Local government support for small business recovery and reopening

<p>It is never too soon to start thinking about recovery, even in the midst of the pandemic. As communities look toward recovery, leaders are wrestling with how to establish a legally permissible aid program to assist small businesses with reopening. Many local governments established small business loan programs with long “no payment” periods to ensure businesses had access to capital to handle cash flow issues during the pandemic, and those programs, coupled with federal loan and grant programs, stabilized many businesses. However, some small businesses will still find it challenging to reopen due to unpaid bills and an unmanageable debt burden. With unemployment at record levels in the midst of a formally declared pandemic disaster, there is a compelling government reason to help stabilize viable businesses that are able and willing to hire back and retain the unemployed. This post will refer to such an effort as a “Reopen and Rehire” program. A prior post, Using Federal Coronavirus Relief Funds for Small Business Support, analyzed the legality of small business loan and grant programs. This post applies similar analysis to a “Reopen and Rehire” program and reviews the implications for program design.</p> <p>Legal Background for a “Reopen and Rehire” Program</p> <p>Funds may be appropriated from state and local government treasuries only by operation of properly enacted law, regardless of the source of those funds (federal, state, or local revenues). N.C. Constitution, Art. V, Sec. 7. This means that any loan or grant program must have statutory authority and must comply with the state constitution. Federal guidance for [...]</p>