As band-aids go, the amount of money the federal government has poured into Western New York to help businesses deal with the economic fallout of the coronavirus pandemic is big. Huge, actually. As in nearly three billion dollars.
The return on that investment? There is no question that things would have been much worse without the aid. Some 21,000 companies and nonprofits received forgivable loans. That’s a lot of employers. But even with the money, we’re left with the smallest private-sector workforce the metro Buffalo area has seen in thirty years.
That money needed to be spent, but I’m left feeling that it—in some ways—could have been better spent. The situation in the early days of the pandemic was: “Do something! Anything!” And that’s kind of what Congress did.
The money came in the form of the Paycheck Protection Program (PPP), the largest of several federal stimulus programs approved to help cushion the pandemic’s economic blow. Loans ranged from up to $10 million (most were for much less) to amounts in the thousands. The money was intended primarily to cover payroll costs; thus, the bigger the staff, the bigger the loan. The loans, if used as intended, are forgivable.
The government finds all sorts of ways to funnel money to businesses during normal times. There are economic development incentives galore. That said, those not among the chosen few wind up holding the bag and footing the bill for everyone else.
To put WNY’s PPP money in perspective—all $2.75 billion of it—consider what had been the gold-plated standard for business subsidies, the Buffalo Billion, whose pricetag to date is a little over $1 billion, most of it flowing to Tesla’s solar roofing plant in South Buffalo.
PPP was targeted to help small business, with the key threshold being the number of employees on the payroll. The limit was 500, in most cases, which isn’t exactly small. But an analysis done by Phil Gambini of Investigative Post found most companies were, in fact, small businesses. The median payroll of companies receiving loans of over $150,000 was thirty-four. For smaller companies, the average was four.
A lot of those companies have been hammered by the pandemic, starting with restaurants and including dairy farmers, small construction contractors, and hotels, motels, and other tourism-related businesses. But some of the biggest winners—those taking home the most amount of money in the form of forgivable loans—left me shaking my head: doctors and lawyers.
Yeah, doctors and lawyers. I mean, they don’t have money in the bank? Weren’t they finding ways to make it through the pandemic? Were any in real danger of going out of business? The reality is that these professionals had connections with the banks handling PPP applications to make sure they got theirs. I guess it’s a matter of “don’t hate the players, hate the game.”
Among the recipients receiving maximum loans, of $5 million to $10 million, were the Buffalo Medical Group, a large medical practice, and Hodgson Russ, the city’s biggest law firm. Other large recipients were West Herr Ford, Perry’s Ice Cream, New Era Cap, and Ferguson Electric.
A few companies got beat up for taking PPP money. Erie County Executive Mark Poloncarz went after New Era for laying off 187 employees after accepting a loan worth between $5 million and $10 million. (The feds didn’t disclose precise loan amounts, only a range.) I don’t know about that one; if a company’s market dries up, it dries up.
Perhaps the most dubious recipient was the Western Regional Off Track Betting Corp., which got a $3.2 million loan. My problem with that: OTB is not a business, it’s a government entity. Someone has to really stretch the eligibility rules to allow OTB to cash in.
Nonprofits were also eligible for PPP money and some 1,170 obtained loans. Nonprofit health care providers—including hospitals and physician groups—led the list of recipients alongside elementary and secondary schools, including religious institutions. In fact, the faith-based organizations dwarfed other recipients in number at 452. Their loans, though, were typically small. A sampling of faith-based institutions include the Chapel at Crosspoint, Temple Beth Zion, St. Mark Church, the Diocese of Buffalo, the Jewish Federation of Greater Buffalo, and the Westminster Presbyterian Society.
Large nonprofit recipients of note included the Erie County Medical Center, the Diocese of Buffalo, the Chautauqua Institution, the Buffalo Philharmonic Orchestra, Girl Scouts of Western New York, and the Seneca Nation of Indians. (Disclosure: Investigative Post, a nonprofit, received a $43,778 loan.)
What have we gotten for our $2.75 billion? A struggling economy that would have been that much worse without the money. It’s left the Buffalo-Niagara Falls metropolitan area with 47,400 fewer jobs in August of this year compared with a year previous. The result: our private-sector workforce of 429,600 is the lowest since at least 1990.
All this is according to an analysis of government data done for Investigative Post by EJ McMahon, research director of the Empire Center for Public Policy. Few metro areas suffered worse than the 9.9 percent drop in private sector employment from August 2019 and August of this year. That compares with losses of 13.2 percent statewide and 7.8 percent nationally.
The losses for Buffalo Niagara ranked sixty-ninth worst among 383 metro areas analyzed by McMahon. It could have been worse. Our share of job losses was less than in Rochester, Syracuse, or Albany. (These days, however, not being as bad off as Rochester when it comes to just about anything, starting with policing, is damning with faint praise.)
We may not have seen the last of the PPP. Another round of assistance in some way, shape or form, is possible after the dust of the national election settles. I think it ought to be better targeted to provide truly small businesses and nonprofits sufficient funds to ride out the pandemic, whose financial impacts are likely to be acutely felt for at least another six months to a year, maybe even longer.
The president and Congress need to move beyond a one-size-fits-all solution that somehow manages to fork over more money to doctors and lawyers than most anyone else.