Governor Addresses Protests and Systemic Injustice: Governor Newsom held a press conference following meetings with community, faith and youth leaders, small business owners, and elected officials to discuss racism, systemic injustice, and how all Californians could move forward together. The Governor emphasized that peaceful protesters have a right to not be harassed, gassed, or fired upon. He announced plans for standardizing police practices in the near term, based on input from people in the communities most directly affected. Last year, the Governor noted that he had signed AB 392 (Weber) and SB 230 (Caballero), which addressed the use of deadly force by peace officers. The training and policy changes which were called for in these bills has yet to be implemented. The Governor declared that even with that legislation, there is more work to be done. Among other actions, the Governor called for the halting of training of peace officers on the use of strangle holds, as well as the need to address achievement gaps, health disparities, and pay equity.
Small Business Liability Protection: Several members of the Assembly Committee on Jobs, Economic Development, and the Economy (JEDE), including Assemblymembers Sabrina Cervantes (Chair), Luz Rivas, Sharon Quirk-Silva, and James Ramos, sent further recommendations to the Governor on how to jump-start the state’s economic recovery by removing impediments to businesses successfully re-opening. In this second set of recommendations, JEDE Committee Members joined other Legislators and organizations to protect small businesses from third party claims that persons contracted the COVID-19 virus while at, or through, a place of business. Existing law already provides some levels of protection to businesses and nonprofits operating during a state of emergency. The letter calls on the Governor to issue an executive order or to help set parameters for legislation that clarifies/provides liability protections to small businesses with fewer than 25 employees that abide by state and local health and safety regulations. The letter states that these protections would not apply to a company which commits a grossly negligent act or omission, or willful or wanton misconduct. [The letter is attached.]
In May 2020, the JEDE Committee called for the establishment of a Manufacturing Response and Recovery Initiative and amended and unanimously passed AB 3307 (E. Garcia and Cervantes as authors, and all JEDE members as co-authors).
AB 3307, currently pending on the Assembly Floor, authorizes the establishment of the California Manufacturing Disaster Direct Loan and Loan Guarantee Program for the purpose of attracting, retaining, retooling, establishing, and expanding manufacturing and logistics capacity to meet the needs of California. The bill responds to the current lack of domestic production in key areas and the need to pivot existing manufacturers to new and expanded lines of production.
Streamline PPP Forgiveness: The Consumer Bankers Association and Bank Policy Institute, in a co-signed letter, have called on Congress to automatically forgive Paycheck Protection Program (PPP) loans under $150,000. According to a news article, the $150,000 threshold includes about 85% of the loans, but only 26% of the dollars borrowed. The two organizations said it would save more than $7 billion for business owners, which could be used for reopening and other such costs. https://www.consumerbankers.com/sites/default/files/CBA%20%26%20BPI%20Letter%20-%20Forgiveness%20Proposal%2C%206.2.20.pdf
Entering Stage Three: The California Department of Public Health announced the launch of the County Data Monitoring webpage, which allows individuals to track epidemiological conditions within their county. The state also released additional guidance to support the re-opening of the economy. As of June 9th, 51 of the 58 counties are beginning to enter into Stage 3 as early as June 12. This guidance for businesses and industries is contingent upon county health officer approval based on local epidemiological conditions, including an assessment of cases per 100,000 population, rate of test positivity, and local preparedness to support a health care surge, vulnerable populations, contact tracing, and testing.
Hackers Target Hundreds of Institutions: The Financial Times reports that a “hackers-for-hire group dubbed ‘Dark Basin’ has targeted thousands of individuals and hundreds of institutions around the world, including advocacy groups, journalists, elected officials, lawyers, hedge funds and companies, according to the internet watchdog Citizen Lab. Researchers discovered almost 28,000 web pages created by hackers for personalized ‘spear phishing’ attacks designed to steal passwords.” This information came from a report published on Tuesday by Citizen Lab, part of the University of Toronto’s Munk School. www.ft.com
DATA, SURVEYS, AND ANALYSIS
REVISED - National Employment Numbers: The US Bureau of Labor Statistics released UPDATED May 2020 employment data indicating that the US unemployment rate decreased from 19.7% to 16.3%. State employment data for May 2020 will be available on or around June 20, 2020. https://www.bls.gov/news.release/empsit.nr0.htm
Occupations Most Impacted by Pandemic: Gallup published a recent blog, The Unequal Distribution of Economic Damage From COVID-19, which identifies those occupations which were and remain most impacted by the COVID-19 emergency, including loss of pay, loss of hours, and loss of jobs. These occupations include: service workers, workers in the arts and entertainment sector, and small business owners, among others. “These data further substantiate earlier analysis that less-educated workers in low-wage, blue-collar roles have been hardest hit by COVID-19 and confirm concerns that the pandemic is exacerbating the income inequality that existed before its arrival.” https://news.gallup.com/opinion/gallup/311714/unequal-distribution-economic-damage-covid.aspx
New Data Tool: The US Census Bureau launched a new tool — the Census COVID-19 Hub — specifically designed to help guide economic recovery efforts. The information is available in downloadable databases and data layers that geographic information system (GIS) specialists can integrate into their own maps and dashboards. The COVID-19 Hub features data on more than 30 demographic, socio-economic and housing variables from the Census Bureau’s American Community Survey; the number of businesses, employment and payroll from its County Business Patterns survey; and data on self-employed people from its Nonemployer Statistics (NES) program. https://covid19.census.gov/
CRB Explains PPP Reform Bill: The Congressional Research Bureau released a study, SBA Paycheck Protection Program (PPP) Loan Forgiveness: In Brief, that summarizes the situations in which loan forgiveness amounts may be reduced under the initial bill and how H.R. 7010 affects two of its features: (1) increasing the covered period and rehiring safe harbor, and (2) the forgiveness cap on nonpayroll expenses. https://crsreports.congress.gov/product/pdf/R/R46397
Microbusinesses: The Association for Enterprise Opportunity released a report, The Economic Impact of Microbusiness In the United States. According to the report, microbusinesses (businesses with under five employees) contribute to 41.1 million jobs in the US, including direct, indirect, and induced. https://caled.org/wp-content/uploads/2020/06/Bigger-than-You-Think-Report_FINAL_AEO_11.10.13.pdf
ECONOMIC RECOVERY
Federal Infrastructure Funding: The US House Transportation and Infrastructure Committee released the Investing in a New Vision for the Environment and Surface Transportation(INVEST)in America Act. The Invest in America Act provides $500 billion to reauthorize federal surface transportation programs for five years, through fiscal year 2024. The current program authorization expires on September 30, 2020. NCSL notes that there is still no agreement on the source of the funding, which most likely means there will be a short-term extension of the existing federal programs. https://www.ncsl.org/documents/standcomm/scnri/INVEST_Act.pdf
California Manufacturing Meets Business Re-Opening Needs:
N95 Certified Respirators and Surgical Masks: Governor Newsom announced that California-based BYD North America has received certification from the National Institute for Occupational Safety and Health (NIOSH) to produce N95 respirators for the state. To date, the state’s agreement with BYD has yielded more than 110 million surgical masks, which have been distributed public and private entities, including businesses and organizations in public health care (8.2 million), agriculture (6.1 million), non-emergency medical (3.5 million), retail (3.2 million), and education (2.5 million), among others. With this new certification, BYD will now also produce and ship 150 million N95 masks to the state for distribution to health care workers and those identified by health officials as requiring respirator-style masks. The first shipment of N95 masks produced as part of this contract are expected to arrive in the coming days. https://www.gov.ca.gov/2020/06/08/governor-newsom-announces-federal-health-and-safety-certification-of-life-saving-n95-masks/
Over-the-Counter-Drugs: Governor Newsom signed an executive order (N-68-20) to help increase the availability of over-the-counter drugs, such as hand sanitizer, and medical devices, such as respirators, ventilators and masks, which are in demand due to the COVID-19 pandemic. The order allows the temporary manufacture of over-the-counter drugs and medical devices by firms not currently licensed by the California Department of Public Health. Under the executive order, a business can apply for temporary registration and self-certify they are compliant with guidance by the US Food and Drug Administration (FDA). The order also defers renewal fees to address COVID-19 related economic hardship for manufacturers of drugs, medical devices, food and cosmetics that currently have California Department of Public Health licenses, registrations, and certificates.
PPP Program Changes: On Friday, June 5, 2020, HR 7010 was signed into law. The SBA, in consultation with Treasury, has committed to promptly issuing rules and guidance, a modified borrower application form, and a modified loan forgiveness application implementing these legislative amendments to the PPP. The SBA issued a summary of the PPP legislative changes:
Extends the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness. Borrowers who have already received PPP loans retain the option to use an eight-week covered period.
Lowers the requirements that 75% of a borrower’s loan proceeds must be used for payroll costs and that 75% of the loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period to 60 percent for each of these requirements. If a borrower uses less than 60% of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.
Provides a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020, due to compliance with requirements or guidance issued between March 1, 2020, and December 31, 2020, by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to worker or customer safety requirements related to COVID–19.
Provides a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on February 15, 2020, and unable to hire similarly qualified employees for unfilled positions by December 31, 2020.
Increases to five years the maturity of PPP loans that are approved by SBA (based on the date SBA assigns a loan number) on or after June 5, 2020.
Extends the deferral period for borrower payments of principal, interest, and fees on PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).
In addition, the new rules will confirm that June 30, 2020, remains the last date on which a PPP loan application can be approved.
Program Changes to the Main Street Program: The Federal Reserve Board expanded its Main Street Lending Program to allow more small and medium-sized businesses to be able to receive support. The Board, among other changes, lowered the minimum loan amount from $500,000 to $250,000; raised the maximum loan limit, adjusted the principal repayment schedule to begin after two years, and extended the term from four to five years, providing borrowers with greater flexibility in repaying the loans. The Board expects the Main Street program to be open for lender registration soon and to be actively buying loans shortly afterwards.
Export Support: US Department of Commerce announced the temporary reduction or elimination of the costs several of export services. These efforts are intended to encourage the export of non-COVID-19-treatment-related “Made in the USA” products around the world in this moment of economic transition and recovery. The US & Foreign Commercial Service is authorized to reduce user fees and services by up to 100% for US small and medium-sized enterprises and economic development organizations, and by up to 50% for large US companies. Reduced fees will be provided until September 30, 2020.
