News Story

State’s Biggest Teachers Union Repaying COVID Grant It Shouldn't Have Received

Federal CARES Act benefit was intended for struggling small businesses, not big unions

Two of the largest recipients of federal COVID-19 relief money in Michigan are the Michigan Education Association and its insurance benefits affiliate, MESSA. Both recently repaid the $10 million-plus in loans they together received in 2020 after determining they would not be eligible for federal loan forgiveness, a spokeswoman for the teachers union said Sunday.

The MEA and MESSA received money under the Paycheck Protection Program, which Congress enacted in spring 2020 to help small and medium-sized businesses meet payroll during shutdowns governments ordered during the early days of the pandemic. The organizations received more than $5 million each, with the MEA receiving $5.6 million.

Under the program, money came in loans that did not to be repaid if it was used for payroll for other operating expenses.

It is unclear how Michigan’s biggest teachers union and its health insurance affiliate were deemed eligible when the program was initiated in April 2020. Eligibility rules issued by the federal Small Business Administration dictated which nonprofit entities could receive the loans. Only those entities classified as 501(c)3 charitable organizations were eligible, along with veterans or tribal organizations. The MEA is a 501(c)5 labor union, and MESSA is a 501(c)9 organization, a voluntary employees beneficiary association under federal tax law.

In response to an inquiry from Michigan Capitol Confidential about that incongruity, MEA communications consultant Elizabeth Boyd released a statement. “At the time of applying for the PPP loans we believed doing so was the right decision given the guidelines available at the time and the tremendous uncertainty facing our organizations. However, as each organization independently prepared for the loan forgiveness application and reviewed final rules promulgated after the loans were funded, the organizations each believed we would be ineligible for forgiveness. As such, both MEA and MESSA paid back the PPP loans in full prior to the end of the calendar year.”

Steve Delie, the director of labor policy at the Mackinac Center, reviewed the loan program and said the decision to repay the money is laudable.

“We certainly appreciate that they recognize their mistake,” he said, “but it’s rather remarkable that it could have been made in the first place.”

Delie said restrictions on participation in the forgivable loan program were well publicized before its launch. A group of 105 U.S. House Democrats had formally objected to excluding labor unions from the program, writing in a letter to congressional leaders in late April that it was “a serious impediment to achieving the main goal of the CARES Act.”

The AFL-CIO, in its series of publications designed to help unions navigate the pandemic, clearly noted that labor organizations were not eligible.

The impact of COVID-related school closures on the MEA’s financial health appears to be minor. When the pandemic arrived in March, schools ended classroom teaching and went to online lessons only, and they have only partially and sporadically reopened for in-person teaching since. Delie said public records indicate that union dues collected by the MEA remained relatively constant between 2019 and 2020.

In July, MEA spokesman Doug Pratt told The Detroit News that the federal program was needed because there was “pandemic-induced uncertainty on the horizon relative to the funding situation for public education.”

Andrea Roebker of the SBA Great Lakes Region, which includes Michigan, said the agency couldn’t address the appropriateness of specific loans awarded under the loan program. Roebker said the agency couldn’t comment on specific borrowers.

Loan applications and processing were handled by lending institutions, she said, adding that the SBA did not review them directly. Loans of $2 million or more are currently under review for both eligibility and forgiveness, Roebker said. Comerica, the bank which processed the MEA and MESSA’s applications, did not respond to an emailed request for comment.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.