WASHINGTON — It’s been less than two months since Congress passed a $2.2 trillion coronavirus relief package meant to stabilize the nation’s economy and keep workers employed, yet Hawaii has already received more federal aid than it did during the 2008 financial crisis.

The Coronavirus Aid, Relief and Economic Stimulus Act, or CARES Act, is historic in proportions, and is already considered the country’s largest ever economic stimulus package.

Even more money is likely on the way. Just this week House Democrats unveiled a $3 trillion proposal — likely to be negotiated downward — that would extend unemployment benefits, provide billions of dollars in hazard pay to frontline workers and send another round of direct cash payments to individuals.

The numbers are staggering even when compared to the U.S. response when global markets tanked more than a decade ago, causing what is now known as the Great Recession.

In 2008, Congress allocated $700 billion in taxpayer funds to bail out some of the nation’s largest banks and businesses, including insurance companies and auto manufacturers. The following year another $840 billion was approved to jolt the economy through a series of tax breaks, entitlements and “shovel-ready” infrastructure projects.

More than $2.5 billion in relief came to the islands through these programs over the course of several years. The CARES Act, meanwhile, has pumped at least $5.4 billion into the state through grants, loans and direct cash payments from the IRS, according to data maintained by the Hawaii Office of Federal Awards Management.

Expanded unemployment benefits are expected to bring another $1 billion to the state while Hawaiian Airlines has reported it will receive at least $654 million in federal aid, which would bring the total to more than $7 billion so far.

The money is needed now more than ever as Hawaii faces an unemployment rate of about 34%, which is among the highest in the U.S. and nearly five times its peak of 7% in 2009 during the height of the Great Recession.

Hawaii’s economy has been flipped upside down since the COVID-19 pandemic shut down tourism — the state’s economic driver — and forced people inside to prevent the spread of the virus. Despite struggles with homelessness, low wages and lack of affordable housing, Hawaii has long had one of the lowest unemployment rates in the country.

“Seven percent unemployment is tough, but today we’d kill to have 7% unemployment,” says Walter Dods, the former CEO and chairman of First Hawaiian Bank.

“These are extraordinarily different crises in almost every way,” he said. “The 2008 financial crisis was really the life and death of the economy and the financial structure of the United States, if not the world. This one is just such an unbelievable health crisis, which then has long-term financial implications.”

Dods, who’s served as chairman on some of the most influential business boards in the state including Matson, Hawaiian Telcom and Alexander & Baldwin, said the government’s response to the market meltdown in 2008 worked.

He said the bailouts were necessary and that the influx in new money did stimulate economic activity.

But the same approach might not translate today, he said, because the immediate needs are just too great.

“The patients have two totally different symptoms because you know you have a heart attack and you don’t have an appendix problem,” Dods said. “You need to get help to individuals directly. You can build new gyms and you can build new highways, but that doesn’t put food on the table right now.”

Jack Suyderhoud, a professor emeritus of business economics at the University of Hawaii and member of the state Council on Revenues, says the government’s strategy this time around is more direct than it was in response to the financial crisis of 2008 in that it puts more money directly into the pockets of Americans.

The government is also moving much faster in its response due to just how quickly COVID-19 sunk the U.S. economy — which by most measures was humming — into its current slumber.

“The whole idea is to throw money at a problem and the faster you can do that the more effective it’s going to be,” Suyderhoud said. “What we have is a situation that compares to 2008 and 2009 only in terms of the direction, but not in terms of magnitude and speed of the decline. The decline today is both deeper and steeper.”

The Last Great Recession — TARP And ARRA

There were two main prongs to the government’s approach to stabilize the economy and stimulate job growth and consumer spending in the face of financial ruin.

The first was the 2008 Troubled Asset Relief Program, or TARP, that allocated $700 billion to bail out some of the country’s largest private businesses, including banks, insurance companies and auto manufacturers.

In 2009, there was the American Recovery and Reinvestment Act, an $840 billion program that sought to create new jobs and pump huge sums of money into rebuilding the nation’s infrastructure.

Suyderhoud said ARRA was a more circuitous way to get money back into the economy, especially when it came to the shovel-ready projects, such as bridge repairs and road repaving, that were a hallmark of the stimulus’s promise to retain and create jobs.

The money moved slowly, he said, because even when a project is shovel-ready that doesn’t mean it has all the environmental clearances it needs to proceed. He pointed to the fact, too, that ARRA money was still trickling into the state’s coffers as late as fiscal year 2016, long after the crisis had subsided.

“That’s the problem with this kind of infrastructure money that you give to state and local governments,” Suyderhoud said. “It’s hard to spend it fast. It’s hard to spend it when it’s needed most.”

In Hawaii, the only financial institution to take advantage of the federal government’s bailout was Central Pacific Bank.

The bank’s parent company, Central Pacific Financial Corp., received $135 million from the U.S. Treasury in January 2009 to help shore up its finances.

Ronald Migita, the bank’s president and CEO at the time, told the Honolulu Advertiser that Central Pacific was hit particularly hard by troubled loans to California homebuilders and that the hope was to use the funds to “strengthen the fundamentals of our bank and provide additional resources to support our commercial and retail customers here in Hawaii.”

Taxpayers ultimately lost out on that deal. According to ProPublica’s Bailout Tracker, the Treasury took a $60 million loss on its loan to Central Pacific Financial.

“The whole idea is to throw money at a problem and the faster you can do that the more effective it’s going to be.” — Jack Suyderhoud, professor emeritus at the University of Hawaii

Only two other island banks — Bank of Hawaii and American Savings Bank — had applied for bailout assistance through the Treasury, but did not accept the money.

The largest share of stimulus money for the islands came through ARRA.

While the Recovery.gov website tracking the flow of federal dollars is no longer active, a database maintained by ProPublica through June 2012 shows Hawaii received at least $2.6 billion in ARRA stimulus funds, which were spread out through tax breaks, increased funding for entitlements, such as unemployment benefits and food stamps, and federal contracts, grants and loans.

Much of the focus at the time was put on so-called shovel ready projects that could quickly put people back to work and stimulate a sluggish economy.

While there were tens of millions of dollars for infrastructure improvements to government roads, bridges and wastewater treatment facilities, there was millions more for other massive undertakings, including more than $131 million to build a 312,000-square-foot facility to house the National Oceanic and Atmospheric Association’s regional offices at Ford Island and another $146 million to help build the world’s largest solar telescope atop Haleakala on Maui.

Both the NOAA offices and the telescope would eventually bear the name of U.S. Sen. Dan Inouye.

There was also millions of dollars more for new construction at Volcanoes National Park on the Big Island, renovations at the Prince Jonah Kuhio Kalanianaole Federal Building in downtown Honolulu and reef restoration at Maunalua Bay on Oahu. Not surprisingly, the largest share of federal dollars flowed to Honolulu, the state’s capital and its most populous city.

A number of still-active construction companies such as Nan Inc. and Hawaiian Dredging Construction Co. received millions of dollars in contracts. Both are major contractors still working on Honolulu’s $9 billion rail project.

Several nonprofits also benefited from the stimulus, including Alu Like Inc., which received money to provide job training for Native Hawaiians, and Kokua Kalihi Valley Comprehensive Family Services, a community-based health care center that provides medical assistance to underserved populations.

Kate Stanley, who chaired the state’s ARRA oversight commission and was a top advisor to former Hawaii Gov. Neil Abercrombie, said she felt Hawaii did an OK job getting the federal dollars out the door and into the community, although she wouldn’t be surprised if there was still some disagreement over why some projects received funding and not others.

When she looks at what’s happening today with the response to COVID-19 she says she was just as flabbergasted and unprepared as everyone else.

“I don’t envy anyone who has to work on this,” Stanley said. “The magnitude of the money coming in and the complexity of the problems that we’re facing are so different because we’ve had to shut down so much of the economy.”

“This is quite different because we didn’t have any time to prepare,” she added. “The ARRA put a lot of emphasis on being shovel ready. In this crisis we’re trying to give people sufficient income and hopefully support businesses so that they can come back.” 

The CARES Act — $1.8 Billion And Counting

More than $1.8 billion in CARES Act money has flowed into Hawaii, according to the state Office of Federal Awards Management.

That figure doesn’t include direct payments made to residents, the $2.5 billion in loans for small businesses made through the Paycheck Protection Program or the $654 million in federal aid Hawaiian Airlines secured to help stay afloat and maintain its workforce.

Of the $1.8 billion, more than $1.2 billion is dedicated to state and county governments to cover the costs of responding to the pandemic. The City and County of Honolulu has received $387 million while the state will dole out the remaining $863 million.

Senate President Ron Kouchi and House Speaker Scott Saiki said last week that the Legislature will oversee how that money is spent, with plans already beginning to take shape, including sending at least $179 million to the neighboring counties to fight COVID-19 and dedicating another $100 million to the Hawaii Emergency Management Agency. 

Lawmakers are back in session now and have suggested some tweaks will be made to requests put in by state agencies for the money.

While there are some disagreements about what to do with the federal funds, Hawaii Gov. David Ige said he is generally okay with the Legislature overseeing how it gets allocated.

“I felt it was important to engage the legislative process to facilitate additional discussion and transparency,” Ige said during a recent press briefing.

At this point it’s unclear if lawmakers will create an independent oversight entity to monitor the federal coronavirus relief funds the same as they did in response to the American Recovery and Reinvestment Act.

So far they’ve introduced a bill that would require any state agency receiving federal money to file a monthly report to the Legislature detailing how the funds were spent, but that requirement would only apply to a fraction of the money flowing into the state.

Beth Giesting is the director of the Hawaii Budget and Policy Center, which just last summer released a report detailing how vulnerable the state’s economy is to a global recession, and how individuals working low wage jobs tend to be hit hardest. Preliminary data is showing that to be true, as lower income workers seem to make up the largest share of the job losses.

As Giesting watches the federal money come to Hawaii, she said, it appears to be addressing the immediate needs of people who might be out of work or whose businesses are suffering due to mandated closures and social distancing.

Eventually, though, officials will need to consider what to do about the people whose jobs might not exist when the pandemic subsides. She said state officials also need to be more transparent about how they plan to spend the federal relief dollars to help rebuild the economy.

“I am concerned about the transparency of the legislative process,” Giesting said. “How are they ensuring that they have an opportunity to listen and respond to the needs that are being identified in the community? Right now nobody can go to the capitol except for them.

“The way the systems are set up in Hawaii there is not much of a culture of bringing people together and having them coalesce and contribute to ideas. I think that our leaders — whether it’s the Legislature or the executive — tend to make decisions on our behalf without asking us what we want.”

Following The Money

Oversight is a major concern any time the federal government doles out billions of dollars. In the wake of the 2008 financial crisis, a number of new investigative bodies were formed to follow the money and root out any fraud, waste and abuse.

There was the Special Inspector General for TARP that kept tabs on the bank bailouts, a congressional oversight panel that held more than two dozens hearings to get to the bottom of what caused the meltdown and a Recovery Accountability and Transparency Board — known as the RAT Board — that boasted that its audits and inquiries led to 1,665 convictions, pleas or judgments and more than $157 million in taxpayer dollar recoveries, forfeitures and savings.

The $2.2 trillion CARES Act includes similar mechanisms to keep tabs on how the relief aid is being spent, although President Donald Trump has already begun changing the safeguards put in place by Congress.

Last month, he ousted Glenn Fine, a Department of Defense inspector general, who was supposed to chair a new watchdog panel meant to provide oversight and accountability. The move came shortly after Trump declared during a press briefing, “I’ll be the oversight,” of a $500 billion U.S. Treasury fund reserved for corporate bailouts.

Earl Devaney, who was the chairman of the RAT Board from 2009 to 2011, described Trump’s boast of being the government’s watchdog over billions of dollars in relief aid as a “bad omen.”

In a recent interview with the nonprofit Project On Government Oversight, Devaney said it’s reasonable to expect between 5% to 7% fraud on any major government spending initiative. Getting below that, he said, will require the support of the president.

“It strikes me that he vastly underestimates the job of protecting this money and he is definitely not ready for the embarrassment of losing any of it to fraud,” Devaney said. “With $2 trillion on the table, every fraudster in America will show up.”

Government watchdogs are trying to keep an eye on COVID-19 relief aid and whether it’s being spent properly, but so far there’s been a dearth of data.

Liz Hempowicz, who’s the director of public policy for the Project on Government Oversight, said that the Trump administration’s guidance to agencies for complying with disclosure requirements in the CARES Act could mean the public is left in the dark until this summer before learning how the money is being spent.

“The CARES Act was passed in March and here we are in May with the money going out the door,” Hempowicz said. “It’s unacceptable that we have to wait that long to get information from these agencies because they should have it.”

For instance, the Small Business Administration has yet to release details about which companies have received money through the Paycheck Protection Program. The only information that’s been made public by the SBA so far are aggregate numbers showing how many forgivable loans have been paid out across the country and for how much.

The latest data shows that nearly 22,000 loans worth more than $2.5 billion were made to Hawaii businesses through the program. The SBA has yet to respond to a Civil Beat public records request made under the Freedom of Information Act for the information.

Jack Suyderhoud, of the University of Hawaii, said that one of the benefits of ARRA was that the money was better targeted and therefore easier to track. That’s not the case with the CARES Act and other coronavirus relief efforts when the money gets pumped out faster, to more people and with less vetting.

“Direct money splashes in real quick and it sloshes around,” Suyderhoud said. “You can’t help but misdirect some of the money when you don’t have time to be careful.”

He pointed to flaws with the Paycheck Protection Program, which was supposed to help small businesses. After the first $349 billion in loans went out, media reports surfaced that large, nationwide franchises, like Ruth’s Chris and Shake Shack had received millions of dollars through the program.

Even the Los Angeles Lakers, a basketball franchise worth an estimated $3.7 billion, received $4.6 million in loans meant for small businesses. All the companies have since promised to return the funds.

“That’s just the inevitable trade-off in trying to be fast and get the money out,” Suyderhoud said.

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