The federal Paycheck Protection Program (PPP) was created in March 2020 to help small businesses weather the economic storms of the COVID-19 pandemic. Despite being ineligible, the Michigan Education Association and the Michigan Education Special Services Association received a sum totaling more than $12.5 million in taxpayer funds. The Mackinac Center Legal Foundation discovered the error, and both organizations have since repaid the loans, as well as fines and costs.
In March 2020, millions of American workers and small businesses were facing the devasting economic harm caused by the COVID-19 pandemic and government-mandated lockdowns. To combat this, the federal government passed the CARES Act, which authorized forgivable loans to eligible small businesses for job retention and certain other expenses through the federal Paycheck Protection Program (PPP).
To receive a PPP loan, qualifying businesses needed to submit a formal application, signed by a representative of the business, certifying that they had read and met the eligibility requirements. While private businesses and some nonprofits were eligible for the loans, 501(c)(5) and 501(c)(9) organizations, like the MEA and MESSA, were prohibited from receiving PPP funds.
In April 2020, despite their ineligibility, both the MEA and MESSA applied for and received PPP funding. The MEA received $6.4 million, while MESSA received $6.1 million, taking funding away from small businesses across the state who needed it most.
That summer, while reviewing SBA loan data, the Mackinac Center discovered that both organizations had received PPP loans. In January 2022, the Mackinac Center Legal Foundation filed suit against the MEA and MESSA. The suit was settled in March 2023 after the U.S. District Attorney for the Western District of Michigan intervened to prosecute the case.
The MEA and MESSA have returned the loans, but now must also pay hundreds of thousands of dollars in fines and costs. The Mackinac Center is proud to continue its longstanding tradition of holding special interests accountable and protecting taxpayers.
