By Liz Rammer
The recent budget outline agreed to by Gov. Tim Walz, Senate Majority Leader Paul Gazelka and House Speaker Melissa Hortman has a glaring omission: hospitality.
The leaders addressed a wide range of issues but were silent on Minnesota’s devastated hospitality industry and how the state will follow up on its declarations to aid recovery for these businesses.
Over the last year, hospitality businesses have been forced to close and/or limit capacity. In Minnesota, the industry lost a projected $11 billion in sales while operators’ bills continued unabated for rent, mortgage, insurance, utilities, vendors and even taxes. A mountain of debt piled up.
We’ve seen businesses collapse, and more will follow without swift action. In a March survey by the Minneapolis Federal Reserve, Explore Minnesota Tourism and Hospitality Minnesota, 77% of restaurants and 69% of hotels indicated they remain in jeopardy of bankruptcy within the next six to 12 months.
The current federal Restaurant Revitalization Fund won’t, as many imagine, stem the tide for food service because it is woefully underfunded. Currently, the fund only represents 10% of lost revenue for the industry and already is overrun with more than double the applications for the allocated funding.
Repeatedly, we’ve heard state leaders acknowledge that hospitality businesses have been the hardest hit sector of our state’s economy. They have extolled the virtue of these businesses sacrificing their financial livelihood in order to keep their fellow Minnesotans safe.
With a $1.6 billion surplus, $2 billion in budget reserves and $2.8 billion coming to the state from the federal government, now is the time to invest in the recovery of an industry that was driving more than $16 billion in economic activity in the state.
We urge the governor and legislative leaders to honor their statements of support by stepping up with genuine action.
The federal American Rescue Plan is intended to provide aid to industries impacted by COVID-19. The only industry specifically named in the section providing $2.8 billion to the state is “tourism, travel and hospitality.”
Other states are stepping up. Several weeks ago, while standing in a hospitality business, Wisconsin Gov. Tony Evers announced that Wisconsin would dedicate $600 million of the state’s $3.2 billion in American Rescue Plan funds to small businesses, including $420 million in direct grant relief.
We have suggested similar programs to Gov. Walz and legislative leaders. One particular Senate proposal would have directed nearly $700 million of Minnesota’s American Rescue Plan funds to grants for hospitality and other small businesses (events, hotels, caterers, restaurants, etc.). The budget announcement, however, made no mention of any such targeted relief.
While Gov. Walz negotiated for $500 million of American Rescue Plan funds to be used at his discretion, there’s been no indication that any of those dollars will be dedicated to hospitality relief efforts.
Leaders noted that the budget deal struck will exempt Paycheck Protection Program loans from state taxes. This has been a top priority for hospitality businesses this session and is welcome news. But it is not enough. If the state’s sole action to support hospitality business recovery is not taxing the emergency assistance they received, then our leaders are turning their backs on thousands of hospitality operators and workers.
Our state’s economy depends on a thriving and robust hospitality industry. We are at a critical point.
While businesses are being allowed to reopen, the hospitality industry will not bounce back quickly. The massive debt load operators have taken on in the last year will take time to pay down. We are facing a multiyear recovery and the threat of collapse is very real for thousands of small hospitality businesses across our state in an industry that remains down nearly 100,000 jobs.
We need the governor and legislative leaders to back up their words of support by committing to a significant investment in recovery now, either within the legislative targets or through Walz’s discretionary spending.
Words of support about how much we love our favorite hospitality businesses are nice, but what’s needed is to see those words mean something through leadership and action.
Liz Rammer is president and CEO of Hospitality Minnesota.