COVID's economic toll affected most in NY: Here are the lessons learned for a second wave

When the economy was shut down to slow the spread of COVID-19, the impact on New Yorkers was swift and severe and the worst might be yet to come.

  • Rollout of relief programs was rocky, but without them the economy would likely be in worse shape.
  • What failed: NY's unemployment system and tax revenues.
  • What's next: Businesses and officials want better guidance from the state.

Editor's Note: COVID-19 killed tens of thousands in the Northeast, caused massive unemployment and wrecked the economy. In an ongoing series of stories, the USA TODAY Network Atlantic Group examines what the government got wrong in its response to the virus, what policies eventually worked — and why we remain vulnerable if the coronavirus strikes harder in the fall. 

In the beginning of March, New York’s unemployment rate was the lowest it had been in 50 years. 

By April, more than 1.7 million jobs had evaporated following the state’s decision to shutter schools, businesses, houses of worship and entertainment venues in an effort to contain the spread of COVID-19. 

Many working families saw their savings quickly diminished after earners were laid off and fought to receive unemployment benefits. Small business owners shuttered their storefronts, unsure if they’d have the resources to stay afloat until they could open again. 

James Christian, 28, at his Yonkers home May 15, 2020. Laid off in March, he was stuck waiting on his first unemployment check two months later.

In the face of an economic free fall, the federal government sprang into action, passing a historic $2.2 trillion emergency economic stimulus measure on March 27 and creating rescue programs for small businesses, unemployed workers, renters and workers paying off school loans. 

The rollout of these programs — including Pandemic Unemployment Assistance (PUA) and the Paycheck Protection Program (PPP) — was rocky, but without them, the economy would likely be further from recovery than it is. 

The PPP program, which has been extended to Aug. 8, has given out more than $500 million in business loans to date. The funds have helped cover payroll and operating expenses for businesses and nonprofits of all sizes. These loans were originally promised to be forgiven if businesses retained their workforces. 

Door signs remind customers to wear masks and practice social distancing when they enter Human Power Plant Earth bike shop in Main Street in Saranac Lake.

Pandemic Unemployment Assistance provided an extra $600 per week to unemployment benefits, allowing them to pay rent and other expenses while they were out of work for an undefined period of time. The program ended on July 31, raising questions of whether it should be extended or whether the boost kept people home who would have otherwise gone back to work or found a new job.

Kourtney Harris, a self-employed hair dresser at her salon in the Town of Poughkeepsie on May 15, 2020.

A rental relief program, funded by the CARES Act, became available in the state on July 16, and direct payments on federal student loans were suspended until Sept. 30. 

Despite the help given to individuals, families and businesses, a plunging economy and a soaring unemployment rate revealed the weaknesses in the state’s safety net programs. How will those gaps be fixed in the event of a second wave of COVID-19?  

What failed in NY's shutdown? 

Caroline Wiley, center, shares a laugh with Sadie and Porter Gall while enjoying lunch at a temporary outdoor dining space Thursday, June 18, 2020, in Clinton. The space is used by nearby businesses to follow state COVID-19 guidelines.

Most of the state’s commerce shut down in the span of a week in March, and with that came a tsunami of layoffs, furloughs and unemployment applications. 

New York’s unemployment system, which was in the midst of a technology overhaul started last year, buckled under the weight of hundreds of thousands of applications, many from workers who were applying for unemployment for the first time. 

The department has processed more than 3.2 million unemployment applications since the beginning of the pandemic and paid out over $34 billion in benefits, as of late July. 

The website repeatedly crashed and the phone lines were impossible to manage; applicants would call thousands of times in a week, to no avail. 

Add to that the Pandemic Unemployment Assistance program, a federal initiative written into existence in April as the $2.2 trillion CARES Act took effect, which aimed to provide unemployment benefits to independent contractors and the self-employed. 

The state facilitated the distribution of PUA, but those in line for those benefits waited weeks or months as the state and federal governments hammered out how PUA's framework and guidelines.

“My back is against the wall,” said Myra Colon, of the Bronx, in June. She’d lost her storage facility job in March and fought for months to get access to unemployment benefits, while trying to care for her 12-year-old son, Tyler, who has autism. 

“Here’s the New Yorker who is the taxpayer, law-abiding, contributes to being a mentor to others. If they don’t help right now, my life could fall apart,” Colon said. She received her benefits in June, following the publication of her story by the USA TODAY Network

The New York Department of Labor attributed the delays in the state to the sheer influx of claims, and the complexity of certain applications, such as those that include income from several states. Over 6 million new claims came in nationally during some weeklong periods in April, dwarfing the previous record of 695,000 claims in one week, set in 1982. 

The department added hundreds of call center staffers, expanded its hours and eventually implemented new online and phone systems to more efficiently handle the number of applicants. They installed an online chat bot that used artificial intelligence to answer applicants' questions, and created a text and email system to update users on the status of their applications. 

A streamlined online unemployment application and a website fortified using Google Cloud infrastructure will allow the department to handle more applications at once in the event of a second wave of coronavirus and a related re-shutdown of businesses. 

"New York moved faster and more aggressively than any other state to get people their money," said Deanna Cohen, spokesperson for the Department of Labor. "We will continue to build on this progress as we partner with other State agencies to move New York forward through a data-driven reopening."

Economic morass ahead

Widespread unemployment, though alarming and distressing, is but a single element in a nearly boundless economic collapse facing the nation, with serious implications across New York.

With another federal bailout held up in Washington, D.C., the state and respective municipal governments are looking at an unprecedented financial abyss. Some have resorted to voluntary furloughs, postponed capital projects or delayed scheduled salary increases to deal with revenues in a literal free-fall.

Something unheard of in the public sector may be next: Layoffs.

“We’re basically going to be out of money by the end of August,” Broome County Executive Jason Garner said.

He’s not alone. Every New York county is facing a serious revenue shortfall.

Sales tax receipts are down by double-digit percentages. It’s easy to explain why. Eating and drinking establishments, forced closed or to operate at greatly reduced capacity, are among the largest generators of sales tax revenues.

Gone too are bed tax receipts, an equally important source of income in upstate tourist regions.

Rural Schuyler County may have escaped the wrath of coronavirus but it is looking squarely at the frightful economic scenario.

When NASCAR at the Glen was canceled in early July, Schuyler County Executive Tim O’Hearn was certain the economic hit to the rural area of 18,000 residents would be devastating. NASCAR weekend alone, which attracts about 100,000 fans to the community for a huge weekend party, pumps millions of dollars into the local economy, with the commensurate tax proceeds a critical ingredient in defraying the cost of government services.  

O’Hearn is looking at a $4.5 million revenue shortfall in a county with a property tax levy of $11.3 million.

Mid-year estimates indicate Schuyler County’s sales tax revenue will fall at least $2 million short of projections; occupancy tax revenues may be up to 65% short, possibly a $600,000 shortfall.

There’s no chance at recovery.

“It’s a shock and awe scenario,” said Stephen J. Acquario, executive director of the Albany based New York State Association of Counties. “This is a recipe for disaster and beyond the capacity for the local taxpayers to absorb.”

For counties counting on casino assessments, the revenue chasm is even wider. State-sanctioned casinos have been closed since March, with little hope they will open in the near future In Broome County, which received $4 million from Del Lago and Tioga Downs casinos last year, the depth of despair is hard to comprehend.

“It’s going to be a tsunami of pain if we don’t get something” from the federal government, Garnar said.

The light for that kind of help is dimming. The fourth economic stimulus package recently approved by the Senate has no provision for aid to states and localities.

“We are in the midst of an emergency declaration,” Acquario said. “It is really unprecedented. Our state has sent out an SOS to the federal government. We need help.”

Federal assistance is not, as often portrayed, a bailout for fiscal irresponsibility, Acquario and other county executive said, but payment for lost revenue caused by the months-long pandemic. Compare it to a weather disaster, a tornado, flood or hurricane, Acquario said, where response is quick and there’s wide sympathy for the victims.

“I cannot fault the American government for helping the American people,” Acquario said about the Payroll Protection Plan payments or the CARES Act, but there’s one glaring segment that has been bypassed. 

“They missed the mark and they have to reconcile that,” he said.

Wanted: Better guidance from state 

What can the state do to help businesses prepare if there’s a second coronavirus pandemic wave? Some cash-strapped business owners are imploring state leaders to explain the timing and circumstances under which the state will permit businesses to operate based on whether the pandemic abates or worsens.

Technically, all 10 state-designated regions are currently in the final phase of New York’s four-phase reopening plan. But the state has greatly restricted service at restaurants and closed bars that don’t primarily derive their income from food.

Plus, many other businesses remain closed for indoor operations, including movie theaters, shopping malls, gyms and yoga studios. More than 2,000 of New York’s fitness-related businesses are part of class action suits to prevent the state’s continued ban on indoor operations. They’re also seeking compensation for the time they’re closed.

“There’s no guidance, no transparency and no communication from the state,” said Attorney James Mermigis of Syosset, who filed the primary class action suit on behalf of fitness-related businesses on July 9 in state Supreme Court in Jefferson County. Fitness-related businesses “were told they could reopen in Phase 4, but now they have no date to reopen” and little guidance.

Bill Fioravanti, Orange County’s economic development director, praised the state for “being fluid in determining what’s safest and what’s prudent” for businesses to reopen, while relaxing or tweaking some restrictions on the fly.

“But the state mandates don’t always make sense,” meaning they can seem arbitrary or even absurd, Fioravanti said. “At one time, dentists couldn’t open before nail salons. Dentists were saying, ‘We took these extreme (sanitary) precautions every day before the pandemic, and we have a medical association giving us stringent standards. How can you compare us with a nail salon?’”

New York businesses such as gyms need the state “to help us understand what the data need to look like to reopen and how we can stay open,” said Greg Monahan, owner of three Anytime Fitness studios in Orange County.

“Give us a shot,” Monahan added. State leaders should “set the regulations they deem sufficient to keep people safe, and see if we (businesses) can meet them. To come out with nothing is not acceptable. They (in state government) would be surprised about what we’re capable of.”