DURING a webinar with Virginia business leaders on Thursday moderated by Fredericksburg Regional Chamber of Commerce CEO Susan Spears, Gov. Ralph Northam was asked whether he would either veto or at least delay the implementation of a number of bills passed by the General Assembly that would impose increased costs on businesses being crushed by efforts to contain the coronavirus pandemic. Northam replied that “a decision would be made before April 11.”
We strongly urge the governor to use his powers as chief executive to veto these bills to prevent placing any additional financial burdens on the struggling private sector.
Northam’s mandated closure of schools and “non-essential” businesses due to concerns about the spread of coronavirus affected everyone in Virginia, but small businesses in particular really got hammered. Many of them are service-oriented operations that rely on face-to-face contact with their customers. Some of these small enterprises were already operating on shoestring budgets and were not prepared to weather any shutdowns, much less one that lasts until June 10.
Here’s why the governor’s intervention is so critical: In 2019, small businesses made up 99.5 percent of all businesses statewide and employed 1.5 million Virginians, or 47.2 percent of the commonwealth’s total workforce, according to the U.S. Small Business Administration. If small businesses fail, they will pull the entire commonwealth down with them.
A random survey by the National Federation of Independent Business’ Research Center also released on Thursday found that 92 percent of small employers have been negatively affected by the COVID-19 outbreak, with 80 percent reporting slower sales, 31 percent reporting supply chain disruptions, and 23 percent expressing concern over sick employees. Only 5 percent of small businesses reported no change, while 3 percent said they actually experienced stronger sales in response to the pandemic.
About half of small businesses that responded to the survey reported that two months was the longest they could hold out without going under, and just a third said they can maintain operations under the current conditions up to six months. After that, all bets are off.
In a March 31 letter to Northam, the Coalition for a Strong Virginia Economy, representing 27 business associations in the commonwealth, asked him to mitigate the impact of the General Assembly’s minimum wage, project labor agreement, collective bargaining, clean energy and local taxing authority legislation on their members.
“While we had serious concerns about several pieces of legislation related to the business community during the session, the negative impact these bills will have on our members’ livelihood is even more critical considering the economic devastation many of our members are facing,” the letter stated. “Virginia’s economy will be weakened for months to come and it will be difficult to estimate when our members and their workforce will begin to see some recovery. Now is not the time to place more financial burdens on their shoulders.”
Quite right. And if the governor is still not convinced, he should take a look at the soaring unemployment numbers in Virginia last week: 114,104 state residents applied for first-time unemployment benefits for the week ending March 28, which was more than double the already eye-popping 46,277 laid-off workers who filed for unemployment the week before. These figures will likely continue to grow as the shutdown continues.
Small businesses will receive some relief from the federal Paycheck Protection Program in the $2 trillion CARES Act, and their laid-off employees will also qualify for additional federal unemployment benefits, but the damage done to the Virginia economy is already enormous, with no end in sight. SBA loans will help some companies stay afloat, but cannot compensate restaurants, hotels and tourist attractions for lost revenue while everybody is ordered to stay at home. Those are permanent losses, and they are mounting by the day.
If small businesses in Virginia start going belly-up in any great numbers, everybody in the commonwealth will be negatively affected. Tax revenue will plummet. Thousands of workers will have no jobs to go back to when the pandemic is over. State and local resources will be stretched to the breaking point.
This should not be a hard decision for Northam to make. Vetoing any bills based on now-outdated economic assumptions that would increase state taxes on small businesses during this unprecedented economic crisis is the only responsible thing to do.