On Friday, March 27, 2020, United States President Donald J. Trump signed into law an unprecedented $2 trillion economic relief package to stimulate the U.S. economy during the coronavirus pandemic crisis. The new law is known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the full text of which can be read here.

I have researched and pondered the ethics of churches and other 501(c)(3) non-profit organizations participating in any of the U.S. Federal Government’s programs authorized in the recently passed economic stimulus plan. There are four programs for small businesses and employers with fewer than 500 employees. Each program is administered by the U.S. Small Business Administration (SBA). Two of these programs are specifically aimed at providing immediate cash infusions into small businesses and non-profit organizations, as well as independent contractors and the self-employed, to help them cope with the financial impact of the pandemic on their businesses, employees, and personal incomes. For the remainder of this article, all four of the aforementioned catagories will be referred to simply as “businesses”.

This assistance is provided in the form of grants and forgivable loans. Briefly, the CARES Act amends the Economic Disaster Injury Loan (EIDL) program by offering businesses a one-time, $10,000 “Emergency Advance“. The “advance” (technically a loan) is forgivable. The SBA’s website specifically states that,

“The Economic Injury Disaster Loan advance funds will be made available within days of a successful application, and this loan advance will not have to be repaid.”

Applications for the EIDL $10,000 emergency advance are processed via the internet, and the online form may be accessed here. Applicants will need to have on hand the following information:

• • Employer Identification Number (EIN)
  • Type of Entity (C-Corp, S-Corp, LLC, etc.)
  • Gross revenues for the period Feb 1, 2019 – Jan 31-2020.
  • Total operating expenses for the period Feb 1, 2019 – Jan 31-2019.
  • Bank account and routing number.

In addition to the EIDL emergency advance, the SBA has added a second program for businesses. This program is called the Paycheck Protection Program (PPP). The PPP will make a forgivable loan of up to 2.5x the average monthly payroll for the 12 months immediately preceding the loan application or for the 2019 fiscal year. These loans are fully forgivable provided certain rules are followed, including the retaining of employees. The PPP uses a paper application that is submitted to any participating bank, a list of which can be found here. Applicants will need to have the following printed information to submit along with their applications to their lending banks:

• • Average monthly payroll for the period Apr 1, 2019 – Mar 31, 2020.
  • Payroll reports for each pay period Apr 1, 2019 – Mar 31, 2020.
  • A summary payroll report for the period Apr 1, 2019 – Mar 31, 2020.
  • A form certifying the type of entity (provided by the bank).

Note: Business may apply for both programs, as the programs are not mutually exclusive.

There is no doubt that many churches and other non-profit organizations are wondering whether or not they are eligible for these programs and, perhaps more importantly, are struggling with what they perceive to be obvious and potentially very serious ethical issues. What follows is an attempt to shed light on the ethical questions involved and to provide cogent reflection and practical responses to these concerns

Separation of Church and State: The primary concern of churches participating in any U.S. Government or Small Business Administration (SBA) program is the Separation of Church and State, also known as the “Establishment Clause” of the U.S. Constitution. As Christians, we support the Establishment Clause of the Constitution (Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof) because we do not want the government to decide what is orthodox religious belief or practice, whether Christian or otherwise, or to establish a federal church (e.g. – The Church of England, Saudi Arabia’s Sharia Law). Moreover, we do not want the government involved in our individual churches either by attempting to control what is and what is not preached from our pulpits, or by telling us what we can or cannot, or must or must not, believe or do. The fear arises that, if the government gives money to a religious institution, then the government has a say in the religious expressions of that institution.

Why is the government offering these programs? The purposes for the government establishing coronavirus-related SBA financial assistance programs for employers are several:

• To prevent the collapse of the economy as a result of the temporary shutdown of the majority of U.S. employers – public, private, business, and non-profit employers, including churches, synagogues, and mosques.
• To mitigate the impact of the decline in the Gross Domestic Product (GDP), which is a measure of the sum total of all finished goods and services produced in an economy. In the past, when GDP fell for two consecutive quarters, a recession was officially declared by the National Bureau of Economic Research. However, the U.S. economy is already in a recession due to the damaging economic effects of the coronavirus pandemic. There is little question of whether a recession could turn into a depression, depending upon how long and how deeply the pandemic ultimately plagues our economy.
• To mitigate unemployment claims that would overwhelm state treasuries. States and the Federal Government collect unemployment taxes from employers based upon the size of their payrolls and the frequency of their employee terminations and lay-offs. These “insurance premiums” are set aside in the treasuries of the States and the Federal Government to fund unemployment benefit checks for those who lose their jobs through no fault of their own. These funds are not unlimited and are not sufficient to pay unemployment benefits to all potential claimants losing jobs under a pandemic.
• To prevent the collapse of the banking system, should there be a “run on the banks”. When national fears of economic disaster occur, or when excessive numbers of businesses fail, or when millions of workers lose their incomes, people tend to hoard cash, and they sometimes line up at their banks and demand all their money. This occurred causing, in part, the Great Depression after the 1929 crash of the U.S. stock markets nearly a century ago. It resulted in the closing of thousands of banks, leaving millions of people destitute. A run on the banks also further inhibits economic recovery, since there are no loan funds available to businesses seeking to build factories, invest in the development of new products, hire more workers, or otherwise expand their businesses. And loans are not available for individual buyers to purchases or cover their short term expenses.
• To prevent hoarding of food and necessary supplies. We have already seen the hoarding of paper products, as they have largely vanished from our grocery stores’ shelves and are difficult to find even through online outlets. If hoarding continues and spreads to food items, it will be difficult to estimate the number of people threatened with malnutrition or starvation or the increase in the crime rate as people engage in unlawful activity to meet the basic needs of themselves and their families. Hoarding has a compounding effect. The more hoarding of goods, the more fear the unavailability of goods creates, and the more desperate the impulse to hoard becomes. The result is an ever-increasing scarcity of essential goods.

• How should our church view these programs? There are various principles that should be considered and applied to churches or other non-profit organizations considering whether to participate in the current round of coronavirus-related SBA programs:
  • These SBA programs are for employers. They are not for Christian churches only to the exclusion of other commercial or religious institutions. If they were, then Church – State issues would quickly arise. Anytime a government decides to financially support, fund, or bail out churches, there are likely to be unwelcomed “strings attached”. Churches should not take government funding or bail outs unless they are willing to submit to the restrictions and demands a secular government might place on them. This becomes a “slippery slope”. Over time, the government would inevitably involve itself more and more in the goings on of the churches it supports. This is something that we could never tolerate. Yet, these SBA programs are neither funding nor bail outs. The government wants as many employees as possible to continue to receive regular paychecks. Only gambling and sexually-oriented businesses are excluded. Our lawmakers are not concerned with the dictation of religious life in America. They are seeking to protect and preserve the economy. The government provides services such as fire and police. Churches would not hesitate to call their local fire departments in case of fire, or call their local police departments in the event of a crime. The government provides roads for all Americans, whether individuals, businesses, or non-profit organizations. Churches do not hesitate to make use of roads. These government services are provided to businesses and religious institutions alike, without discrimination and without the dictation of any particular beliefs or practices. They are provided for the physical, mental, spiritual, and economic health of the nation. Similarly, these current coronavirus SBA programs are being provided for the health of the nation, and not for the specific benefit or control of our churches.
  • The economy is suffering in two major ways. First, businesses are no longer producing goods and services at the level they did prior to the pandemic. A decline in the production of goods and services (the GDP) reduces the wealth and prosperity of the nation, increases prices (inflation) as demand does not fall commensurate with the loss of products and services, increases taxes as a percentage of individual persons’ incomes since property taxes, for example, are not tied to wages or incomes and still have to be paid, even if incomes decline or disappear, and restricts the nation’s ability to right itself economically. Second, the incomes of individuals and families are declining due to reduced work hours and pay rates, or are eliminated altogether due to furloughs, terminations, and pay-offs. Moreover, there is both the lack of work for independent contractors and the self-employed and the closure of sole proprietorships. These SBA programs will help keep the nation producing many of its essential goods and services, which will help to support our GDP, and the programs will help ensure that people continue to receive income, which is spent in support of the economy.
  • People are losing jobs across the country at a rate that is alarming in the extreme. A normative rate of unemployment claims filed, as tracked by the U.S. Bureau of Labor Statistics, is between 200,000 and 300,000 per week. More than 10 million American have lost their jobs and applied for unemployment benefits in the past two weeks alone. More are expected this week. These SBA programs will lower unemployment claims, the unemployment rate, and the stress on state treasuries, which provide unemployment benefits.
  • As businesses are saved from bankruptcy and people continue to receive income, there is less pressure on banks. This is so because businesses and those that continue working and receiving pay are likely to become more conservative and frugal in their spending habits and keep more money in their banks. This is also so because fewer people and fewer businesses are likely to significantly or fully draw down their bank accounts to stay afloat. If the banking system remains sound, then it can continue making loans. Loans are a necessary component of the economy. We buy homes using mortgages and automobiles with car notes. Many, especially during an economic downturn, need to make use of their credit for essential living expenses, major repairs, etc.
  • If the nation continues to produce goods and services and businesses, non-profit organizations, and individuals continue to receive income, there is less economic fear, which in turn lowers the impulse to hoard, and most importantly, the impulse to hoard essential goods.

In conclusion, worries over violating the Separation of Church and State, or heading down a slippery slope of government control of our churches, by making use of these SBA programs is unwarranted. Churches struggling with lower giving, or the fear of future lower giving, may be compelled to cut staff work hours, lower wage levels, release employees, or even close their doors. Practically speaking, this harms the economy. Churches, and indeed all employers, have an obligation to retain as many of their employees as possible and, as well, to maintain their work hours and the levels of their compensation, wherever possible, out of love, care, and concern for the welfare of their employees and their families and for the good of the economy and the health of the nation.