It is a reality as sure as death and taxes that bureaucrats desire to increase their turf as a means of justifying new powers and additional funding.
But President Joe Biden’s penchant for “whole of government” approaches to advancing his policy priorities, from the “climate crisis” to “racial equity” to “[increasing] union membership,” has certain agencies working well outside their lanes.
Few examples are quite as stark as the U.S. Small Business Administration’s recent promotion of labor unions.
As federal agencies go, the SBA’s mission is largely uncontroversial. When it created the SBA in 1953, Congress directed it to “aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise.”
But the SBA’s handling of key COVID-19 relief programs has undermined the agency’s standing.
A major component of the CARES Act, the first COVID-19 spending bill passed by Congress in March 2020, involved creation of the Paycheck Protection Program. The SBA-administered program provided forgivable loans to businesses with fewer than 500 employees to help maintain payroll and avoid mass layoffs during the government-imposed pandemic lockdowns.
While the initial eligibility criteria were quite broad, PPP eligibility for tax-exempt organizations was limited to 501(c)(3) charitable nonprofit groups and 501(c)(19) veterans’ organizations.
Nonetheless, a recent Freedom Foundation analysis of SBA’s PPP loan database identified 223 loans totaling $36.1 million made to labor unions and related organizations between March 2020 and March 2021 that, as mostly 501(c)(5) nonprofit groups, were not eligible to participate in the program.
The recipient list included a dozen teachers unions and advocacy groups, such as the Michigan Education Association and the Memphis-Shelby County Education Association, ironically among the fiercest champions of lockdown policies, the effects of which PPP funds were intended to alleviate.
Other government unions, from the Alabama State Employees Association to the Maryland Public Employees Council, also received sizable loans for which they apparently were not eligible. Even affiliates of the AFL-CIO — essentially a political advocacy and trade association for unions — from the Alaska AFL-CIO to the Pennsylvania AFL-CIO secured hundreds of thousands of dollars.
Sending PPP funds to ineligible unions deprived small businesses of the much-needed relief the program was meant to provide. And it’s difficult to argue unions needed the funds. Private-sector unions already benefited from the program, as the loans to employers helped keep paychecks flowing to union members and dues to their unions, while hundreds of billions of federal dollars were separately allocated to states, municipal governments, and schools and used to keep unionized government workers on the payroll.
While the SBA could be forgiven for some oversights in administering a massive new program in the middle of a pandemic, the agency’s continued inaction in the face of its errors is inexcusable.
Documents obtained under the Freedom of Information Act show White House officials alerted SBA staff as early as July 2020 that PPP loans were being approved for ineligible labor unions, but the SBA continued approving first and even second loans for ineligible labor groups.
When the Freedom Foundation published its findings in February, it also submitted complaints to the SBA’s inspector general and the Department of Justice’s National Center for Disaster Fraud.
The following month, in his State of the Union address, Biden accused his predecessor of undermining “the watchdogs whose job was to keep pandemic relief funds from being wasted” and promised to go after “the criminals who stole billions in relief money meant for small businesses.”
However, to date, there is no indication any federal enforcement action has been taken against unions that inappropriately obtained PPP funds.
Finally, noting that unions’ illegal receipt of PPP funds “demands an investigation,” the ranking GOP members of four congressional committees sent a letter to SBA Commissioner Isabella Guzman in early April, demanding the agency provide information about its distribution of PPP loans to unions by April 20. Guzman has yet to reply.
However, perhaps more objectionable is that the American Rescue Plan, passed by the new Democratic congressional majority in March, expanded PPP eligibility to unions, unleashing a torrent of additional federal funds into union coffers and effectively codifying the SBA’s role as union booster.
To help refocus the SBA on its core mission and ensure it functions with greater efficiency and oversight, House Republicans on the Small Business Committee have introduced H.R.7628, the IMPROVE the SBA Act. Among other things, it would exclude labor unions from participation in SBA-administered programs.
Unions and labor groups already have the Department of Labor, the National Labor Relations Board, the Equal Employment Opportunity Commission, the Federal Labor Relations Authority, the Bureau of International Labor Affairs, and more. Leave the SBA to small businesses.
