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The White House and Senate Republicans are developing plans to prod schools to reopen by attaching incentives or conditions to tens of billions of dollars of new aid as part of the next coronavirus relief bill, people involved in the talks said yesterday. The deliberations come as Senate Majority Leader Mitch McConnell (R-Ky.) prepares to unveil legislation next week that would serve as the GOP’s opening offer for negotiations on what could be Congress’s last major coronavirus spending bill before the November elections. Republican officials familiar with the negotiations said the bill may include somewhere between $50 billion and $100 billion for elementary and secondary schools, with one person familiar with the talks saying the target was about $70 billion. Negotiators are looking at $20 billion to $30 billion for higher education, GOP officials said. The officials cautioned that the sums were fluid and that no final decisions had been made. McConnell has said repeatedly that education spending — along with health care and jobs — is going to be a central theme of the next coronavirus bill.

The House Financial Services Subcommittee on Oversight and Investigations will hold a hearing at noon ET today titled "Protecting Homeowners During the Pandemic: Oversight of Mortgage Servicers’ Implementation of the CARES Act." For the full witness list, access to prepare testimony and a link to the live webcast of the hearing, please click here.

American Airlines said yesterday that it is sending 25,000 notices of potential furloughs to frontline workers and warned that demand for air travel is slowing again as COVID-19 cases increase and states re-establish quarantine restrictions, Reuters reported. The Worker Adjustment and Retraining Notification Act requires companies to provide 60 days’ notice of potential layoffs or furloughs. In a memo to employees released on Wednesday, American said the notices are tied to the overstaffing it expects in October when U.S. government payroll assistance expires. American, with more than 130,000 employees in 2019, had already warned that furloughs would be hard to avoid as pandemic-hit revenue remains more sluggish than the airline had hoped. Among different work groups, warnings are being sent to 2,500 pilots or about 18 percent of the total, nearly 10,000 flight attendants or 37 percent of the total, and 3,200 mechanics or 22 percent of the total. Overall, American expects to be overstaffed by about 20,000 in the fall, but hopes to reduce the actual number of furloughs through enhanced leave and early-departure programs it has rolled out alongside unions, Chief Executive Doug Parker and President Robert Isom said in the memo.

Cirque du Soleil Entertainment Group is preparing to reject a buyout offer from shareholders in favor of a competing proposal from lenders that have offered to supply $375 million in new loans while taking control of the bankrupt company, WSJ Pro Bankruptcy reported. The restructuring proposal from Cirque’s top lenders would supersede an offer by shareholders TPG Capital, Fosun International Ltd. and Caisse de dépôt et placement du Québec, which had hoped to preserve their stakes in the company without fully repaying its debt. The Montreal-based company’s board is close to accepting the lender offer as the lead bid, subject to better offers, and could do so as soon as Wednesday. Any sale of the company requires approval from the Montreal court overseeing Cirque’s bankruptcy. The company could continue to entertain other proposals. Cirque was forced to shut down its shows world-wide as the COVID-19 pandemic spread, choking off virtually all of the company’s revenue and forcing it to lay off close to 3,500 employees.

The U.S. Small Business Administration’s internal watchdog has launched an inquiry into a technical glitch that led many small businesses to receive duplicate loans through a high-profile federal coronavirus aid program, Reuters reported. A spokesman for the SBA Office of the Inspector General confirmed that the office has begun a review of the issue, which Reuters reported last month may have led to hundreds of millions of dollars in duplicate loans being approved under the $660 billion Paycheck Protection Program (PPP). The review comes after U.S. Rep. James Clyburn (D-S.C.), who is chairman of the Select Subcommittee on the Coronavirus Crisis, pressed the SBA watchdog in a letter to investigate the issue. The duplicate loan issue may have created “significant opportunities” for fraud and potentially wasted more than $100 million in taxpayer dollars, Clyburn said in the June 23 letter addressed to SBA Inspector General Hannibal “Mike” Ware. He said that it was “critical” to probe the issue as soon as possible. The SBA launched the program on April 3 to help keep workers at struggling businesses employed. In the race to get funds out the door, the program encountered paperwork, technology and fairness issues. In the case of the duplicate loan approvals, a blind spot in SBA’s loan processing system failed to catch when some borrowers submitted applications multiple times, typically through different lenders, Reuters reported. Lenders are still grappling with unwinding duplicate loans across several banks and retrieving the cash where those loans have been deposited. The government has said it will only guarantee one loan per borrower, which means lenders, rather than the taxpayer, are likely to be on the hook for the error.

Eastern Niagara Hospital, which filed for chapter 11 protection in November, temporarily withdrew its filing last month so it could obtain a $5.85 million loan from the federal government, the Buffalo (N.Y.) News reported. The legal maneuver made the Lockport, N.Y., hospital eligible for funds from the Paycheck Protection Program, a federal program to help businesses avoid laying off workers during the COVID-19 pandemic. The U.S. Small Business Administration, which administers the program through participating banks, rejected Eastern Niagara's application because of the chapter 11 filing. In late May, Eastern Niagara sued the SBA for rejecting its PPP application, even though the first question on the application form was whether the applicant has filed for bankruptcy. The form said that if the answer is yes, there would be no loan. But the hospital's attorneys, Jeffrey A. Dove and Beth A. Bivona of the Barclay Damon law firm, came up with an easier way of obtaining the $5.8 million. On June 18, they asked to withdraw the chapter 11 petition, so the hospital could file a PPP application before the program's money ran out on June 30. The hospital also dropped its lawsuit against the SBA, with Dove and Bivona writing in a court filing that even if the hospital beat the SBA in court, the federal agency might not have any money by then. U.S. Bankruptcy Court Judge Carl L. Bucki signed the dismissal order June 24. Two days later, the SBA approved the hospital's loan application. Last Wednesday, the hospital filed a fresh bankruptcy petition in Judge Bucki's court and announced all the employees it furloughed during the pandemic had returned to work. Hospital spokeswoman Carolyn Moore said all the loan money was used for payroll. "This financial reorganization must be concluded to ensure our sustainability," hospital president and CEO Anne E. McCaffrey said in a prepared statement.

Paper Store LLC, a chain of 86 stationery and gift stores located in the Northeast, has filed for bankruptcy and plans to look for a buyer, the latest retailer to resort to chapter 11 as a result of the coronavirus pandemic, the Wall Street Journal reported. “In short, the filing of these chapter 11 cases has been caused by the COVID-19 crisis,” Chief Restructuring Officer Don Van der Wiel said in papers filed yesterday in U.S. Bankruptcy Court in Worcester, Mass. Paper Store sells ornaments, clothes, shoes, accessories and, since the COVID-19 pandemic, items such as face masks. The privately owned Acton, Mass.-based company said the pandemic caused temporary store closures, hurting revenue. It also said sales of sports items were weaker after the New England Patriots failed to advance in the National Football League playoffs. Although recently it has been allowed to reopen many of its stores, “the disruption and additional cost of trying to preserve the health and safety of nearly 2,000 full- and part-time employees has only made matters worse,” Van der Wiel said. Paper Store is expected to post revenue of $133 million this year, down from $167 million in 2019, he said. The company said its online sales are projected to grow to $18.8 million this year from $5.9 million last year. Sales of personal protective equipment are doing well it said.

It’s become abundantly clear that the responsibility for responding to the pandemic cannot lie only with local and state governments. Congress must act decisively — and it must act in ways that don’t repeat mistakes of the recent past, during the Great Recession, according to a commentary by former Federal Reserve Chairman Ben Bernanke today in the New York Times. Our state governments serve a dual role as providers of critical services — health care, public safety, education and mass transit — as well as large employers. Many states, including New Jersey, are responsible for tens of thousands of jobs and the paychecks that go with them. Since a raging outbreak in March, New Jersey has successfully flattened the curve of new COVID-19 cases and hospitalizations. But since the state had to virtually shut down in order to control the spread, that success has come with a staggering price tag: The state faces a revenue shortfall in the billions of dollars. Many other states face ominous budgetary outlooks, too, implying the need for draconian reductions in essential services to state residents and large potential job cuts, according to Bernanke. States and localities are in desperate need of additional federal intervention before the bulk of the CARES Act funding expires this summer. Budget gaps like the one in New Jersey cannot be closed by austerity alone. Multiply New Jersey’s problems to reflect the experiences of 50 state governments and thousands of local governments and the result, without more help from Congress, could be a significantly worse and protracted recession. The CARES Act allocated $150 billion to state and local governments. This new aid package must be significantly larger and provide not only assistance for state and local governments but also continued support for the unemployed, investments in public health and aid as needed to stabilize aggregate demand and restore full employment.