Hogan Extends More Help to Businesses as Lawmakers Scrutinize Test Kit Deal

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There was split-screen action on the state’s response to the COVID-19 pandemic Thursday, with Gov. Lawrence J. Hogan Jr. (R) announcing a new aid package for businesses while lawmakers scrutinized his administration’s expensive procurement decisions during the early days of the crisis.

Whether it was deliberate counter-programming by Hogan is unknown; his mid-afternoon State House news conference also overlapped with a drama-filled legislative hearing about controversial payments made to former officials at the Maryland Environmental Service — one of whom briefly served as the governor’s chief of staff [see related story].

At his news conference, Hogan said Maryland businesses that received any of the state’s $75 million in COVID-19 relief loans earlier this year won’t have to pay them back.

“These loans will be converted to grants, which will not have to be paid back,” he said.

Hogan also issued an executive order that will shield Maryland businesses from skyrocketing unemployment taxes due to layoffs and furloughs. The order will exclude the period from July 1, 2019 to June 30, 2020 from the tax. Under Maryland law, that means the rate will be based on unemployment data from the state’s 2017, 2018 and 2019 fiscal years.

Donald C. Fry, president and CEO of the Greater Baltimore Committee, said in a statement that Hogan’s actions are a “good first step” to curb the financial blow dealt to businesses by the pandemic.

“Governor Hogan’s actions today to protect small businesses from sudden or substantial increases in unemployment taxes and to forgive $75 million in emergency loans are to be applauded as they come at a time when many, especially small and minority businesses, are literally struggling to survive,” Fry said.

The state will also fund $25 million in low-income housing tax credit projects, which Hogan said will lead to the construction of 2,000 affordable housing units.

“Last year we broke all records with our low income housing tax program,” said Kenneth C. Holt, secretary of the Maryland Department of Housing and Community Development. “This year, those records are shattered. “

Hogan also announced $12 million for the state’s Rental Housing Works Program, which will mean even more affordable housing units could be built. Holt said he expects the funding will also create construction, design and engineering jobs for the developers who build the affordable housing units.

While state officials have distributed millions in COVID-19 relief funding to residents, businesses and local governments, Hogan warned that the state needs federal help to weather the pandemic – and slammed Congress for not quickly passing a relief package.

Maryland Secretary of Commerce Kelly M. Schulz said the state’s relief measures will help some businesses survive the pandemic, but reiterated Hogan’s call for congressional action. She noted that the Paycheck Protection Program, which was created to help small businesses, has long been out of money.

“This is bigger than any one state,” Schulz said. “The Paycheck Protection Program has been depleted for months now, and America’s businesses urgently need Congress to act to provide for relief.”

State officials have said it will take congressional action to provide additional rental relief and eviction prevention assistance to Marylanders. Holt said the state has provided about $40 million through its Assisted Housing Relief Program and Eviction Prevention Partnership so far – but fair housing advocates and landlords alike have warned it’ll take more than that to help the state’s tenants.

Hogan said Marylanders can’t wait until next year for relief funding, and added that he’s met with congressional leaders to urge the passage of a relief package. In the meantime, he said he wants local governments to push out any of their remaining CARES Act funding.

Hogan didn’t announce any more restrictions on travel or commerce, although he noted that the state is experiencing a post-Thanksgiving coronavirus wave. He said there were 1,720 COVID patients hospitalized in Maryland as of Thursday, the highest number the state has seen during the entire pandemic.

Some counties have taken steps to limit gatherings and dining: Baltimore City, as well as Anne Arundel and Prince George’s counties, have all announced more restrictions this week as cases surge. Additionally, Montgomery County Executive Marc B. Elrich (D) recently proposed shutting down indoor dining, and the county council is scheduled to debate the proposal on Tuesday.

Hogan said he was puzzled by the new restrictions in Baltimore City and Anne Arundel County, which bar outdoor dining as well as indoor dining. He said the experts he’s consulted with have advised him that outdoor dining is safe.

“I don’t know where that decision came from,” Hogan said. But he acknowledged that county officials are allowed to enact additional restrictions if they choose.

‘It’s very frustrating’

While Hogan was announcing his latest policy moves to mitigate the impact of the virus, two House subcommittees spent two hours Thursday scrutinizing some of the more controversial steps his administration took in the early weeks of the pandemic to procure medical supplies and equipment.

But officials from the Maryland Department of Health came armed with multiple facts and figures, minimizing the opportunity for lawmakers to ask probing questions.

Atif T. Chaudry, acting deputy secretary of operations for the Health Department, told members at a joint meeting of the House Appropriations and Health and Government Operations subcommittees Thursday that when vendors began offering services to the state in late March and early April, they were vetted by the Department of Commerce before they were procured and warehoused by the Department of General Services.

“For MDH procurements — the procurements that we handle — we typically, obviously, I think it goes without saying, we’ve followed and continue to follow all applicable laws, rules and regulations,” he said.

Early on in the pandemic, Hogan purchased 5,000 COVID-19 test kits from LabGenomics, a South Korean company, that were supposed to be able to complete 500,000 tests. This order, which garnered national attention for the governor, was a $9 million dud: the test kits were missing materials, leading the state to pay an additional $2.5 million for replacement tests.

According to the Department of Health, of the more than $1 billion the state has spent on procurement thus far, $11,978,654 was spent on the South Korean LabGenomics test kits.

Lawmakers’ heads were reeling — and continue to reel — over the blunder.

“Can somebody please report back to both committees what exactly was in those first 500,000 [kits] so I can answer my constituents and the taxpayers on what exactly we did?” asked Del. Brian A. Chisholm (R-Anne Arundel).

Webster Ye, the director of the Department of Health’s Office of Governmental Affairs, said that the formulation of a proponent in the first batch didn’t meet the necessary benchmarks of the emergency use authorization provided by the Food and Drug Administration.

“They were returned to the manufacturer, I believe, on June 20 or so,” he said.

Chisholm pushed harder: “Can you tell me what’s in a test kit that we bought?”

“It’s very frustrating when I’m asking this question constantly and nobody seems to be able to give us a straight answer on what really came because we, we know for sure now we didn’t use any of those 500,000,” Chisholm added.

Ye said that the upgraded kits met the standards of the emergency use authorization, and had “better control for the extraction of the RNA,” which led the state to upgrade the kits — “just like you would with a phone,” he explained.

“But if I bought a phone and it didn’t work, I wouldn’t have to pay for an upgrade,” Chisholm said sternly.

Atif said that 98% of the test kits Hogan purchased from South Korea have now been used.

“We expect them to be completely utilized in the next few days,” he said.

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Bennett Leckrone
Leckrone is a December 2019 graduate of the E.W. Scripps School of Journalism at Ohio University. He has interned at The Chronicle of Higher Education, The Columbus Dispatch, PennLive.com, The Dayton Daily News and The Troy Daily News. Leckrone is a Report for America corps member.
Hannah Gaskill
Hannah Gaskill received her master’s of journalism degree in December 2019 from the University of Maryland. She previously worked on the print layout design team at The Diamondback, reported on criminal justice in Maryland for Capital News Service and served as a production assistant for The Confluence — the daily news magazine on 90.5 WESA, Pittsburgh’s NPR member station. Gaskill has had bylines in The Baltimore Sun, The Washington Post and The Chicago Tribune, among other publications.Before pursuing journalism, she received her bachelor’s of fine art degree from Carnegie Mellon University in 2016. She grew up in Ocean City.