Hawaii faces a precipitous economic cliff at the end of this week, with federal money that’s provided some $1.3 billion to unemployed workers in Hawaii over the past several weeks set to run out by month’s end. That’s in addition to about $2.5 billion in SBA loan money that mostly ran out in June.
The good news: Hawaii has billions in additional CARES Act money available to soften the fall. The bad news: almost all of that must be spent by the end of December.
Gov. David Ige said he recognizes this: the first drop comes when the state loses the first chunk of money, which has provided $600 per week extra on top of normal state unemployment benefits, and the second when the rest of the CARES Act funding runs out.
“It definitely will be tough,” Ige said. “And it will get tough again.”
Now, state officials and nonprofit executives are working feverishly to soften the second fall coming at year’s end. This means accounting for the additional pools of money – an onerous task given the billions of dollars involved — and making sure the money not only gets to the public it’s intended to help but also is spent on time and according to federal requirements.
“My fear is if we’re not able to spend these funds by the end of the year, we’ll lose millions and millions of dollars,” said House Speaker Scott Saiki, who co-chairs the House Select Committee on COVID-19 Economic and Financial Preparedness.
Such money is vital for the state’s economy. As much as Hawaii has suffered due to COVID-19 – statewide unemployment went from 2.3 % in March to 23.6% in April before settling back to 14.4% in June – the state has also been buoyed by a massive amount of federal aid under the CARES Act.
Hawaii has received so much money in fact that it’s hard to account for all of it.
One source of information is the state Office of Federal Awards Management. From a few bigger pots of money alone, the office reports, Hawaii has gotten well over $7 billion. That includes $1.3 billion in supplemental state unemployment benefits, commonly called “plus-up” money, and $2.5 billion awarded under the U.S. Small Business Administration’s Paycheck Protection Program.
But that doesn’t include some other massive amounts. For instance, there’s also about $654 million, split between two types of aviation industry aid, approved for Hawaiian Airlines. That included $290 million to be used to pay employees and up to $364 million in loan funding to provide cash for operations.
Accounting for everything and making sure it’s spent properly is such a daunting task that Saiki’s House committee set up a special subcommittee just to do just that.
Lauren Nahme, the subcommittee’s chair, said there are billions of additional dollars not going through the state.
“When we add all of it up, it’s looking more like $9 billion,” said Nahme, who is also vice president of strategy and innovation for Kamehameha Schools. “And there may be a couple of billion more that we’re getting straight from the (U.S.) Treasury.”
The Hawaii Data Collaborative, a Honolulu nonprofit, is also trying to account for all of the money, said Jill Tokuda, a former Hawaii Senate Ways and Means Committee chair who is working as a consultant for the collaborative. She said her group and Nahme’s are working to reconcile data gathered by the state awards management office; Eugene Tian, the state economist, and the office of U.S. Sen. Brian Schatz.
Tokuda tentatively pegs Hawaii’s total at about $8 billion but acknowledges there could be more, especially grant money that has gone to individual businesses.
“We have to have a common understanding and unified approach to how we’re monitoring and tracking this,” Tokuda said. “This coordinated effort is critical.”
With more federal funding likely to come, Hawaii needs to show the federal government it can manage the money well to assure the state can receive more when additional money becomes available, she said.
“There’s going to be additional iterations of federal support going forward for the next 12 to 18 months,” she said.
The fallout from COVID-19 has devastated Hawaii’s small businesses. We spoke to three business owners struggling to survive amid the economic crisis.
The pandemic and stay-at-home orders have increased demand for telehealth services, in which doctors perform examinations — or even treatments, like physical therapy sessions — by phone or video call, said Christina Higa, director of the Pacific Basin Telehealth Resource Center, which received the funding.
Doing online medicine is a unique activity, with its own billing codes, software and red tape, Higa said. While big hospitals and health organizations have the capacity to deal with this, she said, individual doctors offices and places like nursing home don’t. Part of the money is going to hire people to reach out to these providers to give technical assistance.
“There’s been more progress in the last few months than there’s been in a decade” before that, Higa said.
Another example, Tokuda said, is money for child care. With schools shut down for months and parents needing to work, there’s been an extraordinary demand for child care services, she said. At the same time, costs to operate such facilities have risen because of protocols needed to deal with COVID-19. Those include cleaning policies and lower teacher-to-student ratios.
The state has managed to provide tens of millions of federal dollars to child care providers to help offset unexpected costs, Tokuda said.
That includes $15 million from a pool of relief money and $11.9 million in Child Care Development Block Grant money. But when that money runs out at year’s end, child care services will be back where they started, and demand for their services and their need to follow costly protocols suddenly won’t just go away.
“We all know that Jan. 1, isn’t some magic time machine where everything goes back to normal,” she said.
While officials are preparing for the worst, there are things that will mitigate the problems, both in the short and long term. The Legislature has approved a $100 per week bonus for unemployment insurance recipients as well as up to $500 per month housing rental assistance for those who qualify.
In addition, an unintended result of the extra $600 per week federal unemployment plus-up, is that many unemployed workers have been able to collect more from unemployment insurance than they could earn when working — which has caused some employers to say they’ve had trouble getting workers to come back.
“I’ve heard from employers that employees have been reluctant to come back,” he said.
This could change when the plus-up money goes away, Ige said.
Finally, there’s the issue of more federal aid. Hawaii is hardly the only state facing hard times at the end of July, and Congress is working to put another package together. What that will mean for individuals and state and local governments will depend on the details, said Carl Bonham, the executive director of the University of Hawaii Economic Research Organization.
“There’s a cliff at the end of next year,” Bonham said. “Of course, we really don’t know how it’s going to change.”
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