[Senate Hearing 107-339]
[From the U.S. Government Printing Office]

                                                        S. Hrg. 107-339
                      REVITALIZING RURAL AMERICA:
                      DO TO PROMOTE SMALL BUSINESS
                       GROWTH AND DEVELOPMENT IN 
                           RURAL COMMUNITIES?

                             FIELD HEARING

                               BEFORE THE

                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                            AUGUST 16, 2001

    Printed for the Committee on Small Business and Entrepreneurship

 Available via the World Wide Web: http://www.access.gpo.gov/congress/

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                      ONE HUNDRED SEVENTH CONGRESS

                 JOHN F. KERRY, Massachusetts, Chairman
CARL LEVIN, Michigan                 CHRISTOPHER S. BOND, Missouri
TOM HARKIN, Iowa                     CONRAD BURNS, Montana
PAUL D. WELLSTONE, Minnesota         OLYMPIA J. SNOWE, Maine
MAX CLELAND, Georgia                 MICHAEL ENZI, Wyoming
MARY LANDRIEU, Louisiana             PETER G. FITZGERALD, Illinois
JOHN EDWARDS, North Carolina         MIKE CRAPO, Idaho
MARIA CANTWELL, Washington           GEORGE ALLEN, Virginia
JEAN CARNAHAN, Missouri              JOHN ENSIGN, Nevada
    Patricia R. Forbes, Democratic Staff Director and Chief Counsel
               Emilia DiSanto, Republican Staff Director
               Paul H. Cooksey, Republican Chief Counsel

                            C O N T E N T S


                           Opening Statements


Wellstone, The Honorable Paul D., a United States Senator from 
  Minnesota......................................................     2

                           Witness Testimony

Meyer, The Honorable Larry, Mayor, St. Cloud, MN.................     1
Kittleson, The Honorable Paul, Mayor, Benson, MN.................     7
Daum, Edward, director, Minnesota District Office, U.S. Small 
  Business Administration, Minneapolis, MN.......................    11
Wallace, Prince, president, AquaCare, International, Inc., Maple 
  Grove, MN......................................................    18
Hasskamp, Dave, director, Aitkin County Growth, Inc., Aitkin, MN.    38
Bouta, Dean, general manager, Bennett Office Technologies, and 
  chairman, KandiLink, Willmar, MN...............................    55
Struck, Renae, director of Human Resources, EMR Innovations, St. 
  Cloud, MN......................................................    60
Stewart, Bonnie, director, Minnesota Women's Business Center, 
  Fosston, MN....................................................    65
Spang, William, president and chief executive officer, Mountain 
  Iron First State Bank, Mountain Iron, MN.......................    71
Phillips, Mark, president, Iron Range Ventures, Virginia, MN.....    76
Matthews, Mary, president, Northeast Entrepreneur Fund, Inc., 
  Virginia, MN...................................................    81

          Alphabetical Listing and Appendix Material Submitted

Bouta, Dean
  Testimony......................................................    55
  Prepared statement.............................................    57
Daum Edward
  Testimony......................................................    11
  Prepared statement.............................................    13
Hasskamp, Dave
  Testimony......................................................    38
  Letters........................................................    40
Kittleson, The Honorable Paul
  Testimony......................................................     7
  Prepared statement.............................................     9
Matthews, Mary
  Testimony......................................................    81
  Prepared statement.............................................    84
Phillips, Mark
  Testimony......................................................    76
  Prepared statement.............................................    79
Spang, William
  Testimony......................................................    71
  Prepared statement.............................................    74
Stewart, Bonnie
  Testimony......................................................    65
  Prepared statement.............................................    68
Struck, Renae
  Testimony......................................................    60
  Prepared statement.............................................    63
Wallace, Prince
  Testimony......................................................    18
  Prepared statement.............................................    20
  Appendix Material..............................................   112
Wellstone, The Honorable Paul D.
  Opening statement..............................................     2
  Prepared statement.............................................     5

                        Comments for the Record

Harvey, Keith D., chairman of the board; Spraag, Cheryl, 
  president & CEO, Virginia/Gilbert Mountain Iron Area Chamber of 
  Commerce, Mountain Iron, MN, letter............................   108
Mercil, Steven, CEO, Minnesota Investment Network Corporations, 
  St. Paul, MN, prepared testimony...............................   110
Wallace, Prince, data prepared by Bruce P. Corrie, Ph.D., 
  Concordia University, St. Paul, MN.............................   112



                       THURSDAY, AUGUST 16, 2001

                              United States Senate,
          Committee on Small Business and Entrepreneurship,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:21 a.m., at 
the St. Cloud City Council Chambers, St. Cloud, Minnesota, the 
Honorable Paul D. Wellstone, presiding.
    Present: Senator Wellstone.

                        CLOUD, MINNESOTA

    Mayor Meyer. Hi. I am Mayor Larry Meyer, and welcome to St. 
Cloud. We are going to get started here just a little bit late. 
I want to welcome you to our city, and we are going to adjust 
that mic there a little bit, thank you very much. You are 
sitting in the old Central School gymnasium. The city of St. 
Cloud bought this building from the school district sometime 
ago, so if you felt like you were ready to participate in a 
basketball game, that is because you are sitting in the first 
childproof bleachers manufactured in the State of Minnesota, 
about 1930 sometime. We just put carpet over the top of them. 
But they were poured concrete, and they were very difficult to 
get out of there, as we found out when we removed them from the 
other site and put the City Mayor's office in.
    But like many of you in rural Minnesota, you know how far 
you have got to stretch a buck to make things go, and we all 
know that business is the lifeblood of our communities in 
outstate Minnesota. St. Cloud has certainly some advantages 
that many of your communities don't that are out further from 
the Metro area. Certainly St. Cloud, as many communities have 
benefited, for instance, with new technology, better telecom 
resources, better technology, has allowed location not to 
matter as much as it did before in business development. But we 
still need the Federal Government's help in so many ways, and 
as Senator Wellstone knows, St. Cloud is always lurking in the 
halls out there in Washington, either us or with our lobbyists, 
because the resources they have are so important, so critical 
for us, particularly in the area of transportation. For us, 
that always seems the No. 1 concern: better roads, better 
highways, better interchanges, and, of course, our airport. 
Many of you, I realize, have other issues, and we will be 
sharing those with the Senator and others today.
    So, Senator Wellstone--and I also want to recognize 
Representative Schumacher and Representative Opatz--thank you 
so much for coming and being here with us today, and I hope you 
have a very productive day here in St. Cloud.


    Senator Wellstone. Thank you.
    Senator Wellstone. I want to thank Representative Opatz. I 
also want to say, you all may have very busy schedules, but if 
you are going to be here at all for any length of time, please 
come up here with me. I feel funny with you being out there. 
Please join me.
    Mr. Opatz. I am State Representative Joe Opatz, 
representing St. Cloud and Sauk Rapids, and I also want to 
welcome all of you here in our community, and also a strong 
thank you to Senator Wellstone and the Committee for your 
willingness to come out here and hear some of the difficult 
issues that we are facing in outstate Minnesota, and lend my 
support as a State legislator to say that addressing some of 
these issues as we see a changing economy, whether it is health 
care or schools or small businesses, needs to be a partnership 
between the Federal Government and the assistance of the 
Senate, the State Legislature, as well as individual 
communities like St. Cloud and many other communities that are 
here today.
    So welcome to St. Cloud, and I look forward to an 
interesting and thoughtful agenda, and I also want to recognize 
Leslie Schumacher, and maybe she would like to join--
    Senator Wellstone. I would love it. Please.
    Ms. Schumacher. Well, I too want to welcome everyone here. 
I am glad I was able to come this morning. I had a little bit 
of short notice, having been on vacation, but I think this is 
critical to bring these issues to the forefront, and being on 
the Policy Committee for the agricultural and rural development 
issues in the State of Minnesota, I am happy to be here, and 
anxious to hear the testimony and thoughts and forward thinking 
that is going to come out of today's meeting. So thank you all 
for being here today.
    Senator Wellstone. Thank you, Representative Schumacher. 
Let me thank Joe and Leslie for their remarks, and Larry, as 
well. Let me just recognize very briefly a few people, and then 
we are going to go right to the hearing, and I am going to be 
uncharacteristically brief. I know that brings a smile to some 
of your faces, but I am going to--because there is a lot of 
really good testimony, and I realize yesterday we had a 
gathering, and it was not a formal committee hearing, but just 
a gathering with the small business community, and I could not 
believe the number of people that turned out and the number of 
people who wanted to speak and had things to say and great 
contributions to make. So I am going to try to move this along. 
I know John DaSilva has joined us from Senator Kerry's staff on 
the Small Business Committee and he is going to help keep 
everybody on track. Perry Lange from my staff came out here 
from Washington, D.C. Perry is a person who does work in the 
small business community. Connie Lewis is--I am not going to do 
justice to everybody--the Director of my Minnesota office out 
here, works a lot on small business issues. And then Toni 
Merdan from Colin Peterson's office. Toni, thank you so much. 
Come up here. No, I am serious, please come up. Come up here. 
Colleen Landkamer is a Blue Earth County Commissioner. Colleen, 
please join us up here. I am serious, I would like you to.
    The other thing I just want to say is, I see Art here, and 
I see Joe and others. I would like to thank some of the 
veterans that are here. Your medical facility is extremely 
important to the veterans community, and the veterans community 
in St. Cloud and West Central Minnesota I think has a voice of 
great dignity, so my thanks to all of you for being here.
    Before we get started, I want to thank Brian and David, who 
are the interpreters. They wanted to also say something before 
we get going.
    Interpreter. We just wanted to check if there are any deaf 
individuals in the audience who need interpreting services? 
Anyone? We will wait for a while to make sure.
    Senator Wellstone. Well, what I would suggest, if you do 
not mind interpreting, that would be great. I am very pleased 
that you are here, and I do not think there is any way to ever 
have a formal hearing without interpreters, so thank you for 
being here.
    With that, the Committee is going to come to order, and let 
me call the first panel. As you are coming up, I will make my 
1-minute worth of remarks. Paul Kittelson, Mayor of Benson. You 
know what? I have got a lot to say about everybody, and maybe 
what I will do is just be as brief as I can. Instrumental in 
building a new fire hall, new ambulance facility, new water 
tower, and also recently Benson has been selected as the site 
of the Fibrominn generating plant. Ed Daum, who is head of the 
Minnesota SBA office since 1987. I said this yesterday. I 
believe that he--and you can think I am being quite the 
politician here--I think he is the best district director in 
the United States. We have the most successful programs in our 
State because of Ed Daum. Ed Daum will be coming up. Prince 
Wallace, who is originally from Nassau, Bahamas. He came to the 
United States as a student of St. John's University--I think we 
all know where St. John's is, am I correct?--and currently owns 
three businesses in Minnesota, one in the Twin Cities, and then 
two others. I guess there were more, am I correct? Is that 
    Mr. Wallace. Yes.
    Senator Wellstone. Prince also joined us yesterday, as 
well. For my own part, I think I could go on and on. I think I 
will just make two points. One I made earlier as some of us 
were talking. I am convinced this is the best way for me to 
summarize the total of my viewpoint about this hearing and 
about why it is important. Every 2 weeks, I try to be in a 
school. Usually it is high schools, and all too often in 
Greater Minnesota I will talk to students, and they will say to 
me that they have heard the following advice which Sheila and I 
gave to our children when we were all growing up and who have 
children themselves: the ticket to getting ahead is getting an 
education. But in Greater Minnesota, in too many communities in 
Greater Minnesota, the translation of that is, ``so you can get 
out of this community, because there is nothing here.'' Colleen 
is nodding her head. That makes no sense whatsoever. For my own 
part, I put emphasis on the three E's: education, 
entrepreneurship, and empowerment. The empowerment piece, by 
the way, is when young people, and not such young people, 
decide, listen, what happens in this community is not 
independent of what we do. For young people to want to stay in 
our communities in Greater Minnesota, they have to answer the 
following two questions in the affirmative. First question: Can 
I afford to live in this community? If I am farming, can I get 
a decent price? If I am working, can I find a good-wage job? 
And if I want to be an entrepreneur, can I grow a business 
successfully? Then the second people ask: Do I want to live in 
the community? That means quality-of-life issues. All of those 
issues that have to do with good schools and good health care 
or good public transportation, or affordable housing, or 
affordable child care are not just urban issues. In many ways, 
they are even more vitally important in Greater Minnesota. So 
to me, this hearing is all about our future.
    My final point, I would rather that the men and women who 
make the capital investment decisions that determine whether or 
not there are going to be businesses and jobs in our 
communities, live in our communities, and know the people in 
our communities, and care about our communities, than those 
decisions be made by a group of people over martinis halfway 
across the world. We are much more interested in our own 
homegrown economies, in our own business people, in our own 
self-reliant, self-sufficient communities, and that is what I 
think this hearing is about.
    [The prepared statement of Senator Wellstone follows:]
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    Senator Wellstone. With that, we will move forward and 
start out with Mayor Kittelson. Thank you for joining us, 


    Mr. Kittelson. Senator Wellstone, staff, and guests, I am 
thankful for the opportunity to speak to the health of our 
rural communities. There is much that is good about our rural 
lifestyle. My experience is that people from all over the 
United States cherish the work ethic of their rural populace. 
There is a reason for this, and it has to do with lifestyle, a 
sense of community, a sense of family, responsibility and 
personal pride.
    In our community, like many others, many of those who have 
retired from work in the metropolitan areas come out to our 
towns to retire. They are tired of the hustle and bustle of the 
cities, and they want a quieter lifestyle. We are continuing to 
try and meet their needs. We try to have senior housing that 
will fit the various economic needs. We have an extensive 
public transit system. We try to keep a hospital going. I think 
we have done a wonderful job making our community senior-
friendly, and we will continue to try harder.
    We, in our rural communities, try to stimulate and attract 
businesses, not only for our economic health but also to keep 
our young families at the center of attention. In order to keep 
a healthy rural area, we must have young families, and in order 
to have young families, there must be opportunities for them, 
either in agriculture or business and industry. It behooves us 
to try to make our rural areas strong so some of those same 
values I spoke of continue and, for that matter, ensure that 
there is a workforce available.
    It is difficult for us to attract businesses for a variety 
of reasons. They are not necessarily graded in order, but the 
first one is, of course, transportation. Many of us are not on 
the interstate system, and depending on the various highways 
and byways throughout the State, transporting goods and 
materials often is not cost effective. Benson was selected to 
be the site of the Fibrominn project. It is a $110 million 
project. We happen to be in the center of one thing the 
metropolitans do not have--turkey litter. This will be the 
first poultry-burning, electricity-producing plant in the 
United States, and it will be the biggest in the world. We will 
have hundreds, if not thousands, of people visiting that plant 
from everywhere in the world. Are they going to fly into 
Minneapolis--St. Paul and drive to Benson? I am sure they would 
prefer to fly to our town. We have a 4,000-foot runway, and 
many on our airport commission feel we ought to have a 4,500- 
to 5,000-foot runway. Where do we get the money to build it? I 
believe improved highways and expanded airports will benefit 
the rural areas.
    Communications. I spoke to our biggest employer in the city 
of Benson, and I asked him: Of all of the points we are talking 
about, which one is most important? He said communications, the 
Internet system, that is No. 1. Some say that businesses would 
relocate in rural communities if they were on the electronic 
highway, and I think I agree. Large telephone providers haven't 
to this point found it economically feasible to provide it. We 
have a few cable companies providing broad band services over 
fiber, but most of the State still operates on a 56K modem 
connected to a telephone line. It is slow, and almost 
prehistoric. Until the Government insists on equal access for 
all communities, there is going to be this disparity and little 
opportunity. It seems to me that there are a multitude of 
businesses that could operate more efficiently in small town 
USA if they had full and fast Internet capabilities.
    Finances. Most of our communities operate on a relatively 
small budget. Our residents want streets, water, sewer, police 
protection, electricity, fire department, parks, a library, et 
cetera. When it comes to budgeting for all of this, there is 
very little left for development. The only thing we, in our 
rural communities, had going for us was tax increment 
financing. Some politicians, mostly from large tax capacity 
districts, want to end this one tool we have had. I believe it 
was used wisely in most cases, and it appears that tool is 
    There seems to be some thought that the rural areas take 
care of themselves. This is an area filled disproportionately 
with retired folks, lower-paying jobs, a rural way of life that 
is in flux, and they seem to tell us, if you want the things 
that other citizens have, you are going to have to dig deeper. 
You have problems, figure them out.
    Our aging population is growing disproportionately in the 
rural areas of the country for obvious reasons. We in Benson, 
Minnesota, try to keep a hospital going with Medicare paying 54 
percent of the costs. This outmoded system pays us the least, 
larger cities in the State more, and other States in the United 
States much more. The hospital is needed in our town. We have 
had to ask the taxpayers for money to keep it going.
    Along with the aging, we have the problem with the young 
people, how to get the best education possible in a declining 
enrollment era. Good schools and medical services are necessary 
to afford any business or industry for relocation.
    At this particular point, I would like to commend Senator 
Wellstone. I am talking to the converted. He has backed bills, 
Senate bills 885, 830, 9776, 706, all of which help our rural 
    I do not think most of us want to see our rural communities 
dry up and blow away. I do not believe this is good for our 
large cities or for America. I do not have the solution, but my 
sense is that improving transportation, giving everybody equal 
access to the Internet, making moneys available for business 
start-ups and relocation, and equalizing the Medicare payments 
will go a long way toward helping solve the problems of our 
    The farm economy is also basic to us, because for all 
intents and purposes, our communities do not end at city 
limits, but they extend for miles around us. I see the things 
that are being done for Third World countries and wonder: Can 
we expect less?
    I believe that if we focus on the problems and muster the 
tools available to us, as well as initiate others that may be 
needed, we can solve the problems of rural Minnesota and 
America. I for one am willing to help find any solution any way 
I can.
    Thank you very much.
    [The prepared statement of Mr. Kittelson follows:]
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    Senator Wellstone. Thank you, Mayor.
    Ed Daum.


    Mr. Daum. Thank you, Senator. Thank you, Senator, for 
inviting me to testify on behalf of the U.S. Small Business 
Administration on our role in rural economic development. SBA 
is beginning a new era, with a new Administration in the White 
House and a newly confirmed Administrator, Hector Barreto. Our 
new Administrator is a small business person, and understands 
the problems and issues that concern small business owners. Mr. 
Barreto wants to ensure that SBA is meeting the needs of its 
customers, the 25-million plus small businesses throughout the 
country. SBA will be working on innovative new ways to meet 
small business community needs, including those located in 
rural areas.
    SBA's initiative is to help people get into business and 
stay in business, and we accomplish this through a variety of 
programs and working with many resource partners. One of the 
newest programs is the New Markets Venture Capital Program. 
This is designed to combine venture capital in low-income rural 
and urban areas. Nationally, seven companies were approved 
during the first round of applications, and there will be 
another request for more companies to be a part of this program 
in late spring of 2002.
    SBA recognizes regulatory compliance is a major concern for 
small businesses. To address this, SBA has established working 
relationships with each of the Federal agencies, and this is a 
high priority for our new Administrator.
    SBA's financial assistance programs cover a wide range of 
business needs. They include microloans for very small start-up 
businesses with loans up to $35,000. In Minnesota, we have six 
active microlenders; four of those are located in rural areas. 
SBA has provided $5 million in loan funds and almost $4 million 
in technical assistance grants.
    Then the SBA Certified Development Company program, this 
program is specifically for the purchase of plant and 
equipment. Over $63 million in loans were made in fiscal year 
    The 7(a) loan program, which is a loan guarantee program, 
over $234 million in guaranteed loans were made in fiscal year 
    Small Business Investment Companies invest in small 
businesses during their growth stages. Over $66 million was 
invested by SBICs in Minnesota in fiscal year 2000.
    Like the finance programs, SBA has several partners that 
deliver the management assistance programs. Minnesota is very 
fortunate to have a business partner such as SCORE. It is an 
all-volunteer organization that conducts management assistance 
workshops, provides counseling and training for small 
businesses. We currently have 510 SCORE members statewide. 
Fourteen SCORE offices are located outside the Twin City metro 
area, and three are located within the metro area.
    The Small Business Development Centers are another very 
important resource for the SBA in program delivery. The SBDCs 
provide counseling and technical assistance. They are located 
in 17 different sites throughout Minnesota. Fifteen are located 
outside the metro area, and two are located within the metro 
    The SBA sponsors two Women's Business Centers in Minnesota. 
These centers specifically provide women-owned businesses with 
management and technical assistance. One is located in rural 
Minnesota and one within the metro area.
    In the area of Federal procurement, the SBA has several 
roles, including helping small businesses get Government 
contracts. One program is the HUBZone program. It provides 
Federal contracting opportunities for qualified small 
businesses located in distressed rural and urban areas. As for 
outreach programs, for those that have computer access, SBA's 
web site and the online classroom is available 24 hours a day. 
The SBA web site, www.sba.gov, brings SBA into your home or 
office at the touch of your keyboard.
    Well, thank you for inviting me here today, and a special 
thank you to Senator Wellstone who has been such a very strong 
advocate of small business in Minnesota and as a member of the 
Senate Committee on Small Business and Entrepreneurship.
    [The prepared statement of Mr. Daum follows:]
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    Senator Wellstone. Thank you very much.
    Mr. Prince Wallace.

                  INC., MAPLE GROVE, MINNESOTA

    Mr. Wallace. Thank you, Senator Wellstone, staff, and 
guests. My name is Prince Wallace. Originally I came from the 
Bahamas to attend St. John's University, fell in love with 
Minnesota and its people, and here I am today.
    As a small business person, I find myself in a unique 
position, being a minority business owner, as well as a rural 
business owner, and the fact that my wife runs one of our 
companies as a woman-owned business.
    My rural entrepreneurship experience has come largely 
through West Central Environmental Consultants. We are a small 
company in Morris, Minnesota. However, credit should be given 
to the four individuals, the founders who created this entity, 
to meet the environmental needs of rural Minnesota. In 
addition, it provided the opportunity for talented students 
graduating from the University of Minnesota--Morris to work and 
live in a rural community. Today, West Central employs 
approximately 40 employees.
    In addition to my entrepreneurial business experience, I 
was fortunate to be a part of the Minnesota Rural 
Entrepreneurship Academy, which was created through a unique 
partnership between the Ewing Marion Kauffman Foundation and 
its Center for Entrepreneurial Leadership and Minnesota Rural 
Partners. Its mission is to build and support a vital rural 
Minnesota. Minnesota was selected, along with three other 
States, to receive the Kauffman technical assistance grant. The 
purpose of the grant and the goal of the academy were to 
identify challenges to rural entrepreneurs and discuss and 
recommend potential solutions. Attached is a final report from 
the Minnesota Rural Entrepreneurship Academy.\1\
    \1\ This report is located on page 25.
    Why is rural entrepreneurship development vital in our 
State? Even though the Twin Cities has experienced tremendous 
growth and economic prosperity, and manufacturing services and 
trade make up over 50 percent of our State's gross State 
product, Minnesota's economy is still dependent on agriculture. 
However, Minnesota's agricultural economy is changing 
drastically, and this change will no doubt have profound 
effects on our rural communities.
    In order to achieve economies of scale, farms, crops, and 
livestock are becoming larger. This trend will eventually 
eliminate the small family farms. The question then becomes, 
where will these families go, and what will they do? Hopefully, 
we, as a society, will have the vision and the will to reinvest 
back into our rural communities so that these same families who 
are being uprooted will experience a new entrepreneurial 
renaissance. The prime example where we as a society have 
invested in our society that I would like for us to recall is 
as follows:
    After World War II, the United States embarked on what I 
would consider a new economic investment strategy. It is called 
the GI bill. This large-scale investment into the education of 
our young people is one of the main reasons the United States 
is what it is today--strong, and the most powerful Nation on 
Earth. We need to do the same for our rural communities.
    The Minnesota Rural Entrepreneurship Academy Report spells 
out in detail what the issues are and their solutions. The four 
areas of significant challenges are capital, technical 
assistance, infrastructure, and culture and education. However, 
as a small business person who has experience in the Twin 
Cities, as well as in rural Minnesota, the most important of 
the four areas is the need for access to capital. I was 
fortunate to have time to spend with Senator Wellstone and a 
group of other minority businesses, and I guarantee you that 
the most resounding No. 1 issue was access to capital.
    I would like to talk now about a new look at the farm, and 
this is somewhat controversial, and that is, I would say, the 
21st century look at the farm. The typical view of a farm today 
is that it produces large-scale crop or livestock. This view 
needs to change, and view the farm as any other asset on the 
balance sheet, where one is always questioning how to make this 
asset produce more. Farming in the 21st century needs to be 
viewed as an entity which can generate many sources of revenue 
on a continual 24-hour basis. For example, a 2,600-sow 
operation's main source of revenue is to generate piglets. What 
about other sources of revenue, such as manure waste converted 
to gas that can generate electricity, fuel to power machinery, 
including automobiles, solids converted to fertilizer to 
enhance our dying--and I would like to emphasize dying--soils; 
and liquid fertilizer to grow specialty crops hydro-
ponically, such as strawberries, tomatoes, lettuces, et cetera.
    There is some additional information I would like to add in 
terms of minority businesses in rural Minnesota. Bruce Corrie 
stated yesterday, it is probably one of Minnesota's best-kept 
secrets, in the sense that in rural Minnesota, minority and 
American Indian businesses are growing. And so I can also make 
this part of the record.
    Senator Wellstone. Absolutely. Thank you.
    Mr. Wallace. Thank you.
    [The prepared statement of Mr. Wallace follows:]
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    Senator Wellstone. Thank you very much, Mr. Wallace. What I 
am going to do, I mentioned this to Colleen and Leslie, and to 
everyone up here, what I am going to do is rather than ask 
questions, there is a really good turnout here today, and I 
want people to have a chance to speak. So rather than asking 
questions, I think we won't do that. We will listen to 
everybody on the panel, and then open it up for discussion and 
do it that way.
    The quickest observations, when Prince Wallace talked about 
access to capital, we in the other room had talked--and, again, 
we won't make this the focus of the hearing, but for those of 
you, either vendors of the small business community, how many 
of you are aware of the fact that there is a proposal now to 
increase the fees in the 7(a) program? How many of you are 
aware of that? OK. Well, some.
    I mention that, because those of you who raised your hand, 
you know why I asked the question. I think one of the things we 
want to make sure of--this can be a strong message from 
Minnesota. I do not hear any complaints about the 7(a) program 
from borrowers or lenders, so this is critically important, 
access to capital, and we want to be sure we maintain the 
funding for that program.
    Then, Paul, the only thing I want to add to what you have 
said is I have been interested in the last few years in a real 
coalition in working on this, and I am determined to get it 
either in the ag bill or the workforce development bill. I 
think there is a tremendous potential.
    Joe, you will probably focus on this, as well. As long as 
the information technology businesses are doing well, we have 
to worry some about where the economy is going. I am convinced 
for Greater Minnesota there is a real potential for many people 
to telework from their home or from a satellite office. And, 
you know, if the companies say we need people, people can work 
for a company in the Twin Cities or a company halfway across 
the world, and if these companies are looking for people with 
good work ethic, and they are looking for people who are 
interested in this, we have it. But we are not going to do it 
if this digital divide is here. I was remiss in not mentioning 
the importance of that technology and that infrastructure, and 
thanks for pinpointing that, because that is a critical, 
critical issue.
    The only other thing--I could go on and on, but going back 
to what Mr. Wallace said again, and when you were talking about 
family farm, the two things that occurred to me about the 21st 
century, one is that I think part of the decline of some family 
farmers has been the inevitability of a stacked deck. I think 
it has been policies that have been far more weighted toward 
larger operations and conglomerate sources than the family farm 
operation, that is, the person who lives on the land and works 
on the land.
    But what you said about diversification, in the Farm bill 
that comes out of the Senate, I guarantee you that there is 
going to be an energy section that is going to deal with the 
potential of renewable energy, wind technology, small business, 
clean alternative fuels, much of which comes from Minnesota. 
Biodiesel, ethanol, you name it. The other thing is there is 
going to be much more of an emphasis on conservation and 
actually giving people credits and incentives for what they are 
doing with the land in production, above and beyond the 
Conservation Reserve Program. I think, frankly, that will be 
all for the better, in terms of the kind of agriculture we 
    Well, why don't we--let me just thank you. I have questions 
and I think other people do also. Can we wait and do that, go 
through everybody? Thank you so much for your testimony.
    Let me call up the second panel, Barriers to Small Business 
Growth. Dean Bouta, general manager of Better Office 
Technologies, which provide Internet services to the Willmar 
area. Again, I am not giving you all the proper introduction, 
but Dave Hasskamp is the director of the Aitkin Growth Alliance 
since 1987. Renae Struck is the director of Human Resources of 
EMR Innovations, which is a small business here in St. Cloud, 
and Bonnie Stewart is co-founder and director of People 
Connection, Incorporated, and the Women's Business Center in 
Fosston, Minnesota.
    Dean, can we start with you? I will wait for everybody to 
get that--OK. We will go from Dean to Dave to Renae, and to 

                    INC., AITKIN, MINNESOTA

    Mr. Hasskamp. My name is Dave Hasskamp. I am from Aitkin, 
Minnesota. Please excuse my voice, it is going away. I have 
been fighting it for a long time. It is wearing out. But thank 
you for asking me here, Paul.
    Senator Wellstone. Well, you have done great work.
    Mr. Hasskamp. Well, I do not have a prepared statement that 
I can refer to, but I have kind of lived this life for the last 
16, 18 years, and I think I can--I could go on until tomorrow 
about the things that I think we could do to improve our rural 
communities. You are absolutely right, Paul, when you talk 
about what rural communities need. Everything, absolutely 
everything that is wrong in rural America has to do with 
access. Whether it is transportation, workforce, 
telecommunications, workplaces, hospitals, structure, 
everything that is wrong is about access.
    I am from Aitkin County. Aitkin County is known to be the 
poorest place in the State since 1857 when we were organized. 
There is no money in Aitkin County. It is pretty simple. But 
there is a way to grow out of that problem. We do not have to 
continue to be the poorest place in the State of Minnesota. 
Today we are the third fastest growing county in Minnesota, but 
the problem there still is access. The only way that we could 
grow Aitkin, Minnesota, was for our community to own and 
operate its tools for economic development.
    We hear about SBA programs, but they are all operated from 
somewhere else. The bankers in our community do not have people 
on staff who do SBA forms, who apply for SBA loans. If we want 
to do that, we have to go to a distant community and find a 
Small Business Development Center at a college. The person we 
work with may be great, but they have no ownership in our 
community, and so it is not as important, it is not as critical 
to the service providers that jobs in Aitkin, Minnesota, create 
development evolve.
    When we first started doing this, the old regional 
Government centers are still in place throughout the United 
States. We are part of the Arrowhead. Five miles to the west is 
the county line, and we could have been a part of the St. Cloud 
district, Brainerd district, but we are going to be positioned 
poorly--we are on the edge of the range, on the edge of the 
Arrowhead district. All of the tools were owned more central to 
the range and the Arrowhead district. Why should we believe 
that some young guy in a suit and tie can drive from Duluth to 
Aitkin, Minnesota, a remote, deserted place to drive through, 
get to Aitkin and be excited about creating a few jobs as I am? 
They may have to be pinched on the way a couple of times, 
because there is nobody on the highway. But I am supposed to 
excite that guy and access cash from those people to make my 
projects work in Aitkin, Minnesota. It just absolutely cannot 
    So communities across the United States have got to have 
their own tools for development. Otherwise, I tell people 
often, it is like having your car broken in rural Aitkin and 
all of the wrenches are in St. Paul or Washington. You cannot 
fix it. You have got to do something to bring those tools to 
the small communities that want to grow that--that do not want 
to be the poorest place in the world. It is a long, hard 
struggle, but you have to do it. You must have local ownership.
    In Aitkin, our schools population was declining, like every 
place else in northeastern Minnesota, and today we are the only 
place in northeastern Minnesota that has an increase in the 
population. We have young people who can have babies to fill 
our schools, working in jobs. Our problem now is access to the 
next level.
    North of town, just a few miles, we have a power company 
that has a huge fiberoptic cable running by our community, but 
we do not have access to it. It is like living on a super 
highway without an off or an on ramp. You cannot get to it. It 
is there, but you cannot get to it. We have created a lot of, I 
call, without any disrespect, grunt kind of jobs, probably 
about 500 to 650 new jobs in manufacturing during the last 15 
years. That has caused a lot of other things to happen 
throughout the area and our community. We have a business 
incubator. But we have to take it now to a new level, and the 
new level has to be attractive to those more educated people, 
or more sophisticated, more professional group of people, so 
then we can really build diversity into our economy, not just 
have jobs available for the run-of-the-mill population. We have 
to be attractive to those who want more. We need access to do 
that. So we need your continued support to do that.
    Not too long ago, I read in the paper $181 million 
appropriated in SBA funding, and the description that followed 
was absolutely my community: to be used in the poor places of 
the State to generate. I guarantee you, none of those dollars 
have found their way into Aitkin County yet. They are all 
controlled from someplace else.
    [The prepared testimony and letter of Mr. Hasskamp 















    Senator Wellstone. I thank you. One of the things I think 
would be interesting is for you and Ed Daum to talk, because I 
think Ed is philosophically where you are. But I think you have 
extremely important testimony. Thank you.
    Dean, we will turn to you.


    Mr. Bouta. Thank you for allowing me to testify here today. 
I am here to talk about the aspect of technology and 
telecommunications. I am here representing two areas: small 
business and a telecommunications advocacy group.
    I am the general manager of an office technology service 
provider and Internet service provider in Willmar, Minnesota. 
Our company works with many small businesses in West Central 
Minnesota, providing office and technology tools that are 
needed to run their business. This includes providing them with 
the data connectivity internally and externally for their own 
data communications, and high-speed Internet connectivity. So 
we see firsthand that our business and as well as our 
customers' businesses experience many roadblocks in rural 
America in the area of telecommunications and technology.
    I am also Chairman of KandiLink, which is a 
telecommunications and technology advocacy group, in Kandiyohi 
County. Our group was started about 3 years ago by local 
business owners and community leaders who were concerned about 
technology in our rural area. Our focus has been to work with 
local businesses to educate them about technology services that 
are available to them, and also educate the technology vendors 
about area businesses' technology needs. You know, with a 
consolidated effort, we have shown that there are unmet 
telecommunications needs in rural Minnesota. Vendors, who are 
becoming aware of these needs, are starting to bring some new 
competition to the local market.
    But one of the largest roadblocks that we see for small 
businesses in rural America is the issue of LATA, which is the 
Local Access and Transport Area boundaries that were 
established in 1984 due to antitrust breakup of AT&T. This was 
to encourage competition in the long-distance market, and 
thereby preventing the RBOCs, which is the Regional Bell 
Operating Companies, which is Qwest in our area, from providing 
long-distance services. For an RBOC to move customer wireline-
based telephone traffic into a different LATA, it must be 
passed off to a third party long-distance carrier, which 
results in additional charges, which are eventually paid by the 
    With the current LATAs in Minnesota--and this is throughout 
the country--it can oftentimes triple the cost of data circuits 
for a business to connect across LATA boundaries. The Telcos 
are required to pass the circuit off to a long-distance 
carrier, when oftentimes the local Telcos could have handled 
that traffic. This restricts affordable circuits from outstate 
Minnesota connecting to the metro Twin Cities area, also to 
other parts of the State, and even connectivity within counties 
themselves. Counties like Renville County happen to have three 
LATAs in one county. An example that I heard is the library 
system in southeastern Minnesota has a connection through a 
grant from Rochester to Owatonna and Rochester to Red Wing. The 
Rochester to Owatonna is in one LATA, and their circuit charges 
for the year are $4,200. When they connect Rochester to Red 
Wing, it crosses a LATA, and their initial bid for that was 
$37,000; it is about the same distance. They got a real deal 
for $22,000. That is just an example.
    But this restricts small business owners and entrepreneurs 
from expanding to rural America. We locally see many instances 
of small manufacturing firms, banks, insurance agencies, 
accounting firms, medical clinics and hospitals that could 
expand or share resources in neighboring communities, but 
because of these costs of telecommunications, they are 
reluctant. This is especially evident with firms that have home 
offices in the Twin Cities metro area and would like to expand 
to rural Minnesota to tap into our workforce and lack of 
congestion. They cannot always justify the cost of high-speed 
connectivity to rural Minnesota when they are located in 
different LATAs.
    Some of the positives of high-speed connectivity in rural 
America are the ability for medical facilities to provide fast 
diagnostics through data communications, eliminating the need 
to transport personnel.
    In 1996, the Telecommunications Act attempted to help this 
situation by allowing more competition and allowing the RBOCs 
the opportunity to reenter the long-distance business. The 
competition has helped some in bringing new vendors to the 
area, but the issue of data circuit costs between LATAs has not 
    LATAs were created at a time when main revenue for Telcos 
was long-distance charges for voice traffic, and this is still 
the case. But times now have changed, and data circuits are 
needed in rural America, and everyone expects to pay more for 
voice traffic between LATAs, but to have the same restrictions 
as on the high-speed data traffic impedes business growth and 
restricts competition.
    Another roadblock is the issue of redundancy, which at 
times is maybe more of a State issue, but, for example, in 
Willmar, all of our traffic goes up one line between Willmar 
and St. Cloud, and so when that line is cut, we lose 
connectivity to the outside world. This does not encourage 
companies to expand out here, because more and more is 
dependent on the e-commerce activity.
    Finally, in most rural areas of the country, the largest 
employer and users of telecommunication are Federal, State, and 
local governments. These include municipal hospitals and 
educational facilities. What hurts the rural economy the most 
is services are not provided by local vendors to these 
entities. Often, local vendors could provide these services at 
less cost, and the remaining business customer base that is 
left after you take those away do not entice vendors to invest 
in additional services that would benefit other local 
    So, in conclusion, the LATA issue in regards to data 
circuits and data circuit redundancy and a lack of public 
entity telecommunication customers is inhibiting the local 
economic development.
    [The prepared statement of Mr. Bouta follows:]
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    Senator Wellstone. Wow. I tell you, I need to learn more. 
Thank you for your testimony. I have to be honest, there are 
some parts of what you said that I need to grasp better. We are 
going to move on.
    Jim is here, and please come down. I really would love it 
if you would. What we are going to do is, rather than ask a lot 
of questions, we are going to wait until the end, we are going 
to have three panels open up for discussion, people are going 
to ask questions, make comments. Please join us, seriously, and 
please come down.


    Ms. Struck. My comments will focus on workforce 
development, particularly for the small business in the rural 
community. As a human resources professional, I would like to 
focus my comments in three areas.
    First is the training of the workers of the future. We need 
to continue building partnerships between schools and 
businesses to assure programs are developed and students are 
encouraged to pursue areas of job development. Too often, 
students consider only jobs they have had contact with, either 
in their community or through the media. Students need to be 
encouraged to broaden their horizons on how many different 
types of jobs are out in the work world.
    One program that had recent success here in the St. Cloud 
area was called ``Outreach to Schools.'' This program placed 
college interns in eight different high schools. These interns 
worked in the high school career placement office on a daily 
basis, up to 12 hours each week. The focus of their one-on-one 
interactions or group presentations to the students involved 
use of the Internet for post-
secondary planning, including finding a college or a career. 
This program was sponsored by the St. Cloud WorkForce Job 
Service through the State Minnesota Youth Program funds.
    We need to continue to look for ways to connect with high 
school students early in their high school years as sophomores 
or juniors rather than wait until their senior year. With 
cutbacks in education, many educators and counselors are 
swamped. The intern in this program allowed students to focus 
on career development issues that could otherwise be 
overlooked. This is one example of a low-cost program that has 
seen early success. It would be great to continue this program 
and develop similar programs to connect students with available 
jobs and careers.
    We also need to focus on training for that dislocated 
worker: those individuals who are laid off from their jobs. 
When one loses their job through no fault of their own, 
unemployment provides a partial weekly wage for up to 6 months. 
However, the Federal programs that previously provided funding 
for the incumbent workers have been drastically reduced. The 
benefits of retraining a dislocated worker so he or she can 
become a productive, tax-paying citizen are obvious.
    Secondly, I belief that workforce development in the rural 
areas must be tied to housing. There must be housing strategies 
to provide an affordable place of residence for workers. There 
have been numerous businesses in rural areas that have 
experienced a direct impact over lack of affordable housing. 
They have had a situation of having viable jobs that could not 
be staffed because the worker could not find affordable 
housing. Recently, the St. Cloud HRA approved a program which 
will develop low-cost housing in the St. Cloud area. Although I 
am not personally familiar with what type of Federal assistance 
is currently available or has been provided in the past, this 
continues to be an issue which must be addressed for additional 
workforce development to occur.
    The final area I would like to touch on is the FUTA Tax--
the distribution of this dedicated tax for the purpose for 
which it was intended--which is funding the public employment 
system. Each business pays the Federal Unemployment Tax of $56 
per employee each year. These dedicated funds are to support 
unemployment insurance and public employment service. However, 
even though the annual amount paid by businesses has increased 
over the years, the return to the States from the public 
employment system has consistently been low. In Minnesota, 
under 50 percent of the dollars paid into the system are 
returned to the State. In 1998, Minnesota employers paid $132 
million in FUTA taxes, with only $56.3 million returned to fund 
services to employers. Nationally in 1998, employers paid $6.5 
billion to this dedicated fund. Only $3.4 billion, or 52 
percent, was returned to the States for the purpose for which 
it was intended. I think all businesses like to see reduced 
Government spending; however, this is a case where the money 
paid by employers has not been reduced, only the benefits 
returned have been reduced.
    This is important for workforce development because a small 
business needs a resource for a multitude of employment-related 
issues. A small business does not have a full-time human 
resources person dedicated to employment, benefits, training, 
compensation and the numerous laws related to employment. In 
the past, the local Job Service office, now called the local 
WorkForce Center, has served as that needed resource for many 
small businesses, particularly in the rural areas. The 
WorkForce Center Job Service is funded by the FUTA taxes.
    As an example, time and money has been spent to develop 
America's Job Bank, and locally Minnesota's Job Bank. This has 
provided an automated system for both those searching for 
employment, also for the small business employer. It allows the 
employer to both post an available job and also search for 
candidates independently. Many small businesses are unaware of 
this system or are unfamiliar with how to utilize it. The 
WorkForce Center has been that resource. Additionally, 
WorkForce Centers sponsor, or co-sponsor, employer educational 
sessions on unemployment, lawful hiring, employment law, and a 
variety of other topics. The WorkForce Centers sponsor, or co-
sponsor, Job Fairs across our State. In the fall of 2000, the 
St. Cloud Area Job Fair hosted 120 employers and was attended 
by over 2000 individual job seekers. Additionally, the 
WorkForce Centers sponsor special job fairs in situations of 
plant closure in small communities, such as one recently held 
in Willmar following the closing of the AGCO plant, which left 
270 individuals unemployed.
    These services and many more have already been paid for by 
the employer through their FUTA taxes. However, with budgets 
that have been reduced steadily for the past 20 years, 
employers are being shortchanged on their return from their 
FUTA taxes. I would like to see a change in the Federal 
Government policy and a release of all FUTA tax dollars 
available. Employers have paid this dedicated tax, and they 
deserve to receive the dollars back through services at the 
local public employment service, known as the Workforce Center.
    I thank you, Senator Wellstone, and the Committee on Small 
Business and Entrepreneurship for allowing me to provide my 
comments on the topic of Workforce Development.
    [The prepared statement of Ms. Struck follows:]
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    Senator Wellstone. I think what you are saying is that 
people want their money's worth. Eventually when we throw this 
open for discussion for everyone, we will make this a giant 
seminar with lots of people speaking. I want to go back to the 
high school students, especially those that are going on to 
higher ed, and the connections we can make, you know, with the 
training and the work that they are doing. Quite often they 
have the idea that they will get a job, you know, but the job 
is not necessarily related to where eventually they are 
heading, and I think we can do a much better job of 
apprenticeships at that age level.


    Ms. Stewart. My name is Bonnie Stewart. I am director of 
the Minnesota Women's Business Center, which is in Fosston, 
Minnesota. We serve a 13-county region in northwest Minnesota. 
Fosston, for those of you who do not know, is 200 miles 
northwest of St. Cloud.
    I want to thank you, Senator, and the Small Business 
Committee for inviting me to be here today. I want to thank the 
City of St. Cloud for hosting this hearing. As a former St. 
Cloud resident, I love to come back here.
    Senator Wellstone. This is a beautiful place. It really is.
    Ms. Stewart. I moved back to Minnesota, my home State, in 
1986 from another State, and I also moved back to my home town, 
the main reason being a rural community seemed like a great 
place to raise a family, and it has been. But in the past 15 
years, I have been involved in a wide range of economic and 
community development programs and activities throughout the 
region, and I have witnessed a dramatic change in business in 
northwest Minnesota. In addition to my activities with the 
Minnesota Women's Business Center, I am also a member of the 
Northwest Minnesota Health Care Alliance, and I serve on the 
Northwest Minnesota Telework Partnership, and I am also a small 
business owner. So those are the four components that are 
focusing on my issues, the development issues that I believe 
impact small businesses.
    No. 1 is the loss of our family farms; they are vanishing 
at a dramatic rate. The global market has created a universal 
food market, providing competition for local small farmers from 
places as far away as Africa, South America, Russia and places 
beyond. Due to the lower prices created by these markets, farm 
families are forced to subsidize their production by looking 
for jobs in their communities. Some of these farm families are 
also starting their own businesses. Also, the next generation 
of farm families does not see farming as a viable economic 
    Another issue is underemployment. New jobs in rural areas 
are dominated by low-wage industries, resulting in 
underemployed workers who often seek higher-paying jobs in 
metro areas.
    Poverty. Poverty remains persistent in rural areas. 
Business development can be a viable economic option for rural 
families, but only after the issues of poverty are addressed.
    Health care. The quality, availability, and affordability 
of health care services for small business owners, their 
employees, and families are eroding while costs are escalating.
    Telecommunications. In addition to the knowledge of how to 
use it, small businesses must have access to broad band 
    These issues and others impact clients of the Minnesota 
Women's Business Center, and I am going to focus now on 
business development issues that pertain to women.
    In 1989, the Small Business Administration established the 
Office of Women's Business Ownership and through congressional 
funding was able to launch the pilot project that formed six 
Women's Business Centers across the country.
    In the past 12 years, continued growth in this funding 
source has enabled over 90 Women's Business Centers to be 
operating across America, and I believe it is through this 
program of empowering women business owners, along with other 
public and private investment, that has created a vast impact 
to our economy. For example, from 1987 to 2000, the number of 
women-owned firms more than doubled, from 4.5 million to more 
than 10 million businesses. In 1997, revenues from women-led 
firms reached $818 billion. That is up 33 percent from 1992. 
Jobs created by women-owned firms reached 27 million in 1999. 
That is up from 9 million in 1996.
    So even though women have showed measurable success as 
entrepreneurs, we still have some issues that need to be 
addressed. These include access to bank financing and venture 
capital. Women-owned businesses currently receive only 4 to 6 
percent of all venture capital invested, while more than 40 
percent of new businesses are started by women.
    Networking. Rural communities have a sparse network of 
other businesses doing the same thing. This results in fewer 
mentors for aspiring women entrepreneurs.
    Education. We need to educate women-owned businesses with 
the critical knowledge needed to take advantage of financial 
opportunity and growth.
    Visibility. The impact of women business owners is 
underrepresented in the business media, business teachings, and 
policy groups.
    As previously mentioned, we are funded through the Small 
Business Administration Office of Women's Business Ownership. 
It is our mission through the Women's Business Center Program 
to empower women to become economically self-sufficient through 
entrepreneurship. We need to focus on the issues that include 
increasing education to our local vendors. They need to be 
aware of and be able to manage SBA and other statewide and 
regional funding resources. Educating women business owners on 
capital investment, and try to bring investment networks to 
rural areas. Increasing mentoring opportunities and leadership 
development. Expand training offerings, create awareness of 
women business success, advocate for affordable health care for 
all small businesses, and to promote business growth 
opportunities through technology, and this includes telework, 
community technology centers, and adequate training and access.
    Successful business development growth in rural areas 
relies on partnerships between agencies, local, State and 
Federal units of government, and the private sector. In 
Minnesota, we do have strong partnerships and alliances that 
have been formed, and they are working, but we must continue to 
be acutely aware of the barriers that we face.
    Thank you very much.
    [The prepared statement of Ms. Stewart follows:]
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    Senator Wellstone. Thank you. I will tell everyone that is 
here--because we are going to the last panel of the session--
listening to you speak, I have got like 20 questions, and it is 
frustrating, but I still think the next thing is to go to the 
next panel. I understand. We will go to the next panel, and 
then we will open it up for discussion for everyone. Thank you 
so much. It was just superb testimony.
    By the way, those that are here in discussion, any 
questions that people have or any comments for 10 more days, if 
you get them to us in the next 10 days, we will just make it 
part of the written record.
    OK. We will move to William Spang, who is the president/CEO 
of Mountain Iron Bank and also chair of the Minnesota Business 
Finance Corporation. Mark Phillips is the president of Iron 
Range Ventures, and vice president of Northeast Ventures. Then 
Mary Matthews. Since 1989, Mary has been the president of 
Northeast Entrepreneur Fund. Again, much more can be said about 
each of you, but I want to just get to your testimony. If we 
could start with you, William, that would be great.


    Mr. Spang. Thank you, Senator. Our bank is in rural 
northeastern Minnesota. We are located in four communities. All 
of the populations are under 2,000 people. We are a small 
business as a bank.
    Our bank is currently involved with the SBA utilizing both 
the 7(a) and 504 programs. Additionally, we work with the USDA 
Rural Development, the Bureau of Indian Affairs, and many other 
local and regional economic development programs. Our bank is 
located on the Iron Range, which has seen the economic roller 
coaster ride over the past decades. Most recently, our area has 
been hit with the devastation of the LTV Mining Company 
closure, which has cost our area 1,400 jobs, due in part, if 
not entirely, to the importing or dumping, if you will, of 
foreign steel.
    Our area experienced a depression 15 years ago, as well, 
when the steel industry was virtually shut down. This time 
period saw massive unemployment, depressed real estate prices, 
and the exodus of over 15,000 people. Although economic 
conditions eventually improved, the permanent jobs that were 
lost never returned, and our area, much like other rural 
America, saw a loss of population that would never return.
    The good to come of this time period was a surge of 
entrepreneurialism and the recognized need to diversify our 
economy. I often say, I would rather have 10 dimes than a 
dollar, because if I lose a dime, I still have nine more. These 
dimes, if you will, represent small business. In spite of the 
recognition given to the giants such as General Motors or 
General Electric, small business is the backbone of our 
    Small business provides jobs and stability to our rural 
communities. But in order for small business to succeed, they 
will need access to capital. Since most people starting or 
expanding a business are not wealthy, they need to borrow 
money. As a banker, this is where I come in. However, when I 
loan money, it is not my money; it belongs to the depositors of 
my bank. I am therefore entrusted with a fiduciary 
responsibility to minimize risk. Inherently, there is more risk 
associated with small business, and even more so with a start-
up business, for success is yet to be proven. But consider how 
many major firms in the United States started off this very 
same way.
    The SBA, through both its guarantee and debenture program, 
provides mitigation to higher-risk commercial borrowing. As 
mentioned earlier, much of small business is in rural areas 
which are typically served by locally-owned community banks, 
which, incidentally, are also small hometown businesses. Small 
banks lack the vast networking the super regional banks may 
have, thus lending issues often come into play. Again, both the 
7(a) and the 504 programs provide avenues where capacity of the 
local lender is increased, and thus total access to capital 
remains local and ensures spinoff jobs as well.
    I hope I have pointed out a brief outline of the benefits 
provided to rural Americans with the SBA. Now to look at some 
of the impacts of the potential cuts in these programs. Besides 
being a banker, I am also currently chairman of the board of 
the Minnesota Business Finance Corporation. We are a 501(c)(3) 
corporation and a certified development company for SBA 504 
loans. We are one of seven development companies in the State 
of Minnesota, and our territory is all non-metro, with the 
exception of St. Cloud and the Duluth markets. Our company 
currently administers 458 small business loans representing 
total outstandings of $117,045,735. Considering these are 
subordinated second mortgages, it is safe to conclude that the 
participating banks carry a like amount, which brings the total 
impact to over $250 million, and we are one of seven counties 
in the State of Minnesota. These are all small businesses.
    Again, 10 dimes rather than a dollar, this capital outlay 
represents hundreds of jobs, productivity, and wealth 
generation in our smaller communities. The elimination or 
reduction to this access to capital would be every bit and more 
devastating than the closure of a major steel plant. Let's also 
consider the impact to our local schools and municipalities, 
the State, and the Nation. These small businesses pay taxes, 
and the people who work for small business pay taxes. When you 
consider this, funding for the SBA programs becomes an 
investment, and the dollars leveraged by this investment are 
returned many times over.
    Investment in small business is a good investment for 
America, and just like my bank, the local hardware store, or 
the U.S. Senate, sufficient staffing is needed to make the 
program run smooth and efficient. If we are committed to 
investing and reaping the rewards of small business, sufficient 
staffing will be needed going forward.
    As I said earlier, typically small business lacks 
substantial capital. One alternative to funding the programs is 
by increasing fees to the small business borrowers. At the time 
when they are borrowing, they can at least afford to pay the 
additional fees. Are we not better off to enhance the ability 
to be successful in their more vulnerable years by reducing the 
fees with the thought that these folks will repay many times 
over with the taxes from their success?
    In closing, the SBA is not corporate welfare, as I 
sometimes hear. It is an investment in America. As the term 
``investment'' implies, a return is expected. We have seen a 
return, let us not throw a good thing away.
    [The prepared statement of Mr. Spang follows:]
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    Senator Wellstone. Thank you, Mr. Spang. I am especially 
appreciative of the fact that you did zero in on the 7(a) and 
504, and I think that one of the things that you at least 
implied, if you were not explicit about, is that not only are 
small businesses not likely to get access to this kind of 
capital through the banks in general without these programs, 
but I think as we see the downturn in the economy, even less 
likely. So this is like a cut-off pipeline; absolutely 
critical, which, as far as I am concerned, we just cannot cut 
this program. Cannot do it.
    Mr. Phillips.

                      VIRGINIA, MINNESOTA

    Mr. Phillips. Thank you, Senator Wellstone.
    Senator Wellstone. Ten dimes is better than a dollar. Have 
I got that?
    Mr. Phillips. I made a note of that myself. Good morning. 
My name is Mark Phillips. I am president of Iron Range Ventures 
in Virginia, Minnesota. Iron Range Ventures is a community 
venture capital fund, and it is a certified Community 
Development Financial Institution, which is commonly referred 
to as CDFI. I am also the vice president of Northeast Ventures, 
an affiliated community development venture fund, which is also 
    Iron Range Ventures and Northeast Ventures have roots going 
back over 13 years of time, when our region of northeastern 
Minnesota was suffering the effects of the restructuring of the 
American steel industry. This region of Minnesota lost 25 
percent of its gross regional product virtually overnight in 
the mid-1980s.
    These two community development venture capital funds were 
established as an effort to partly diversify the regional 
economy by establishing home-owned and home-grown businesses. 
Our region had a variety of economic development programs 
providing primarily technical assistance and debt financing, 
but no venture capital. This was true for most rural areas in 
the United States at that time. These funds were established to 
provide a permanent source of competent venture capital to our 
rural region of Minnesota. To date, approximately $15 million 
has been raised, primarily from philanthropic foundations, 
utilities, and the Federal Government. The factors that were 
established to measure the funds' success were as follows:
    First, we were looking for local wealth creation, and local 
control of these businesses.
    Second, we were looking for sustainable enterprises with 
good employment practices and quality jobs.
    Third, we were trying to attract market-driven venture 
capital to our region.
    Fourth, we were trying to foster self-sufficiency and 
entrepreneurial spirit in the region.
    And, finally, the investments in these companies that 
provide satisfactory financial returns and jobs for our 
targeted population of low- to moderate-income people. We refer 
to this as the double bottom line.
    Iron Range Ventures and Northeast Ventures are mission-
driven organizations that operate within the geographic region 
of northeastern Minnesota. This limits the investment 
opportunities that are available. Our funds may look at 
transactions that are smaller, with less up side and lower 
technology than a traditional venture fund. We also have to 
invest in companies at an earlier stage, hold our investments 
longer, and experience higher transaction costs than 
traditional funds, but still our return on investment is very 
    Over this 13-year period, Iron Range Ventures and Northeast 
Ventures have invested nearly $12 million in 28 companies. 
These investments leveraged another $100 million in additional 
financing. We have attracted co-investors, many from the 
traditional venture capital community. Unlike lenders, 
community development venture funds are intensely involved with 
the companies they invest in.
    Northeast Ventures has become a leader in the community 
development venture capital industry, and our model has been 
replicated throughout rural America. Our fund's senior 
management was part of the leadership that formed the Community 
Development Venture Capital Alliance, CDVCA. It is 
headquartered in New York City. CDVCA is the trade association 
of the community development venture capital funds, with over 
110 members worldwide representing over 50 funds. As the 
Nation's leading practitioners of community development venture 
capital, the CDVCA and its organizations have begun to 
establish a strong record of effectively promoting investment 
in growth companies that will succeed financially and make a 
profit, as well as providing jobs, entrepreneurial capacity and 
wealth among economically disadvantaged populations and 
distressed communities. It appears that community development 
venture capital is a critical element of revitalizing rural 
America, and CDVCA is training and advocating for these new 
funds. This movement has depended on very limited philanthropic 
and Government funding. Among its primary goals is the 
development of the knowledge and human capacity that will make 
these funds successful.
    Iron Range Ventures and Northeast Ventures recommends that 
the Federal Government proceed with the following:
    No. 1, continues and expands the Community Development 
Financial Institution (CDFI) funding that creates a unique 
source of capital for the CDFIs. We ask that you resist efforts 
to reduce and eliminate this valuable program.
    No. 2, support the legislation that you introduced, Senator 
Wellstone, that earmarks funds for the capacity-building 
investments in rural community venture capital funds and the 
companies they invest in. The investment in human capital will 
pay the largest dividends.
    No. 3, retain and improve the New Markets Venture Capital 
Fund under the SBA. We urge that the SBA work with the IRS to 
coordinate with the New Market Tax Credits program as a method 
to provide the matching funds required under the venture 
program. We also urge the program shift from a geographic focus 
to a mission-driven focus, to help low- and moderate-income 
individuals become employed.
    And, finally, retain and improve the New Market Tax Credit 
program that is administered by the IRS. These rules need to be 
made friendlier to venture funds.
    I find it somewhat ironic that the very forces that brought 
our funds into existence over 13 years ago are looming even 
larger at this time. That is why it is critical that the 
limited sources of funding for rural venture funds are not 
deteriorated but expanded, so they can play a vital role in 
revitalizing rural America.
    I thank you very much.
    [The prepared statement of Mr. Phillips follows:]
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    Senator Wellstone. Well, thanks, Mark. Northeast Ventures 
has been a model for me. And the capacity bill, we are hoping 
to put that in the commerce bill. We are not giving up on that 
at all. I think we have got a shot at it. Very much appreciate 
    Mary Matthews. And when Mary testifies, we will then throw 
this open, starting with the Commissioner. I have handed out 
cards, and there are 20 people who have cards right now that 
want to speak, and so we are going right to, if that is OK with 
everybody up here, discussion. Ed, I do not know what--we might 
need you up here because there may be some questions directed 
to you, as Director of SBA as well.
    Mary, thank you so much for joining us.


    Ms. Matthews. Thank you, Senator Wellstone, and guests. 
Good morning. Thank you for this opportunity to testify this 
morning. My name is Mary Matthews. I am here in two capacities, 
first as president of the Northeast Entrepreneur Fund in 
Virginia, Minnesota. The Entrepreneur Fund is a microenterprise 
and small business development organization. We provide 
training, technical assistance, and financing to emerging and 
existing small businesses in seven counties in northeastern 
Minnesota and Douglas County in northwestern Wisconsin. I am 
also a board member of the National Association of SBA 
Microloan Intermediaries.
    The purpose of my testimony this morning is to talk about 
the Microloan Program and the role it has played in our work in 
rural Minnesota and central Wisconsin.
    When the idea for the Entrepreneur Fund was conceived in 
the early 1980s, we focused on the idea that local residents, 
if given tools, could help rebuild the rural economy. 
Northeastern Minnesota's economic future has always been 
determined by large natural resource-based companies whose 
ownership lives elsewhere. We needed solutions that would build 
local entrepreneurship and create local economic opportunity. 
We believe that if our region's skilled workforce, who had long 
considered themselves employees rather than employers, were 
taught business skills and principles, given encouragement, and 
provided with small amounts of capital, they could learn to 
create their own jobs by starting and growing their own 
    In the last 12 years, the Entrepreneur Fund has provided 
business development training and technical assistance to over 
4,700 men and women, all local residents of our region, and for 
many of whom this is their first----
    Senator Wellstone. You might want to repeat that figure.
    Ms. Matthews. Four thousand and seven hundred people. It is 
over 2 percent now of the adult population in the Arrowhead 
area. For many people, this is their first exposure to business 
concepts. In our region, this is. So far, this has resulted in 
the start-up, stabilization, or growth of 561 businesses. We 
have made loans to 168 of those businesses, totaling $2.6 
million. Over 85 percent of these businesses, mostly start-ups, 
are still operating 2 years after receiving assistance. These 
are small businesses, but each is owned and managed by a local 
resident who is creating their own economic opportunity. As a 
group, they generated a significant level of employment for 
themselves and others--over 1,200 jobs created or retained so 
    Here is an example. Colleen and Tom Ray purchased a 
Christmas tree farm in Eveleth 5 years ago. Tom Ray is a part-
time furniture maker, with a veteran's disability pension. 
Colleen Ray was a part-time waitress. They had an idea to 
expand Ray Family Farms by making decorative wreaths out of dry 
twigs using natural materials like pussy willows. They 
successfully test-marketed the wreaths through local craft 
shows and gift shops. A $5,000 microloan last December financed 
their participation in the Atlanta International Gift and Home 
Furnishing Market. That show produced over $26,000 in orders 
for that company. They have hired two employees and, with an 
additional $5,600 dollar loan in May, purchased dry twigs from 
local suppliers, rather than the Rays' continuing to harvest 
their own raw materials. One of the twig suppliers is a former 
LTV employee who started his own brush cutting business.
    The SBA Microloan Program provided the capital for Rays' 
loan. That capital would not have been available from any other 
source. It also provided the funding for the training and 
technical assistance that the Rays received that has helped 
them grow their business. Colleen took our CORE FOUR Business 
Planning course, and both Tom and Colleen meet regularly with 
their Entrepreneur Fund business consultant.
    The SBA Microloan Program was created in 1991 to help small 
business owners get various amounts of capital that were not 
yet bankable. The SBA Microloan Program has grown from a small 
pilot with 35 intermediaries in 1991 to a permanent program 
with over 170 intermediaries today, with the SBA adding new 
intermediaries each year. As Ed Daum testified, there are now 
six intermediaries in Minnesota. The SBA Microloan Program is 
the single largest funding source for the microenterprise 
    The SBA Microloan Program Intermediaries have made over 
12,000 microloans totaling over $125 million since the 
inception of the program.
    The Microloan Program, as you well know, Senator, has two 
parts. There is low-interest 10-year loans that are made to the 
intermediaries who reloan the money to microentrepreneurs. The 
SBA also provides intermediaries with an annual technical 
assistance grant that helps support the cost of training and 
technical assistance to borrowers. The grant is calculated at 
up to 25 percent of the capital the intermediary has borrowed 
from the SBA. Microloans are high-risk loans, usually to start-
up and early-stage companies. The technical assistance protects 
the Federal Government's investment, and it increases the 
entrepreneurs' potential for success.
    Senator Wellstone, the first time you and I met was in 1994 
when you invited me to testify before this Committee in 
Washington. You were then and continue to be one of the 
strongest supporters in Congress for this program. I am here 
today to ask you to be our champion one more time in seeking 
additional funding for the technical assistance portion of this 
program, before the bill goes to the Senate floor for 
consideration next month. As you well know, the President's 
budget and the House and Senate appropriation bill call for $20 
million for technical assistance in 2002 for the Microloan 
Program. There just is not enough money to maintain the current 
level of activity, and the SBA continues to add new 
intermediaries. Let's do the math. By the end of 2001, 
intermediaries will owe the SBA over $100 million. To provide 
25 percent for technical assistance grants to intermediaries, 
the SBA needs $25 million just to serve the current loans. In 
addition, there are 30 non-replicating providers who annually 
receive $125,000. That is another $3.75 million. We have not 
yet talked about program growth. As the demand for the 
Microloan Program continues to grow, if we can continue to grow 
it, the investment and technical assistance dollars each year 
will increase.
    So what is the bottom line? Over $28 million will maintain 
the technical assistance funding at its current level of 25 
percent without new loans to intermediaries to the program. In 
1996, when funding levels were cut last time, the SBA indicated 
that they realized that funding levels of less than 20 percent 
put the program at risk. Without more funding, the Federal 
Government's $100 million investment today is at risk if 
farmers do not receive technical assistance.
    We also know that another intermediary's plan is to return 
their capital to the Federal Government if, in fact, the TA 
grants are reduced. This is and has been indicated to us that 
the program is too high a risk to continue with fewer TA 
dollars. Without a higher level of funding, this program is in 
jeopardy, and its future is in jeopardy, and the Senate floor, 
it appears to us, is the last opportunity to raise the level 
above $20 million. Please help us.
    Thank you.
    [The prepared statement of Ms. Matthews follows:]
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    Senator Wellstone. Thank you. Well, I am honored that you 
ask, and absolutely committed to doing everything I know how to 
do between now and when it hits the floor. Absolutely. Or when 
it is on the floor. Not even any question about it. Thank you.
    What I would like to do is, very quickly we are going to 
now go to just general discussion. In case I forget, because I 
think it is really important to thank people, Suzanne Hagen is 
a court reporter, and I would like to thank you, Suzanne, for 
your help. John, who has been running all around and helping us 
try to stay more or less on time, has been great, and thank you 
for coming out and helping us, John. If it is OK, Tony and 
Leslie and Colleen and everybody, what we will do is, let me 
refresh everybody's memory. Paul Kittelson testified, and, 
Paul, maybe some of these questions will go to you, OK? So if 
you feel like you want to respond, please do. The same thing 
for Ed Daum. I am sure there is going to be questions that will 
be put to Ed. The same with you, Prince Wallace. I mean, it 
could be that you all are going to want to respond. Dave 
Hasskamp, same for you. Dean Bouta, Renae, Connie Stewart, and 
then the last panelists. If somebody--and we would like 
everyone to try to keep their comments--we are going to try to 
keep everybody under 2 minutes, if that is OK, so we can be 
sure everybody has a chance to speak, but if some of the 
panelists--if you have spoken, you feel like it is a response 
to something you said, then just jump in, and that will also 
apply to all of us up here. But I think out of respect for his 
important notice, we will start out--everybody has got cards, 
but the first card I am giving to the Commissioner, OK?
    Mr. Berstein. Senator, thank you very much. You are very 
    I want to thank Senator Wellstone for inviting me to be 
here this morning. I want to thank everybody here for taking 
the time to come and do this. I work for Governor Ventura. 
Governor Ventura is going to be spending much of the next 60 
days on the road traveling all over the State of Minnesota 
talking to folks about all of these issues. But the fact is 
that maintaining a healthy economy in rural Minnesota is a high 
priority for this Administration, like it is for Senator 
Wellstone and Senator Dayton.
    The question becomes, What can we do? My interest in this 
as Commissioner of Commerce is many of the things that have 
come up here today are things that my department regulates. The 
things that are important are for companies to locate in rural 
Minnesota and, most importantly, to stay and expand in rural 
Minnesota are access to insurance. Insurance is pegged to how 
well local fire departments operate. These are small things, 
folks, but this is the kind of thing that companies look for 
when they are going to come into rural Minnesota. Access to 
capital has come up a number of times today. Banking, 
microlenders, and, again, Mary, I appreciate your testimony. I 
have got lots of great stories about what microlenders have 
done in the State of Minnesota.
    Telecommunications. A huge issue in Minnesota. Folks, we 
are falling further and further behind. Part of this is the 
State's responsibility. Much, however, is the responsibility of 
local telephone companies. We have been trying to change the 
laws in Minnesota. We are doing it slowly. I do not know how 
many of you know, but our telecommunications laws in Minnesota 
have not changed since 1930. Many of us were not even born in 
1930, and many of us here remember telephones with rotary dials 
and party lines. We still regulate under that kind of 
assumption, and we all know the technology is radically 
    Access to the Internet is a huge issue in rural Minnesota. 
Access to the entire level of the communication system. 
Commissioner David Fisher, from the Department of 
Administration, is in charge to connect Minnesota with a new 
telecommunications initiative to link all of rural Minnesota. 
That is now underway. The question is always going to become 
funding, and we have to change some of the laws in Minnesota to 
open up networks. A real issue is, even when small rural phone 
companies install fiber or wire, only about 5 percent of the 
people sign up for it. Delivering high-speed access is 
expensive, whether it is in the Twin Cities or any other part 
of Minnesota. But when you have such small take rates, it 
becomes very difficult for small phone companies to actually go 
ahead and build the services.
    I also want to talk about energy very briefly. Minnesota's 
energy future is very secure, at least for the next decade or 
so, but much of the energy development is not going to take 
place in the Twin Cities but in rural Minnesota. We are going 
to continue to develop and build lots of new energy, lots of 
technology. Folks, the time has arrived. I go to public 
meetings, particularly in western Minnesota, like this. When we 
are talking about building coal plants, we are talking about 
building nuclear plants, there are lots of signs out there 
saying do not. When we are talking about wind, I have 
landowners saying, ``How many of these can you give me? I will 
take as many towers I can get.''
    That is one of the differences, folks, between the 
traditional kinds of energy and the new energy technologies 
that are being developed. Minnesota is going to be looking at 
this Administration, the legislature, our friends there in 
Congress are looking at programs like micro turbines. These are 
the kinds of things that distribute generation.
    We were at St. Cloud about 3 months ago, 300 communities 
across the State. Every one of them wants to have control of 
its own energy future. This is a critical thing to do. If it is 
going to take place in rural Minnesota, it is going to take 
bankers, it is going to take the Small Business Administration, 
it is going to take this Administration and the legislature to 
fund those kinds of programs. But whether we are building 
energy for small communities or large communities or energy to 
supply much of the State, it is going to take place in rural 
Minnesota. Northeast Minnesota says, ``We will take all of the 
power plants you want to send up here.'' They haven't talked 
yet about some of the negatives about that, but they want those 
plants, they want those jobs. That is the only part of the 
State that wants to do that, and we are looking to give it.
    Two areas that haven't come up. One is health care. A huge 
issue for folks who want to build businesses in rural Minnesota 
or expand businesses. They need to have employees that have 
access to health care. We are losing physicians, and we are 
losing health care facilities in rural Minnesota. We have got 
to reverse that trend. I do not have answers for that, but I 
want everyone here to be aware of it. We need to look at this. 
How we are going to fix this problem in rural Minnesota? It is 
very difficult to locate a business and to expand a business if 
the employees do not have access to health care in that 
    Finally, workforce issues. We are merging the Department of 
Economic Security, which would provide workforce training, into 
Trade and Economic Development. Well, that is government at 
work, but the fact of the matter is the legislature and the 
Administration recognize that workforce development is economic 
development. And the two ought to be done separately. The two 
ought to be combined, and the focus should be on workforce 
    I am here to listen, by the way. That is why I snuck up and 
sat in the back, but I do want to hear what everybody else has 
to say.
    Senator I want to say thank you publicly, because I do not 
know if I have done it. We have in this State gone through not 
an energy crisis, but we went through an energy spike last 
winter. Almost every one of us here felt that. I think everyone 
here spent two or three times more on heating costs. Folks, I 
have still got all over the State of Minnesota hundreds of 
families, mostly seniors, who couldn't take those price hikes. 
We have a program called the Low Income Heating Assistance 
Program. We had to go to Washington to get more money, and it 
was Senator Wellstone who led that fight to get that money back 
to Minnesota to help folks who really needed the help so they 
could pay their energy bills. Again, Senator, I want to thank 
you publicly for spiriting that effort. It is much appreciated.
    Senator Wellstone. Very nice of you. Thanks for your words.
    OK. Card No. 1. Does that make sense? We will just do it 
that way, but everyone, please, for the record, when you speak, 
do not say, ``I am card No. 1.''
    Ms. Spraag. Good morning, my name is Cheryl Spraag. I am 
president and CEO of the Virginia, Mountain Iron, Gilbert Area 
Chamber of Commerce in northeastern Minnesota.
    Mr. Harvey. My name is Keith Harvey. I am the chairman of 
the board with Virginia, Mountain Iron Area Chamber of 
Commerce. I am also the chief financial officer of the Virginia 
Regional Medical Center, so the Commissioner's comments about 
health care hit me right here, so thank you.
    Ms. Spraag. On behalf of our Chamber, Senator Wellstone, we 
commend you and the U.S. Senate Small Business Committee for 
initiating these discussions about the revitalization of rural 
America businesses, which I think, at this point in time, we 
are reaching a crisis point, and these discussions from here, 
we hope we will come through with some solutions that are going 
to be quick, and offer the help that is needed now.
    Mr. Harvey. We represent about 300 businesses in 
northeastern Minnesota. About 290 of those businesses are the 
dimes that Bill Spang referred to, and about five of them 
represent the dollars. Unfortunately, we experienced losing one 
of those dollars in February of this year when the LTV mine 
closed. That cost us 1,400 jobs, about $60 million in payroll, 
and the economic impact on the region is about $400 million. So 
we sense an incredible urgency on the issues that we are about 
to talk about.
    I would like to request that this letter and the following 
declarations be entered into the official record with the U.S. 
Senate Small Business Committee today, and I would like to 
submit the following resolutions to you.
    Ms. Spraag. These resolutions are based on discussion, a 
membership survey, and the results of the round table 
discussion we had with your staff, Senator Wellstone.
    First of all--and these are taken verbatim from our 
membership--we feel that as far as Small Business 
Administration Program and loans, institute SBA loans which 
will assist existing small businesses with refinancing for 
technology improvements, daily operations, and management 
restructuring, such as partnership buyouts, et cetera. Increase 
SBA staff to provide reliable and prompt service to assist 
financial lenders in determining loan recipients and loan 
distribution. Utilizing the SBA for community development 
grants. Reduce rates and fees on SBA loans. Become more of a 
GAAP financier, and reduce documentation requirements on SBA 
    Mr. Harvey. We would like to allocate funds specifically 
for small business research.
    Ms. Spraag. Designate a larger portion of Federal work 
projects and material orders to rural contractors.
    Mr. Harvey. I think this is one of the biggest ones: 
develop plans and earmark funds for advanced telecommunications 
and Internet access.
    Ms. Spraag. Ensure that natural resource industries, such 
as forestry and mining, particularly in our area, can compete 
fairly with foreign companies on national trade market.
    Mr. Harvey. Review regulatory guidelines which may prevent 
business development in rural areas, such as U.S. Forest 
    Ms. Spraag. Create more venture capital.
    Mr. Harvey. Provide Federal loan and grant dollars for 
rural economic development.
    Ms. Spraag. Assist in the restoration of rural communities 
to our downtown districts and infrastructure.
    Mr. Harvey. And reduce Federal red tape.
    Ms. Spraag. That was a verbatim. Another verbatim, offer 
tax incentives which will inspire business to relocate to rural 
    Again, we appreciate your time and your efforts in 
researching and finding solutions to these dilemmas, and if you 
have any further questions, we have submitted this letter for 
the record of this hearing, and we would be willing to answer 
any more that you have.\2\
    \2\ Letter is located in the appendix.
    Thank you.
    Senator Wellstone. Thank you for your very crisp policy 
recommendations. I agree with almost all of them.
    Ms. Spraag. Thank you.
    Senator Wellstone. No. 2. If you all know your cards, just 
go ahead.
    Mr. Grimlund. Thank you for letting me come. My name is 
Pete Grimlund. I am the CEO of Rural, Inc. We develop regional 
technology cooperatives in rural Minnesota and across the 
country to deliver technology, particularly consulting 
services, and a host of software applications to communities in 
the business, and residents within the community.
    In thinking about what I want to say today, I think enough 
has been said about the digital divide and the issues related 
to connectivity. I would like to suggest we move beyond that 
and think about what happens when connectivity is available to 
    The challenges that we have seen amongst the businesses in 
rural areas is not so much one of connectivity, it is an issue 
of what do you do with it once you have got it. The skills do 
not exist at the rural areas to support the type of 
sophisticated infrastructure like you see around here in St. 
Cloud and the metro area and California and wherever. If the 
businesses are to survive in a virtual economy, a global 
economy that we are in right now, they need to have access, 
local access, to the sophisticated people and individuals who 
can support that infrastructure, who can consult with the 
businesses to help them in the changes that they need to be 
competitive, and to bring to the table the various 
sophisticated software tools and services that they need, and 
need to integrate into the bows of their entity to be able to 
survive in the local marketplace. Then and only then will they 
be able to be fully engaged in the economy.
    The one recommendation that I would like to suggest that 
comes out of this and goes back to Washington is that we go 
back into the past and take a look at what happened when a new 
technology in the last century--or the two new technologies in 
the last century were going out into the local areas: 
electricity and telecommunications. The solution at that point 
in time was to create a funding mechanism to support the 
development of these cooperatives to aggregate demand, to 
aggregate capital, to be able to build that out into the rural 
areas. That same style, that same old financing mechanism, 
needs to be put in place today, but put in place today so that 
it is not asset-based, because the assets that are out in rural 
America that need to be financed are intellectual assets and 
they are software assets. They are not traditional assets that 
you can go to a bank or go to the SBA or go any place else and 
get traditional funding for. That, frankly, has been the 
biggest impediment to our being able to go out and solve the 
    Thank you very much for your time.
    Senator Wellstone. Yes, thank you. I think part of this 
fits into the discussion we were having about workforce 
development earlier.
    Mr. Grimlund. Correct.
    Senator Wellstone. OK. Thank you.
    Card number three. You know, actually, people can--if you 
know you are going to be like fourth, if we can get a couple of 
people lined up and move along quicker. Card three? Card four? 
Five? Six? We are moving along really well now. Seven? Eight? 
Well, as soon as we get through these, we will go right to 
others. Yes?
    Mr. Bauerly. Senator, thank you for being here today. My 
name is Rick Bauerly, and I live in Sauk Rapids. I work for 
Venture Allies, a small business consulting firm, here in St. 
Cloud. I want to tell a story about venture capital in 
Minnesota. We all know that venture capital creates jobs. The 
National Venture Capital Association reported that last year, 
venture-backed companies created 4.3 million jobs in this 
country. A little math would suggest that that is a large share 
of all job growth in this country.
    The second part of the story is that venture capital in 
Minnesota lives in Minneapolis and St. Paul, and the seven-
county metro area. There are 25 venture capital funds there, 
and, to my knowledge, there is not one largely capitalized 
venture capital fund in Greater Minnesota. By largely 
capitalized, I mean $50 million or more, which is sort of the 
critical math that you need for a venture capital fund. So 
venture capital creates jobs, venture capital lives in the Twin 
City metro area. The worst part of the story, though, is that 
the venture capital in the Twin Cities metro area flies to the 
coast. By that I mean that last year, 12 percent of Minnesota 
venture capital was invested in Minnesota. The majority of it 
flew to Silicon Valley, to Wall Street, to Texas and so forth. 
So we hear reports that there is quite a bit of venture capital 
in Minnesota, but it is in Minneapolis, it is spent on the 
coasts, and it is not in Greater Minnesota. That is the 
    There is a great solution. Ed and Mel know about it well. 
It is the small business investment company that the SBA 
sponsors, it has sponsored for 40 years, and we think that is a 
great solution for this problem for Greater Minnesota. It 
provides $3 of debt for every dollar of private equity that we 
can raise. We think there is enough demand for such a fund in 
Greater Minnesota with Central Minnesota as its anchor. As 
evidence of that, if you look at the SPSs in the country, and 
there are 300 of them, there are 30 of them in cities that are 
smaller than St. Cloud, and in regions that are smaller in 
central Minnesota. So a full 10 percent of them are in lesser 
economic areas. We think that Venture Allies has the management 
team to do this, the investors are ready to invest. We have one 
barrier. The barrier to an SBIC in Greater Minnesota is this, 
this is the barrier: I flew to Washington, D.C., and I sat down 
with the license administrator of the Small Business 
Administration, and I said, ``What does it take to get licensed 
from a management team perspective?'' He said, ``Well, here's 
the regulation. You have to have a senior partner who has 
produced investment returns in the top 50 percent of venture 
capital.'' That is an extremely high hurdle, and those people 
live in the big cities. We have tried to recruit them here. We 
cannot, and so we are going to try to make the application 
ourselves. But we need support, and we need your support as we 
make this application, and we need Leslie's support, and we 
need Joe's support, and we need to look at the spirit of the 
spirit of the matter, which is that we have a capable team 
interested in investors, and a strong demand for this, and to 
try to focus on the spirit of the matter.
    Senator Wellstone. I appreciate your testimony, and, as you 
know, we do want to help. I mean, it is not unreasonable to 
sort of want to say, ``Look, we want to make sure that whoever 
is going to be doing this, we have got some record success on 
what they are doing.'' On the other hand, your point is well 
taken, too. Let us just sort of see what we can do with this. 
Thank you so much.
    Mr. Bauerly. Thank you.
    Senator Wellstone. Where are we now? Nine? Ten? Eleven? I 
feel like I am doing an auction, here.
    Mr. Brian. I will take the time and the money from the 
folks that haven't shown up. Senator and staff, I am Tim, the 
Soup Guy, and I started a frozen soup company a number of years 
ago. It is my fourth start-up, but I also, after having success 
with it, looked around and wanted to help some other folks. 
Some of our profits go to homeless kids and family violence 
issues, and so I started a group called Bread Board. You may 
have heard of it. It has been written up in the paper. It is an 
informal--or was supposed to be an informal networking group, 
but the Department of Ag has asked if we would hold it there, 
and we are. So it has kind of taken on a life of its own, and I 
haven't been available to sell soup, so it is available at 
Colborne's, if you live here.
    We found out, as we go around, that Bread Board is a group 
of CEOs and executives from small food start-up companies, and 
statistically 99 percent fail, fall off the cliff. And that is 
a real number.
    Now, after looking at that, I started to look around, 
wondering what could help me along the way--and I started 
really studying it with some other folks, and I have come up 
with the Minnesota Ag Club, which I faxed to your office, 
Senator, and I have a copy here for you also. It has been 
developed with the help of--here goes the acronyms, AURI, MBA, 
USDA, and I do not need to go on. But anyway, input from 
    What I have found is we do not need money. I am the one 
here to say we are not asking for spending. What I am saying is 
that I have found through talking to everybody there that we 
need to spend money more efficiently. There is a reason I 
didn't use any Government programs to start my business. I 
didn't know about them, and it was very hard to understand them 
at the time as a start-up. The resumes of the people who were 
going to counsel with me didn't have a marketing background. 
The idea behind it, in a nutshell, since I am out of time, is 
it looks like a cooperative, and there are many cooperatives, 
but my concern is that on the Bread Board, we have a buffalo 
cooperative, for instance. Everybody in the cooperative knows 
the same thing. How do you help each other? You pool resources, 
but if everybody is poor and doesn't have resources, what good 
is that? Even a dairy cooperative. The reason there are so many 
subsidies going out is because everybody just knows dairy.
    I really believe the model I have built here will help the 
farmer--the difference of this cooperative is there are farmers 
and hunters, which is myself, a food marketing entrepreneur, 
and there are many of us who will come together. Now, when I 
looked at it, the No. 1 reason that has never happened before 
is trust. You know, we are total opposites in personality. So 
it is like any other group. You know, the needs and strengths 
of the farmer are inversely related to the needs and strengths 
of entrepreneurs. They have the ag product, and I need ag 
product. We have experience in marketing, and they need value-
added marketing. My concern is the USDA grants, millions of 
dollars, are going to farmers who, as somebody from the USDA 
said, are living off the grants, because they do not have 
marketing experience. It would be like saying, ``For your soup 
company, we have money, but you have to now milk cows and raise 
cattle and your own carrots and things.'' So the current system 
I think has some opportunity to be refined a bit, and I would 
love to lead the way on that with some of this research.
    Thank you.
    Senator Wellstone. We would love to have your help. Thank 
    We are up to 12, 13? For some of you, there will be some 
follow-up. We would just like to talk more. Thank you.
    Ms. Purvis. Good morning, my name is Lisa Purvis, director 
of the Owatonna Chamber of Commerce and Tourism, and I 
appreciate the opportunity to speak with you this morning.
    Senator Wellstone. Thanks for coming.
    Ms. Purvis. Owatonna is located at the junction of I-35 and 
Highway 14. We have recently gained notoriety, with Cabela's in 
our own backyard. Development continues to expand on the I-35 
corridor with the new health care campus, industry, retail and 
education coalition. Owatonna's population is approximately 
22,000. Our demographics are becoming increasingly diverse, 
including a growing Somali and Hmong population. This diverse 
workforce grows with the largest manufacturing and industrial 
base. However, as in many rural communities, there is a 
disproportionate amount of affordable housing.
    Owatonna grows success. We are the home of Federated 
Insurance, Josten's, Winger Corporation, the King Company, and 
the Owatonna Tool Company. However, several recent mergers by 
multinational corporations that do not possess the same 
community values that you spoke of earlier necessitates 
additional resources to continue to grow our human feasibility 
by fostering a positive environment for the entrepreneur 
    Access to capital is a problem in this State. Economic 
development tools for rural communities and development 
corporations are limited. Tax increment financing legislation 
intended to enable and empower local municipalities has been 
attacked year after year. In 1995, Minnesota even went so far 
as to discontinue a State Main Street program. Therefore, towns 
like Owatonna must look to you not only to continue, but to 
enhance three specific programs. The first one is the Small 
Cities Development Corporate Program funded by HUD, whose 
purpose is to provide decent housing, a suitable living 
environment, and expand equal living opportunities for persons 
of low-income and moderate income.
    The second program is Main Street, which has been 
incredibly successful, making it one of the most powerful 
economic development tools in the Nation. The total amount of 
public and private reinvestment in major communities is $15.2 
billion. The average redevelopment per community is $9.3 
million, and the number of new businesses generated is 52,000.
    In addition, the Liveable Communities Initiative, created 
by the Clinton administration, is a model of intergovernmental 
cooperation of the highest and potentially most effective 
level. I believe these Federal programs have the greatest 
impact on the continued success of Owatonna, as well as many 
other communities in Minnesota.
    Thank you.
    Senator Wellstone. Thank you. I--it is not to be outside of 
it. Any number of different people today have talked about 
affordable housing. As in not metro, but Greater Minnesota, as 
well, and I think it is a long story.
    One of the things that I am looking at, and there are other 
people, but I--we did away with some of the tax credits and tax 
breaks in the 1986 tax bill that was really actually critical 
to the private sector involvement in affordable housing, and 
then we didn't replace it with anything else. I think we really 
need to go back to some of those, and we need to make sure--I 
really think this is critically important in our State, and I 
really appreciate it. All of the things you said about 
Owatonna, I always thought about Owatonna as being a suburb of 
Northfield. I just ended all of my chances in Owatonna. 
Fourteen, fifteen, and sixteen.
    Mr. Fuhr. My name is Dave Fuhr. I am the President and CEO 
of a company, Airborne Data Systems, out of wabasso, Minnesota. 
We build an airborne, digital, multispectral camera system. We 
are the only company that does it. We are an international 
company. One of the things that Minnesota doesn't play very 
high in, is like an old military presence, we have never had 
any bases, never had anything like that, and we play in the 
market that is dominated by Government agencies, military, and 
things like this. We are just totally unheard of. We can walk 
into the best things, like sliced bread. They do not care. If 
you are not growing, you do not exist. There has got to be some 
kind of a way, whether it is just--we are so specialized, the 
only thing we need to do is say, ``Senator Wellstone, go right 
up to Forest Service''--we have got a system on the bench, and 
we can sell this thing at a regional level to the lower echelon 
in Forest Service. We cannot touch the national level. 
Actually, we are a see front. We have got full broad band 
Internet due to a rural telephone company. Anybody looking for 
broad band international office space, we have got it, we will 
rent it out. But when it comes to our markets, we cannot touch 
that stuff. I do not know how to fix it.
    I work with Minnesota Technologies, and they are great. 
They have got some things that they could improve on. They can 
provide some resources for people that little companies cannot 
provide. We work with that since we started our business. That 
is the comment I would like to make. I do not know how to fix 
that, and I have heard nothing from anyone else on how to fix 
that project.
    Senator Wellstone. Thank you. I have two very, very quick 
reactions. One is, without trying to make any promises that 
cannot be followed up on, I do wish that you would talk to me, 
because sometimes what happens is there are just ways that we 
can, you know, go to work for companies and entrepreneurs that 
can be helpful. And then the broader question you raised, which 
I think is the question that was brought up in the Twin Cities, 
as well, the overall question of procurement and contracting 
and subcontracting, and how small businesses get a fair shake 
in the competition is the other question which I think is 
extremely important.
    Mr. Fuhr. Especially when you get into technical 
conferences. I was in a conference, How to Do Government 
Contracting, in one of the hotels a couple of months ago, and 
that was good, but if you get into technical markets and things 
like that, it is--it just wasn't designed. There was just no 
way to take something like that and just direct it to a higher 
echelon level. We do not have the retired generals on our 
staff. We do not have access to those people, because they 
never retired to Minnesota because we do not have the bases. 
And it is--you just do not have--you just do not have the 
clout. You do not have the touch to people.
    Senator Wellstone. Yes, this reminds me, just for a moment, 
if you will think of the levity of Al Franken, who is from 
Minnesota, who can be quite hilarious. I once heard him say at 
a gathering that--he is Jewish, and I am Jewish, and he said 
that he was trying to figure out when we would have the first 
Jewish President. He said he has decided that the only time 
that will happen is if it is a Jewish person that is a military 
man or woman. He said that is the way it is going to happen. He 
said, but the problem is--I then did my research, and I found 
out that the highest-ranking Jew in the military was 
Comptroller General of the Coast Guard. Anyway, I do not think 
that is true. But that is another story.
    Mr. Fuhr. Well, thank you very much.
    Senator Wellstone. Yes, and please make sure that we talk 
    Mr. Fuhr. Thank you very much.
    Senator Wellstone. Yes, do we have any more card numbers? 
Anybody with cards--and, by the way, please, your comments as 
    Mr. Babcock. Good morning. My name is John Babcock. I am an 
attorney and certified public accountant. I practice here in 
St. Cloud, and I have dealt with Jim previously on various 
    Access to capital is a real problem for rural businesses in 
Minnesota. I want to give you a very specific example of 
something that occurred in my experience, and I think Leslie 
may have some reaction to this. There is a large turkey plant 
in the City of Detroit Lakes that produces over a hundred 
million pounds of turkeys per year, and the company that 
operated that decided to leave the State. I worked with a bunch 
of turkey farmers who were interested in acquiring that 
facility and keeping it running, and they produced the turkeys, 
the turkeys would go into the processing plant, and they were 
going to sell these turkeys as finished products. They had a 
certain amount of capital, and we wanted to leverage that. We 
wanted to get some venture capitalists to come in and join us 
in that acquisition. The problem was, the venture capitalists 
were based out of Minneapolis, they just didn't understand an 
agriculturally-based business. Agricultural businesses are 
fundamentally different than a manufacturing business. You are 
selling at large volumes for low margin, and that takes a lot 
of capital that you wrap up in equipment. If you invest in that 
type of business, you have to realize there is going to be 
fluctuations that the market may impose on you, and you have to 
live through those fluctuations, you have to be patient, you 
have to strive for that long-term return. They just didn't 
understand that, and I think that the need is critical that we 
have an outstate venture capital fund that does understand 
those concepts, that can make intelligent decisions, and I 
think Rick, with Venture Allies, is certainly part of that.
    Another tool that I think is available is the Small 
Corporate Offering Program that enables small businesses to 
make direct sales to the public of up to $1 million of their 
stock. I think that is a viable program. I have worked with Jim 
on trying to bring some of those businesses under that program 
and bring that to the table.
    Thank you for allowing me to make some of my comments.
    Senator Wellstone. Thank you for your excellent comments. 
We will just move right along. According to Bill, we are a 
little bit over time, but I want to hear from others, if that 
is OK, and I also want to comment--I want you to, if you do not 
mind, take some time, Connie. Some to you, Leslie.
    Mr. Wood. Senator Wellstone, thank you for the opportunity. 
My name is Ron Wood. I am president of the Minnesota West 
Community and Technical College. I also serve on the Granite 
Falls Economic Development Authority and the Worthington 
Regional Development Corporation.
    Minnesota West serves 20,000 square miles of southwest 
Minnesota, so I get to see an awful lot of ground as I travel 
to our campuses. We have no community over 15,000 people within 
that 20,000 square miles. Most of them are in the neighborhood 
of 800 to 3,000 people.
    Two issues I would like to talk about are access to capital 
and access to technology. Boy, it is hard to stay under 2 
minutes, too. OK. One of the problems that I find sitting on 
the Economic Development Board is we do not have enough capital 
to work in our communities to really help them. Being active is 
not enough in a small community. In a larger community, they 
are going to generate some revenue to do some real good things, 
but it is hard in a small community of 2,000 or 3,000 to make 
that work right. We run into problems. I mean, I just had a 
meeting for 4 hours Monday night, and we run into problems 
where the State and the Federal bureaucracy is so slow, where 
we find that it takes too long. When you are in a business and 
we are trying to move a business through, timing and use is the 
most important thing. It is timing. It is not 2 months later, 
not 6 months later, not 12 months later. The solution that I 
offer is we have to have some more trust and flexibility in 
lieu of the money down to lower levels.
    I am going to just skip quickly forward to the banking 
industry. We are still in the 1930s and 1940s and the 1950s in 
the regulations. They have got to look at collateralization in 
a different way. It has to be done in a different way.
    As the gentleman from Rural Inc. said, we are not talking 
about intellectual resources, we are talking about software. 
When we look at technology one other solution is, we have got 
to stop talking about land lines. We have got to talk about 
satellite use in rural America. It is not going to work with 
land lines. It is too long, it will take too long. It will be 
10 years before we land line this State. Ecostar, Dish, they 
now have a commercial solution that gives you the high speed. 
Minnesota West, at this point in time, we use IP voice for my 
senior staff. I do not have long-distance calls, but my senior 
staff, we use IP voice over our T1 lines. But we cross our land 
lines without problems doing that. That is something we need to 
look at with technology.
    When you write and speak, it seems longer. One of the 
examples I would like to give, Rural Inc. was up here a little 
bit earlier. I didn't know Pete was going to be here today. 
That is an example of what Granite Falls has done. It has taken 
a tremendous risk in its capital, in terms of its available 
capital to do that, but there is an amazing demand out there 
for IT services. Not full-time IT workers, but a quarter of a 
worker, a half a worker. You have the co-ops concept; it is a 
concept that really can be applied in rural America. It works 
over and over and over. But we have to find ways to fund these 
kinds of operations so that they can be successful, because 
rural businesses cannot compete with cities unless they know 
how to use that technology. It is not just access to it. It is 
how to use it, also.
    I want to thank you for this opportunity. Good luck in what 
you are doing in Washington. Commissioner, I thank you, also.
    Senator Wellstone. Yes, thanks for your comment. We will 
get two more people, and if there is anyone else, we are going 
to end within about 10 minutes.
    Mr. Herges. I am John Herges, president of Stearns Bank in 
St. Cloud. I want to thank you for your support with the SBA 
program, and I am here today as a big supporter of the SBA 
    Our bank is an independent bank. In addition to the one in 
St. Cloud, we have five rural banks, and you might say that we 
make a living making small business loans in rural America. We 
are a big user of the SBA program, and both the 7(a) program 
and the 504 program are wonderful programs and really are a big 
aid to the banking community, and to small business people out 
there in rural America. With the success the program has had, 
both 7(a) and 504, I think we ought to be looking at ways to 
increase the SBA budget and increasing the SBA program rather 
than decreasing it.
    I would also like to throw in a word of caution. Please do 
not increase the fees. It puts a real burden on the small 
business person, and what ends up happening is that the SBA 
program becomes a lender of last resort. There are other 
    The other program that I would ask you to continue on with 
your support with the SBA program--it is a very, very important 
program. I would also ask for you to look at the USDA program, 
the USDA Rural Development, BNI program, which is another 
guarantee program that is more specifically zeroed in on rural 
development and rural economic development, and it also allows 
larger laws to be made in rural America.
    Thank you very much, Senator.
    Senator Wellstone. Well, thank you. The whole question of 
rural economic development, I think, will go with this ag bill 
to the family farm bill, but will also be undergoing--Bill also 
mentioned this.
    For the record, your testimony on the 7(a) and 504 is 
extremely important, and I wholeheartedly agree with you. I 
wish we weren't in the position of, you know, trying to keep it 
sort of where it is and say,``no.'' I wish we would extend, but 
I think there are any number of us that are going to push very 
hard. I know that John Kerry is certainly--this is a huge 
priority. I know what is in Minnesota; I do not think we can 
emphasize it enough. It is so successful, and it is critically 
    Mr. Herges. As you pointed out earlier, the SBA office in 
Minnesota is one of the best offices--is the best office, in my 
    Senator Wellstone. I think so. Let's give Ed Daum a hand. 
The other thing that will--it is not part of the subject matter 
of our official hearing, but I cannot resist saying it because 
of what you said earlier. I also feel very strongly that there 
is an important distinction, and I do say everywhere, most of 
you will agree, but I can say it everywhere. There is an 
important distinction that is also involved between independent 
and community banks, and I am very--I will only use the word 
``saddened.'' I think we have made a terrible mistake by just 
simply going forward and saying so little about the mergers and 
the acquisitions and the concentration that has taken place in 
the industry, because just as people were talking about small 
business, you are talking about people who live in the 
community and know people. I think the same distinction can be 
made between your kind of a bank versus some of these large 
branch banks. It is completely different, and I find myself 
very much in opposition to some of the legislation that has 
passed, and I think it has just encouraged more mergers. 
Anyway, I am done. I am off my soapbox.
    Ms. Johnson. Good afternoon. I am Susan Johnson, director 
for the Nursing Service Department at St. Cloud University. I 
am also from southern Minnesota, grew up on Century farm.
    I am here just to mention that rural development is 
contingent on good health care, and nurses do represent the 
backbone of the health care industry. We currently have a 
severe international, national, and regional and State nursing 
shortage, and rural areas will be mostly severely impacted by 
this issue. Again, I would like to encourage better funding to 
go to nursing education, and State funding. We currently have--
I am acutely aware of this. We are starting, we are trying to 
start, and we have over 700 students on an interest list.
    Senator Wellstone. You have what?
    Ms. Johnson. Over 700 students on an interest list, and 
that is without even having--this is just word of mouth, this 
is just coming to our office, and we have a lot of agencies 
crying for nurses, but we do not have the funding for the 
educational program to provide the education. So I would urge 
you to think about increasing funding for nursing education and 
making sure that some of that funding flows to rural areas.
    Senator Wellstone. Absolutely.
    Ms. Merdan. Susan. Oh, my mic is not on. Susan, I was just 
going to say, there is not a nursing program now? Would you 
talk about that? North of the Twin Cities--I am sorry. I am 
Toni Merdan.
    Ms. Johnson. Yes. We did our research looking at access to 
nursing education. What we discovered was if a student is 
interested in a generic, just a degree in a nursing program, 
there are currently only three in the State of Minnesota in the 
public sector: one in Mankato, one in Winona, and one at the 
University of Minnesota. So if you live north of the Cities, 
you do not have access to nursing education. When we look at 
that, part of the reason is funding; nursing education is 
expensive, or universities, and so we need to figure out some 
incentive, some university incentives to provide nursing 
education. Part of it, I think, is just looking at the problem 
and getting the money to an interested student.
    Mr. McLean. I am Bob McLean. I am in beautiful Pequot Lakes 
in Minnesota. First I would like to say something to you, 
Senator Wellstone. I genuinely appreciate the integrity and 
intellect that you bring to the Senate. It is so vitally 
important, and I think not in the mainstream, and it is really 
    I wanted to address one area that I think is being touched 
on in almost every person's comments, but it concerns me it is 
not getting more emphasis. If you want to increase the rate on 
technology, if you want to mitigate risk in capital, if you 
want to increase the confidence of loan officers and venture 
capitalists, I think you need to increase education. 
Especially--and I will start, I think in particular, with your 
group, Ed. The SBA and SBDCs are doing an incredible job in 
Greater Minnesota. You cannot imagine, when a loan officer has 
to look at two different loans, and they have gone through an 
SBDC program, there is such a heightened confidence in looking 
at that loan. But these people are terribly overworked and the 
demand for their work is growing. Not just in start-up, but in 
the ongoing emerging. I think, too, in their host--generally in 
our universities, we have got some wonderful entrepreneurial 
programs in the University of Minnesota. They need to be 
supported more strongly.
    I didn't come with an agenda, but I do think that a key 
point to our economic development is our education, and the way 
that we fund education, that necessarily is in a traditional 
form, but with technical assistance, like Mary, who was talking 
about up in the Northeast, with--if you are getting an increase 
in entrepreneurialism, you cannot expect somebody who is a 
farmer to all of a sudden be an outstanding business person. Or 
if they worked in a mine, they are not an instant MBA. So 
whatever we can do to try and help get at the grass-roots level 
and bring more of that kind of technical support and kind of 
business support to our people, I think that is going to draw 
the capital, I think that is going to increase the confidence 
of our loan officers, I think it is going to help the process 
of economic development in Greater Minnesota.
    Senator Wellstone. Absolutely. I think that is what Renae 
was saying earlier, as well. Jim, I am sure you agree with me. 
One thing I am sure of is that all of this is of the definition 
of K through 1. A number of people talked about what has been 
outdated. That is another outdated--I mean, education is pre-K 
through, I think, 65, and a lot of our students today are not 
18 or 19, and many of them are trying to make this transition. 
The human capital piece and the way in which you link that to 
small business or entrepreneurship or ongoing development is 
critically important. You couldn't be more right.
    Mr. McLean. A key point, too, Senator Wellstone, is we do 
not have to invent it. We already have good programs that 
exist. We need to support that and increase it. So it is not a 
matter of having to start over or starting anew. It is a matter 
of taking what we have and making it available and supporting 
it strongly. I always say, if you think education is expensive, 
try ignorance. If you think a loan is a dangerous thing, if 
someone doesn't know what to do with money, that costs you a 
whole lot more.
    Thank you.
    Mr. Berstein. Senator Wellstone, in Minnesota we have a 
terrific technical education system that needs to be preserved. 
Much of what is going on in the workforce is going on in 
technical colleges as well. There are difficulties, however.
    Is there anyone else from technical colleges here? There 
is, again--adapting to changes in the workforce, and so many of 
the--it used to be that communities after 23 years--anybody go 
to a technical college? Three or four, OK. That is because of 
the change in the economy and having to go through the 
retraining. So they need access--businesses to help them with 
providing what we need in our workforce, but we also have to 
provide the funds, and that is where the legislature comes in 
and the Administration comes in to make sure that those systems 
are what are funding it.
    Senator Wellstone. Sonja.
    Ms. Berg. Good afternoon. I want to welcome you, Senator 
Wellstone, and all of the rest of you as individuals. My name 
is Sonja Berg, and I am a city council member here in St. 
Cloud, I am an educator, and just interested in this hearing. I 
didn't hear about it until yesterday morning at the local 
Economic Development Partnership meeting. I happened to be down 
at the National League of Cities Steering Committee for 
Information Technology, and some of the comments today sparked 
my interest or sparked--I wasn't asked to speak on behalf of 
anybody, but I am--I put up my own hand.
    I think some of the issues that were talked about are 
really important, and one is that what is happening in the 
Federal Government right now in terms of not having--thinking 
about selling off broad band for our safety police and fire 
departments, rather than leasing it. Are you aware of that, the 
spectrum digits? OK.
    Another one that someone else talked about is the digital 
divide. I think getting our schools and our libraries wired, 
and then training our teachers so that they can teach at 
preschool through grandparents, because many of these people 
want to have and need to train to communicate with business, 
through business, and so on. This will not have any popularity 
whatsoever, but it has been on the--hardly has hit the radar 
screen locally or in State government. We won't have any--we do 
not currently have any taxes on goods purchased through the 
Internet, and that while as a small business owner, one might 
think, oh, that is wonderful, I can go and get my books that 
way, and not be taxed. You are replacing what happens in that 
the State collects and the Federal Government--I mean, State 
tax collects, and you won't then have the police and fire 
safety that you need in order to come back to the communities, 
and you will take away the small businesses that once we went 
to the local John Deere, we went to the local hardware store, 
we went to the local book store. Those will be gone, because 
why would you do that, unless you had a special book that was 
only--I mean, there are more available through the Internet 
than otherwise.
    So those are the things that I wanted to add, and I 
appreciate you coming and being here, and I appreciate the 
chance to get to speak and listen.
    Senator Wellstone. Thank you so much. The last issue you 
raised is very much on the radar screen. There are many people 
who are thinking along the same lines.
    We are going to have one final comment.
    Ms. Leonard. I am 55.
    Senator Wellstone. No. 55. This better be great. You are 
the conclusion, Jane.
    Ms. Leonard. Thank you. My name is Jane Leonard, chairman 
of the Minnesota Rural Partners, and also co-owner of Community 
Technology, which is a very small business but helps lots of 
communities with their community technology planning. I wanted 
to take this opportunity, Senator Wellstone, to publicly thank 
you and your staff for supporting the National Partnership 
Development Act. We have worked very hard on that, and your 
staff has been a great help, and so I wanted to publicly thank 
you for that.
    I wanted to just echo what I have heard here today, both in 
energizing the entrepreneurs and closing the digital divide. 
Those are two of the five areas that Minnesota Rural Partners 
has been working on for the last 2 years, really, and we have 
already heard about the Rural Entrepreneur Academy, and I want 
to just let people know that, as we have heard today, there has 
been a lot of collaborative efforts at the grass-roots level to 
try and get the digital divide closed, and we have heard a lot 
about infrastructure not being there. I think infrastructure is 
there, there is a lot of activity in Minnesota, and we are 
doing pretty well. The problem, I think, as has been pointed 
out, is a lack of market development, especially for the new 
technologies, like DSL, and a lot of folks will tell you that 
they installed DSL, and they get 4 customers or 11 customers. I 
think that one of the things that we do need to emphasize is 
education. Technical training, but also leadership training, 
and I would just like to invite anybody here, and including 
your staff, the University of Minnesota, Minnesota Rural 
Partners, League of Cities, Association of Small Cities, and 
other regional cooperators are putting together regional 
leadership seminars this September all across the State in each 
of the six initiative fund regions, and we invite people to 
come out to this. It is a way to help community leaders 
understand the multi-dimensions of what we have talked about 
here today, the regulatory issues, the leadership issues, and 
in 3 hours. So we will see if it works.
    Senator Wellstone. I think that what you all are going to 
be doing this fall is so important. I think it is just 
    What I would like to do is, first of all, I have some 
remarks that I would like to have included in the record, and 
there are 10 days for additional remarks that I know you might 
want to make. At the front door, there are instructions about 
how to submit your testimony. I wanted to ask Representative 
Schumacher, Leslie, and Toni and Colleen whether you all have 
any final comments to make. We will all try to be relatively 
brief. I have had a chance to speak more than enough, so I 
would like to thank everyone. I thought it was a great hearing, 
and I take it to heart, and it is not just symbolic. Owatonna 
is not a suburb of Northfield.
    Ms. Schumacher. I am Representative Leslie Schumacher. I 
would like to thank you, Senator Wellstone, for conducting this 
hearing today. I learned a great deal and have a ton of 
questions. I have been taking notes, and I am hoping that you 
will provide us with the names and titles, and how to contact 
the individuals that testified here. I see lots of faces in the 
crowd that I would like to take time out to talk to, and intend 
to. Unfortunately, I have another appointment that I am running 
late for, so I am going to have to exit very quickly. But this 
was a fantastic meeting.
    I have some concerns, and as well as some questions, and 
some partnerships that I would like to form with individuals 
that testified here to talk about how we can collaborate work 
out of--I think out of the box. I think there are some changes 
that need to occur, and we need to better work together to 
provide services to rural Minnesota that they need.
    So thank you for giving us this opportunity to listen and 
participate. Thank you all for being here.
    Senator Wellstone. Thank you for giving us your time. It is 
much appreciated.
    Toni, please go next. Colin is all over the district and is 
absolutely committed to these issues, and so I am so glad you 
are here.
    Ms. Merdan. Thank you, Senator, for having me here today. I 
really appreciate this, and I appreciate you being in the St. 
Paul District. My name is Toni Merdan, and I am Senior Economic 
Development Officer for Congressman Colin Peterson.
    As you said, Senator, this is an issue that is vitally 
important to the Congressman. He was the first U.S. Congressman 
to appoint a full-time professional economic developer to his 
staff, and since he has done that, and since he has had me, 
there are quite a few other Congressmen in the U.S. House of 
Representatives that have also followed suit.
    I appreciate you having us today. It has all been excellent 
testimony, and I will take back everything I have heard to the 
Congressman for his consideration.
    Also, one thing I might mention is that he is on the 
Agriculture Committee, and he continually needs information and 
feedback from what policy changes there should be, and so 
anytime, please get hold of us, let us know what your thoughts 
are. We are especially interested right now in USDA rural 
development and any policy changes or ideas that could come in 
front of the Committee on those issues. So like we talked 
about, this is a program in rural development, and all of the 
wonderful community development programs they have, and so if 
there is anything there that we can take information back to 
him, I would appreciate it.
    So, again, thank you, Senator.
    Senator Wellstone. Thank you for coming.
    Ms. Landkamer. I am Colleen Landkamer, and I am a Blue 
Earth County commissioner, and I have been a chair of the Rural 
Caucus of the National Association of Counties. I just think it 
is great you had this hearing today. You know, too frequently, 
we do not get this information in the district, and it is nice 
for you to bring people out to the State to hear the ideas here 
and to make a difference. We all know that all good ideas do 
not start in Washington. They start here, and you know that. So 
bringing it out here and getting the ideas that are important, 
and the people who put the programs actually in the ground, the 
people who work in the dirt and make things happen out here, 
that is what is important, and that is what we heard today. It 
all shows how interdependent everything is.
    We talk about health care, talk about technology, talk 
about living in a knowledge economy, and the importance of 
bringing all of that together and looking for new solutions and 
new ways to do things. In that way, encouraging resilient 
communities--and that is what this is all about, making sure 
that rural Minnesota has resilient communities, places for 
people to live and grow and have good jobs.
    So I just want to thank you for doing this. I want to thank 
you for letting me sit up here and learn so much from all of 
you, and I look forward to working on this with you for a long, 
long time.
    Thank you.
    Senator Wellstone. Thanks Colleen. I think you are being a 
little modest. I think economic development is one of your 
great areas of expertise, much less national.
    Commissioner, before you finish up, Ed, you are getting the 
final word. Since people put all of this praise on you, it is 
only fair that you do. But, Commissioner, one of the things we 
talked about, and I agree with you more on the other piece, the 
one thing that you did say, although I think everybody knows 
it, is that this clean technology is also much more small 
business intensive. We have got so much potential. The other 
thing is, it is a no-brainer for Minnesota, because we have got 
over a $10 million a year energy bill. We are a State at the 
other end of the pipeline, and so when we import the barrels of 
oil and gas, we export dollars. Whereas wind, biomass--this is 
a big part of our future.
    Mr. Berstein. Yes, we have wind, we have the technology in 
Minnesota, I think, and some of the big companies like 3M have 
been instrumental. All are developing micro turbines.
    I want to thank everyone here for your time today, and 
honest issues. I also have a lot of notes on follow-ups, and if 
I can grab a couple of cards, here, as well.
    I came from a food marketing background, and the soup man 
and some of his ideas, and Bread Board, but what is our largest 
tax supporter? Does anyone know? It is agricultural products, 
and we do not just have to send out corn or raw wheat. We can 
send out processed or manufactured foods. There is also huge 
development in the food industry. People do not always want to 
buy Campbell's Soup or Progressive Food. This is the future of 
Minnesota, market niches and, again, Minnesota is an energy-
producing State. Not with oil, not with traditional 
technologies, but with the next generation of technologies, 
whether it is wind, whether it is biomass, and whether it is 
micro turbines.
    So thank you, everyone.
    Senator Wellstone. Thank you, Commissioner.
    Ed Daum, thank you for having us, by the way.
    Mr. Daum. Yes, thank you very much. I have taken lots of 
notes today. I took lots of notes yesterday. Senator Wellstone 
held meetings last week in several cities--Two Harbors, several 
other ones. Our staff are taking notes. The reason I am saying 
that is next week I am meeting with our Administrator in 
Washington, and I will certainly take this and present this to 
him, as well.
    I would like to introduce someone, Karen Honz. Karen, can 
you raise your hand? She flew in from Washington, D.C. She 
works with the Senate Ag Committee, as well. So we are taking 
notes. Again, Senator, thank you very much for inviting us here 
    Senator Wellstone. This was a superb hearing. Thank you. 
Some of you traveled very far, and for all of you who came and 
sat through several hours of testimony, it is much appreciated. 
Thank you everybody.
    The hearing is adjourned.
    [Whereupon, at 12:55 p.m., the Committee was adjourned.]






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