Yesterday I read through the entire text of the of the American Recovery and Reinvestment Act of 2009. It is a very long and challenging document to slog through, and I wouldn’t recommend it to many people. However, as a policy wonk, it was important to me to read text of the legislation myself.
Since the best way to learn is to teach, I then set myself to the task of providing an executive summary of sorts for the full 496 pages of the appropriations section of the bill. I am neither a tax attorney nor a CPA, so I am leaving the 577 pages of the tax section for others to summarize. As there is already a plethora of partisan summaries of this landmark legislation, I have done my best to represent an unbiased summary of the contents of the bill.
Given the time it has taken me to summarize the first section of the bill, I am going to publish the summary relating directly to small businesses today. In the coming days I am hoping to do the same for technology and software development and education. I welcome and comments and feedback, and I encourage all readers to share this far and wide. We (and I mean that collectively for both ours and future generations) are paying for this, so we should all know what we are spending our money on.
Funding the Small Business Association (SBA):
* $24m is allocated for “marketing, management and technical assistance… for intermediaries that make microloans under the microloan program,” “$20m is for lender oversight activities…and $20m if for “improving, streamlining and automating information technology systems for related to lender processes and lender oversight”
The entire $69 m is “Provided that no later than 60 days after the date of enactment of this act, the Small Business Administration shall submit to the Committees on Appropriations of the House of Representatives and the Senate a detailed expenditure plan for funds provided…”
* An additional $6m is to be made available until September 30, 2010 and an additional $630m for direct loans to remain available until September 2010. $375m shall be for loan subsidies and loan modifications for most small businesses, with an additional $255m for loan subsidies and loan modifications for small business investment companies.
The legislation also eliminates or severely reduces many of the application fees and reduces the amount of capital small businesses need to leverage any loans they receive. The loan guarantees created by this act sunset 12 months after the date the bill is signed into law.
In order to encourage lending by private banks, a Secondary Market Guarantee Authority will be created within the Small Business Administration.
In order to increase small business investment, the maximum leverage of a company’s private capital is the smaller of 300% or $150m.
Business Stabilization Program
Although there is no specific appropriation set-aside for the new Business Stabilization Program, the appropriation for other SBA loans may be used to provide loans on a deferred basis to viable (as defined by the SBA’s Administrator) businesses who have a qualifying small business loan and are experiencing immediate financial hardship. These loans will be guaranteed100%, with interest subsidized for the period of repayment (a period not to exceed 6 months), and may be used to make payments of principle and interest either in full or in part. The loan may be amortized over a period not to exceed 5 years, and may not begin until 12 months after the final disbursement of the funds is made. Any available collateral may be used, including subordinated liens. No fees are to be charged for loans falling under this section. No new loan guarantees under this section may be made after September 30, 2010.
There are a lot of resources dedicated in the legislation for oversight of the appropriate allocation and distribution of economic recovery funds. Most of the oversight is decentralized, with the Office of the Inspector General (located in the Department of Commerce) overseeing the funds distributed through that department, and the Inspector General overseeing and auditing programs administered by the Department of Labor.
The oversight of funds distributed to states and localities will be tracked with bimonthly reviews by the Comptroller General.
Overseeing and coordinating these decentralized controls and audits will be a Recovery Act Accountability and Transparency Board, whose mission it is to ensure that the money allocated is spent appropriately and in clear view of the taxpayers underwriting it. All reports produced by this board will be posted on a designated website (presumably Recovery.Gov). The legislation also creates an appeal process in cases where an agency disagrees with an audit, and endows the board with the authority to conduct its own independent audits and investigations.