Kansas Senate committee weighs creation of a $60 million small-business loan program; Gov. Laura Kelly defends embattled labor secretary; GOP legislators seize on delays in jobless benefits to press for Secretary Delia Garcia’s ouster; Kansas death toll rises to 172
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TOPEKA — Kansas Bankers Association president Doug Wareham said Friday the pandemic’s influence on the economy requires direct state action to remediate the damage.
He said there was bleak evidence the health crisis mutated into a financial crisis. Meat processing plants are operating at 60% capacity. Oil and gas industry layoffs approached 50%. As much as 40% of agriculture producers have negative cash flow. It could take three to five years for the hospitality industry to recover. Commercial real estate values are volatile.
"I do not share these numbers to be an alarmist," Wareham said. "I share them because they are a reality and it will take significant time for our agricultural and business sectors to recover from the crisis."
On that point, he endorsed a proposal before the Senate Financial Institutions and Insurance Committee to create a $60 million loan program. It would allow banks, savings and loans, credit unions and the farm credit system to borrow state dollars at below market rates to provide low-interest loans to Kansas businesses. The money would be taken from the state’s idle-funds account. In the bill, 10-year loans of up to $250,000 could be made made at an interest rate of no more than 3%.
State Treasurer Jake LaTurner said state funding for the program was immediately available to assist businesses working to recover from COVID-19. The idea is to reallocate unused money set aside for a rural housing loan program, he said.
"There is nothing but upside to this reallocation," LaTurner said.
Eric Stafford, who represents the Kansas Chamber, said the U.S. Chamber released a new survey indicating up to 40% of small businesses could go bankrupt in the next six months.
Scott Schneider, of the Kansas Restaurant and Hospitality Association, said the industry in Kansas lost $325 million since March 1 and 64,000 restaurant employees have been laid off or furloughed. He said 38% of restaurants have closed temporarily or permanently, and many might not survive the year.
"Sixty percent of customers out there, we’ve surveyed, say they don’t feel comfortable going back into restaurants for another 30 days," Schneider said.
Sen. Jeff Longbine, R-Emporia, said the original draft of the loan bill would have formed a $200 million loan fund for COVID-19 response. The total was trimmed to $60 million to avoid depleting resources that might be necessary to balance the state budget, he said.
"While this program is a step in the right direction," said Aaron Popelka, of the Kansas Livestock Association, "KLA is concerned that the $250,000 lending limit may be too small for many agricultural operations. If the program proves effective, it may be worth examining whether an increase in the individual loan limits is merited."
The committee approved the bill without dissent. It will be put on the Senate calendar in anticipation of the 2020 Legislature’s return Thursday for one day of meetings to wrap up the annual session.
Gov. Laura Kelly expressed little patience with Republican legislators using the Kansas Department of Labor secretary as a political punching bag while venting about the pace of unemployment check deliveries and continuation of mandatory business closures.
Kelly responded to comments at a Senate Commerce Committee meeting Thursday that began with testimony from Senate President Susan Wagle, a Wichita Republican in a tough race for U.S. Senate. Wagle alleged Delia Garcia, labor secretary in the Kelly administration, mismanaged the agency so badly that thousands of people were denied prompt payment of unemployment benefits.
"To put it quite simply," Wagle said, "I am appalled by the absolute failure by the Department of Labor that I have witnessed during this pandemic. The administration has blamed nearly everyone, except themselves."
Wagle said business closures ordered by Kelly due to COVID-19 and unemployment benefit woes tied to Garcia would trigger depression, alcoholism, drug abuse and domestic violence.
"The financial insecurity can be far more harmful than the COVID crisis," Wagle said.
More than 7,800 Kansans have tested positive for the virus, state health officials said Friday, and 172 residents of the state have died.
Kelly said the state unexpectedly went from record low to record high unemployment rates as the economy shut down to slow spread of the virus in Kansan. At one point, the labor department received 1.5 million telephone calls in a single day. Other states have experienced comparable call volumes and demand for assistance, she said.
The executive branch hasn’t been shy about outlining shortcomings of its response to the crisis, and the governor didn’t hold back in responding to Wagle’s critique.
"I am beyond disappointed that some members of the Legislature (Thursday) chose to take political cheap shots and attack the secretary of labor and her staff, rather than discuss possible solutions to help unemployed Kansans, including replacing the 40-year-old computer system that is at the root of the system failure," Kelly said.
The governor said Garcia had a long history of fighting for working Kansans and that commitment hadn’t wavered. The agency has worked "tirelessly over the last two months to meet the unprecedented demand for unemployment benefits," Kelly said.
The governor signed an executive order allowing barber shops, tattoo parlors, hair salons, tanning shops to open by appointment only Monday. Fitness centers and health clubs also will be allowed to open, but cannot offer group fitness classes and locker rooms will limited to restroom use.
In what Kelly described as Phase 1.5 of her multi-part strategy for reopening the economy, indoor graduation ceremonies would be permitted Monday if limited to no more than 10 people at a time indoors and to drive-thru celebrations if outdoors.
Wagle and several of her Senate GOP colleagues have expressed frustration the Kelly administration repeatedly blamed Republican Gov. Sam Brownback for abandoning a major computer overhaul at the Department of Labor nearly a decade ago. That modernization project, Kelly said, would have been beneficial during the pandemic.
"I think we need to stop the blame game and solve the problem," Wagle said.
Sen. Tom Holland, a Baldwin City Democrat, said there was irony in Wagle’s demand to cease finger pointing at the same time she directed accusations at Kelly and Garcia. Holland said the entire Legislature, which has inadequately financed IT infrastructure for years, shared responsibility for the labor department’s challenges.
"Let’s face it," Holland said. "The technology is decades old. From a technology perspective, it’s kind of like a Model A. It gets the job done. Just barely. We’ve got to use baling wire. You’ve got to use duct tape. And we’ve got to get through this crisis as best as we can."
Republican Sen. Rob Olson, an Olathe Republican, said Kansas’ labor secretary ought to be removed. He’s among legislators who accused Kelly of panicking in March when she became the nation’s first governor to close public school buildings for the rest of the academic year.
Olson suggested private contractors could be hired to quickly resolve the jobless claim issue in Kansas.
"To me," Olson said, "it looks like the governor’s office and the secretary, they’re just waiting for it to go away. I think the governor owes us an answer to resolve this. These people need their money."
His first option for obtaining a fresh perspective would be Karen Brownlee, the former labor secretary under Brownback. Olson said Brownlee cleared a backlog of unemployment applications in a couple of weeks after replacing a Democrat in 2011.
Brownlee, however, was fired by Brownback in 2012.
Garcia, a former state legislator appointed to the Cabinet post by Kelly, said Kansas was among states across the country grappling with double-digit growth in unemployment.
The state has paid out more than $320 million in jobless benefits since start of the pandemic, she said. The agency is receiving 150,000 to 250,000 telephone calls daily.
"There’s no system that can easily handle these volumes. We are working hard to serve as many Kansans as we can every day and we continue to build capacity so we can do more," Garcia said.
She said computer-system complexities of processing unemployment benefits in Kansas should serve as a warning.
"States that have not invested in the digital infrastructure that supports critical government functions should be looking at what is happening in our unemployment insurance system as a North Star," she said.