With the COVID-19 crisis hitting groups including minorities and lower-income people particularly hard, a recent University of Chicago Harris School event, held virtually, put a spotlight on how public policy can help keep those who are struggling from falling “even further behind.”

Inequality, Debt, and the Fight for a Better Financial Future” offered private and public sector insights from panelists Jennifer Tescher, MPP’96, president and CEO of the Financial Health NetworkMarie Trzupek Lynch, MPP’96, president and CEO of Skills for Chicagoland’s Future; and Dominic Garcia, MPP’03, chief investment officer of the Public Employees Retirement Association of New Mexico.

Michael Belsky, headshot
Center for Municipal Finance Executive Director Michael Belsky, AM'83

Led by moderator Michael Belsky, AM’83, executive director of the Center for Municipal Finance at Harris, panelists spent 75 minutes on May 18 exploring COVID-19-related topics ranging from the systemic hurdles keeping government stimulus payments from getting to those who need them most to steps that could smooth rebuilding.

“The COVID crisis is really exacerbating the existing inequities that we’re all familiar with,” Tescher said,  “and if we don’t focus on these things now, people are going to fall even further behind.”

Here are takeaways from the event as well as comments from later interviews with Tescher and Trzupek Lynch, for whom the session was a reunion of sorts. The Chicago-based CEOs were classmates and study partners during their time at Harris.

Financial Challenges

Before the pandemic, lower income people and people of color were already facing financial challenges, said Tescher, whose Financial Health Network — a nonprofit resource for the business community founded in 2004 —  focuses on improving Americans’ financial health, particularly the underserved.

Jennifer Tescher, headshot
Jennifer Tescher, MPP’96, president and CEO of the Financial Health Network

“The crisis,” she said, “has absolutely hit these populations far more drastically.”

Providing an early snapshot of the impact is data from the Financial Health Network’s U.S. Financial Health Pulse, an annual poll of more than 6,500 people done nationally in partnership with the University of Southern California.

“It just so happens that we are in the field with this study during the month of April,” Tescher said, “and so when we saw what was happening, we were able to add several COVID-related questions so that we could really understand what was happening to people.”

She and her team are currently analyzing the data, which would usually be released at the end of the year. With the thirst for more real-time COVID-19-related data, they have released some results and, she said, would start fielding the survey more than once a year.

“The COVID crisis is really exacerbating the existing inequities that we’re all familiar with,” Tescher said,  “and if we don’t focus on these things now, people are going to fall even further behind.”

One study finding is that a third of respondents said their income had decreased due to COVID-19. Also, 44 percent said their employer had reduced hours or pay; 42 percent worked less; and 34 percent were furloughed or were on a temporary leave from a job, Tescher said.

Those numbers hit a nation that, in general, Tescher said, was already not in great financial shape.  In 2019, she said, only 29 percent of Americans were considered financially healthy. “This isn’t just about the poorest and most vulnerable among us,” she said. “This is a middle-class problem.”

Help Delayed

The IRS began sending out CARES Act stimulus payments in mid-April. About half of U.S. Financial Health Pulse respondents said they had received their payment by the time they took their survey, Tescher said. “But,” she added, “when you break the numbers down, they tell  a very different story.”

Among households earning under $30,000, only 37 percent had received their money while the percentage was 60-plus for households earning $30,000 to $150,000, she said.

The first payments went to the nearly 80 million Americans who included bank details on their tax returns. The IRS has had a harder time finding the tens of millions of Americans who didn’t provide direct deposit information to the IRS or don’t have a bank account.

“Six percent of the people in the U.S. are unbanked,” Tescher said, “but those who make less than $30,000 a year have an unbanked rate of 17 percent. That’s 12 million people.

“The people who need stimulus money the most are going to get it the slowest.”

‘Astronomical’ Jobless Numbers

The COVID-19 crisis has put an “astronomical” number of Americans out of work, Trzupek Lynch said. Data that Skills posted on its site in late May show that the millions of jobs lost in the first four weeks of the crisis erased jobs that had been gained since the Great Recession. 

Marie Trzupek Lynch, headshot
Marie Trzupek Lynch, MPP’96, president and CEO of Skills for Chicagoland’s Future

“If you were struggling to begin with, the economic impact of the pandemic has been really, really devastating,” said Trzupek Lynch, who founded Skills — a public-private partnership that pairs employers in need of workers with the unemployed and underemployed  — during the last recession.

In 2009, she said, there were about 200,000 unemployed Cook County residents, with 160,000 job postings. Today there are roughly 600,000 to 650,000 unemployed Cook County residents and about 70,000 job postings.

“Certainly,” she said, “those job-posting numbers are starting to go back up, but what you are seeing is a greater mismatch and that will take some time to even out.”

While 55 percent of Skills’ clients stopped hiring as the COVID-19 crisis escalated in March, there are pockets of industries looking for workers, she said, pointing to cargo, food transport and processing, banks and health-care. One example of a company Skills works with, she said, is Chicago’s Freedman Seating Co., which creates seats for vehicles and mass transit. Several of its clients are distribution and delivery companies dealing with online order surges fueled by stay-at-home edicts that are increasing their need for delivery vehicles.

Impact on Retirees

Pre-COVID-19, America was facing a retirement security crisis:  21 percent of Americans had no retirement savings, said the Santa Fe-based Garcia, adding that less than 10 percent had about $5,000 saved while nearly a third of baby boomers had less than $25,000 in savings.

Dominic Garcia, headshot
Dominic Garcia, MPP’03, chief investment officer of the Public Employees Retirement Association of New Mexico

On the public side, many pension funds are funded at a 70-percent ratio or less, added Garcia, who manages the assets for the $15 billion pension fund for 90,000 public sector workers in New Mexico.

“In the private sector,” he said, “folks are just not saving enough.” And now, with company budgets slammed, 401K matches are being suspended “making things even worse.” 

“If you were struggling to begin with, the economic impact of the pandemic has been really, really devastating,” said Trzupek Lynch.

For underfunded public pensions, like in Illinois, increased financial strains on governments put  pension fund contributions at risk adding to the danger that governments will fall even further behind, putting their credit ratings and ability to issue debt in peril.

In New Mexico, pension reform enacted in February increased contribution rates and altered how the state pays cost-of-living adjustments, tying future COLA payments to investment returns instead of promising a fixed amount.

“That sets our system up on a very sustainable path to weather even these storms,” said Garcia. “But a lot of public pension plans around the country don’t have that benefit of sustainability.”

Some, he said, face asset exhaustion within the next decade.

Problems on the Horizon

Amid the push for recovery, the panelists pointed to concerns ahead. On the financial side, large banks won’t start to feel the implications of the job losses — resulting in loan delinquencies and defaults — until late summer or early fall, Tescher said.

“A lot of people have now been given forbearance on their loans,” she said. “The real problem is going to be in three months when the forbearance is up and people are supposed to be able to make good on the whole three months’ worth of payments, which is not going to be possible. That’s when we’re going to start to see the need for loan modifications and a range of other things.”

As for the jobs outlook, Trzupek Lynch said  “we are expecting what I’m calling waves of unemployment.” For example, when the airline stimulus ends on Oct. 1, the industry has warned that layoffs, currently barred by the bailout, are coming. Some estimate that a third of airline jobs could disappear.

Under Pressure

Amid so much grim news, the panelists did see a way forward, albeit with an asterisk.

Planning has gone out the window, Tescher said, and Trzupek Lynch added: “I think we have a long way to go.”

Both also noted the extreme time pressure they feel in the face of the crisis. “I feel like there’s going to be a window post the most-challenging part of the health crisis when … people are going to be ready to think about ‘OK, what do we need to start doing in the longer term to rebuild.’ I feel like we have to be ready for that moment. Because the longer this goes on … it’s easy to feel less pressure to act.”

Trzupek Lynch added: “In my 27 years of working, I think this is probably the biggest weight I’ve felt in terms of knowing the numbers and seeing magnitude of the situation.” But she said, she and her team feel a duty to move as quickly as they can. That has meant six-day workweeks, with the longtime runner easing the stress with activities including runs and walks with her four children.

The Path Forward

Solutions raised during the webinar included the possibility of a new New Deal. “Time will tell,” Trzupek Lynch, adding that she and 15 other CEOs of  workforce organizations in Chicago who regularly meet have “been raising that to the state and to the city and the federal level because we do anticipate that there are going to be WPA-type projects that are going to be coming in our direction.”

As workforce organizations try to map out which industries are going to come back when, other options for the unemployed are being suggested, she said, including a return to school.

Companies, meanwhile, are stepping up to help. While initially empathy efforts were all about food and housing, she said, companies are now focused on job recovery. As proof, she said, Skills recently got a very substantial grant from JPMorgan Chase.

“Chicago,” she added, “is an incredibly philanthropic community.” And there are number of people and groups working on plans to tackle unemployment with innovation coming from the public, private and not-for-profit sectors “which will help us get through this moment.”

On the financial front, finding a way to simplify delivery of one-time payments from the government, like the CARES stimulus cash,  would solve a long-time problem, Tescher said.

“There are so many small what I would call plumbing issues that we don’t tend to think about that really end up being huge obstacles for people,” said Tescher, a mother of three who pursued a public policy degree after starting her career in journalism but wanting to make change “in a different way.”

No Problem Too Big

The unique problem-solving toolkit that Harris provides to its students, Trzupek Lynch said, is proving invaluable amid the crisis.

Harris students and alumni “are energized by a problem,” she said in comments echoed by the other panelists. “We want to dig our teeth into it and solve it. Problems for us are opportunities.”

The students and alumni, Garcia added, are also “optimistic people that are willing to find solutions and roll up their sleeves and get the job done. … That was one of the biggest benefits of being a Harris Schooler.

“I think by and large life [post-COVID] will get better. It’s just that we’ll have to transition to what that better is. … It’s not going to be a straight path but I think students like those at Harris who are willing to have that belief that there’s always a solution and we’ll find it, I think those are the people who are needed now more than ever.”

Tescher agreed. The crisis, she said — along with what happens in the November U.S. election — could bring a more muscular federal government in terms of programs and policies to support mainstream America “and that should be like a candy store for all of the Harris students and alums.”

“Everyone, Tescher added, “is going to be looking for how to wrap big policy ideas into the rebuilding that’s going to need to take place. And that’s exciting for folks like us.”