Over the past month, the BGC has worked to equip believers with the resources they need to face the pandemic crisis wisely and remain on mission for the gospel. Even as we have focused on covering a wide range of topics to walk churches through this season, many of the most urgent questions we receive from pastors and leaders relate to the financial side of this crisis. This is understandable; this is an unprecedented crisis and its impact on organizations is just beginning to be felt. Even as the government has stepped in with help through passing the CARES Act, there remains significant ambiguity on how this applies to churches.
In response, the BGC has worked to help alleviate these concerns through a variety of resources such as Joshua Laxton’s article “The CARES Act and Your Church Staff.” Yet often ambiguity and complexity provoke multiple opinions. In this spirit, we wanted to present two different viewpoints by leaders on how churches should approach the CARES Act.
As our society is fueled by polarization and politicization, it’s important to realize we are not pitting these viewpoints against each other but modelling constructive discussion. In times of crisis, dialogue and disagreement can often be powerful tools for refinement and clarity. Moreover, every church and organization is unique and leaders need to make the right decision for their people.
In this spirit, the following article by Florida Senator Marco Rubio outlines the reasons why churches should apply for the CARES Act. This article was drawn from the transcript of an interview with Senator Rubio where he and I discussed the details of the CARES Act and its impact on churches and religious organizations. If you want to read a contrary opinion, Valparaiso, Indiana former mayor Jon Costas explored the reasons why churches should not apply for the CARES Act. You can read that article here:
Ed: Why did you desire to bring churches and other nonprofits into the PPP (Paycheck Protection Program)? What was your role in that and why is it important?
Rubio: We actually didn't have a lot of opposition to it in Congress. I think one of the reasons why is because the design of this program was really to help workers; hence the name, The Paycheck Protection Program. It really wasn't about helping businesses, but to help businesses keep their workers on staff and not have to lay them off. In essence, the choice was between continuing undignified work, or having to stand in line somewhere and try to draw a check from the government. The goal was to keep as many as people as possible connected to their employer.
When you look at the small business sector as the place to start, and then you add to that the independent contractor workers, people who drive for Uber, and the like, the next logical step is this massive sector known as the 501(c)(3) universe of all sorts of organizations and churches as anybody else's. So in a catastrophe like this, where literally no community in the country is unaffected, we wanted to make sure we took care of workers across various sectors.
In a time like this, where there's so much need, uncertainty, fear, and anxiety, many of these organizations are going to step in to fill the void. It's an amazing thing to think about.
Ed: Tell us broadly what we could expect.
Rubio: I'm not a banking expert. I was talking to the chairman of the Federal Reserve yesterday. I said, "I've learned more about banks in seven days than I ever wanted to know." But the process by which that happens is that anytime you write a law, there are now a set of rules that have to be written to apply them and especially in banking, because the banks are the ones that are administering this program. They're the ones that are taking the applications.
Banks are highly regulated. They require everything in writing on government letterhead for their lawyers. Because the Small Business Administration (SBA) has never let money go to the not for profit sector until now for emergency loans, there are no rules on this, or on the question, "What if you are a member of a church, but your church is part of a broader and bigger denomination? Does that count towards the 500-employee restriction for small businesses or not?"
This becomes a big challenge, for example in the [more ecclesiastical churches]. Our intent was to be inclusive, not exclusive, and cover as much as we could in the 501(c)(3) sector.
Ed: How can we participate? What are the steps to do that?
Rubio: I'm going to give you the easiest scenario: you go to your regular bank. They already confirmed your 501(c)(3) status when they opened your account. Then you have to estimate your monthly payroll.
If today was February 15th, what would my monthly payroll be for this month? You receive 250% of that figure, which becomes a payment deposited directly into your account. A year from now when the books will close on that transaction, you're going to be able to say, "Here's how much I took out." Let's say I took out 30,000, this is how much I spent on payroll: at least 75 percent salary or benefits for those employees for our rent, for our lease, for our utilities.
As long as you can demonstrate that's what you spent all the money on, 100 percent of it becomes forgivable; it goes away and the story's over. If any percentage of that, any portion of that money is spent on anything other than those things I just described, then the rest of it, that portion becomes a 1% loan that you have to pay back. Our sense is that the overwhelming majority of the loans are going to be spent that way and the overwhelming majority of the money that's left out is going to be spent appropriately, because people want to hold onto their employees. They're not replaceable in many cases, or at least not easily replaceable.
Ed: Can the terms of forgiveness be changed by subsequent administration in such a way that might put churches where they might have violated their faith beliefs? Is there a scenario where these rules could be changed?
Rubio: No, I don't think you can. They'll be trying to come back and there's all kinds of legal principles for not doing it. Whoever's taking this money now is doing so on the basis of an application, and a promissory note with the terms clearly delineated. Once you sign that, once you enter into that contract with that lending institution, you can't come back and unilaterally change the terms of that contract on someone.
Ed: How does the timing work if churches are accepted? At what point do we need to get our staff back?
Rubio: June 30th is the cutoff of the program. What they really want to see is that the money was used to keep your employees on payroll. That's why the 75 percent requirement is there. You can choose not to use it for payroll, and at that point it turns into a loan. If you don't want a loan, then avoid spending it on anything that's not utilities, rent, lease, and payroll.
What I can tell you with certainty is, if you spend the money on payroll and benefits, you're not going to pay a penny of it back. Obviously, you've got to sustain over that period of time. That's why it's 250 percent, which comes out to about eight weeks of payroll and about two weeks or half of one month of rent and lease. But obviously it gives you some flexibility and as long as 75 percent of it is payroll.
Ed: Let’s talk about payroll. What about the housing allowance that many clergy members would take?
Rubio: How it reads is payroll and benefits for the employees. Obviously, this would be a benefit that comes attached to the employment. The reason why we did that is because in some cases in addition to payroll, they may choose to continue to make contributions towards the retirement or health insurance. So, it's payroll and benefits, which includes rent, lease, and utilities.
The payroll does include housing because that's part of typically the payroll housing allowance. This is actually a good point to try to get a clear answer. I wrote the law so I'm confident that the benefits were part of it and that that's exactly what we meant by benefits. Sometimes, the benefits attached to the payroll isn't simply the pay, but some of the things that come around with it.
Ed: Is the PPP first-come, first-serve, and at some point there will be no more money?
Rubio: It is first-come, first-serve in terms of the amount of funds. It's not an entitlement program. There’s a finite amount of money that's been appropriated for it, and we're going to have to put more money into it. In just four days, the program had already committed $100 billion. So that just tells you what the uptake is.
Ultimately, we may hit the cap and the loans will stop, or at least the processing will stop. I'm confident that at some point the funds will be replenished. I just don't want there to be any interruption in a program that's already had a lot of confusion around it.
But I remind everybody that every penny that's being spent through this program on payroll is a penny that isn't being spent on unemployment. And on unemployment benefits. At the end of the day, people are better off being attached to a job even if the job is not functioning the way it used to.
Ed: With unemployment benefits increasing during this time, would you encourage a church to prioritize keeping staff on and go with the PPP or is there still some benefit to receiving unemployment?
Rubio If they are on unemployment, they obviously can't work for you. I imagine when it comes to a church or a C3, they can volunteer I suppose, but I think we'd all be much better off if people stayed on payroll. The goal here is to keep things as close to normal as possible. The challenge is that in many states, when you add $600 onto their benefit that they already give, there are people that are actually better off making more money on unemployment than they would on their job.
The concern people had was that it would incentivize workers to go on unemployment as opposed to taking their job back. But by and large, the overwhelming majority of Americans who are employed want to have their job. They'd rather be working.
We were created to work and to be productive with our time. The problem here has not been the worker, it has been in many cases the employer. We've seen some big companies say, "We're going to lay everybody off because we think our workers are going to be better off anyway on the unemployment system."
That's actually turned out to be a bigger problem. A related problem, which I fear we may see at some point, is the longer this goes on, a lot of small businesses are going to say, "We took PPP, we tried to hire our workers back, but they won't come back." Because they're making more on unemployment. We haven't seen that yet because the funds haven't really started to flow yet, but that's something to be concerned about down the road. The overwhelming majority of people would rather have their job or a job. But some businesses, big companies have decided differently.
Ed: What if churches have already laid off some staff before the CARES Act and these people are now seeking unemployment. Can you bring the employees back?
Rubio: You can. Once you've laid them off, if they filed for unemployment, they have to voluntarily come back and work for you. You can't force them to come back. In some States you can, but most of you aren't going to do that. But it does allow you to hire people back. In essence, it provides you cash to bring these folks back, maybe even pay them a couple of weeks that they weren't working, and so that's a big benefit to a lot of people to be able to do that and to hold onto the staff you have now, because the way we view it, especially for C3 there's no sector of our economy that's been unimpacted.
Right now your members are not contributing or are not contributing what they did before because they've lost their jobs, and so your revenues are going to come down at a time when you still have to do maintenance and you still have to do the janitorial service, and there are still people who need ministry. There are a lot of people and their families that are sick that need ministry and counseling as a part of it and you still have to preach the gospel. The gospel has not been suspended. The gospel has not been quarantined.
All of that needs to happen at the same time. People need to make a living and be able to provide for their families. The goal is to bring people back as close to normal as possible.
Ed: A lot of people are unsure of what they should do. There's been a lot of enthusiasm for PPP among churches, but also some caution. Give us a closing word about those unsure of what to do.
Rubio: The legislative intent of every single one of us who help write this was to cover churches and other C3s and as many people as possible. That includes small businesses of varying sizes, mid-sized businesses, and independent contractors. The legislative intent was clearly to be inclusive.
The people who wrote this were very, very engaged in making clear to the administration what our goal was, because it's a short-term program that will expire during the term of this presidency. It's also helpful to know that we have an administration, no matter how you may feel about the broader political issues, that is friendly to our view, and that's helpful in terms of the way the regulations are written and being applied at this moment in time.
Every church and each organization is going to have to make their own decisions about what's in their best interest, and what they should be doing. But this is an option that's available to you and a good one. It helps you to keep some percentage of your payroll on staff and be able to pay them at a time in which revenues are substantially down and uncertain moving forward. And it's not just about the church being able to operate, it's as much as anything else about those families who depend on that salary, to be able to sustain themselves and their families who are having to go on the unemployment line and so forth.
That's really the goal here. It's why it's called The Paycheck Protection Act. It's not designed to support religion or faith or any organization, it's designed to support the people that work for them, through their employer. And it was designed to be inclusive and we are very engaged in making sure that's what it is.