Juneau judge weighs temporary block of small business grant changes

Superior Court Judge Philip Pallenberg closely watches an attorney during opening arguments in a recent civil trial. (Photo by Matt Miller/KTOO)

A judge is weighing whether to temporarily block changes the state made to allow more businesses to receive COVID-19 relief. At the same time, small business owners are seeking more changes to the same relief program.

The AK CARES grant program is intended to provide $290 million that the state government received from the federal CARES Act. Gov. Mike Dunleavy’s administration proposed a plan in April, which the Legislature approved in May.

Under the original rules, businesses that got federal aid from two other programs couldn’t get grants. The state changed that last month, to make more businesses eligible. 

Juneau resident Eric Forrer is asking for an injunction to block that change. He said it’s an important constitutional principle that the Legislature must decide how to spend money. 

On Thursday, Forrer’s lawyer, Joe Geldhof, told Juneau Superior Court Judge Philip Pallenberg during oral arguments that if he doesn’t issue an injunction, he’ll open the door to the state government spending federal money without any oversight in the future.

“If this court elects not to require the administration to follow the standards they wrote as ratified, in regards to the business relief, you will be inviting not just mischief, but perhaps corruption,” Geldhof said.

Pallenberg focused on whether Forrer has legal standing to even make the argument for an injunction. One reason people can have for injunctions is if they would be harmed without one. Pallenberg said at one point Forrer is alleging an “abstract or metaphysical harm” and questioned if there was a precedent for an injunction in a similar case. 

Chief Assistant Attorney General Margaret Paton-Walsh said Forrer’s objections don’t get anywhere close to what’s needed for an injunction. 

Pallenberg said he would decide late Thursday or on Friday whether to issue the injunction. 

Shortly after the court hearing ended, the House Labor and Commerce Committee met to take testimony from business owners about how the program is working.

There’s still concern from some businesses that they aren’t eligible for the grants. The change made last month expanded eligibility so those that received less than $5,000 from the other federal programs could receive the grants. 

But some businesses have received more than that and still have enormous unmet costs. Also, some fishing businesses don’t have state business licenses, since they operate with fishing permits. And they want to be eligible. 

Other business owners are concerned that the applications are taking too long to process. One of them is Todd Kingery, who has a fishing guide business in Talkeetna. He said he’s paying out of pocket for business costs when he has no revenue.

“So it’s almost to the point where I just want to close and not even open,” he told the committee. “But that does nothing for anybody else. It does nothing for the restaurant business, the accommodation business, the transportation business, the airline business, the cruise business. Everybody is in my boat up here, with a huge hole in it, sinking.”

There has been some progress in approving loans. Roughly 10 percent of more than 2,000 applications have been approved.

If lawmakers want to make changes to the program — or if Pallenberg agrees to the injunction, there are multiple possibilities. They could reconvene in Juneau — Forrer’s lawsuit effectively forced the Legislature to convene in May when he objected to other aspects of how the state was proposing to spend the CARES Act money. But another potential solution that stops short of a legislative special session would be for the administration to submit proposed changes to the Legislative Budget and Audit Committee, which could approve them.