The deadline to distribute $1.25 billion in coronavirus relief funds given to Hawaii by the federal government is roughly three months away, but most of that money has not yet been spent.
When Congress rushed to pass the $2 trillion emergency assistance package known as the CARES Act in March, the goal was to get the money to individuals and businesses quickly.
While there were some initial bureaucratic delays, much of the funds were dispersed within a few weeks; primarily in the form of stimulus checks sent to individuals and emergency loans for small businesses.
However, states and large cities also received billions of dollars to offset pandemic-related expenses. But states and municipal governments have generally been much slower to spend those funds.
Part of the reason for the delay is that the funds come with restrictions. CARES money cannot be used to cover expenses budgeted before the pandemic, like public worker salaries and pension contributions.
The funds also have to be spent by December 31st.
“If we don’t spend any portion of the $1.25 billion by the end of the year, it goes back to the federal government,” says Jill Tokuda of the Hawaii Data Collaborative. The group has been tracking how CARES Act funds are spent locally.
So far, just over 11 percent has been distributed.
Tokuda, who previously served as a state senator, says much of the money will be given to nonprofit social service providers, rather than being spent directly by the government itself. Contracts using taxpayer dollars to provide social services normally take much longer to set up.
“This is not business as usual for anyone, to spend that amount of money in such a short period of time,” Tokuda notes. “But the reality is we’ve just got to do it,” she added.
Another factor complicating the dispersing of CARES funds is that in Hawaii, government contracts often reimburse nonprofits for their services, rather providing the money up front.
That means the service provider must be able to float the initial cost of services upfront.
Six months into a severe recession, many nonprofits are struggling financially, meaning that is more challenging than prior to the pandemic.
Michelle Kauhane with the Hawaii Community Foundation, which helps distribute grants from the State of Hawaii and the City and County of Honolulu, told HPR that the reimbursement model is posing a challenge, given current economic conditions.
“In a COVID environment, it's very difficult for nonprofits who may have lost revenue streams, to get the money to get reimbursed through CARES Act. I think that’s the largest barrier,” Kauhane explained.
With the rush to spend the funds, she added that there are also concerns over a potential audit by the federal government, which could result in having to pay some of the money back.
That has pushed nonprofits and government administrators to opt for caution when crafting eligibility and documentation requirements for assistance programs, slowing the pace of applications.
Another challenge is that for many small nonprofits, the amount of money coming from the CARES Act is much larger than what they’re used to processing. Spending it before January could require quickly hiring and training more staff.
Maude Cumming with the Maui homeless services provider Family Life Center said in a phone interview that there is a “ramp up time” to expanding capacity.
“Just administratively, you have to spend a lot of time trying to get people on board that will be able to handle the kind of work that you’re asking them to do,” she said.
Cumming said that it took Family Life Center several months to distribute a $400,000 dollar Maui County grant that came from the county’s share of CARES Act funds. That experience contributed to Family Life Center’s decision not to participate in a recently unveiled state initiative to provide $100 million in rent assistance, funded by the CARES Act.
The program will be administered by Aloha United Way and Catholic Charities.
Yet another reason for the sluggish pace of spending can be found in political calculation, rather than bureaucratic wrangling. State and local leaders have been advocating for more assistance from the federal government for months.
The possibility of a second round of CARES-type funding, or a relaxing of the current restrictions, has led some local leaders to hold back on distributing their relief funds.
Governor David Ige cited that prospect in July when he vetoed several assistance programs approved by the legislature.
However, U.S. Senator Mazie Hirono told HPR that she considers that the wrong approach.
“At this point, I don’t know that the Senate Republicans are going to be prioritizing that kind of aid to the state and counties,” Hirono cautioned.
“Therefore, I do have a concern about getting this money out to people who need the help.”
In May, the Democratic-controlled House passed a bill that would have provided additional resources to state and local governments. But the Republican-led Senate has thus far been unable to reach a consensus.
Hirono has been critical of the Ige Administration’s sluggish pace when it comes to getting the federal money out to people in need. In a Zoom interview with HPR, she also took the state to task for its lack of transparency and called more regular reporting of how the funds are being spent.
Governor Ige has said that any funds unspent by January will be assigned to bolster the state’s unemployment insurance fund, so it’s unlikely Hawaii will lose the money outright. Social welfare advocates have argued that is not be the best use of those funds.