$1.9 trillion American Rescue Plan Act boosts help for innovation

The American Rescue Plan Act, a $1.9 trillion spending package to address the ongoing health and economic impacts of COVID-19, was signed into law today. The legislation includes several initiatives that could strengthen regional innovation economies. Most notable among these is the $10 billion State Small Business Credit Initiative (SSBCI), $3 billion for the Economic Development Administration (EDA), and $350 billion for state and local government relief.

SSBCI Reauthorization

The legislation creates a $10 billion new authorization for SSBCI, but there are several significant differences from the program that was first created and funded in 2010. Of the total, $6.5 billion would be distributed to the states, territories and D.C. according to job loss and unemployment, as would another $500 million for tribal governments (which were excluded from the original program). An allocation of $1.5 billion would go to the states specifically to support socially- and economically- disadvantaged businesses, with another $1 billion available as incentive payments to states that prove particularly effective in supporting these companies. Finally, the program provides $500 million for technical assistance funding that will prioritize disadvantaged businesses and could be awarded to states; that funding also could be transferred to the Minority Business Development Agency, or used by Treasury to hire technical assistance providers.

The original SSBCI was a $1.5 billion program authorized during the Great Recession. It allowed states to use the funds for a wide variety of debt and investment programs — in fact, SSBCI is one of the federal government’s only sources of funding for equity investments — and provided many options for states to use financial entities (such as venture development organizations and community development financial institutions) to provide funding to small businesses. The overall goal of the program was to leverage private capital to strengthen businesses while preserving and creating jobs. About one-third of the program’s funds were used for equity investments.

Emergency funding for EDA

The legislation provides $3 billion for EDA, doubling the amount provided by the CARES Act. Congress is requiring one-quarter of the funds to support regions that have suffered from losses to their tourism and hospitality industries. This funding is subject to the agency’s economic adjustment assistance rules, which are different than those governing Build to Scale awards. CARES funds were used to support innovation- and entrepreneurship-focused projects, primarily through the SPRINT competition.

Funds for state and local governments

Congress has provided state and local governments with $350 billion in new relief funds, with about $220 billion to be made available for states. Generally, the statute provides more flexibility to the governments this time, as funds can be used to cover costs related to public health, economic support, and budget shortfalls related to the pandemic. Several states used the CARES Act version of these funds to support their innovation economies, and the additional flexibility should make it easier for states to consider these uses in 2021. Congress did add a prohibition against using the funds to pay for tax cuts.

Additional items

Other sections of the COVID relief bill that will affect regional innovation economies include:

• $600 million for the National Science Foundation to fund new or extend existing research projects;
• $150,000 million for the National Institute of Standards and Technology to fund R&D and “testbeds” related to coronavirus;
• $100 million in a new community navigator pilot program at the Small Business Administration to award funds to Small Business Development Centers, Women’s Business Centers, SCORE, other nonprofits, and state, local and tribal governments to assist businesses in accessing state and federal emergency assistance; and,
• $15 billion in new funding for the Small Business Administration’s Economic Injury Disaster Loans.

A full section-by-section summary of the bill is available from the Senate Democrats.