[Senate Hearing 117-154]
[From the U.S. Government Publishing Office]


                                                       S. Hrg. 117-154

                    THE PAYCHECK PROTECTION PROGRAM:
                  PERFORMANCE, IMPACT, AND NEXT STEPS

=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          AND ENTREPRENEURSHIP

                                 of the

                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 17, 2021

                               __________

    Printed for the Committee on Small Business and Entrepreneurship

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

        Available via the World Wide Web: http://www.govinfo.gov
            
                              __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
46-626 PDF                 WASHINGTON : 2022                     
          
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            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                    ONE HUNDRED SEVENTEENTH CONGRESS

                              ----------                              
                 BENJAMIN L. CARDIN, Maryland, Chairman
                  RAND PAUL, Kentucky, Ranking Member
MARIA CANTWELL, Washington           MARCO RUBIO, Florida
JEANNE SHAHEEN, New Hampshire        JAMES E. RISCH, Idaho
EDWARD J. MARKEY, Massachusetts      TIM SCOTT, South Carolina
CORY A. BOOKER, New Jersey           JONI ERNST, Iowa
CHRISTOPHER A. COONS, Delaware       JAMES M. INHOFE, Oklahoma
MAZIE K. HIRONO, Hawaii              TODD YOUNG, Indiana
TAMMY DUCKWORTH, Illinois            JOHN KENNEDY, Louisiana
JACKY ROSEN, Nevada                  JOSH HAWLEY, Missouri
JOHN HICKENLOOPER, Colorado          ROGER MARSHALL, Kansas
                 Sean Moore, Democratic Staff Director
              William Henderson, Republican Staff Director
                           
                           C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Cardin, Hon. Benjamin L., Chairman, a U.S. Senator from Maryland.     1
Paul, Hon. Rand, Ranking Member, a U.S. Senator from Kentucky....     4

                               Witnesses

Mensah, Ms. Lisa, President and CEO, Opportunity Finance Network, 
  Washington DC..................................................     6
Griffith, Mr. Joel, Research Fellow, Financial Regulations, The 
  Heritage Foundation, Washington, DC............................    17
Hoey, Mr. John K., President and CEO, The Y in Central Maryland, 
  Baltimore, MD..................................................    27
Polumbo, Mr. Brad, Editor, Foundation for Economic Education, 
  Arlington, VA..................................................    33

          Alphabetical Listing and Appendix Material Submitted

Cardin, Hon. Benjamin L.
    Opening statement............................................     1
Forefront
    Letter dated March 15, 2021..................................    52
Griffith, Mr. Joel
    Testimony....................................................    17
    Prepared statement...........................................    20
    Responses to questions submitted by Ranking Member Paul and 
      Senator Young..............................................    68
Hoey, Mr. John K.
    Testimony....................................................    27
    Prepared statement...........................................    30
Marshall, Hon. Roger
    Slides of Weekly COVID-19 Cases, Deaths, and Hospitalizations 
      Reported in Kansas.........................................    43
Mensah, Ms. Lisa
    Testimony....................................................     6
    Prepared statement...........................................     8
    Responses to questions submitted by Ranking Member Paul and 
      Senator Hirono.............................................    63
National Association of Federally-Insured Credit Unions
    Letter dated March 16, 2021..................................    71
Polumbo, Mr. Brad
    Testimony....................................................    33
    Prepared statement...........................................    35
Paul, Hon. Rand
    Opening statement............................................     4

 
                    THE PAYCHECK PROTECTION PROGRAM:
                  PERFORMANCE, IMPACT, AND NEXT STEPS

                              ----------                              


                       WEDNESDAY, MARCH 17, 2021

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:30 p.m. in Room 
301, Russell Senate Office Building, Hon. Ben Cardin, Chairman 
of the Committee, presiding.
    Present: Senators Cardin, Cantwell, Shaheen, Booker, 
Duckworth, Rosen, Hickenlooper, Paul, Ernst, Young, Hawley, and 
Marshall.

OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, CHAIRMAN, A U.S. 
                     SENATOR FROM MARYLAND

    Chairman Cardin. The Small Business and Entrepreneurship 
Committee will come to order. Let me welcome those of you who 
are in this room, and we know we have members and witnesses 
that are appearing through Webex, which is the new reality of 
the world we are living in today.
    So let me thank first Senator Paul for his help and 
cooperation in putting together this first of our oversight-
type hearings on the programs that were put together in 
response to COVID-19 for small businesses. It totals over $1 
trillion that has been made available for small businesses, and 
this Committee has the responsibility to oversight of those 
programs we are operating. I know several members of the 
Committee have raised those questions about oversight, and this 
is our first opportunity to hear from private sector witnesses 
who will give us their view on how these programs are working 
to date.
    I would also like the Committee to know that we anticipate 
having an opportunity next week, with representatives of the 
SBA present to answer questions that we may have in regards to 
the small business programs, to continue our effort on 
oversight.
    In the meantime, let me also point out to the Committee 
that yesterday the Senate confirmed Isabel Guzman as the 
Administrator of the SBA, and again I want to thank Senator 
Paul for accommodating the ability to get that nomination to 
the floor in an expedited fashion. So we now have a confirmed 
administrator. It was a strong bipartisan vote on the floor, 
which I certainly appreciate, and I think we are off to a very 
good start with the SBA.
    We have one immediate issue that will be brought to our 
attention next week, so let me make sure the Committee members 
know about that. Many of you have already communicated with us 
that we have a deadline coming up at the end of March for 
applications for the PPP program. And since December, when 
Congress acted on the second round of PPP and some additional 
eligibilities, there have been significant challenges that have 
been placed in administering the PPP program.
    First, the second round of PPP requires different 
verifications. There is a need base, so that has to be put into 
the equation on the applications that are made for the second 
round of PPP.
    Secondly, we have had a real concern for the self-employed 
and those who do not have employees as to the calculations of 
the funds they can get under the PPP program, which was 
recently clarified by the Biden administration. So we have now 
some additional applications that are coming in with the 
clarification on the formula.
    We have had some changes in eligibility under the PPP 
program, including what was recently done on the American 
Rescue Plan. We had a change in administration. On January 20th 
we changed from the Trump administration to the Biden 
administration. All that has made it much more challenging for 
us, for small businesses, to get their applications processed 
by the March 31st deadline.
    It is for that reason that we are looking at an extension. 
The good news is that the resources are there. We have been 
informed by the SBA that the extension of the deadline can work 
within the funds that have already been made available by 
Congress. This is not the first time we did this.
    Let me remind the members that after the original PPP 
program I brought a bill to the floor of the Senate, and 
Senator Rubio worked with me on that, with an extension to give 
more time for businesses to file for their PPP forgivable 
loans. Senator Collins has filed legislation in the Senate. We 
have bipartisan legislation to extend that date by two months. 
The good news, again, is this legislation was just passed by 
the House of Representatives by a 415 affirmative to 3 negative 
vote, overwhelmingly passed by the House of Representatives.
    Today, the Committee has received a letter, signed by 90-
some organizations, in support of a clean extension of the PPP 
program. I would just point out that it includes the NFIB, it 
includes the Chamber of Commerce, it includes so many other 
organizations that are telling us that they need additional 
time. And the reason I mention this is I hope that this will 
clear the hotline and we can do it by consent as early as next 
week. If not, Senator Schumer has told me that we can have four 
times we may be on the floor next week in regards to the 
extension.
    I would urge my colleagues to continue in a bipartisan way 
to support this extension in a clean manner. We will have 
opportunities to look at changes or modifications in the 
program, and I can assure you that the way that is going to be 
done is in a bipartisan manner, both Democrats and Republicans 
working together, as we have throughout the entire development 
of the programs to help small businesses.
    One year ago today, COVID-19 had just been declared a 
global pandemic by the World Health Organization, as well as a 
national emergency by the Trump administration, and there were 
less than 1,500 reported cases of COVID-19 in America. Soon 
after it became clear that the public health measures required 
to prevent the spread of the virus would hurt small businesses, 
so Congress had a duty to provide support, because our national 
economy is only strong when we have healthy, robust small 
businesses.
    Small businesses are our job creators and are responsible 
for two out of every three new jobs, and employ almost half of 
our Nation's private sector workforce during the years leading 
up to the pandemic. And they are where innovation happens in 
our economy. They are the entities that are figuring out 
better, more efficient ways of doing things. But they are not 
as resilient as larger businesses, due to the razor-thin 
margins and low cash reserves.
    So we passed the historic, bipartisan CARES Act, which 
created the Paycheck Protection Program as well as the EIDL 
advance grant program and the Small Business Debt Relief 
Program. PPP has played the largest role of all programs, 
providing more than 7.9 million loans worth more than $700 
billion in the past year.
    I mention that because I know we all have our individual 
stories. I am going to tell you, just this past weekend I went 
to one of my favorite local restaurants, and I had a chance to 
talk to the store owner. He is a businessperson with less than 
ten employees. And he told me that without the help he has 
gotten from the PPP program, and now this restaurant program 
that has just passed, he would have had to close his doors. We 
have kept him open, and he is a very creative innovator. He has 
figured out different ways in order to keep revenue coming into 
his business. But these programs have been essential so that 
these small business owners can stay in business during the 
pandemic.
    The goal of the PPP was simple: help employers keep their 
employees on payroll during the pandemic so our economy can 
rebound more quickly afterwards. During the drafting of the 
CARES Act, Senator Shaheen and I knew that while PPP would be a 
lifeline for small businesses, the program's reliance on 
private lenders would make it less useful to small businesses 
and black, Latino, Native, and rural and other underbanked 
communities that do not have strong relationships with banks.
    So we put a provision in the bill that required the SBA to 
issue guidance to banks participating in PPP to prioritize loan 
applications for underserved small businesses. Unfortunately, 
SBA did not do that, which led the SBA inspector general to 
issue a report that found the SBA's implementation of PPP did 
not fully align with the congressional intent in the CARES Act.
    That is why Senate Democrats pushed for specific set-asides 
in PPP for community development financial institutions, 
minority depository institutions, microlenders, and other 
mission-based lenders, each COVID-19 relief bill Congress has 
passed since the CARES Act. When Congress replenished the PPP 
funds in April of last year, we secured a $60 billion set-aside 
for mission lenders. In the bipartisan Economic Aid Act, which 
passed in December, we secured another $15 billion set-aside 
for mission lenders, as well as an additional $60 billion set-
aside for the smallest small businesses with ten or fewer 
employees.
    We pushed for the lender set-asides because CDFIs and MDIs 
and other mission lenders have a demonstrated history of 
getting capital into the hands of entrepreneurs in underserved 
and underbanked communities, as we push for the borrower set-
aside, because we had to ensure the funds would remain 
available for the smallest mom-and-pop businesses that cannot 
afford accountants and lawyers, so they need more time and 
assistance to get their applications together.
    I was proud last month when the Biden administration came 
out with certain guidelines and made it easier for businesses 
in underserved communities to be able to get those loans, by 
having an exclusive time period and changing some of the rules 
that would help deal with the underserved community.
    I am proud to share that data from the SBA on the the 
current amount of PPP shows that thanks to the Economic Aid Act 
and steps taken by the administration we are seeing progress, 
which indicates that more of the smaller, and more vulnerable 
small businesses are receiving loans this time than during the 
initial round of PPP.
    The historic American Rescue Plan that President Biden 
signed into law last week made further improvements to PPP by 
expanding access to the program to more nonprofits. We have 
witnesses today who will talk about that. I know that we have, 
from Baltimore, John Hoey, who leads a nonprofit that was 
unable to access PPP prior to the passage of the American 
Rescue Plan, the YMCA of Central Maryland. So I am looking 
forward to hearing directly how important access to PPP will 
help organizations such as the Y.
    I am also looking forward to hearing from Lisa Mensah, who 
is President and CEO of the Opportunity Finance Network, a 
network of CDFIs, about her members' experiences with PPP, what 
has worked and what has not with PPP, as well as the need to 
extend PPP to give borrowers additional time to get their 
applications.
    So for all those reasons I look forward to hearing from our 
witnesses. I look forward to hearing from Mr. Polumbo, who is 
personally present here, who can help us sort out the bill. 
Joel Griffith, from The Heritage Foundation, is on, I think 
Webex.
    So we have an excellent group of panelists, and let me now 
turn to the Ranking Member, Senator Paul.

   OPENING STATEMENT OF HON. RAND PAUL, A U.S. SENATOR FROM 
                            KENTUCKY

    Senator Paul. Thank you, Mr. Chairman. I would like to 
welcome our panel today. Welcome today 367 of 15 days to slow 
the spread. Proponents of the economic lockdowns promised it 
would be just 15 days to flatten the curve. Instead of 15 days, 
the lockdown has now gone on for over a year.
    Early on in the pandemic, as we all remember, there were 
projections that hospitals would be full and have to turn away 
people, medical equipment was in short supply, businesses were 
closing, what they hoped would be on a temporary basis as 
governments started locking down their economies and telling 
people to stay home. At that time, when programs like PPP were 
created, no one was under the belief that we would still be 
doing this a year later, with no end in sight.
    The PPP program was devised as an emergency stop-gap to 
keep businesses running and people on payroll, at their job, 
instead of having to be laid off. It has been a year now. The 
virus is in full retreat. Hospitalizations are declining 
rapidly. Vaccines have been rolling out since December. Instead 
of touting these incredible successes and offering people hope, 
governments keep moving the goalposts. Our hospitals are not 
overcrowded. We do not have PPE shortages. All the reasons the 
economy locked down in the first place are no longer a concern. 
It is time to reopen our economy.
    What we have learned is that this continued stream of money 
from Washington has encouraged way too many governors and 
mayors to keep their economies closed indefinitely. They stifle 
their economies, roll yellow police tape across store shelves 
and threaten small businesses with revoking licenses, or worse, 
then demand Washington cleanup their mess when the businesses 
have to shut down for good. We should demand these elected 
official stop imposing arbitrary rules and stop illogically 
picking winners and losers. We simply cannot keep printing and 
borrowing trillions of dollars when the best thing we can do to 
provide relief now is to simply reopen the economy.
    Congress has spent more than $800 billion on the Paycheck 
Protection Program alone, and according to our estimates, we 
burn through $3.5 billion a day in taxpayer dollars. In just 
one year, the Small Business Administration went from being a 
million-dollar agency to nearly a trillion-dollar agency. No 
agency is equipped for that kind of exponential growth in such 
a short time.
    Without adequate controls, the program has benefited large, 
well-financed businesses, alleged fraudsters and organizations 
like Planned Parenthood. Despite the widespread evidence of 
fraud and misuse within the PPP, Congress expanded and funded 
the program four times. The President's recently signed $1.9 
trillion packages provided even more funding for PPP, despite 
signs of economic recovery, and many in Congress are discussing 
yet another extension of the program past its March 31st 
deadline.
    Meanwhile, the Small Business Administration inspector 
general has produced ten reports on the lack of SBA oversight 
of this program. The Department of Justice has charged 184 
defendants with crimes related to PPP fraud, and the Government 
Accountability Office has now put emergency small business 
loans on its high-risk list, for the first time in history.
    Small businesses are thriving in states that have eased 
restrictions. It is clear that there is pent-up demand for 
Americans to go back to their normal lives. This is, in many 
ways, a crisis of Congress' and governors' own making.
    I look forward to our discussion today on how we can 
improve the effectiveness and oversight of the program and how 
small businesses get back to business.
    Chairman Cardin. Thank you, Senator Paul.
    Our first witness comes to us through Webex, and that is 
Lisa Mensah, who is President and CEO of the Opportunity 
Finance Network, the Nation's leading network of community 
development financial institutions. Under her leadership, the 
Opportunity Finance Network helps CDFIs leverage public funding 
with private investment from mainstream financial institutions, 
socially responsible investors, and philanthropic partners in 
distressed communities across America.
    For all of our witnesses, your full statements will be made 
part of the record. We ask that you try to summarize your 
testimony in five minutes.
    Ms. Mensah.

   STATEMENT OF LISA MENSAH, PRESIDENT AND CEO, OPPORTUNITY 
                FINANCE NETWORK, WASHINGTON, DC

    Ms. Mensah. Thank you. Thank you, Chairman Cardin and 
Ranking Member Paul and members of the Committee for the 
opportunity to be here today.
    I am here to speak for America's smallest businesses and 
the lenders that matter most to them, community development 
financial institutions, or CDFIs. I lead Opportunity Finance 
Network, a network of more than 350 CDFIs, working in all 50 
States.
    The American people saw this past year just how valuable 
our Nation's smallest businesses are to everyone. Ensuring that 
Federal relief funds make it to these businesses requires 
partnership with lenders that specialize in serving them. It 
takes CDFIs.
    CDFIs know how to quickly deliver responsible capital to 
America's underserved businesses, including Paycheck Protection 
Program loans. Through the Paycheck Protection Program, 
Congress said to these businesses, ``You matter,'' and the 
program also showed just how much lenders matter to these 
businesses.
    It is well-documented how the first round of PPP missed 
many of these underserved businesses, in part because it missed 
their lenders, CDFIs. An OFM has testified before this 
Committee about the challenges that CDFI faced in the early 
days of the program, and Congress listened.
    I especially want to thank this Committee and Chairman 
Cardin for all of your work to reform the PPP as part of last 
December's COVID relief bill. Our industry is encouraged by 
your recognition that CDFIs are best positioned to drive PPP to 
businesses owned by people of color, businesses owned by women, 
and many underserved by the mainstream financial markets.
    And SBA heard us too. They prioritized the needs of these 
small businesses in the second round. During the first week of 
the most recent PPP round, the agency only accepted PPP 
applications from community financial institutions, including 
CDFIs, and this was a welcome improvement from the CDFI 
experience in the earliest months of the original program.
    And while there were real challenges in the rollout, CDFIs 
and other small lenders made more than 60,000 PPP loans, 
totaling more than $5 billion, and these loans helped small 
businesses like Alcantara Driving School in Silver Spring, 
Maryland. The CDFI Latino Economic Development Center provided 
two PPP loans, totaling $35,000, to help the Latino-owned 
business stay afloat after devastating revenue losses during 
the pandemic.
    We also saw the SBA's new calculations for the self-
employed and smallest businesses, and these changes will help 
many minority businesses qualify for more funding.
    I am so pleased to see CDFIs helping PPP reach more 
underserved small businesses, but our work is not finished. We 
need more time, and we need more help from Congress for the 
Paycheck Protection Program to realize its full promise.
    So we have two recommendations for PPP. First, extend this 
program to May 31st. Congress needs to move quickly to adopt 
the PPP Extension Act of 2021 and to give more businesses the 
chance to get access to this important program. And second, 
make retroactive the new income calculations. The changes to 
income calculations for the smallest businesses, sole 
proprietorships often, were an important policy change.
    For example, the CDFI HOPE Enterprise shared that a Black 
woman-owned boutique in Alabama qualified under the old rules 
for a PPP loan of about $7,500, but with the changes she 
qualified for a loan of more than $22,000. But the new rules 
only apply to PPP loans made after March 3rd, so for those 
businesses that already received PPP loans, we need 
retroactivity so that they too can benefit from the change.
    I see PPP as critical emergency relief, yet for the 
American economy to rebound and flourish, small businesses need 
more than PPP. They need responsible loans, credit 
enhancements, and working capital.
    So let me close on next steps. First, Congress must direct 
the SBA to make CDFIs central to its strategy. The inability of 
SBA's core programs to reach underserved communities was never 
acceptable, and it cannot continue. The SBA need to fully 
rethink how to reach underserved businesses in its entire suite 
of programs, not just PPP and not just the Community Advantage 
and microloan programs.
    And second, Congress must double down on its efforts to 
strengthen the financial institutions who are providing 
responsible finance in low-wealth markets. And this can be done 
by providing $1 billion in annual appropriations for the CDFI 
fund.
    Congress and the American people have pulled together to 
help America's small businesses during this painful crisis, and 
right now Congress can take steps to build a stronger and more 
inclusive economy for the long term. CDFIs are pivotal to this 
work, and I urge Congress to invest in the institutions that 
are here, on the ground, in our rural, urban, and native 
communities. Your investment in CDFIs tells our smallest 
businesses that they matter today and tomorrow.
    Thank you so much.
    [The prepared statement of Ms. Mensah follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Cardin. Well, thank you very much for your 
testimony and for the work that you do in underserved 
communities.
    Our next witness is coming to us through Webex, Joel 
Griffith, who is currently a Research Fellow for the Institute 
for Economic Freedom and Opportunity at The Heritage 
Foundation. He previously worked as a researcher for a former 
member of The Wall Street Journal editorial board.
    Mr. Griffith.

    STATEMENT OF JOEL GRIFFITH, RESEARCH FELLOW, FINANCIAL 
      REGULATIONS, THE HERITAGE FOUNDATION WASHINGTON, DC

    Mr. Griffith. Thank you, Chairman Cardin and Ranking Member 
Paul and other members of the Committee for this opportunity to 
testify today. This testimony will provide an overview of the 
economic calamity that has been impacting our Nation stemming 
from the COVID-19 shutdowns, the varied strength of the 
economic recovery from state to state, small business lending 
conditions, and the Paycheck Protection Program, of course, 
PPP.
    Beginning in March of last year, our Nation witnessed an 
historic plunge in economic output. For the first time in our 
Nation's history, governments across the country intentionally 
suppressed the supply of goods and services. Likewise, 
restrictions on consumer activity artificially suppressed 
demand. The Federal Government borrowed, printed, and spent 
trillions of dollars in an effort to cushion the economic 
downturn. But it is really the government-mandated closures 
that are now deterring investment and suppressing economic 
activity in parts, but not all, of the country.
    In the weeks following the onset of the pandemic, some 
Federal Government aid to businesses impacted by shutdown 
orders was justifiable, but after a year, we know that serious 
problems exist with PPP. It has been inefficient, untargeted, 
and ineffective, and we know that those areas of the Nation 
that have reopened are now experiencing an economic boom, a 
far, far stark difference compared to New York City and L.A.
    The small business loan problem has been ineffective at 
boosting employment. Three initial assessments of PPP found 
that the program cost between $109,000 and $380,000 per job 
saved. On the other hand, the economic resurgence in Quarter 3 
of 2020, even as PPP payments declined, underscores how 
reopening can rapidly repair economic damage.
    Unemployment rates and business conditions vary wildly 
across the Nation, and that is dependent largely on the 
restrictions that some governors and mayors continue to impose 
on society. State and local policymakers oversee decisions that 
affect businesses' abilities to operate, and they should assume 
the potential costs of new and ongoing businesses, school, and 
other closures that they, on the state and local level, impose. 
States with the most restrictive economic policies are the ones 
that are suffering the largest business and employment losses.
    Federal taxpayers should not continue to subsidize state 
and local decisions to shutter businesses and ruin livelihoods. 
Continuing this PPP program moves the costs of overly 
restrictive shutdowns to Federal taxpayers and it allows 
governors additional latitude to keep society shuttered with 
one-size-fits-all policies. Targeted, temporary, and local 
economic restrictions may be necessary, but those decisions, 
and the costs that they incur, should be weighed by the 
responsible policymakers on the state and local level. PPP 
continues to incentivize state and local policymakers to 
continue destructive shutdowns and allows them to shirk their 
responsibility.
    PPP continues to be troubling in other ways as well. It was 
intended to assist businesses impacted by the pandemic, but 
often it benefits well-funded and well-connected nonprofits. In 
New York City, millions in government loans, some of which are 
forgivable, flowed to entities such as the Philharmonic, the 
Vivian Beaumont Theater, and the School of American Ballet.
    Left unsaid in all this is the fact that quarterly 
charitable giving actually rose by 2 percent in 2020, compared 
with the year prior. Private individuals and businesses are 
generously contributing to nonprofits that are aligned with 
their own objectives and personal beliefs.
    Extensive fraud in PPP continues to stretch law 
enforcement. A few noteworthy investigations include a Brooklyn 
individual who took $2 million in loans by claiming to employ 
50 people, and then spent the proceeds on luxury items. The 
same instance occurred in the San Fernando Valley with a fraud 
ring using $18 million in PPP proceeds to do the same.
    Small businesses are actually being serviced by the credit 
markets. It is a misnomer that credit markets are not providing 
sufficient funds. Most small businesses are saying they are 
generally not looking for more credit. Only 3 percent of 
respondents in a recent NFIB survey reported that borrowing 
needs are not satisfied. Small business credit conditions in 
December, based on the percentage that are reporting easier 
lending conditions versus harder, were identical to conditions 
one year prior. Obtaining financing is the reported top concern 
of just 1 percent of small businesses owners.
    What we know is that the reopening economy is what is 
saving small businesses. Real economic recovery does not stem 
from stimulus checks or bailouts, and it does not stem from 
PPP. It is largely a result of individuals and businesses at 
last being allowed to legally interact with each other. The 
historic rebound of the summer proves that those who were 
properly informed of the actual risks of the virus are 
enthusiastically participating in the reopening. Nationally, 
economic growth in the third quarter smashed all records, even 
as government transfer payments declined by 20 percent.
    The bottom line is that the pace of the recovery varies 
according to lockdown restrictions. The Federal Reserve State 
Coincident Index estimates State GDP, and it illustrates how 
variant this recovery is. At the end of 2020, economic output 
in eight states was actually larger than the year prior, states 
such as Georgia and Utah, which did not endure crushing, long-
lasting shutdowns. Meanwhile, places like Hawaii, Michigan, 
Rhode Island, and Massachusetts are 10 percent smaller than 
they were before.
    The same can be said for unemployment rates. A number of 
states have unemployment of 4 percent or less. These are states 
that have reopened. Meanwhile, states like Connecticut, Nevada, 
New Mexico, New Jersey have unemployment rates nearly twice the 
rates in those states that have reopened.
    Businesses across parts of the Nation certainly face 
economic hardship as a result of the myriad COVID-19 
restrictions that are still in place in some local governments. 
Resolution requires governors and mayors to permit people to 
once again freely create, work, shop, and engage. The misery, 
economic misery, persistent across portions of the Nation 
should not be used by Congress as an excuse to further expand 
government control over the financial system and credit 
allocation. Any additional Federal relief measures should 
provide legal protections for businesses to reopen and tailor 
any additional aid to meet the health crisis.
    Thank you for having me today.
    [The prepared statement of Mr. Griffith follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Cardin. Thank you, Mr. Griffith. I appreciate your 
testimony.
    We will now go by Webex to John Hoey, who is the President 
and CEO of the YMCA of Central Maryland. Prior to the Y, John 
worked in the private sector across four different industries 
while also volunteering his time in the community. John has 
been recognized for his leadership on many occasions, including 
as an Ernst & Young Entrepreneur of the Year and one of the 
Maryland Innovators of the Year.
    Mr. Hoey.

STATEMENT OF JOHN K. HOEY, PRESIDENT AND CEO, THE Y IN CENTRAL 
                    MARYLAND, BALTIMORE, MD

    Mr. Hoey. Thank you, Chairman Cardin, Ranking Member Paul, 
and the Committee for inviting me today to talk about an 
incredibly important issue that has been little understood or 
discussed since the COVID pandemic hit early last year. Let me 
first start by thanking, in particular, Committee Chair Senator 
Cardin of Maryland for his steadfast focus on ensuring that the 
American Rescue Plan Act of 2021 included long overdue relief 
for large nonprofits, which have been, for some reason, shut 
out from all of the previous relief packages, and in many cases 
have been pushed to the brink of bankruptcy while doing some of 
the most important, essential work to support those most in 
distress during these past 12 months.
    I have the privilege of being the CEO of the Y in Central 
Maryland, one of the largest and longest-operating community 
service organizations in the greater Baltimore region. We are 
also one of the largest YMCAs in the country. Prior to COVID, 
our organization served over 300,000 central Marylanders 
through a wide variety of programs and services that focus on 
healthy living, youth development, and social responsibility.
    While the Y may be best known for our large buildings that 
bring individuals, families, and communities together, we are 
also our region's largest early childhood and Head Start 
provider, the largest provider of after-school enrichment, 
mentoring, summer camp, and community school programming. In 
short, we are the largest youth-serving organization in the 
region and have a profound impact on the well-being of young 
people and their families. What you should also know is that we 
were one of the largest employers in our region, with over 
2,700 people on our payroll.
    As someone who worked in the private sector before being 
recruited to do this work in 2006, I appreciate the incredible 
uniqueness and strength of the Y's overall business model. Over 
70 percent of our revenue, prior to COVID, came through 
``earned revenue,'' meaning the membership and program fees 
that people pay us to participate in the Y's programs and 
services. The remainder of our revenue comes from Federal and 
private grants and donations. The diversity of our business 
model allows us to operate at scale and to be in the unique 
position to connect people and families across the economic and 
social spectrum to opportunities that smaller organizations 
focused on only one thing or one small community could not 
imagine doing.
    In other words, scale matters, and at the Y we leverage 
that scale for the good of our community in more ways than I 
have time to describe here.
    Unfortunately, when COVID hit and we were forced to close 
most of our programs and buildings we operate, our scale and 
earned revenue model worked against us. As we have now lost 50 
percent of our members, shuttered most of our school-based 
operations, and had to run through a dizzying array of local 
and state requirements that changed sometimes daily, we also 
became the State of Maryland's and local municipalities' go-to 
organization to quickly spin up a wide range of services for 
thousands of people who were most deeply impacted by COVID.
    For example, the state's behest, we quickly opened 15 Y 
sites to care for over 800 children of essential workers so 
their parents could care for others. Partnering with food banks 
and others, we launched a massive food distribution operation, 
with over 500,000 meals distributed to date. We made thousands 
of ``care calls'' to seniors who are members of ours and others 
at risk for isolation during the shutdown.
    We were able to keep our over 1,000 Y Head Start families 
and children learning and well supported through virtual 
learning and family engagement. We quickly pivoted our 
mentoring work for over 600 youth to a virtual format, to 
ensure that those young people still had a caring adult to 
interact with. With schools closed and parents in need, we 
opened 20 Y Academic Support Centers to provide safe, in-person 
school support to help children and parents successfully 
navigate virtual learning.
    We did all this while having to eliminate over 1,000 of our 
2,700 jobs at all levels of the organization, cutting salaries 
for all Y managers, and burning all of our available cash in 
the bank.
    We did all of this because that is who we are and what our 
community expects us to be, but we did it despite being shut 
out of the PPP program. While so many worthy small non-profits 
received PPP funds, even though their fundamental business 
model was unaffected by the pandemic, we were left to almost 
bleed out for the ``sin'' of having over 500 employees and the 
audacity to operate at scale across the region. Our operating 
revenue for 2020, expected to be around $92 million, was down 
over $20 million last year, and is projected to be down $25 
million from that number this year. We have spent all of the 
cash we previously had on our balance sheet and we are now 
using our line of credit to fund operations.
    After 167 years of serving this community, it is really 
hard to understand why Congress failed to help us until the 
American Rescue Plan Act was passed just last week. On behalf 
of the Y and this community, I am deeply appreciative that the 
President made this legislation his first priority, and that 
enough Senators understood the essential role that larger non-
profits play in this country.
    For our Y, we anticipate that we will be eligible for 
around $8 to $9 million from the Payroll Protection Program. 
That means that we will likely not have to go any further into 
our line of credit to fund operating losses this year, as we 
ramp back up to hopefully being cash flow positive again by 
year-end.
    I am concerned, however, that the deadline for accessing 
the program remains March 31st. After being shut out for the 
past year, it is unreasonable to ask organizations that were 
heretofore ineligible for the program to file their 
applications within two weeks. I can also tell you that the 
banks that we are talking to right now have told us that the 
SBA will not have processes in place for large nonprofits to 
apply for PPP for at least two weeks. So we are looking at 
potentially getting shut out yet again. I think a three-month 
extension is not only warranted, but owed to all of us after 
what we have been through this past year.
    Thank you again for the opportunity to speak to you today, 
and thank you to Senator Cardin and those who understood how 
critically important large nonprofits are to their communities 
and to helping our country survive this past year.
    [The prepared statement of Mr. Hoey follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Cardin. Thank you, Mr. Hoey. We will now go to our 
fourth witness, who is here in person, Brad Polumbo, who is a 
journalist and opinion editor at the Foundation for Economic 
Education. He was previously a media and journalist fellow at 
the Washington Examiner, and an editor at the media nonprofit, 
Young Voices.
    Mr. Polumbo.

  STATEMENT OF BRAD POLUMBO, EDITOR, FOUNDATION FOR ECONOMIC 
                    EDUCATION, ARLINGTON, VA

    Mr. Polumbo. Chairman, Ranking Member Paul, members of the 
Committee, thank you for the opportunity to testify here today. 
I am an editor at the Foundation for Economic Education, where 
I conduct policy reporting and analysis, and I have been doing 
this for several years now, but this week was the first time 
that tears flooded my eyes when I reported a story.
    I was reporting an interview that the Associated Press did 
with doctors across the globe, warning that lockdown orders are 
leading to an international epidemic in child suicide.
    ``We are very surprised by the intensity of the desire to 
die among children who may be 12 or 13 years old,'' a French 
doctor said. ``We sometimes have children of 9 who already want 
to die. It is a genuine wish to end their lives,'' this doctor 
told the AP. And he told the AP that the number of youth 
suicide attempts his hospital sees in a month has more than 
doubled amid pandemic restrictions.
    Here in the U.S., the Centers for Disease Control reported 
that 25 percent of young adults considered suicide during the 
COVID lockdowns, while overall mental health issues appear to 
have spiked as well. CDC data show a 24 percent increase in 
emergency room mental health visits for children ages 5 to 11, 
compared to 2019. Among adolescents aged 12 to 17, that 
increase is 31 percent.
    The spike in depression and suicidality triggered by the 
social isolation of pandemic lockdowns is most certainly not 
what proponents of the restrictions intended. But as Henry 
Hazlitt wrote in Economics in One Lesson, responsible 
policymaking requires us to look beyond intentions and 
immediate effects. It means taking into account a policy's 
indirect consequences and its collateral damage. And sweeping 
government interventions tend to be plagued by unintended 
consequences, sometimes lethal ones.
    There has been perhaps no more dramatic example of this 
lethality than the unintended consequences of pandemic 
lockdowns. Government officials took drastic, unprecedented 
steps of closing businesses en masse, criminalizing citizens' 
livelihoods, and essentially placing healthy Americans under a 
form of house arrest. The lockdowns and restrictions have been 
normalized, but they are not normal.
    My colleagues and I at the Foundation for Economic 
Education have spent the last year chronicling the myriad ways 
that COVID lockdowns have led to unintended consequences. The 
aforementioned mental health crisis is only one of many that 
have emerged as a result of these unprecedented government 
restrictions. We have also seen an enormous uptick in addiction 
and drug overdoses. According to the CDC, over 81,000 drug 
overdose deaths occurred in the United States in the 12 months 
ending in May 2020. That is the highest number of overdose 
deaths ever recorded in a 12-month period.
    Now the full data will take years to analyze, but state and 
local level examples of this tragic trend are too numerous to 
list. Meanwhile, an analysis from the National Commission on 
COVID-19 and Criminal Justice found that domestic violence 
spiked 8.1 percent after lockdowns. The study's author said 
that this figure is, if anything, ``a floor, not a ceiling.'' 
It is an underestimate.
    None of this even touches on the economic devastation 
wrought by government pandemic lockdowns. According to the 
business website Yelp, 60 percent of the 163,735 businesses 
that used the website which have closed will never reopen. 
Small businesses, in particular, have been hit hardest by COVID 
pandemic lockdowns. More than 100,000 small businesses 
permanently shuttered last year, while polling shows that 60 
percent of small business owners worry that their business will 
not survive until June 2021.
    From mental health to drug overdoses to domestic violence, 
the immeasurable economic and social damage that lockdowns have 
wrought cannot be made whole by any amount of welfare, by any 
amount of stimulus payments, or by any amount business grants. 
Lockdowns and continued pandemic restrictions are what is 
crushing the American spirit and the American economy. Neither 
the Paycheck Protection Program nor other fraud-rife and 
inefficient Federal band-aids can heal this ailment.
    Policymakers who continue to perpetuate lockdown policies 
and heavy-handed pandemic restrictions must discover the 
humility necessary to see that their sweeping actions have 
consequences beyond their control, beyond their understanding, 
and beyond their intentions. Until they do, millions of 
Americans will continue to suffer silently. Thank you.
    [The prepared statement of Mr. Polumbo follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Cardin. Thank you very much for your testimony. We 
will now go to five-minute rounds for questioning.
    Mr. Hoey, let me start, if I might, with you. You point out 
the challenges that you have in navigating the program, that 
you were not eligible, now you are eligible. Let me make it 
even a little bit more complicated for you. The law requires 
you not only to file an application by the end of the month, 
you have to have it acted on by the end of the month by the 
SBA, so it makes it even more challenging. And as you know, 
there are certain requirements that have to be verified, under 
certain order process, before a forgivable loan can be 
approved.
    I also want to underscore the point on nonprofits and then 
give you a chance to sort of talk about how important it is to 
extend the program beyond the March date, and that is, 
according to Johns Hopkins University, which is really the 
premier organization for reliable statistics in regards to 
COVID-19, they have reported that the nonprofit employment 
number is down about 1 million as a result of COVID-19, just 
underscoring the point that you said, the financial challenges 
in the nonprofit sector.
    So I know you are active within the nonprofit community. 
How critically important is it for nonprofits, but as well as 
other small businesses, the change in the standard for the 
self-employed to be able to calculate how much they are 
entitled to? How important is it for us to extend that date?
    Mr. Hoey. I think it is essential. We are fortunate to have 
a really talented CFO, and we are doing our best. We also are 
reaching out to as many banks as we can. And I can tell you, I 
was just on a call this morning with colleagues of mine across 
the country, and the level of confusion, the different 
information being provided by different banks, which I do not 
think are intentional but there is just a level of confusion, 
given this bill was just passed last week. The SBA still is 
trying to set up its protocols for handling organizations which 
admittedly they do not typically administer programs for.
    And at the end of the day, I am convinced that most worthy 
and large not-for-profits will get shut out yet again if the 
extension is not granted. I just do not think it is reasonable. 
You know, this, to me, should not be a partisan issue. It 
should simply be a practical issue of, you know, can you do 
something this quickly, within two weeks' time, that requires, 
you know, a bank and a Federal entity to coordinate? I do not 
really think so. I do not think so at all.
    So I think it would be a grave mistake not to extend the 
period for 90 days. I think a lot of large nonprofits still do 
not even know they are eligible, quite frankly. That is another 
issue.
    Chairman Cardin. And we have got to get that information 
out. I understand that.
    Ms. Mensah, let me turn to you, if I might in regards to 
how effective the targeting of funds, or walling off for the 
CDFIs or for the small of the small businesses. Do we have a 
structure in place that gives us a better chance of reaching 
the underserved community? We know there is a challenge to 
start off with, with lack of banking relations with a lot of 
the small businesses located in underserved communities, but 
have the changes that we have made in the program over this 
past year been helpful, and what additional changes do you 
think we need?
    Ms. Mensah. The changes were incredibly helpful, Senator 
Cardin. This was a powerful change. You listened to the CDFIs. 
You listened to the businesses in your communities. So the 
changes made sense. The changes are working.
    What we must do is extend this deadline, and what you 
propose is a sensible extension, an extension to May 31st for 
the program and two months for the agencies and the lenders to 
do the back-office paperwork after that. That is the sensible 
change we need, and it will make a difference.
    And if I can also say, this income calculation that you 
made a change, it is a very sensible one. But like what Mr. 
Hoey spoke to, we need retroactivity. It came very late. So we 
need to be able to capture more businesses, and there is 
precedent for this. Congress made a similar income calculation 
for PPP loans to ranchers and farmers, so we have done this 
before. We listen to our constituents and to our fellow 
Americans who are hurting.
    So I simply urge you--you got it right. Let's give us time 
to make this work and heal these businesses and our economy.
    Chairman Cardin. Thank you. Senator Paul.
    Senator Paul. Mr. Polumbo, thank you for reminding us, you 
know, of the children who have suffered from these lockdowns. I 
agree with you. I do not think anybody intentionally wanted 
more children to kill themselves, to have more teenage suicide, 
but it is an unintended consequence and I think no one is 
really pushing back and saying it does not have something to do 
with the isolation kids are feeling from being at home and 
cooped up and not able to go to school.
    It would be one thing if people could say, well, the locked 
saved a million lives. Instead, I think it is very hard to look 
at objective evidence that says the lockdowns have saved any 
lives. And this will be debated for some time to come, 
hopefully with less emotion and with more objectivity.
    You mentioned Henry Hazlitt and the idea that responsible 
policymaking looks at immediate intentions but also at ultimate 
consequences, unintended consequences. Bastiat referred to this 
as sort of the seen and the unseen. It is very easy to see the 
PPP program. Someone gives you a whole bunch of money and you 
buy something or you keep your employees employed for three 
months and you see the seen. The unseen is what happens to so 
much debt and so much borrowing over time. Can you describe 
your opinion as to what will happen and what are the risks of 
borrowing $6 trillion over a two-year period?
    Mr. Polumbo. Yes, Senator Paul, and thank you for the 
question. I can speak to this as somebody who will be paying 
off this debt the rest of my life, in my 20s. We just have 
spent a total of $6 trillion, in total, on COVID relief, though 
according to PolitiFact, 90 percent of the last bill was not 
directly related to COVID-19. Now that money will hang over my 
generation the rest of our lives, and future generations in the 
form of decreased economic growth and opportunity, higher taxes 
every year just to meet the interest payments, and if interest 
rates go up anywhere close to historical norms, that will 
become an enormous expense on us.
    So when we are talking about expensive programs, expensive 
government programs, we have to see clear proof that they have 
worked, if we are going to argue that they should be reiterated 
in future iterations. And when it comes to the Paycheck 
Protection Program and many of these other stimulus efforts, 
that evidence just simply is not there.
    An MIT economist found that the Paycheck Protection Program 
only preserved roughly 2.3 million jobs in its first iteration. 
That came out to $224,000 in taxpayer expenditure per job 
preserved. That, for members of my generation who will be 
paying the consequences the rest of our lifetimes, is not a 
fair tradeoff.
    Thomas Sowell said this, the famed economist. ``There is 
only tradeoffs in policy.''
    Senator Paul.
    [Inaudible.] I do not know if you heard me because of my 
microphone. Mr. Griffith, do you hear me now?
    [No response.]
    Senator Paul. All right. I will direct that question to Mr. 
Polumbo then. Of the trillion dollars that is still left in the 
pipeline, do you think we would be wiser to be looking at how 
that money can be spent and will be spent rather than adding 
another $2 trillion?
    Mr. Polumbo. Yes, it is disturbing to me that we are 
pouring more Federal money out the door like candy on Halloween 
before even eating what we have already doled out. I just find 
the way that this was done, in terms of sending money out, in 
response to an emergency it is understandable, but it was done 
with very minimal verification requirements, leading to 
enormous fraud problems.
    Here is what The Wall Street Journal reported. ``The 
Federal Government is swamped with reports of potential fraud 
in the Paycheck Protection Program. Evidence is growing that 
many took advantage of the program's open-door design. Banks 
the government allowed companies to self-certify that they 
needed the funds, with little vetting. A Federal watchdog 
within the Small Business Administration said there were strong 
indicators of widespread potential abuse and fraud. They have 
counted tens of thousands of companies that received PPP loans 
for which they appear to be have been ineligible,'' The Journal 
reports, ``and tens of thousands of organizations also appear 
to have received more money than they should have, based on 
their head counts.'' And this is just one of the many COVID 
programs.
    So we have already allocated so much money but we have not 
fixed the glaring problems with how it is being spent, so to me 
it is irresponsible that taxpayer resources go and send much 
more out the door.
    Senator Paul. Thank you.
    Chairman Cardin. Senator Cantwell.
    Senator Cantwell. Thank you, Mr. Chairman. You know, I find 
this last point interesting just because, you know, when the 
first PPP checks went out, during the Trump administration, 
there clearly were problems. And we did not hear too much about 
it other than people were concerned and that we should do 
something. And then when we were getting to the next round, 
which also was bipartisan, people heeded some of the problems 
and made some corrections. But it is not as if this problem is 
just now here.
    And the other thing that we tried to is each round of PPP 
funding we have actually not done a good job of reaching some 
communities. So each time we have improved on the PPP program 
with changes to say that we are trying to reach those who just 
did not have a banker on speed dial. And when I think about 
putting small business dollars out the door, I am glad that we 
have made the effort, particularly on CDFIs, to make sure 
that--and listen, I know some people who actually had bankers 
on speed dial and still did not get PPP money.
    So, look. This is an issue about getting access to capital, 
which is really the fundamental issue of this Committee 
overall, I think, is working with SBA and making continued 
improvements so access to capital reaches more people. Why? 
Because when women and minorities get access to capital, half 
of the population, they actually help build the economy for the 
future.
    So I want to bring up Tribal communities, and this is for 
Ms. Mensah. Tribal and Native-owned small businesses continue 
to be on the underserved list. They face real challenges in 
getting COVID relief. The Biden administration, I believe, 
needs to focus on this, because they have been hard-hit by the 
pandemic. Lenders have denied Paycheck Protection Program loans 
to some Native-owned small businesses because they do not meet 
the SBA lending documentation requirements, that is, that 
Tribal businesses do not file a tax return because they do not 
have to, under their treaty rights, they do not have an 
employment identification number, and most are operating on 
cash basis and do not have the same kind of banking or internet 
systems.
    Yet they are a part of our economy. Native businesses have 
been--we have 20 federally recognized Tribes in the State of 
Washington. They participate in treaty-right fisheries. The 
Lummi Nation alone, just one of our Tribes, has over 470 
registered vessels that provide over 1,175 jobs in the fishing 
area. So this is very big, important businesses for us in the 
north part of our State.
    So the Lummi CDFI was able to help a very limited number of 
Native fishermen get PPP loans, and my staff were told that a 
majority of Tribal fisherpeople and other Native business 
owners who applied on their own at local banks were either 
denied by the SBA PPP loans or did not have the technical 
support on their admissions.
    So my question is to you, Ms. Mensah. The Recovery Act plan 
that was signed by President Biden last week contains $175 
million for community navigator pilot programs to better reach 
underserved communities, including Tribal communities. The 
Native CDFIs, like the Lummi CDFI, have been essential. What 
should we be doing to make sure that the navigator pilot 
program reaches more of these businesses, and what resources do 
the CDFIs have to help with these lenders, to make sure that 
these Tribal records help to bridge the gap here?
    Ms. Mensah. Thank you, Senator Cantwell, for your question 
and for raising the issue of Native communities and Native 
CDFIs. There are 70 Native CDFIs. The Lummi CDFI that you 
mentioned is an OFN member, as is the Northwest Native 
Development Fund in Washington. They get up every morning to 
help their Native communities and these Native businesses.
    You have come a long way already, and I praise the 
Committee and the administration for its inauguration of the 
community navigator program. We expect to see great things out 
of that program, but frankly, CDFIs have always played the 
navigator role. We are capital-plus. We always work with our 
communities. So strengthening CDFIs, which you can do through 
that program but also through what we have called for, is an 
increased appropriation to the CDFI fund. That will strengthen 
the effects of the money of CDFI and others to reach our native 
communities.
    What we learned in this pandemic is that it revealed 
historic inequalities and the ongoing inequalities. And when we 
push, with your help, the SBA to pay attention to all 
businesses, we are going to get the thriving economy that we 
need.
    So I have thanks for what you have done, I have great hopes 
for the navigator program, and I think the more we double down 
on our CDFIs and their ability to provide technical assistance, 
and capital, we will see all communities prosper.
    Senator Cantwell. Thank you. Thank you, Mr. Chairman.
    Chairman Cardin. Next we hear from Senator Marshall, who 
will be followed by Senator Booker on Webex.
    Senator Marshall. Okay, Chairman. Thank you. Thanks for 
having me today. My first question is for Ms. Mensah. I am very 
proud of the Paycheck Protection Program. I think it is one of 
the best programs the Federal Government has ever ran out. I am 
proud of my community banks, the commercial lending 
institutions, credit unions, the SBA, how they worked together. 
Kansas alone saved 600,000 jobs, 50,000 loans, and 600,000 
jobs.
    I knew, from any type of a crisis, though, that minority-
owned businesses would have the hardest access to capital, that 
that would be a challenge, and I specifically worked with my 
staff, and I worked with the lending community, and I worked 
with the local Chambers and especially the minority Chambers in 
some of the more distressed counties, and said, ``This is a 
priority. What can I do?''
    And the first round, sure enough, there was a lot of 
concern, and then the second round happened, and I went back to 
those same people and said, ``How are things going?'' And they 
said, ``Oh, we think it feels better. We think it is better.'' 
I said, ``Well, that is nice, but I need to see the data.'' And 
here we are, a year later, and I am looking at data from NAICS 
details from my particular State and trying to figure out, did 
we help minority-owned businesses or not?
    And the data I have got here, percent of total loans, 76 
percent are unanswered. So we do not know if they were from 
Black African Americans, Hispanic, Asian, or White. Seventy-six 
percent of the loans we do not know who they went to. And I 
went to the national data as well, and 87 percent are 
unanswered.
    So I guess I do not know. How did we do with minority 
loans, and can you give me any help understanding? Is there 
data out there that proves, that shows we are doing a good job?
    Ms. Mensah. Senator, thank you for your interest and for 
your concern with our minority businesses. That is the kind of 
concern that helped our CDFIs and our local banks, credit 
unions, to get this done.
    Thankfully, the new administration is putting more focus on 
accounting and reporting. We are hearing more. We, at CDFIs, 
did not originally get easy data from the SBA, and we are 
getting more now. So I know you will have opportunities to 
bring in the SBA staff and hear more.
    There is no question we lost businesses, but there is also 
no question that are poised to double down on helping minority 
businesses recover, and that is what these new resources are 
doing.
    Senator Marshall. So do you have good data that you could 
share with me or send to us, to show us how we did in my State 
with the institutions that you are responsible for, that work 
with, what percentage of the loans went to minority businesses? 
I am trying to figure out how do we measure success.
    Ms. Mensah. Yes. I think we have to look countrywide, 
statewide, but I will be happy to share with you what we have. 
But we also received that data from the SBA itself. I will 
share with you from my numbers. We have 350 members. About 50 
of them did PPP, and most of them were helping in this 
navigator role.
    Senator Marshall. Someone smarter than me once said if you 
cannot measure it, you cannot manage it. But thank you so much.
    My next question for Mr. Polumbo. You know, I am sad that 
here we are a year later, it is going to take someone like you 
to have to show us what I intuitively knew, and Dr. Paul knew 
as well, that shutting down the economy, shutting down schools, 
shutting down society was going to create a mental health 
crisis. And the records bore out--increased depression, 
suicide, substance abuse, overdose, domestic violence--that 
shutting down the economy, shutting down society would create 
all these.
    And I was always especially concerned about youth suicides. 
You know, going back to last April, I said that more children 
would die from suicides and substance abuse than the virus. We 
already knew by then that this virus was not especially 
virulent to children. And I thought that there was a safe and 
responsible way to keep our kids in school, and certainly by 
August I think there was enough data to prove that as well.
    You know, I just want to submit for the record, in Kansas, 
what the COVID cases are doing. The hospitalizations are going 
down. I mean, we certainly are close to herd immunity. If I 
could submit these for the record, please.
    Chairman Cardin. Without objection, they will be part of 
the record.
    [Slides submitted by Senator Marshall follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Marshall. So we knew that these consequences would 
be unattended but they were totally predictable. What would 
your plea be to teachers, and thank you to the teachers that 
are helping us at our schools. What would your plea be to the 
teachers that are refusing to go back and teach?
    Mr. Polumbo. Well, I would say that there are many great 
teachers in this country, but teachers' unions have been a 
pernicious force to fight to keep schools closed, and data 
consistently shows, studies consistently show that schools are 
not dangerous, if proper precautions are taken, and they have 
demonstrated the achievement gap this will create for this 
generation of children. We will have a generation of lost 
children, to some extent, who will see lower incomes, according 
to McKinsey analyses, of thousands of dollars a year, with 
higher gaps for African American and Hispanic children. This 
damage will follow them for the rest of their lives.
    Senator Marshall. Thank you so much, and I yield back.
    Chairman Cardin. Thank you. Senator Marshall, I just really 
wanted to point out that under the leadership of Chairman Rubio 
I joined him in asking for that type of granular information on 
the PPP loans. We were not alone. The inspector general of GAO 
also wanted to get that information. And for reasons that we 
would not accept, they did not have that granular information 
when the program was first implemented. We are now getting 
better information. We now know the sizes and where they are 
going. So we do have better information, but I join you in 
wanting to see the granular information. We are going to get 
that for the Committee.
    Senator Marshall. Thank you.
    Chairman Cardin. Senator Booker via Webex.
    Senator Booker. Mr. Chairman, thank you very much. I am 
excited about the promise and possibility and opportunity that 
is going to be afforded so many families in peril and in 
crisis. As a Senator that lives in a low-income, Black and 
brown community where we do not confuse wealth with work, to 
see the difference it is going to make for so many children and 
so many families who have been impacted by this pandemic is 
incredible, and the overall economy, as The Wall Street 
Journal, who has boosted their average forecast for 2021 for 
economic growth to 5.95 percent following the passage of this 
bill. It is going to be really the fastest pace of growth we 
have seen since 1983, is what they are predicting. That 
benefit, because this bill, unlike the toxic Trump tax cuts, 
which will cost about $1.9 trillion, were the top quintile, saw 
most of the benefit, about 65 percent. This is actually going 
to help communities like mine and working people all across the 
country and all across the State of New Jersey really thrive 
and succeed.
    I am also happy that we addressed a lot of the problems we 
were having, justice-involved entrepreneurs. We talked about 
this. We got it addressed in this bill, and I am appreciative 
of Senator Rubio and Senator Cardin for speaking out and 
supporting my efforts there.
    We saw a lot of the smallest businesses, women of color, 
women and people of color, really get more targeted support in 
this, as well as what we have already heard in this Committee, 
is the nonprofit organizations that have really been 
struggling.
    I want to turn my question, in my remaining time, to Ms. 
Mensah. In your testimony you outlined a number of issues that 
underserved business owners are still up against--slow tech 
rollouts, delayed guidance from the SBA and Treasury, and the 
lack of communication, really, between the SBA and lenders and 
customers. And I have heard about these repeatedly from my 
constituents from north Jersey all the way to south Jersey, 
small business owners who are really struggling to get through 
what is a complicated process, trying to decipher the 
requirements at the kitchen table.
    The American Rescue Plan actually tried to address this by 
including $175 million to establish community navigator pilot 
programs to improve the support that these small businesses and 
entrepreneurs are really receiving. Can you tell a little bit 
more? I know you have talked about this a bit, but how CDFIs in 
your network are actually going to do the work, engaging that 
navigator role, and how we can expect that investment to 
translate into really better serving small business owners.
    Ms. Mensah. Thank you, Senator Booker, for your work and 
for explaining the crucial role of navigators. We think you got 
so much right in this plan.
    When you do not have a banker on speed dial, or an 
accountant or a lawyer on speed dial, you need help. You need 
good advice that you trust, that is on the level, that you 
trust, and that is where our CDFI partners come in. As I said, 
maybe 50 of our members actually make the CDFI loans out of 
their own resources. The others are active in actually helping 
borrowers and pointing them many times to community banks or 
others in their community--where can you get this help?
    So this is what the navigator grants will allow, all this 
technical assistance, and it is going to be important. It will 
be important in our rural communities, you know, in places 
where people are familiar, we are in, we are rooted, and in our 
cities, like right in your hometown. We will be there as a 
field of institutions, to help people connect to these 
resources. It is a perfect partner, and we appreciate you 
listening.
    The only thing we need now is more time for this program to 
work, so this extension gives us more time to get loans 
forgiven, and what we hope is more resources for the CDFI field 
in general, and more emphasis in the SBA on connecting once 
this program is done, so that we are there for the long haul 
for those businesses.
    Senator Booker. And just really quick, in my remaining 
seconds, you know, the time that you mentioned is so important 
right now. The revised loan calculations for sole proprietors, 
independent contractors, and self-employed individuals just put 
out by the administration, just earlier this month, has meant 
that a lot of these sort of micro-businesses can get some 
relief. There was a North Carolina Black-owned florist shop 
that got a PPP loan of $525 early this year, now is eligible 
for $2,750. There is a Latino-owned marketing business that I 
heard about in California. They received a loan of $1,500, now 
is eligible for $2,600. These are big differences for those 
small micro-businesses.
    And so just really quick, to close me out, in your 
experience if these micro-enterprises had the time that they 
need and the resources to fully access the PPP, they could have 
been more successful in getting these loans. But right now, 
this time that you just talked about, and that help, could be a 
difference-maker for tens of thousands of micro-businesses 
around the country. Is that correct?
    Ms. Mensah. That is correct. The changes will be game-
changing. What we need is retroactivity and we need the program 
to extend.
    Senator Booker. Thank you. Thank you very much, Mr. 
Chairman, for allowing me the time, and I am grateful for this 
very, very good panel.
    Chairman Cardin. Thank you, Senator Booker. We will now go 
to Senator Ernst who will be followed by Senator Duckworth via 
Webex.
    Senator Ernst. Thank you very much, Mr. Chair, and thanks 
to our witnesses as well for being here today. And as we are 
sitting here it has been just shy of one year since the CARES 
Act was signed into law and the Paycheck Protection Program was 
originally created. PPP has provided essential assistance for 
our small businesses in Iowa and all across the country.
    Though this program has saved millions of jobs and 
continues to be a proven success, it is important that we 
continue to consider ways to improve the program and make it 
work for all forms of small businesses, including family 
farmers and our self-employed folks, which is why I am glad 
that we are having this hearing today.
    And we will talk a little bit more. I am going to carry on 
kind of where Senator Booker started. But Ms. Mensah, about the 
recalculation issue, I would like to discuss that with you 
today. In your testimony, you do discuss the new rules that 
allow self-employed folks to calculate their loan based on the 
gross income instead of the net income, which increases the 
size of the loan that they would qualify for. And you also 
reference the fact that the new calculation is not available 
for those businesses who received a loan prior to March 3rd, 
and I also agree with many others that this is unfair. I have 
heard from Iowans who received loans as small as $80--$80--last 
year, and these folks should be able to benefit from a higher 
loan amount. But under the current rules, they cannot 
recalculate their loan.
    In your testimony you suggest that SBA make these changes 
retroactive, just as you said, in the same way that we do for 
farmers and ranchers. However, this would not fully solve the 
issue. Under current rules, only farmers who have not been 
approved for loan forgiveness yet are allowed to recalculate 
for the higher loan amount, and as a result of this policy many 
Iowa farmers lost out on thousands of dollars because they had 
their loan forgiven shortly before the relief bill had passed 
in December.
    If we treat self-employed folks the same way, those who 
already had their loan forgiven would still be left out, and I 
believe that Congress should take this a step further and allow 
all Schedule C and Schedule F filers, including those who have 
already had their loans forgiven, to recalculate using gross 
income. And what are your thoughts on this?
    Ms. Mensah. Well, Senator Ernst, it is always impressive to 
hear you are listening to all of the communities, including 
rural communities, including those who derive their income from 
ranching and farming. Many of our CDFIs work in rural areas, 
supporting the many small businesses that are sustaining rural 
communities.
    So I stand with my testimony. We urge Congress to do the 
two things that will help here. First, give us more time, and 
so please extend to May 31st the true extension of the program, 
and then please consider this retroactivity. We think this will 
help. And with CDFIs on the ground to help work through these 
changes we can help those businesses reapply.
    So I hope you look at us as partners to working. This is 
the best way government works, when you have a responsible, 
fair partner on the ground who can help reach into the crevices 
of the economy. So thank you for your listening ear on this.
    Senator Ernst. Thank you, Ms. Mensah, and I would also 
continue on. You are absolutely correct. We need to reach every 
community possible, helping the folks in the urban areas as 
well as our rural areas. We have difficulties all the way 
around. And you also spoke of some glitches in the SBA's new 
lending platform and delayed or incomplete guidance, and we 
have heard those similar concerns from folks in Iowa. Do you 
believe that there are any additional improvements that SBA 
needs to make sure and ensure that no one gets left out of the 
program, and can you explain a little more?
    Ms. Mensah. We are pleased to see the SBA working with the 
new administration and working quickly. We are pleased to see 
the changes that have been made. Our principal recommendation 
is to extend the time, and then once the Paycheck Protection 
Program is over and you have the agency in front of you, to re-
look again, top to bottom, at how all of these programs can 
better serve the most underserved. That is the group that is 
having the challenge, so that is our principal recommendation.
    Senator Ernst. Yep, absolutely. Thank you so much for your 
time. To all of our witnesses today that have appeared in front 
of the community, and thank you, Mr. Chair. This has been a 
very, very helpful Committee hearing, I think as we look at the 
Paycheck Protection Program. Thank you.
    Chairman Cardin. Senator Ernst, let me just underscore a 
point that was just made. We are going to have on the floor 
next week the extension. It has passed the House by 415 to 3. 
We are also going to find out from the SBA--I support the 
retroactivity and we are going to have a bipartisan way of 
trying to correct that. We need to work with the SBA, because 
they have raised some administrative issues.
    So we are going to work through that. As a matter of 
fairness, we need to make that provision retroactive. So we are 
going to try to figure out how to do it. And what Ms. Mensah 
was saying, we want to make sure these programs are working 
well, so the Committee is making that one of our priorities, 
and I can assure you we are going to do this in the manner in 
which this program has been handled since its inception, with 
bipartisan, working together.
    Senator Ernst. I appreciate the attention to it. Thank you, 
Mr. Chair.
    Chairman Cardin. Senator Duckworth via Webex.
    Senator Duckworth. Thank you, Mr. Chairman. As President 
Biden said last week, we are emerging from a dark winter to a 
hopeful spring and summer, but we have to keep our foot on the 
gas and take nothing for granted. We must sustain relief 
efforts so that our businesses and nonprofits also can keep 
their doors open and we can build back better than before.
    So on that note, I want to turn to Mr. Hoey. First, I want 
to thank you for everything you and your organization have done 
over the past year. Essential workers and others needed the 
help of nonprofits like yours, and you all stepped up. 
Nonprofits in Illinois stepped up too. They helped those 
struggling with severe and persistent mental illnesses, worked 
through rapidly changing circumstances. They distributed PPE, 
food, other resources, and they are a part of our effort to get 
citizens vaccinated quickly. We owe a great deal of thanks to 
our nonprofit leaders.
    Now, many of these entities face another crisis with PPP 
set to expire on March 31st. I agree with your testimony. 
Congress expanded this program to nonprofits like yours and it 
should certainly extend the program to allow it to happen.
    Mr. Hoey, please describe, for the members of this 
Committee, the services that you are currently providing to 
bring us out of the pandemic and that you may have to shutter 
if Congress does not take this simple action of extending the 
PPP deadline.
    Mr. Hoey. Thank you so much, Senator Duckworth. And by the 
way, I applaud the Y in Chicago. I am very familiar with their 
work and they have done yeoman's work as well.
    Yes, the challenge here is that, you know, organizations 
like ours, we have such a wide array of programs and services, 
and because we are a not-for-profit and our charter is really 
to serve the community, you know, we are on a very thin margin 
and we can never accumulate enough cash for a pandemic, for 
sure.
    So this program is essential. Otherwise, we are going to 
have to borrow a significant amount of money at market rate, 
that will really stunt our work for years and years to come. 
You know, there is just no way around it, and probably result 
in further reduction of force.
    During this pandemic and going forward, you know, we have 
stepped up, and we have done so because we are really one of 
the few organizations at scale that had the sites and the 
structure to step in on food distribution. So we partner with 
food banks. We have 100 sites around the region, and many of 
those are in the most challenged neighborhoods so we were able 
to get food to people more efficiently, using our sites and our 
volunteer network. We opened up what we call academic support 
centers with all the virtual learning that is going on, and 
particularly parents that have to go to work and they do not 
have the luxury of working from home. We provide a safe way for 
kids to learn and make sure that they do learn, but they also 
get socialization.
    And then, you know, we had reopened our doors for our 
regular service, by and large, but, you know, the community 
relies on us, seniors rely on us to have a place to stay active 
and healthy. Families rely on us to have a place to go to keep 
their kids active and for them to connect. Our work is endless. 
I mean, we have been providing wraparound services for schools 
that are sort of in a hybrid situation, which is very tricky. 
So one day we may be providing a full day of virtual learning 
and the next day providing after-school programming.
    So, you know, it has really been quite a year, I have to 
say, and I am proud of the work that we have done, but not just 
the Y but really not-for-profits. And like I said, I have to 
emphasize the not-for-profit community stepped up, but the 
larger not-for-profits were the go-to organizations for the 
states and the counties, in Maryland and throughout the 
country, to really get stuff done in the face of this, because 
of our infrastructure and our expertise. We are proud to do it, 
and all we are asking for is just now that this bill has been 
signed, an extra 90 days to get our applications in.
    Senator Duckworth. Thank you. Mr. Chairman, I would like, 
at this time, to enter into the record a letter from several 
nonprofits in my State, highlighting the importance of this 
issue.
    Chairman Cardin. Without objection, those statements will 
be made part of our record.
    [Letter submitted by Senator Duckworth follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Duckworth. Thank you, and I would like to submit 
the rest of my questions for the record. It has to do with the 
simplification of the forgiveness process for those with PPP 
loans of $150,000 or less. I urge the Small Business 
Administration to simplify this process, because so many of my 
businesses are finding the process extremely onerous.
    Thank you. I yield back.
    Chairman Cardin. Thank you. We will now go to Senator Rosen 
via Webex, and she will be followed by Senator Shaheen.
    Senator Rosen. Thank you, Chairman Cardin. I appreciate 
that. And I want to thank you really for holding this hearing 
on the Paycheck Protection Program and how we can continue to 
serve our small businesses as they recover from the economic 
downturn caused by the pandemic. So, Mr. Chairman, I was proud 
to join you, Senator Collins, Senator Shaheen in co-sponsoring 
legislation to extend PPP through the end of May, and I look 
forward to working with this Committee to pass that legislation 
before the PPP expires in two weeks.
    So I want to talk a little bit about EIDL, because COVID-19 
has impacted our country of course in profound ways. It has 
been particularly challenging for many of our small businesses 
in Nevada. For travel and tourism, our industry has been hit 
hard, and 99 percent of businesses in Nevada are small 
businesses.
    And while we are on the road to recovery, our economy is 
just not going to come back to life with the flick of a switch. 
It is going to take time. So that is why, two weeks ago, I 
reintroduced by bipartisan EIDL for Small Business Act with 
Senator Cornyn. My bill would lift the SBA's caps on EIDL loans 
and EIDL advance grants, providing all eligible small 
businesses with loans up to $2 million, and the full $10,000 
grants regardless of size or location, just as Congress 
intended to when we passed the CARES Act just about a year ago.
    So I know we are here to discuss PPP. As our small 
businesses continue to struggle, we cannot lose sight of the 
other critical lifelines like EIDL.
    But, Ms. Mensah, in your written testimony you talk about 
the impact of reforms Congress has made to the SBA relief 
program, including repealing requirement to deduct auto-advance 
payments from PPP loan forgiveness. Could you talk about the 
impact of that policy on our small businesses, and thinking 
also a little bit, too, I guess as a second follow-up to that, 
our businesses that CDFIs work with every day, what it would 
mean if they got this full $10,000 from the EIDL advance grant 
to keep their doors open.
    Ms. Mensah. Thank you, Senator Rosen, for your concern and 
your understanding of the nature of the small business economy. 
We think you got so much right, and, you know, it is 
disheartening when our CDFIs work with a business only to 
conclude that the very thing that helps them reduces the amount 
that they were supposed to get. That is tragic, that is hard, 
and it is disheartening to go through all the work. So you got 
the right proposal and we urge you.
    We also think, key to this whole recovery, is the time on 
task to get really these reforms ingrained, and when a business 
can receive this kind of support and receive it skillfully, it 
is game-changing and it is the bridge they need to retake their 
place in the economy. This is the kind of bridge.
    So we are thankful for the work you have already done. I 
agree with also Senator Duckworth's point, streamlining the 
forgiveness. That will also help our CDFI-supported businesses, 
particularly when the loans for many are well under $150,000. 
And that is what Congress' direction was, and I think if we can 
keep that focus then our businesses can fully participate in 
the recovery.
    Senator Rosen. Thank you. I want to move on and talk a 
little bit about our indoor air, making it germ-free or clean, 
our indoor spaces, to build consumer confidence to help our 
small businesses reopen safely. And, of course, for me, our 
tourism industry, hospitality, restaurants, retail, 
conventions, all of the live events.
    And so I just introduced, with Kevin Cramer a bipartisan 
act called the Fresh Air For Small Business Act. This 
legislation is going to provide refundable tax credits for 
small businesses to upgrade their HVAC systems to mitigate the 
risk of COVID-19 in the air we breathe. I want people to go to 
back indoors and feel confident.
    So, Mr. Hoey, as someone whose organization brings the 
community together indoors, can you talk about the importance 
of making investments to ensure that our indoor activities are 
safe, not just for the workers but for all of us who want to go 
back and enjoy all of it. So how can investments in PPE, 
ventilation, and other modifications, how does this help us 
bring back members and protect workers?
    Mr. Hoey. Yes, it is very important. Obviously, most 
organizations or entities or companies have indoor spaces, and 
they vary in size, so ventilation is a complicated issue and it 
is so dependent on size and the structure of the building. But 
the truth is most businesses, most organizations like ours did 
not anticipate something of this nature, and so a lot of the 
systems that we have, HVAC systems, do not have the 
requirements. We were fortunate that a lot of our buildings are 
newer so we were in a little better shape, but some of them are 
not.
    And so these are very expensive systems we are talking 
about, and so I think support for that is wise, not just now 
but I think going forward. Improving the air quality inside 
buildings is very important, and I think it will be a good 
investment, even when we all hopefully get vaccinated and can 
move back to a more normal world.
    Senator Rosen. Thank you. I could not agree more. I yield 
back my time. Thank you.
    Chairman Cardin. Thank you, Senator Rosen. We will now go 
to Senator Shaheen, who will be followed by Senator 
Hickenlooper. And in introducing Senator Shaheen I just really 
want to thank her. She has been one of the leading architects 
of trying to make sure we get the program tailored to those 
small businesses that really need it, and one of the sponsors 
of the amendment that would extend the date on the PPP program.
    Senator Shaheen. Well, thank you very much, Mr. Chairman, 
and I certainly appreciate the opportunity to have worked with 
you and your leadership on this issue. And we are seeing 
progress, which is very exciting. I want to thank all of the 
witnesses for their testimony.
    One of the issues that I have heard consistently from small 
businesses in New Hampshire, and I just heard it again on 
Monday with respect to the Restaurant Relief Fund that has been 
incorporated into the American Rescue Plan, as well as the 
Shuttered Venue Operators Grant program that was initially 
passed in December and get $1.25 billion more help for that 
program in the recent COVID package, is concern that there has 
not been clear guidance that has been put out.
    Now I do appreciate, and I tried to reassure people, that 
we have been in a transition from one administration to the 
other. We have a just-approved new administrator of the SBA. 
But, Ms. Mensah, can you talk about how important it is for 
small businesses to have that clear guidance from the SBA and 
to know what the parameters are, so that they can move forward?
    Ms. Mensah. Thank you, Senator Shaheen. You are so right. 
What you are hearing is echoed through all of our CDFI 
community. The lenders need the guidance so that they can 
advise the businesses, and this has been a challenging time, 
particularly for the changes you made, wisely, for sole 
proprietors, it is now possible to get this assistance and it 
was not as possible earlier.
    So this clear guidance is important and time is what is 
going to make that possible, time and the right partner. So I 
would urge you the swift passage of this extension, and it is a 
true extension. It is an extension to keep the program open 
until the end of May, and then to have administrative side. 
Already, lenders are having to stop lending. And so it is a 
confusing time. I believe time will heal that confusion, and I 
think there is a lot of good out there. There are so many CDFIs 
that are in place in our communities that know how to help and 
can come with better advice, better resources.
    And so I urge you to look to the swift extension of this 
program.
    Senator Shaheen. Well, thanks very much, and I think an 
extension is critical. I hope we will be able to get bipartisan 
agreement for that. I also think it is very important for the 
SBA to hear loudly and clearly from this Committee that the 
focus should be on providing guidance for these new programs, 
to make sure that that can get done just as soon as possible. 
And now that Administrator Guzman has been approved, hopefully 
she will be able to get in and see what help they might need. 
And if it is a resource question, I hope they will come back to 
the Committee, Mr. Chairman, and let us know what they need in 
order to get this done.
    I have a question, I guess it is Mr. Hoey?
    Mr. Hoey. Hoey, yes. Thank you.
    Senator Shaheen. Because I understand that yours was one of 
those entities that previously could not qualify for PPP 
because you were technically affiliated with the national YMCA, 
and that now, under this new COVID rescue package we have 
allowed for your organization, with the YMCA, to qualify. Can 
you talk about what the impact will be on your workers and your 
community if you are able to take advantage of the program?
    Mr. Hoey. Sure, and thank you for that. Yes, the Y is what 
is called a federated organization, so we are all independent 
501(c)(3)s throughout the country. There are actually 800 of 
those, and we are one of them, and obviously we all vary in 
size. The larger Y's, like mine and many others across the 
country, all have well over 500 employees, and so we were not 
eligible. But this change now looks at the number of employees 
by site, since we all are multisite, the large Y's are 
multisite across regions.
    So it is really a game-changer for us. I would tell you 
that the alternative for us was really to go into debt, and we 
already carry debt on many of our buildings. We have never had 
to borrow money for operating purposes. In my 14 years doing 
this, the idea of borrowing money just to operate on a day-to-
day basis is an anathema. We have always been one of those 
organizations that was able to be financially sustainable.
    And I have often said that, you know, the Y is one of the 
best business models for a nonprofit you could think of, except 
for during a pandemic. You know, it really would have put us on 
our back, and also, with that incremental debt, additional 
debt, I think we would have had to look at closing a lot of our 
sites and not being able to justify doing some of our work, and 
sadly, some of our work in some of the most distressed 
communities, because, you know, we rely on some of our 
operations to have better cash flow than others, and we make it 
all work. But when you force organizations like ours into 
borrowing for its operating needs you end up making some 
choices that really have a negative impact in communities, 
particularly communities that are more disadvantaged. I just 
think that is the wrong thing to do, it is counterproductive, 
it is short-sighted, and all we are asking for, and thankfully 
this bill does this, and the extension will enable it, is to 
let us get back to the point where we can be self-sustaining. 
And that is what this is. This is essentially a bridge to our 
normal self-sustaining financial model.
    Senator Shaheen. Well, thank you very much. That is what I 
have heard from the Y's in New Hampshire, and as you say, you 
provide very valuable services, particularly to many 
communities that have a lot of need from the folks who live 
there. So thank you. I am glad to hear that this is going to be 
helpful to you. I hope it is going to be helpful to our Y's in 
New Hampshire as well.
    Thank you, Mr. Chairman.
    Chairman Cardin. Thank you, Senator Shaheen. Senator 
Hickenlooper via Webex.
    Senator Hickenlooper. Yes. Thank you, Mr. Chair, and I want 
to thank all of the witnesses today for I think really an 
illuminating session. One of the benefits that comes out of a 
crisis is we do see our economy and the businesses that create 
it and the nonprofits that create it, you know, with a clarity, 
both in terms of the challenges but also the opportunities.
    Ms. Mensah, can you discuss--well, or just try and parse a 
little more deeply which small businesses will benefit from the 
changes that the Biden administration has made around the 
change involving sole proprietors, and these are, as I think, 
the truly small businesses.
    Ms. Mensah. Thank you, Senator, for that focus on a group 
that, frankly, was left out and did not feel that they could 
have meaningful participation.
    So I described a client, HOPE Enterprise in Alabama, a 
woman that under the old rules was running a boutique. All of 
the things were filed. Her Schedule C filing only enabled her 
to have $700. But when she could file under the new rules, she 
could get $20,000. So that is the kind of power. It is fair. 
You know, it was looking at gross income instead of net profit, 
and this is the understanding this Committee and the SBA and 
this administration took when it made the changes.
    So this is so important, and as Senator Ernst and I 
discussed this, there is a precedent for this in farmers and 
ranchers before. So what we are proud of is that in the middle 
of a crisis Senators came together, bipartisan worked together, 
and worked to let us do our work, frankly. And they gave us 
more time, you know, to come in and help these kinds of 
businesses.
    So we are ready. CDFI's get up and work on someone that may 
be eligible for $400, so we are not making money off making 
loans like that. We are helping businesses to thrive.
    And so the real request here is all of the streamlining 
that you put in place, but we need the time to get it done, we 
need the simplification. One of the things that, you know, for 
people coming back now with their forgiveness, if they are 
under too much scrutiny all of our staffs have to switch to 
helping people with the forgiveness phase, and they are unable 
to help that next layer of people who now have eligibility as 
sole proprietors.
    So I would just urge the Senate, in its work with the 
administration, to keep the pressure on. Let's take the time, 
but then let's focus on what really needs to be focused on, 
particularly in this forgiveness phase, where we need to keep 
the focus on those loans that are $550, not worrying about 
chasing down a $1,000 loan for forgiveness. We believe those 
remain in good faith, and we look forward to seeing this 
program sail forward for the months that should be left on the 
program.
    Senator Hickenlooper. Right. Well, I think you have been 
doing great work there, and we really do hear many more success 
stories this time, I think, than before. And certainly the SBA 
has said it would create additional communication channels with 
lenders to make sure that we got this new approach to PPP and 
to the Shuttered Venue program, to get those lines of 
communication.
    I know that previously there was so much frustration. Have 
you found a way to kind of create those channels of 
communication, and is that something that might be a permanent 
benefit, not just to your organization but to other people 
providing loans to these truly small businesses?
    Ms. Mensah. I think, as you began your remarks, you said 
sometimes this crisis helps us see more clearly. And I think 
the agency has done a good job now. They are doing more 
reports. They are holding more briefings. They are opening 
their website. They are giving us more data, which we did not 
even have at the beginning. And I know they are working all the 
time to do this. They are clearing out the error codes and they 
are trying. So I appreciate that this is a difficult task, but 
this is where we need to focus.
    And the other thing I would say is that what this crisis 
showed, what the nutshell of PPP showed was that all small 
businesses are not equal, that some are truly smaller and more 
disadvantaged. They are still part of this economy, still 
essential to this economy. But it took more. They did not have 
huge leagues of bankers and lawyers to help them, and so they 
had CDFIs. And what we have learned from this crisis is that is 
what matters.
    And so I hope when SBA, when the dust clears and the 
programs move to the more permanent side that what you will be 
pushing the SBA to do is top-to-bottom review of all of its 
programs. Let's make this agency help us get down to the bottom 
of the economy, where so many people do need these programs to 
work better. And that is the partnership we are urging with the 
CDFIs.
    Senator Hickenlooper. I appreciate that more than I can 
say. You know, when I started a restaurant in 1988, back when 
it only had eight people working there, when you are that small 
it feels like you feel everything more intensely, like your 
emotions are right on the surface of your skin. And you are 
exactly right, we need to do a better job of going back into 
the SBA and looking at how do we take these lessons learned and 
make it part of their DNA.
    Thank you very much. I thank you all for your testimony 
today, and I yield my time.
    Chairman Cardin. Senator Hickenlooper, thank you for those 
questions. We, in the last Congress, tried to look at the 
reauthorization of the SBA programs. We did not quite get 
there. I can assure you, we are going to be looking at the 
existing tools to see whether we cannot make them more 
effective in carrying out the mission, particularly reaching 
the traditionally underserved communities, and the smaller of 
the small businesses. So we are going to be looking at those 
programs.
    Ms. Mensah, I want to ask you one additional question, if I 
might. There were two changes made in December that affect 
qualification for the second round of the PPP. One was to 
reduce the size from 500 to 300, and the other was to put a 
revenue requirement of a 30 percent reduction. Quite frankly, I 
have not heard a lot of concern about those standards as to 
needing an adjustment or not. I was wondering whether you have 
heard any chatter as to hardships or whether this is the right 
number and now we are tailoring it to the more in need. What is 
your reaction to the two changes made in the second round of 
PPP?
    Ms. Mensah. Thank you, Senator Cardin. The reduction of 
size from 500 to 300 was not a problem for CDFIs. It was a 
welcome change. We knew that the group that was struggling had 
300 and much, much less. So that I have not heard any 
objections to from our CDFI community.
    As for the revenue request, I am not aware of challenges to 
this. My basic point is that we felt heard by this Committee. 
We were invited to testify before. We felt you worked in a 
bipartisan way. And we felt listened to, and we felt like 
partners, as one of the lenders that should have always been 
central to the kind of approaches. Even though we were smaller, 
we felt listened to.
    So I am here to say thank you for listening, thank you for 
your invitation to come today and really dive into what the 
impact has felt like in 50 States, diverse places throughout 
this country, and to give us more time to do this right.
    Chairman Cardin. Well, thank you. Quite frankly, I have not 
really heard too much concern about those two changes that were 
made. We do know that the initial information we are receiving 
showing that it is tailoring to smaller small businesses, the 
size of the loans and the targeting seems to have worked very 
effectively. We do not have the numbers yet, and obviously we 
want to see the numbers. And then, of course, we are using the 
revenue standard losses for other programs, including some of 
the priorities on Shuttered Venues, et cetera.
    So it is a standard that looks like it is being accepted 
and makes a great deal of sense. If you are trying to target to 
those businesses that have suffered the most as a result of 
COVID-19, looking at the revenue losses is certainly a 
legitimate way to try to target money to those small businesses 
that really need it.
    And I noted some of the concerns that were raised initially 
about the program. But let me point out, in March of last year, 
when we started the PPP program, the objective was to get money 
out quickly to small businesses so they could maintain their 
payroll. The view was that it would be a better investment for 
a small company to keep their workforce rather than having 
their workforce go on unemployment, which it would cost 
taxpayers equivalent sums of money without the benefits of 
having the workforce maintained. This was very much a 
bipartisan effort. Senator Rubio and myself, along with Senator 
Collins, Senator Shaheen, and others worked together on this 
program.
    So the original PPP program was to get money out quickly to 
as many small businesses as possible, and I think we achieved 
that objective. But as you pointed out, Ms. Mensah, as we went 
through the program we recognized that certain communities were 
not treated as well as we wanted them to. They did not have the 
relationship with the bankers. We knew that was going to be a 
problem. We thought SBA would deal with it. That is why we put 
language on page 30 for them to do that, but they did not. And 
that was when Congress had to be more aggressive in targeting 
funds.
    And I just really want to point out, Secretary Mnuchin at 
the time worked with us to get money into the CDFIs, which I 
applaud him for working with us on doing it. We wanted to be 
more aggressive than he wanted to be, but he was able to help 
us in targeting money into CDFIs.
    So this has been a bipartisan effort to try to evolve the 
program to meet the current needs, and we are still on that 
path, and I want to thank all of our witnesses for their 
testimony. It has been extremely helpful. This is the beginning 
of our record as to how we can make sure that the government 
investment in the small business programs are working as 
Congress intended, and this Committee will continue to hold 
oversight hearings, including next week with representatives 
from the Small Business Administration.
    The record will remain open for two weeks for questions 
from members of the Committee. I want to thank all four of our 
witnesses for your attendance here today and your help in our 
Committee work. And with that the Committee will stand 
adjourned. Thank you all very much.
    [Whereupon, at 4:16 p.m., the Committee was adjourned.]

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