THIS WEEK IN WASHINGTON
May 12, 2020
Welcome to the Georgia edition of This Week in Washington . Thank you for your interest in politics and policy from the Peach State to the Potomac.
 
COVID-19 continues to impact our families, our communities, our state, and our country. It created a health crisis, which in turn created an economic crisis – and Washington’s necessary response to both may indeed cause a fiscal crisis.
 
Steve Gordon , Erik Paulsen , and Todd Smith bring you up to date on how the Administration and Congress continue to respond to these crises in “ Heard on the Hill. ” Jesse Weathington gives us a glimpse at what may be a "new normal" as well as the most recent economic figures in Georgia with his “Gold Dome Report”. As always, make sure to check out the Infographs for an in-depth look at current hot topics.
 
Stay safe, healthy AND sane…

Todd Smith
Chairman, Georgia Group
Jesse Weathington
Director, Georgia Group
Heard on the Hill
by Todd Smith , P artner and Georgia Group Chairman; Steve Gordon , Managing Director; and
Congressman Erik Paulsen (2009-2019), Strategic Consultant

The number of people who have been impacted by the COVID-19 health crisis is significant. Equally significant are the number of people who have been hurt by the economic crisis. The numbers are sobering. But there are some hopeful things to report.
 
Health Crisis
One of us (Erik) participated in an Axios virtual presentation with Dr. Peter Marks, Director of the Center for Biologics Evaluation and Research (CBER) at the Food and Drug Administration (FDA). Dr. Marks said that a significant number of biopharmaceutical companies are working on a vaccine. The goal is to reduce the time needed to develop these vaccines from 12 to 18 months down to 9 months by eliminating the “dead time” between approval and the start of the manufacturing process. He said that safety and effectiveness will be assured, but by taking risks and scaling up the manufacturing process they can significantly speed up the development. Dr. Marks said that he would have a good sense of the probable success of this effort by mid-summer.
 
Abbott Laboratories received on Monday an emergency use authorization from the FDA for a new test that can detect COVID-19 antibodies. They will start shipping 30 million tests in May and will ramp up to manufacture and ship 60 million more in June. Abbott says their new test can exclude 99.6% of false positives and 100% of false negatives for patients tested 14 days after symptoms began.
 
The National Institutes of Health has also created a $1.5 billion “Shark Tank”-style initiative to accelerate COVID-19 testing. This entrepreneurial approach is designed to encourage scientists and investors to create diagnostic developments by matching them with investors and manufacturers.
 
The FDA’s Coronavirus Treatment Acceleration Program currently has 72 therapies being tested and another 211 therapies in active planning for clinical trials.
 
More than 8.7 million tests have been performed for COVID-19 in the U.S. Of these, more than 1.9 million were performed in the past week, and the FDA has issued 63 individual emergency use authorizations for test kit manufacturers and laboratories.

Continued below after the Gold Dome Report
Partner and
Georgia Group Chairman

Partner and
Georgia Group Director

Partner

Partner
INFOGRAPHS
Click image to download
April Unemployment Shows Largest Ever Month-to-Month Increase
What you need to know about the
Strategic National Stockpile
How Covid-19 disrupted tax filing season
What you need to know about
Municipal Bond Market
What you need to know about
Marijuana and the Stimulus
Gold Dome Report

The past week saw the first ever virtual Appropriations committee meeting, conducted via Zoom. While many of us have gotten used to the legislature streaming committee hearings, this was the first time that no committee members were present at the Capitol, and is just one of the many ways the new will become normal as the state cautiously proceeds with opening back up. The Joint Committee heard presentations from Dr. Jeffery Dorfman, the state fiscal economist, and OPB Director Kelly Farr. Both gentlemen gave briefings on the impact of COVID-19 and the economic shut-down on the State of Georgia’s financial situation.
 
To summarize, the news isn’t good. Highlighting one example, of the 4.9 million previously employed Georgians, approximately 1.4 million (28%), have filed initial unemployment claims due to a lost job or reduction in hours. April’s revenue collections were off slightly more than $1 billion. The lone bright spots were increases in tobacco and alcohol excise taxes, up 37% and 13% respectively. Although sales at retail general merchants (read: grocers) were up 30% on average, this will not necessarily be a fillip to state coffers since groceries are exempt from state sales tax. The pain has not been evenly distributed, with the accommodations (-56% YoY state and local sales tax), general merchandise (-50%), and restaurant/food service sectors (-27%) being hit particularly hard. 
 
Budget Chairmen Terry England and Blake Tillery, in conjunction with Director Farr, issued new instructions to state agencies requesting that each department prepare a revised budget request reflecting a 14% cut from the current (amended) Fiscal 2020 base by May 20. Unlike previous reductions, formula driven programs are not exempt. Although Governor Kemp’s initial budget instructions directed agencies to cut spending by 6% (a move that looks more and more prescient), for comparative purposes the budget was never cut by more than 10% during the worst part of the Great Recession. As the state tightens its belt, there will be a mad scramble find savings in an already lean government’s operations. The joint committee will meet remotely again this week to begin deliberations on how to address the urgent task now before them. 
Heard on the Hill continued

Economic Crisis
Last week’s unemployment numbers were as bad as most people expected: nearly 21 million jobs were lost in April, and the unemployment rate shot up to 14.7% according to the Department of Labor. Expectations are that the unemployment rate for May will be near or over 20%. By comparison, it was only a few months ago that the unemployment rate was hovering around 3.5%.
 
The Small Business Administration put together a report on the distribution of funds dispersed under the Paycheck Protection Program through April 16. The second appropriation of this program, $321 billion via Stimulus Bill 3.5, is nearly allocated.
 
Stimulus Bill 4.0
We initially projected that there would be at least four stimulus bills. The first three were passed by as close to unanimous consent as we are going to see. The fourth bill will be more difficult.
 
The Senate came back to Washington last Monday. The mood of the Republican Majority is to look and see how the first three stimulus bills are working and what needs to be adjusted or fixed before appropriating additional funds. 
 
Majority Leader McConnell wants included in the next bill liability protections for both large and small employers, medical providers, as well as colleges and universities – and this is a red-line issue for him.
 
Senate Majority Whip John Thune said last week that “any additional funds must be effective, targeted, and efficient, and help us get back to an active and robust economy.” He talked to a small group of us about specific items –
  • He strongly supports additional funds for broadband and connectivity for fiber, wireless, and 5G. “Everybody is using more broadband for education, for business, for telemedicine, and for our evening entertainment.”
  • Senator Thune said there is a lot of discussion about ways to incentivize companies that bring back parts of their supply chains from China.
  • He is working on a medical privacy bill. “It is hard to imagine having contact tracing and more and more testing without determining how the information is used” and wants to get it in the next stimulus bill.
 
The House did not return to Washington last week. The Speaker and Majority Leader Hoyer have not indicated when they will come back, but there is speculation that they will convene late this week to vote on their version of Stimulus 4, which they are calling CARES 2.0. No one knows for certain what will be in the Speaker’s bill, but we have detailed below what some people expect to see when her bill is released.
 
CARES 2.0 – Provisions likely to be included:
  • State and local assistance (direct funding)
  • Increased assistance for small businesses through the Paycheck Protection Program (PPP) and other traditional SBA programs (7a, 504 and microloan). The Paycheck Protection Program looks to be expanded to include all non-profits regardless of size and extend the dates for loan forgiveness (likely through August 31, possibly later)
  • Increased funding for SNAP, the Supplemental Nutrition Assistance Program
  • Testing as well as accountability in testing with data to see who is being tested, where, and how many test positive
  • Increased money for hospitals/health providers, as well as looking into the flow of funds to the Hospital Fund.
  • Increased money for free treatments, drugs, and (when ready) vaccines
  • Election assistance funding
  • Pension fixes (the Butch Lewis Act)
  • Direct stimulus check round #2
  • Assistance to allow voting by mail for elections
  • OSHA protections for workers
  • Family and Medical Leave Act expansion

Additional Items of Interest :
Paycheck Protection Program (PPP) - Small Business Lending:
  • PPP looks to be expanded to include all non-profits regardless of size and extend the dates for loan forgiveness (likely through August 31, possibly later)
  • PPP funding replenishment; amount to be determined
  • Reform PPP to change the way the large banks are paid for PPP loans
  • New capital infusion for CDFI’s, MDI’s, microlenders
  • Set aside for small employers of 25 employees or less
  • Set aside for nonprofits of any type or size
  • Clearer guidance on loan forgiveness in states with mandated shutdowns
  • 5-year payback plan
  • Loan forgiveness safeguards for those who cannot rehire their workers
  • Extending PPP coverage to August 31, possibly longer
  • Lowering fees and increasing government guarantees on 7a, 504, and microloans as was done in the Recovery Act (2009)
  • Opening PPP to all non-profits of all sizes

In a May 10 letter to the Democratic Caucus, Speaker Pelosi encouraged her colleagues to "go big" on the next stimulus bill.
 
UPDATE: This afternoon, the Democratic House Majority released the text of its next stimulus bill, called the Heroes Act. The bill would appropriate an additional $3 trillion on top of the almost $3 trillion appropriated in previous stimulus bills. There is some discussion within the Democratic Caucus that the bill is too expensive, and it may be pared down, but the Speaker is indicating the House will vote on it Friday. We do not expect the Senate to take up this bill until they return from the Memorial Day recess.
 
We’re busily combing through the bill text and summary ourselves, but gladly share them with you here and will report next time in more detail.
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