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Minnesota businesses got $17 billion in federal aid. Where did it go?

Roughly 60 percent of the federal money has already been forgiven.

U.S. President Biden signs the Paycheck Protection Program Extension Act of 2021 at the White House in Washington
President Joe Biden speaks prior to signing the Paycheck Protection Program Extension Act of 2021 into law in the Oval Office at the White House in Washington on March 30, 2021. Jonathan Ernst / Reuters
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ST. PAUL — Minnesota businesses got more than $17 billion in federal money over the last year to offset losses caused by the coronavirus pandemic.

It is easily the largest infusion of taxpayer money into the private sector in modern U.S. history and most of the cash will not need to be repaid. The money saved roughly 1.8 million Minnesota jobs and countless more nationwide, according to the U.S. Small Business Administration.

The money primarily came from three federal programs contained in coronavirus relief packages approved by Congress and Presidents Trump and Biden throughout the pandemic. Altogether, the federal government sent more than $700 billion to businesses across the nation.

The programs include:

  • The Paycheck Protection Program that sent about $16.6 billion to Minnesota businesses in the form of low-interest loans so they could keep paying their workers. Nearly $10 billion of those loans have already been forgiven.
  • Another $525 million went to Minnesota restaurants through the Restaurant Revitalization Fund. The $28 billion federal program quickly ran out of money and thousands of restaurants that applied lost out.
  • The Shuttered Venue Operator Grant sent $165 million to the state. It supports entertainment venues that were forced to close. Both the venue and restaurant program money do not need to be repaid.

Taken together, these federal programs sent about $3,076 to Minnesota businesses for each of the state’s 5.6 million residents, a Pioneer Press analysis found. While Hennepin County got the most per capita, the remaining top 20 recipients by population size were all rural counties.
The aid was limited to small businesses with 500 or fewer employees. Nonetheless, the impact of the federal dollars was widespread across the economic landscape.


“This was unlike any recession we had seen in the last century,” said Doug Loon, president of the Minnesota Chamber of Commerce. “It was caused by a pandemic that was and is highly unpredictable and knew no boundaries. Its impact on the economy, at least in modern times, was felt in unusual ways.”

Without the federal money, not only would there have been more layoffs and businesses that went under, but the state’s unemployment system could have been overwhelmed. Loon noted that the $216 million in state aid approved by the Minnesota Legislature last December, near the peak of the state’s worst surge in cases, was also very essential.

“That was an important bridge. It was all about maintaining cash flow and keeping businesses afloat as they worked through multiple revisions of business models they were forced to deal with,” Loon said, referring to evolving stay-at-home requirements and other mitigation efforts.

Economic deep freeze

The money sent to businesses across the nation throughout the pandemic was targeted at offsetting one of the largest and most widespread restrictions ever placed on economic activity in the U.S.

Consumers were ordered to stay home, businesses had to curtail or completely end their services, there were shortages of some products and an overabundance of others. Government was called on to step in to steady the waters.

“The problem that we faced was we were shutting down the economy to fight the virus, but we wanted to make sure there was an economy at the other end of it,” said John Phelan, an economist at the Center of the American Experiment, a Golden Valley-based think tank. “What we were trying to do effectively is put the economy in deep-freeze.”

Phelan added that while the PPP program and others amounted to government intervention on a massive scale, he felt they were effective.

“If the government is shutting your business down and making it impossible to function, then the government has a duty to make sure you can survive that,” he said. “If I smash a baseball through the neighbor’s window, I’m responsible for paying for the neighbor’s window.”


Nationwide, business leaders lobbied state lawmakers hard to forgive taxes on the aid. Eventually, the divided Minnesota Legislature agreed to spend more than $400 million to make the PPP loans tax-exempt.

A massive program to oversee

There’s a general consensus that the aid programs had to be put in place quickly to be effective, but that made them less precise — more of a hammer than a scalpel. The scope also is enormous, which made oversight tricky.

Out of millions of loans and billions of dollars, the U.S. Small Business Administration Inspector General reported in January that it had found approximately 55,000 loans were given to ineligible businesses and 43,000 more received more money than they should. The federal Department of Justice has filed fraud charges against hundreds of aid recipients including a few in Minnesota.

In July, a Maple Grove man pleaded guilty to attempting to defraud nearly $10 million from the Paycheck Protection Program. Aditya Raj Sharma, 47, eventually received $1.7 million in PPP money, which he misspent, according the U.S. District Attorney’s Office in Minneapolis and FBI investigators.

Yet, the fraud that has been found so far is just a fraction of the money that has been approved.

Loon points to the fact that nearly 60 percent of the money Minnesota businesses received through PPP loans has already been forgiven is evidence the money is being used for what it was intended.

In order to have a PPP loan forgiven, companies must prove it was used for things like payroll, mortgage payments, rent and other business expenses.

“Minnesota businesses are fundamentally rule followers,” Loon said. “That the loans were forgiven, that is what we would expect.”


‘It was brutal’

Without federal aid, Jason Tschida, whose family operates DeGidio’s Restaurant and Bar in St. Paul, feared they would have to shutter a family business that’s been around for more than 80 years.

“The first PPP was an unequivocal lifeline for us,” Tschida said. “I don’t know of anyone who would be able to make it without public help.”

Lockdowns, capacity limits and restrictions on gathering decimated much of his business. Federal aid helped him keep workers on and do what carry-out business he could.

Later, Tschida was one of the lucky ones who was able to get money from the Restaurant Revitalization Fund. He’s now advocating for the federal government to put more money into the program to help other restaurants that applied but didn’t get approved before the funding ran out.

One of those restaurateurs is Stephan Hesse, co-owner of Eclectic Culinary Concepts, which operates several restaurants around the Twin Cities. Hesse received PPP funding, but so far hasn’t gotten the restaurant revitalization money.

“The PPP money was good,” Hesse said. “It helped us keep staff on when it wasn’t very busy. It was brutal, but we got through it.”

Business picked up for most proprietors in the spring and early summer when coronavirus cases plummeted. But as inoculations slow and the more contagious delta variant spreads, there’s new worry about how the pandemic will hurt the economy.

“When the news is bad, there’s a decline in sales,” Hesse said. “We made it through with the support of guests coming in. What everyone did to help businesses has been awesome.”

It wasn’t just restaurants and storefronts that were impacted by stay-at-home orders and other mitigation efforts. Many entertainment venues are also fighting for survival.

That includes the state-run Minnesota Zoo in Apple Valley. Leaders of the zoo recently learned they would receive more than $7 million from the shuttered venue grant program.

“The dollars awarded by this grant are essential to the zoo’s recovery from the challenges presented by the pandemic,” spokesman Zach Nugent said in an email. “The zoo will utilize these funds for critical recovery efforts. More information on these plans will be available in the months ahead.”

A changed economy

Loon thinks it will likely be years before economists and business leaders can confidently grade the state and federal response to what amounted to an economic catastrophe caused by the pandemic.

One thing the Minnesota Chamber of Commerce leader says is already clear is that COVID-19 changed the economy, in some ways permanently. Going forward, businesses are likely to face new challenges recruiting workers, the dynamics of supply chains have been upended and e-commerce has become an even more powerful force in the overall economy.

It’s hard to predict what those broad challenges mean for businesses of all types — from restaurants and salons to offices and shopping malls.

But the federal help businesses in Minnesota and around the nation received means there will be more companies around to navigate these challenges.

“The good news is the consumer is back,” Loon said. “The consumer is back, just in a different way.”

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