Coronavirus draws Kansas farm bankruptcy, business stagnation into focus

TOPEKA — The federal Paycheck Protection Program created in response to COVID-19 didn’t help a majority of Kansas agriculture producers at a time when the number of farm bankruptcies ranks sixth nationally and at least 15% of operators struggle with negative cash flow, officials said Wednesday.

Insight into alarming developments in the agriculture sector, an anchor of the Kansas economy, kicked off six days of meetings by a joint House and Senate committee responsible for developing recommendations for the 2021 Legislature. The task is to devise strategies to boost the state’s emergence from a global pandemic that spawned business shutdowns, operational restrictions and huge job losses.

Alex Orel, a lobbyist with the Kansas Bankers Association, said the Federal Reserve Bank of Kansas City reported delinquency rates on farm loans were trending higher and agricultural credit conditions remained weak amid low commodity prices. Bankers say government payments may limit severity of stress on farm borrowers but won’t lessen concern about longer-term prospects, he said.

“It’s the ag community and commercial real estate values that really give them the most heartburn,” he said.

Orel said Democratic Gov. Laura Kelly made a mistake by not including a commercial banker on her SPARK task force responsible for key decisions about allocation of $1 billion in federal disaster aid. He said not enough of that federal assistance, which is subject to oversight by Kansas legislative leadership, has been earmarked for benefit of existing businesses in the state.

“The priority needs to be the businesses that are here,” Orel said. “There is no doubt that the uncertainty caused by the pandemic has changed behaviors. The pandemic has chosen winners and it has chosen losers.”

Sen. Julia Lynn, a Johnson County Republican and chairwoman of the joint committee, said decisions in March by the governor to shut down in-person K-12 instruction and to issue a statewide stay-at-home order caused lingering damage to business interests.

“That came at very high cost, extremely high cost,” Lynn said.

So far, Kansas has recorded 395 fatalities, 1,975 hospitalizations and 32,547 infections from the coronavirus that swept into the state in March.

Orel said the state’s recovery, whether in agriculture or other parts of the economy, could be hampered if business owners remained reluctant to make investments necessary for job expansion. The crisis may result in what the Federal Reserve Board chairman suggested may be an extended period of low productivity growth and income stagnation, Orel said.

He said the 220 banks and savings and loans in the state association had capital to assist businesses, but bankers across the state agreed not many struggling companies were in a position to take on additional debt. He endorsed an idea advanced by the SPARK task force to funnel federal aid to businesses through a new grant program rather than with more loans.

David Soffer, legislative and policy director at the Kansas Department of Commerce, said the SPARK grant initiative would offer $32.5 million to small business and nonprofits. There would be $22 million in grants for in-state companies engaged in manufacturing related to coronavirus, including personal protective equipment. That would leave $7 million for COVID-19 research and development grants.

Sen. Caryn Tyson, a Linn County Republican, said she was puzzled by the Department of Commerce’s intention to use some of the available grant money to assist entertainment venues and the arts. There are other options more directly related to the economic welfare of families in Kansas, she said.

A grant system can create unfair competitive advantages for companies that get the free money and operate in the marketplace against companies that don’t win a grant, said Rep. Sean Tarwater, a Republican from Stilwell.

Galena Republican Sen. Richard Hildebrand said the Department of Commerce should get a handle on the number of Kansas businesses that have closed for good due to the pandemic. He recommended the commerce agency implement a plan designed to rebuild consumer confidence shattered during COVID-19.

Russ McCullough, an Ottawa University economist, shared with the legislative committee results of the Kansas Policy Institute’s survey of approximately 150 businesses. He was hired by the conservative Wichita-based organization to work on the survey examining views of people involved with the National Federation of Independent Businesses.

He said three-fourths of respondents said executive orders closing Kansas barber shops, nail salons and other non-essential businesses were too restrictive. Half of those taking part in the survey said COVID-19 would result in permanent closures of businesses in their industry. Forty percent didn’t expect to return to pre-pandemic levels of economic activity during 2020.

McCullough said he subscribed to the idea that most decisions by government during a pandemic ought to have been made at the local level with the objective of delivering to people the most freedom of choice.

State intervention might be justified, he said, in the unlikely event the hospital system came close to reaching capacity with COVID-19 patients.

“Use the buyer beware concept and Kansans will be proud of it,” he said. “People should be free to choose the risks they want to do. It’s not the government’s job to protect me.”