes on employers, and passed legislation to protect businesses from COVID liabilities. Now, it is hard getting people back into lower paying jobs ($9-10/hour), such as restaurant work. Sen. Stivers also expressed interest in understanding whether states are seeing the permanent loss of some downtown activities and businesses, as many patrons have not fully returned and many employees will continue to work remotely.
Having the more-open states of Tennessee and Indiana on its borders puts pressure on Kentucky to open up or lose revenue across the border. The Legislature wants the state to be more open than the Governor has allowed. The Kentucky Derby may serve as a test for opening. Most of the 70,000 people (half the usual attendance) at the Derby did not wear masks, and some events are indoors. Will there be a COVID spike after the Derby? If not, that may help us open up more. However, the state has a long way to go to get back to pre-COVID levels.
Sen. Karen Fann
President of the Senate, Arizona
Arizona has done well — we kept open and kept going, with the exception of the hospitality industry and tourism. The Wayfair online sales tax, and sales taxes overall, were up substantially, enabling significant tax cuts and infrastructure investments. Sen. Fann also commented on her state’s current election audit.
Sen. Martin Looney
Senate President Pro Tempore, Connecticut
Last year, the state saw as many unemployment claims made in two months as would occur in a normal two-year timeframe. The legislature allocated funds to avoid any large increases for businesses in their unemployment assessments. Small business entrepreneurship was seen to be impeded by people’s fear of losing healthcare insurance coverage. Zoning restrictions were changed to allow businesses to expand into parking areas for outdoor dining,
The state’s business (COVID?) restrictions will end on May 19, opening up the state. The next challenge will be to determine the roles of the Governor and the Legislature in deciding how ARP funds will be distributed.
Sen. David Sokola
Senate President Pro Tempore, Delaware
Delaware’s Legislature returned to in-person sessions on May 11, and pandemic rules for the whole state will be relaxed as of May 21. A Special Session will be convened to address how federal ARP funds will be distributed. An example of one successful small business development was closing Main Street in Newark, DE, to traffic and creating al fresco dining and music, which has been well attended. So far, this seems to be safe and no COVID spikes have been seen.
Sen. Rodric Bray
President Pro Tempore, Indiana
A small business program has allocated $60 million in grants to businesses with less than $10 million in revenue. We have worked to fund the unemployment insurance so we can avoid burdening businesses with additional unemployment assessments. Grants have been given for technical development, education, and capital investment, and we provided immunity to businesses for COVID liability. Like the Kentucky Derby, the Indianapolis 500 — a major event for the state — will be a test of opening up safely. We expect 150,000 to attend, which is half of the normal crowd. We will see if a COVID spike follows.
Like the Kentucky Derby, the Indianapolis 500 — a major event for the state — will be a test of opening up safely.
Sen. Ronald Kouchi
President of the Senate, Hawaii
In terms of small business development, Hawaii has been hard hit by the lack of tourism, and has yet to recover. A Special Session of the Legislature may be required to address fiscal and budget issues, including allocation of ARP funds.
Sen. Kouchi provided a heartfelt tribute to Sen. J. Kalani English, former Majority Leader for Hawaii, who is dealing with long-haul COVID effects and has retired from the Senate after 22 years of service (Official Announcement).
Sen. Lee Schoenbeck
Senate President Pro Tempore, South Dakota
Significant business grants were allocated last year for capital projects and long-term investments. Meanwhile, the state is doing well economically, but faces labor, housing and lumber shortages. The Legislature will decide on how to allocate additional COVID funds when its members meet in January. Currently, the state has 2.9% unemployment and businesses are struggling to fill open jobs. The Governor has declared that the state will accept no additional federal funding in COVID-related unemployment programs..
Sen. Chuck Winder
Senate President Pro Tempore, Idaho
The state is doing well; the economy is one of the fastest growing economies, on a par with Utah. A Transportation Funding Bill has been passed, capital funding for maintenance projects and upgrades has been allocated, and education funding has increased. The current focus is on reducing personal and corporate income taxes, providing property tax relief, and tax rebates. The Legislature has made progress on realigning the balance of power and has developed a consensus bill endorsed by the House, the Senate, and the Governor.
Sen. Dean Kirby
Senate President Pro Tempore, Mississippi
Sen. Kirby reported that his bout with COVID was awful, and that a number of fellow legislators had the infection. However, now the state is open for business, and mask restrictions are maintained only in a few cities and all of the schools. State income tax reductions and forgiveness for COVID-crisis loans have lessened the burdens on small businesses. Loopholes were closed so that people could not collect both unemployment and a paycheck. Mississippi has a program that permits a person who holds an occupational license in any state to do business in Mississippi.
A person who holds an occupational license in any state is permitted to do business in Mississippi, noted Sen. Kirby. Learn more about states with Universal Licensure here.
Sen. Sen. Larry Taylor
Chair, Senate Education Committee, Texas
The economy is recovering after being hit with losses related to oil and gas. COVID affected real estate values, it changed where people live and work. Now people can work remotely and live in beautiful, rural locations, so this has impacted some businesses but brought opportunities to rural areas. The Wayfair decision on online sales taxes has been a boon for the state. Two years ago, the Legislature allocated $2 billion to education. Now another $16 billion in federal funds is coming to the state. We cannot allow the COVID losses in education to become multi-generational.
Sen. Tom Alexander
Chair, Senate Labor, Commerce and Industry Committee, South Carolina
Now that many people are working remotely, they are moving into South Carolina, and downtown businesses are doing well. We are meeting and exceeding budget projections.
However, the biggest challenge to economic recovery is ongoing workforce shortages throughout South Carolina, which Governor Henry McMaster attributes to the federal supplemental unemployment payments of $300 per week that he believes disincentivize workers from getting back on the job. South Carolina will terminate its participation in all federal, pandemic-related unemployment benefit programs, effective June 30, 2021.
Conclusion
• Most senators expressed optimism and reported improving outlooks for small business, with some sectors, such as hospitality and tourism, still struggling.
• Some states contend that an unexpected consequence of federal COVID unemployment relief programs has been to create a shortage of willing workers for open jobs.
• Re-balancing legislative and executive powers continues to be a hot topic on some states’ agendas.
Speaker Biography
Patrice Frey
President and CEO
Main Street America
Patrice Frey is President and CEO of the National Main Street Center, where she oversees the Center’s work, offering technical assistance, research, advocacy, and education and training opportunities for Main Street’s network of approximately 1,800 members. Based in Chicago, Illinois, the National Main Street Center is a subsidiary of the National Trust for Historic Preservation, and has participated in the renewal of more than 2,000 older commercial districts during its 30-year history.
Percent Change in Small Business Revenue*
The Forum Welcomes
New Senate ParticipantsSen. Peter Micciche
President of the Senate
(Alaska) Sen. Chuck Winder
Senate President Pro Tempore
(Idaho)
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