The Paycheck Protection Program launched in March 2020 to provide relief to small businesses and charities amid the COVID-19 pandemic. But 226 labor unions that were ineligible for the program received $36.7 million in forgivable loans, according to a report provided exclusively to the Washington Free Beacon.
For the first wave of loans in early 2020, only nonprofits that were registered as 501(c)(3) charitable organizations were eligible for the loans, according to Small Business Administration rules. It is unclear how the labor unions, which were incorporated with other nonprofit tax statuses, were able to receive the program loans. Maxford Nelsen, who authored the report from the Freedom Foundation, told the Free Beacon the disbursement of loans to unqualified organizations "represents a failure on so many levels" from the SBA and its lenders.
Those who submit a knowingly false statement to obtain a guaranteed loan from the SBA may be sentenced to five years in prison and a $250,000 fine. The penalty jumps to 30 years of imprisonment and a $1,000,000 fine if the loan was distributed through a federally insured institution.
The SBA declined a request for comment.
The SBA has forgiven $790 billion in PPP loans to small businesses and nonprofits that had to prove the funds were used to retain employees amid the pandemic. Some of the unions that incorrectly received loans, however, openly advocated shutdowns as they applied for PPP relief. The Michigan Education Association, a National Education Association chapter that received the largest PPP loan for a union at $6,420,500, applauded Democratic governor Gretchen Whitmer's (Mich.) decision to suspend in-person K-12 instruction in April 2020. The Memphis-Shelby County Education Association, another NEA chapter that received a $107,525 loan, supported school closures in March 2020.
"It only adds insult to injury to know that teachers' unions were getting federal funds all while trying to keep schools closed and that labor groups that engage primarily in political advocacy received taxpayer dollars to do so," Nelsen told the Free Beacon.
In a statement to the Free Beacon, a spokesman for the Michigan Education Association said the union returned its PPP loan at the end of the 2020 calendar year because it believed it would be ineligible for loan forgiveness. The national NEA did not respond to a request for comment.
Documents released in response to a Freedom of Information Act request show Trump administration officials notified the SBA in July 2020 that ineligible labor unions received loans through the program. Unions eventually qualified for PPP relief in March 2021 when President Joe Biden signed the American Rescue Plan. Applications for loans closed two months later.
The SBA declined a public information request for the unions' employer identification numbers, which would confirm their tax statuses. The Freedom Foundation instead identified the organizations' tax statuses by tracking down financial records of each union based on their listed name and address. About 80 percent of the unions that received PPP loans in 2020 were registered as a 501(c)(5), which is the typical tax status of labor unions. The rest were given to union-affiliated organizations registered as other ineligible tax statuses, or do not appear to have a public tax status.
The Free Beacon reached out to dozens of the top unions that received PPP loans in 2020 and received only one response. Keith Williams, the executive director of the Memphis-Shelby County Education Association, said his union does not have a 501(c)(3) tax status and that he "assumed they applied as a 501(c)(5)" for the PPP loan.
Just behind the NEA, the International Brotherhood of Teamsters received the second-largest sum of any union membership organization, tallying $3,354,946 in loans. The national Teamsters organization declined a request for comment.
Government unions took 11 loans that totaled $1,517,811.
Labor bosses have struggled to maintain influence as union membership has steadily declined in recent decades. Unions have enforced policies to steady their finances, such as short window periods for workers to opt out of paid dues. The Supreme Court's Janus v. AFSCME decision in 2018 banned public sector unions from requiring membership as a term of employment.
Update 2/7/2022 10:05 a.m.: This piece has been updated with comment from the Michigan Education Association.