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An Act To Provide Relief to Federal Employees Affected by the Federal Shutdown
Emergency preamble. Whereas, acts and resolves of the Legislature do not become effective until 90 days after adjournment unless enacted as emergencies; and
Whereas,  Maine has many residents who are employees of the Federal Government; and
Whereas,  due to the partial shutdown of the Federal Government, these federal employees are not being paid, regardless of whether they are working, which is causing enormous stress, both fiscal and emotional, on those employees; and
Whereas,  in addition to the assistance already being provided by the banks and credit unions in Maine, it is imperative that the State respond quickly and in an appropriate manner to the needs of its residents; and
Whereas,  in the judgment of the Legislature, these facts create an emergency within the meaning of the Constitution of Maine and require the following legislation as immediately necessary for the preservation of the public peace, health and safety; now, therefore,
Be it enacted by the People of the State of Maine as follows:
Sec. 1.  5 MRSA §157  is enacted to read:
§ 157. Federal Shutdown Loan Guarantee Program Fund established
The Federal Shutdown Loan Guarantee Program Fund, referred to in this section as "the fund," is established as a nonlapsing, Other Special Revenue Funds account within the Office of the Treasurer of State. All money received by the fund from any source, including any transfers from the General Fund unappropriated surplus, must be credited to the fund. Money credited to the fund must be used to guarantee the repayment of loans made by an eligible financial institution to an eligible affected employee pursuant to Title 10, chapter 110, subchapter 13.
Sec. 2.  10 MRSA c. 110, sub-c. 13  is enacted to read:
SUBCHAPTER 13
FEDERAL SHUTDOWN LOAN GUARANTEE PROGRAM
§ 1100-AA. Definitions
As used in this subchapter, unless the context otherwise indicates, the following terms have the following meanings.
 
1.  Affected employee.     "Affected employee" means a federal employee who, during the shutdown, is:
 
A.  A resident of this State; and
 
B.  Required to work as a federal employee without pay or furloughed as a federal employee without pay.
 
2.  Bureau.     "Bureau" means the Department of Professional and Financial Regulation, Bureau of Financial Institutions.
 
3.  Credit union.     "Credit union" has the same meaning as in Title 9-B, section 131, subsection 12-A.
 
4.  Eligible affected employee.     "Eligible affected employee" means an affected employee who is eligible to receive a loan as determined pursuant to section 1100-CC, subsection 1.
 
5.  Eligible financial institution.     "Eligible financial institution" means a credit union or financial institution that is in good standing as determined by the bureau pursuant to section 1100-BB, subsection 2.
 
6.  Financial institution.     "Financial institution" has the same meaning as in Title 9-B, section 131, subsection 17-A.
 
7.  Good standing.     "Good standing," with respect to a credit union or financial institution, means that the credit union or financial institution is not subject to:
 
A.  A formal agreement with the bureau;
 
B.  A consent order or a cease and desist order issued by the Federal Deposit Insurance Corporation;
 
C.  A consent order or a cease and desist order issued by the bureau;
 
D.  A letter of understanding and agreement or a consent order issued by the National Credit Union Administration; or
 
E.  A finding by the bureau that the credit union or financial institution has failed to comply with a provision of section 1100-CC.
 
8.  Grace period.     "Grace period" means the 90-day period after an affected employee's federal agency is funded.
 
9.  Loan guarantee payment.     "Loan guarantee payment" means the amount paid by the Treasurer of State in satisfaction of a claim filed by an eligible financial institution pursuant to section 1100-DD.
 
10.  Program.     "Program" means the Federal Shutdown Loan Guarantee Program established in section 1100-BB.
 
11.  Shutdown.     "Shutdown" means the federal fiscal year 2019 partial shutdown of the Federal Government that began on December 22, 2018.
§ 1100-BB. Federal Shutdown Loan Guarantee Program established
 
1.  Establishment; purpose.     The Federal Shutdown Loan Guarantee Program is established within and administered by the authority. The authority shall guarantee the repayment of loans made by an eligible financial institution to an eligible affected employee pursuant to section 1100-CC. The authority shall submit all approved claims to the Treasurer of State, who shall pay from the Federal Shutdown Loan Guarantee Program Fund, established in Title 5, section 157, any claims submitted by the authority pursuant to the program.
 
2.  Application process for credit unions and financial institutions.     A credit union or financial institution may apply to the bureau to participate in the program. Not later than one business day after receiving the application, the bureau shall determine whether the credit union or financial institution is an eligible financial institution and immediately notify the credit union or financial institution and the authority of that determination. An eligible financial institution may make loans to eligible affected employees in accordance with section 1100-CC.
 
3.  Notification of loan and borrower information.     Each eligible financial institution that makes a loan pursuant to section 1100-CC shall notify the authority in writing not later than one business day after making the loan, specifying such information about the borrower as the authority may request.
§ 1100-CC. Eligibility of affected employees; loan terms; process
 
1.  Determination of eligibility of affected employee.     An eligible financial institution may make a loan to an affected employee who meets the following eligibility requirements.
 
A.  An affected employee shall provide the eligible financial institution proof of the employee's employment status, income and residence in this State. An affected employee may meet the requirements of this paragraph by providing to the eligible financial institution proof such as a pay stub or bank statement, a federal employee identification card or the federal tax identification number of the employee's employer; and
 
B.  In addition to the proof required in paragraph A, an affected employee shall submit to the eligible financial institution a sworn affidavit from the affected employee stating:
 
(1) The affected employee is currently a federal employee residing in this State;
 
(2) The affected employee is eligible to receive back pay when the shutdown ends;
 
(3) The affected employee is not receiving a loan from any other financial institution pursuant to this subchapter; and
 
(4) The amount per week of unemployment compensation benefits pursuant to Title 26, chapter 13:
 
(a) Received by the employee, if any, during the shutdown; and
 
(b) The affected employee is eligible to receive, if any, during the shutdown.
 
2.  Loan amount.     The amount of the loan may not exceed, after subtracting 4 times the amount, if any, the affected employee has reported to the eligible financial institution under subsection 1, paragraph B, subparagraph (4), division (a) or (b) or both, whichever is greatest, the lesser of:
 
A.  Five thousand dollars; and
 
B.  The affected employee's most recent monthly after-tax pay.
 
3.  Standards for issue of loan; creditworthiness.     An eligible financial institution shall make a loan pursuant to this subchapter in accordance with the eligible financial institution's underwriting policy and standards, except that the affected employee's creditworthiness may not be a factor used for the purposes of determining eligibility.
 
4.  Terms of loan agreement.     The following terms apply to a loan issued pursuant to this subchapter.
 
A.  A loan agreement may not:
 
(1) Require repayment during the grace period;
 
(2) Charge interest on the principal amount before or during the grace period or for 180 days after the grace period; or
 
(3) Contain a fee or penalty for the prepayment or early payment of the loan.
 
B.  The loan agreement must require that the affected employee repay the loan in full not later than 180 days after the end of the grace period by making at least 3 and no more than 6 equal installment payments.
 
C.  After 180 days have elapsed following the grace period, the eligible financial institution may charge interest or fees in accordance with the financial institution's lending policy and the terms of the loan agreement.
 
5.  Multiple loans to same eligible affected employee.     An eligible affected employee who has received a loan pursuant to this section may apply to the same eligible financial institution for an additional loan for each 30-day period that the employee remains an eligible affected employee, except that an eligible affected employee may not receive more than 3 loans under the program. An eligible affected employee who applies for an additional loan shall provide the eligible financial institution with updated information as required under subsection 1, including the amount of unemployment compensation benefits the employee has been determined eligible to receive or has received during the shutdown. Each additional loan must be made in accordance with this section.
 
6.  Treatment of deferred interest.     Notwithstanding any provision of Title 36, Part 8 to the contrary, any interest deferred or not charged related to a loan issued pursuant to this section is exempt from all state taxes that may be applicable to such interest amounts as they relate to an affected employee. An eligible financial institution shall disclose to eligible affected employee borrowers in the signed affidavit or loan documents that there may be federal tax consequences to the program loans.
§ 1100-DD. Loan guarantee
 
1.  Claims.     No sooner than the 180th day following the end of the grace period and no later than the 210th day following the end of the grace period, an eligible financial institution that has made a good-faith effort to collect the outstanding principal of a loan issued pursuant to section 1100-CC and has been unsuccessful may make a claim to the authority for recovery of an amount equal to the outstanding principal of that loan.
 
An eligible financial institution shall demonstrate to the satisfaction of the authority that the eligible financial institution has made a good-faith effort to collect the outstanding principal from the eligible affected employee in accordance with the eligible financial institution's loan servicing and collection policies and has been unsuccessful.
 
2.  Loan guarantee payment.     The authority, upon receipt of a properly documented claim submitted by an eligible financial institution pursuant to subsection 1, shall submit the claim immediately to the Treasurer of State for payment. The Treasurer of State immediately shall pay to the eligible financial institution from the Federal Shutdown Loan Guarantee Program Fund, established in Title 5, section 157, any claims submitted by the authority pursuant to the program.
 
3.  Effect of payment of claim.     After payment of a loan guarantee payment to an eligible financial institution pursuant to subsection 2:
 
A.  The loan must be assigned by the eligible financial institution to the authority on behalf of the State; and
 
B.  The authority has the right to continue collection efforts on the loan.
§ 1100-EE. Duties and powers of authority
 
1.  Maintenance and review of records.     The authority shall maintain records in the regular course of administration of the program, including a record of loans issued pursuant to section 1100-CC and loan guarantee payments issued pursuant to section 1100-DD, subsection 2 to honor claims on defaulted loans. The authority shall regularly review these records to monitor all the loans issued and identify duplicative applications.
 
2.  Termination of loan recovery guarantee based on misrepresentation by financial institution.     The authority may terminate any agreement to pay the claim of an eligible financial institution pursuant to section 1100-DD if the financial institution misrepresents any information pertaining to the loan or fails to comply with any requirements of this section or section 1100-DD in connection with the claim for the loan.
 
3.  Termination of loan recovery guarantee based on excess claims.     If the amount expended for loan guarantee payments under section 1100-DD equals 10% of the total of all loans issued, the authority shall immediately cease to approve claims and shall notify the Treasurer of State and each eligible financial institution of the total amount of loan guarantee payments made and that the authority has ceased honoring loan claims.
 
4.  Recovery of defaulted loans.     The authority, on its own or by contracting with a private entity, shall make reasonable efforts to recover the amount of guaranteed loan payments made pursuant to section 1100-DD, subsection 2. Any funds recovered pursuant to this subsection, less reasonable administrative costs, must be deposited in the Federal Shutdown Loan Guarantee Program Fund established in Title 5, section 157.
§ 1100-FF. Termination of program; repeal
 
1.  New loans prohibited after shutdown.     An affected employee may not apply for a loan under the program after the shutdown ends. A financial institution may not approve a loan under the program after the shutdown ends.
 
2.  Termination.     The program terminates upon the earlier of the:
 
A.  Repayment or discharge of all loans made under the program;
 
B.  Payment of all claims filed pursuant to section 1100-DD that are eligible for loan guarantee payments; and
 
C.  Repayment or discharge of loan guarantee payments.
 
3.  Repeal.     This subchapter is repealed upon the termination of the program.
Sec. 3. Transfer. Notwithstanding any provision of law to the contrary, the State Controller shall transfer $250,000 from the General Fund unappropriated surplus to the Federal Shutdown Loan Guarantee Program Fund established within the Office of the Treasurer pursuant to the Maine Revised Statutes, Title 5, section 157 no later than February 15, 2019 to be used to guarantee the repayment of loans made by an eligible financial institution to an eligible affected employee pursuant to Title 10, chapter 110, subchapter 13.
Sec. 4. Additional transfer and allocation. The Joint Standing Committee on Appropriations and Financial Affairs may report out legislation to the 129th Legislature to address any funding needs of the Federal Shutdown Loan Guarantee Program established in the Maine Revised Statutes, Title 10, chapter 110, subchapter 13.
Sec. 5. Appropriations and allocations. The following appropriations and allocations are made.
 
TREASURER OF STATE, OFFICE OF
 
Federal Shutdown Loan Guarantee Program Fund N296
 
Initiative: Establishes the Federal Shutdown Loan Guarantee Program Fund with a $250,000 transfer from the unappropriated surplus of the General Fund.

OTHER SPECIAL REVENUE FUNDS	2018-19	2019-20	2020-21	
				
All Other	$250,000	$0	$0	
				
OTHER SPECIAL REVENUE FUNDS TOTAL	$250,000	$0	$0	
 
Emergency clause.  In view of the emergency cited in the preamble, this legislation takes effect when approved.
 
SUMMARY
This bill establishes the Federal Shutdown Loan Guarantee Program. The program, administered by the Finance Authority of Maine, provides easier access to no-interest loans for certain federal employees in Maine affected by the partial shutdown of the Federal Government, which began December 22, 2018, by guaranteeing up to 10% of the loans eligible credit unions and financial institutions make to affected employees.
Under the bill, affected employees are eligible for up to 3 loans, each equal to their monthly after-tax pay, up to $5,000, less unemployment benefits. The bill prohibits interest on the loans during the shutdown and for 270 days after the shutdown ends. Following the end of the 270 days, an eligible financial institution that made a loan under the program, after a good faith effort to collect the principal amount of the loan, may apply to the authority for repayment of the uncollected amount of the loan in default. The authority is required to make reasonable efforts to recoup the amount of any payments made to eligible financial institutions from the employee who defaulted on the loan.
The bill gives the Joint Standing Committee on Appropriations and Financial Affairs authority to report out legislation to address any funding needs of the program.