Joy Mack feared that her Northeast Portland salon wouldn’t survive after being forced to shut down for three months due to the coronavirus pandemic.
Jayah Rose Salon & Spa had always been more than a business to Mack. She had partnered with community members to host workshops and book signings at the salon, held classes for adoptive parents on caring for the hair of children of color and worked with Kaiser Permanente to help Black individuals get their blood pressure checked. Seventeen independent contractors rely on the salon for work.
But the business fell further and further into debt in the early months of the pandemic. When it reopened in June, it did so with increased expenses for personal protective equipment and fewer customers.
The salon received a lifeline this fall through the Oregon Cares Fund, the state’s new $62 million coronavirus relief fund for Black Oregonians and businesses. The grant Mack secured through the fund enabled her to pay off the salon’s debt. Mack declined to specify the size of the grant.
“Black-owned businesses, we don’t always have the same access to resources and there’s a lot of disparities in how money is dispersed,” Mack said. “We have to jump through a lot of hoops that a lot of people don’t have to jump through. Having the Oregon Cares Fund was really helpful because it was geared toward us and we just don’t have those types of things geared toward us.”
The fund is a unique experiment in earmarking public money to aid African Americans, a share of the population that has been historically marginalized in Oregon and across the country. Those challenges have only grown during the pandemic.
But legal experts say the Oregon Cares Fund is legally tenuous and may not survive a pending court challenge.
That could ultimately result in the fund’s dissolution, and might preclude similar initiatives in the future. Legal experts, though, say it is unlikely that Mack and other grant recipients would have to pay their money back.
As of Wednesday, the fund had approved more than $37 million in payments and paid out more than $27 million to more than 7,000 Black Oregonians and nearly 400 Black-owned businesses and nonprofits.
Great Northern Resources, a small logging company in John Day, filed litigation last month in the U.S. District Court in Portland contending that the state and organizers of the fund were violating the equal protection clause of the U.S. Constitution by distributing government benefits on the basis of race.
The logging company says it expects to lose $200,000 this year and has the right to compete for coronavirus relief money allocated to businesses, contending that “the express use of race in distributing government money is unprecedented and blatantly unconstitutional.”
A unique program
The Oregon Legislature’s Emergency Board voted in July to allocate federal CARES Act dollars to seed the fund.
At least four other states have set aside a share of their coronavirus relief funds for women and minority-owned businesses, according to data compiled by the National Conference of State Legislatures. But Oregon appears to be the only state that has allocated federal coronavirus relief dollars to individuals and business owners of a specific race.
A July 13 opinion by the legislative counsel’s office said that setting aside funds for one race could be unconstitutional without strong data and evidence showing “past discrimination in the economic sphere.” The agency said it wasn’t aware of the Legislature compiling that evidence.
At the time, proponents of the fund pointed to a separate legal opinion from firm Schwabe, Williamson & Wyatt, which noted Oregon’s discriminatory history against Black residents. That opinion contends that Black Oregonians were suffering disproportionate economic harm from COVID-19 due systemic inequality, while receiving less aid than other groups from existing relief efforts.
The Contingent, a nonprofit administering the fund in partnership with the Black United Fund, has retained Schwabe, Williamson & Wyatt in its defense against the lawsuit. A spokesman said the firm looked forward to supporting the constitutionality of the Cares Fund in court, but wouldn’t speak further about an active case.
According to the Oregon Health Authority, Black Oregonians are more than three times as likely as white Oregonians to contract COVID-19.
Additionally, a study conducted by the National Community Reinvestment Coalition in July found that Black business owners had a harder time securing coronavirus financial relief than white business owners.
Reporting by the Business Journals shows that the number of Small Business Administration loans going to Black-owned businesses has declined significantly since the Great Recession. Available data shows that Black-owned businesses in Oregon have also obtained fewer Paycheck Protection Program loans than any other racial group.
A separate study from researchers at the University of California, Santa Cruz found that Black-owned businesses were closing twice as fast as white-owned businesses during the pandemic.
“Here we are defending a $62 million fund, but in the court of public opinion, no one ever talks about the money that has passed us by,” said Stephen Green, an entrepreneur and member of the committee distributing Oregon Cares Fund money.
“You are talking about a community that even prior to COVID really didn’t feel like there were people standing up for them and advocating for them at a city or state level,” he added. “To have something like (the Oregon Cares Fund) come together, led by and created by folks in their community all over the state, has really sparked a fire of hope for a lot of folks.”
Constitutional questions
But William Funk, an emeritus law professor at Lewis & Clark Law School in Portland, said he believes that Great Northern Resources will prevail in its challenge especially given that the pandemic is hurting communities and business owners of all races.
Funk said the U.S. Supreme Court has consistently required that race-conscious policies be subject to strict scrutiny, serve a compelling government interest and be narrowly tailored to be constitutional.
He pointed to a 1989 case, City of Richmond v. J.A. Croson Co., in which the Supreme Court ruled it was unconstitutional for Richmond to require a specific portion of city contracts to go to minority-owned businesses. The court said that past societal discrimination alone was not enough to justify rigid racial quotas. While Funk said he wasn’t happy with the standard, he said that it is the state of the law.
“The loggers are going to win,” Funk said. “This law is so clearly unconstitutional. It boggles my mind that the Legislature did it. The Supreme Court has never upheld a state law that gave a particular benefit to a particular race.”
Funk said the fund would likely be barred from continuing to use race to distribute money if the logging company prevailed, but said he doesn’t see the court requiring money that has already gone out to be returned.
Harrison Latto, a Portland-based lawyer and chairman of the Oregon State Bar’s Constitutional Law Section, said evidence showing that Black-owned businesses had faced greater challenges receiving aid could be important in the fund being able to defend its constitutionality.
Courts have generally seemed to be more deferential to government action during the pandemic, Latto said. But he said the logging company has a compelling case.
“I think the state and agency that administers the program will have a fight on their hands,” he said.
A lifeline
Oregon Gov. Kate Brown and Attorney General Ellen Rosenblum insisted in a statement Thursday that the fund is constitutional and vowed that the state will actively defend it. The lawsuit lists both The Contingent and the Oregon Department of Administrative Services as defendants.
“The fund provides narrow, timely, and targeted relief to Black-owned businesses, Black-led nonprofits and Black families that demonstrate financial adversity due to COVID-19,” the statement said. “As a state, we have a duty to aid those in need. We must not allow pernicious and ideologically-motivated lawsuits to impede our efforts to deliver critical resources to Oregonians amid a devastating pandemic.”
A grant from the Oregon Cares Fund was critical to Allen Temple Christian Methodist Episcopal Church, which serves thousands of Oregonians annually through its emergency aid center and provides outreach programs for homeless and low-income individuals. The church did not specify the size of the grant.
The church was founded in Northeast Portland in 1949 at a time when much of the city’s Black population lived within the neighborhood. But discriminatory development policies adopted by the city led to gentrification. Many who were displaced continued to come to the church and today it serves community members across Portland. A large portion of those are elderly or have health conditions that put them at greater risk amid the pandemic.
But at the same time that the pandemic was leading to an increased need for its services, the church’s donations fell by half, threatening its ability to provide food, clothes, personal hygiene products and outreach to community members in need. The grant filled the void.
“The fund materially sends a signal by the state of Oregon that we care about those that have been at a disadvantage and in most instances, at a disadvantage because of systemic issues of race and racism in our state and the country,” said the Rev. Dr. LeRoy Haynes, senior pastor and presiding elder at the church.
The lawsuit
But Great Northern Resources contends in the lawsuit that it, too, has been adversely impacted by the pandemic and deserves the right to compete for government aid.
Tad Houpt, a lands-rights activist who was active in the events around the occupation of the Malheur National Wildlife Refuge in 2016, is the president of Great Northern. In a court filing, Houpt said the mill where his company sells its timber stopped making purchases in March due to the pandemic. The timber the company had on hand became dried and cracked when they couldn’t sell it.
He said that cost the company an estimated $100,000 and that the business expects to lose far more by the end of the year. Yet, he said the company has been unable to secure any government grants to help it recover.
“After more than seven months of slow operations, Great Northern has exhausted its modest operating capital reserves and company revenue is far eclipsed by its costs and expenses,” Houpt wrote.
Lawyers for Great Northern did not respond to a request for comment.
Conservative legal strategist Edward Blum, who has led high-profile challenges to the federal Voting Rights Act and to racial considerations in college admissions, said his organization, the Project on Fair Representation, is funding Great Northern’s lawsuit.
“It is unfair and unconstitutional to treat individuals differently because of their race,” said Blum in a statement. “If the state of Oregon wants to help small business owners who have been affected by Covid-19, those relief funds should be made available to everyone – African-Americans, Asian-Americans, Hispanics, Native-Americans and whites.”
Great Northern filed a motion Saturday to block the fund from using race to allocate money until the courts resolve its legal challenge, contending that the fund will be depleted and that it will be denied the opportunity to compete for a grant on equal footing without emergency injunctive relief.
Lawyers for the fund responded by offering to post a $200,000 bond, more than the program’s maximum grant amount, to reserve for Great Northern in case their lawsuit succeeds. The court scheduled a hearing for Nov. 20 to decide whether Great Northern could establish irreparable harm to support a preliminary injunction in light of the bond offer.
In the meantime, organizers for the Oregon Cares Fund say they remain confident in the constitutionality of the fund and will continue to distribute grants to Black Oregonians, businesses and nonprofits in need.
“This is about the fact that this particular community needed a very targeted fund to be able to survive this pandemic. … If we didn’t have it, what would be the outcome for our community post-COVID-19?” said Rep. Akasha Lawrence Spence, D-Portland, a member of the committee distributing Oregon Cares Fund money. “I can’t even imagine it.”
— Jamie Goldberg | jgoldberg@oregonian.com | @jamiebgoldberg
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