[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
REMOVING THE ROADBLOCKS TO SUCCESS: HOW CAN THE FEDERAL GOVERNMENT HELP 
                SMALL BUSINESS REVITALIZE THE ECONOMY?

=======================================================================

                             FIELD HEARING

                               before the

                SUBCOMMITTEE ON TAX, FINANCE AND EXPORTS

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                      DENVER, CO, AUGUST 27, 2003

                               __________

                           Serial No. 108-32

                               __________

         Printed for the use of the Committee on Small Business


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

                                 _____


                   U.S. GOVERNMENT PRINTING OFFICE
                          WASHINGTON : 2004
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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
Chairman                             JUANITA MILLENDER-McDONALD,
SUE KELLY, New York                    California
STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
PATRICK J. TOOMEY, Pennsylvania      FRANK BALLANCE, North Carolina
JIM DeMINT, South Carolina           DONNA CHRISTENSEN, Virgin Islands
SAM GRAVES, Missouri                 DANNY DAVIS, Illinois
EDWARD SCHROCK, Virginia             CHARLES GONZALEZ, Texas
TODD AKIN, Missouri                  GRACE NAPOLITANO, California
SHELLEY MOORE CAPITO, West Virginia  ANIBAL ACEVEDO-VILA, Puerto Rico
BILL SHUSTER, Pennsylvania           ED CASE, Hawaii
MARILYN MUSGRAVE, Colorado           MADELEINE BORDALLO, Guam
TRENT FRANKS, Arizona                DENISE MAJETTE, Georgia
JIM GERLACH, Pennsylvania            JIM MARSHALL, Georgia
JEB BRADLEY, New Hampshire           MICHAEL MICHAUD, Maine
BOB BEAUPREZ, Colorado               LINDA SANCHEZ, California
CHRIS CHOCOLA, Indiana               ENI FALEOMAVAEGA, American Samoa
STEVE KING, Iowa                     BRAD MILLER, North Carolina
THADDEUS McCOTTER, Michigan

         J. Matthew Szymanski, Chief of Staff and Chief Counsel

                     Phil Eskeland, Policy Director

                  Michael Day, Minority Staff Director

                                  (ii)




                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
O'Donnell, Rick, State of Colorado...............................     5
Henderson, Jim, U.S. Small Business Administration...............     7
Hea, Rebecca, M.D., Denver Children's Home.......................    13
Hilleary, Patrick, Brookfield Properties.........................    15
Weston, Bert, Inner-City Community Development Corp..............    17
Piper, Robert, Association of Builders and Contractors...........    25
Cirocki-Trujillo, Susan, Arrow Sheet Metal Products Co...........    27
Tyler, Cedric G., BusinessGenetics...............................    30
Ziegler, John, National Restaurant Association...................    33

                                Appendix

Opening statements:
    Toomey, Hon. Patrick J.......................................    42
    Beauprez, Hon. Bob...........................................    44
Prepared statements:
    Henderson, Jim...............................................    47
    Hea, Rebecca, M.D............................................    54
    Weston, Bert.................................................    57
    Piper, Robert................................................    61
    Cirocki-Trujillo, Susan......................................    69
    Tyler, Cedric G..............................................    73
    Ziegler, John................................................    81
    Barber, David, River's Edge Woodworking, Inc.................    85
    Krell, Steven, Imaging Systems, LLC..........................    87
    Santoro, John, Executive Business Decision Software, LLC.....    90
    Fried, Jack, Electric Power Equipment Company................    92
    Houston, Tracy E., Colorado Statehouse Conference............    99

                                 (iii)




REMOVING THE ROADBLOCKS TO SUCCESS: HOW CAN THE FEDERAL GOVERNMENT HELP 
                 SMALL BUSINESS REVITALIZE THE ECONOMY?

                              ----------                              


                       WEDNESDAY, AUGUST 27, 2003

                  House of Representatives,
             Subcommittee on Tax, Finances, Export,
                               Committee on Small Business,
                                                         Denver, CO
    The Subcommittee met, pursuant to call, at 10:00 a.m., at 
the Old Supreme Court Room, Colorado State Capitol Building, 
Denver, Colorado, Hon. Pat Toomey [Chairman of the 
Subcommittee] presiding.
    Chairman Toomey. Good morning, everyone. The Small Business 
Subcommittee on Tax, Finance, and Exports hearing will begin. I 
would like to say, first of all, thank you all for being here.
    I would like to thank the Governor for his kind 
accommodation in providing us with this beautiful facility, 
this beautiful room which, just for your information, is 
considerably more eloquent and well-appointed than the one we 
normally conduct our hearings in in Washington, so it is a 
pleasure to be here.
    I would like to just request that people take any cell 
phones and put them into an inaudible mode if they would be 
kind enough to do so, and just welcome everyone.
    I am delighted to be here today to examine the potential 
roadblocks to the success of American's small businesses. And 
specifically this morning we are going to look at problems 
either generated or neglected by the federal government that 
limit the growth and prosperity of the small business community 
along with potential solutions to those problems.
    I am sure most of you are aware small businesses are the 
driving force behind our economy. They actually represent about 
99 percent of all employers in America. More than half of all 
U.S. employees work for small firms. It is small businesses 
that are generating anywhere from 60 to 80 percent of the net 
new jobs being created in America.
    Given the importance of the small business to our economy 
and to our country, we as elected officials have a real 
obligation and responsibility to try to make sure we are 
advancing legislation that create an environment in which they 
can thrive. That is what we are trying to do and part of what 
our aim is today.
    Before I go on, I want to thank my good friend Congressman 
Bob Beauprez for inviting me to be here today. First of all, I 
should say we, or I personally, and many of my colleagues, I 
know, are very grateful to the good people of Colorado for 
sending Bob to Congress. He has become an invaluable asset not 
only to this committee but to the Congress as a general matter.
    I think most of it comes from the fact of his really very 
extensive real-world experience out there creating jobs, 
dealing with the pressure of making a payroll, being a small 
business owner himself, complying with government regulations.
    Bob has a personal and unique understanding of the 
pressures that are felt by the people who are risking their 
life savings to try to create prosperity for their neighbors 
and their colleagues and their co-workers. Because so few of 
our colleagues in Washington have that kind of experience, it 
is particularly helpful.
    I can tell you not only on this committee but throughout 
the House of Representatives Bob's advice and counsel is 
already widely sought, despite the fact that he is only in his 
first term. I am delighted that he is on this committee and I 
am grateful to be serving with him in Congress.
    Mr. Beauprez. Thank you.
    Chairman Toomey. Perhaps because too few of our colleagues 
have ever actually been on the front lines of owning and 
operating a small business. There has been a tendency for 
Congress, in case you haven't noticed, to pass a lot of laws 
and impose mandates and regulations and put burdens on the 
people who have to carry that out.
    Fortunately, in recent years, I think, there has been a 
growing awareness of this problem and Congress has enacted a 
number of legislation that is designed to help diminish that 
burden, the Paperwork Reduction Act, the Small Business 
Paperwork Relief Act and, most recently, the Jobs and Growth 
Tax Relief Reconciliation Act of 2003 all come to mind.
    Despite these bills and despite some progress that has been 
made, many small businesses still site complying with 
government mandates and regulation as ranking among the very 
top of their burdens in operating their business. As an 
example, according to a report recently published by the Small 
Business Association, Office of Advocacy, Americans spend $843 
billion combined to comply with federal regulations. It is 
really a staggering sum of money.
    Of course, it is not just the regulatory burdens that are 
challenging small businesses. The healthcare marketplace is 
especially difficult for small firms. The cost of health 
insurance has become prohibitive for many of America's small 
businesses and their employees. Of the 41 million uninsured 
Americans 60 percent work for small employers.
    They are working and are productive citizens but their 
employers can't afford to purchase the health insurance either 
for themselves or their employees so I think Congress has an 
obligation to try to find ways to make health insurance more 
affordable. There is a number of ways we can do this.
    This Subcommittee and other committees have explored 
several including mechanisms such as association health plans, 
expanding the use of medical savings accounts and flexible 
spending accounts, and increasing tax credits specifically for 
the purchase of health insurance. All of these mechanisms can 
help small businesses to obtain health insurance.
    The tax codes is another government invention that is 
particularly onerous to small business. Despite the very 
important and, I believe, construction tax relief that Congress 
and the President have provided to small businesses this year 
and 2001, taxes are still too high and the code that we have to 
comply with is ridiculously complicated.
    A 2001 study conducted for the SBA's Office of Advocacy 
found that tax compliance cost $1,200 per employee for the very 
small firms versus about $600 for the large firms. Our tax code 
itself put small businesses at a competitive disadvantage to 
larger businesses and that is one of many good reasons that we 
should be simplifying this code.
    These are just a few examples. There are very many more but 
I am anxious to get to our witness testimony today so I am 
going to limit my remarks to these. At this time I would again 
like to thank Congressman Beauprez for inviting me to be here 
and for his being here. I would like to yield to the gentleman 
from Colorado for his opening statement.
    Mr. Beauprez. Mr. Chairman, thank you. You have been very 
generous in your praise. Let me reciprocate very honestly. When 
I went to Congress, and not everybody would appreciate this so 
I will digress for just a minute, you are asked what committees 
you would like to serve on. I specifically asked to be on the 
Small Business Committee and I even more specifically asked to 
be on the Committee for Tax, Finance, and Export in large part 
because of the issues but, in very large part, because of who 
that Subcommittee chairman was, the gentleman next to me, 
Congressman Toomey.
    One of the real champions in the House of Representatives, 
he is unfortunately in a very personal way seeking to leave the 
House of Representatives but in a very fortunate way. The other 
side of the coin is seeking the Pennsylvania seat in the United 
States Senate and I wish him well in that endeavor.
    A true gentleman and a true champion of the issues that he 
outlined, certainly serious tax reform and, Congressman, I join 
you in the wish that sometime soon we can take the massive 
complicated owners tax code we have, throw it in the Potomac, 
and start over again with something that makes a little bit 
more sense.
    Let me also thank you for taking the time out of what I 
know is an extremely busy schedule for you, especially now, to 
take this opportunity to come out to Colorado and host this 
hearing with me. I share your passion for helping our small 
businesses to succeed in today's very difficult economy and 
applaud you for holding hearings outside Washington as I know 
you are doing. Not just in Colorado but, I believe, tomorrow 
you go to California and you do the same.
    We look for answers on how we can create an environment in 
which our country's small business owners can prosper. Not just 
survive but prosper. I would also like to recognize our 
distinguished panel for being here today. As I look out, I am 
very happy to see so many faces of friends and leaders of the 
small business community in Colorado.
    In addition we have with us today representatives of the 
federal government, Jim Henderson, who is the Regional Advocate 
for the U.S. Small Business Administration, and the State of 
Colorado in Rick O'Donnell, my good friend. He is the Executive 
Director for the Colorado Department of Regulatory Agencies.
    Mr. Chairman, being here this morning, I would like to take 
a moment to reflect on just how important small businesses are 
to the U.S. Economy. The Small Business Administration 
estimates that in 2002 there were approximately 22.9 million 
small businesses in the United States.
    As you alluded to, these small firms represent more than 
99.7 percent of all employers and employ more than half of all 
private sector employees. In addition, they pay about 45 
percent of the U.S. total private payroll taxes. In addition, 
it is estimated that small businesses create over three-
quarters of all the new net jobs that are created in the United 
States annually.
    These numbers aren't much different here in Colorado where 
the small business sector has always played a vital role. 97.5 
percent of businesses in the great state of Colorado are 
classified as small and an estimated 170,000 individuals are 
self-employed. These small businesses employ over 52 percent of 
the all the state's private sector workforce.
    And how is it that we thank these entrepreneurs and 
innovators that are lucky enough to make it in today's tough 
economic condition? We impose countless regulations and 
billions of dollars in taxation upon them. The total cost, Mr. 
Chairman, as you already referenced, of federal regulations 
have been estimated to be $843 billion in the year 2000. $843 
billion in 2000 which $497 billion fell on businesses and the 
remainder on consumers or other governments.
    Now, $843 billion of regulatory expense in a $10.5 trillion 
economy, we are approaching 10 percent of our total economy in 
the cost of regulation. For firms employing fewer than 20 
employees, which is a great many of the firms in Colorado, the 
annual regulatory burden is a staggering $6,975 per employee--
nearly 60 percent more than that of large firms with more than 
500 employees.
    Environmental regulations and tax compliance paperwork are 
particularly disproportionate in their effects on small 
businesses. Such regulations impose about 40 percent of the 
total business regulatory burden.
    What is clearly evident from these stats is that the 
regulatory costs continue to increase and to the disadvantage 
of small businesses. This needs to change, and change soon if 
we are going to ask these small businesses to lead the charge 
to economic recovery.
    Mr. Chairman, I now that you and I have sat through many 
hearings together out in Washington dealing with all kinds of 
issues that affect America's small businesses. I have got to 
tell you how excited I am again that you are here today in my 
state's capitol to hear what some of our real life small 
business people have to say about operating in today's 
difficult marketplace
    Again, I want to thank you for holding this hearing, and I 
want to thank you and our witnesses for being here today and I 
look very much forward to their testimony.
    Thank you, Mr. Chairman. I yield back.
    Chairman Toomey. Thank you very much, Mr. Beauprez.
    At this time I would like to welcome the first panel. I 
will recognize for his comments Mr. Rick O'Donnell, the 
Director of Regulatory Agencies for the State of Colorado. I 
would just like to remind the panelists that we will try to 
operate with the five-minute rule. We have five minutes for you 
to summarize your testimony. We look forward to that and at the 
end of the testimony from the both of you gentlemen, we will 
have some questions and then we will proceed from there.
    At this time I would like to welcome and recognize Mr. 
O'Donnell.

STATEMENT OF RICK O'DONNELL, EXECUTIVE DIRECTOR, DEPARTMENT OF 
             REGULATORY AGENCIES, STATE OF COLORADO

    Mr. O'Donnell. Thank you, Mr. Chairman. I appreciate the 
opportunity to be here today. I commend you for coming out here 
to look at how we can help small businesses which, I think you 
pointed out, are truly the job creators of our economy.
    I am Rick O'Donnell, the Executive Director of the Colorado 
Department of Regulatory Agencies. My Department oversees more 
than 590,000 licensed professionals and businesses in the State 
of Colorado. Everything from accountants to stockbrokers to 
realtors to nurses to doctors to veterinarians. We really have 
A to Z.
    We also regulate the insurance industry, telecommunications 
industry, and energy industries in Colorado. Of those 590,000 
businesses the vast majority are small businesses or sole 
proprietorships. As a free market Republican I sometimes think 
it is a dubious distinction to be the chief business regulator 
of the state but it is something I enjoy.
    If you want to know the most about small business, I think 
you can probably turn to your right and ask Congressman 
Beauprez who is very successful and knows what it takes to be a 
small business owner. We have been working here in Colorado to 
lighten the regulatory load from the state level on our small 
businesses.
    Governor Owens championed legislation really following the 
motto, ``First, do no harm,'' and made sure that what the state 
is doing is protecting consumers and that regulations aren't 
going to stifle the job creators that we rely on to keep our 
economy vital.
    We passed a law earlier this year in Colorado that requires 
all agencies in the state government to submit drafts of any 
proposed rule or regulation to my department well before they 
have their public hearing. We have created the Office of 
Economic Competitiveness and Regulatory Reform that has the 
authority under this new law to review each and every proposed 
state regulation for its impact, specifically on job creation, 
and economic competitiveness in small businesses.
    This is similar to what the federal government has in the 
Office of Information and Regulatory Affairs, except ours has a 
very specific component focused on the negative impact a 
regulation might have on small businesses. As you mentioned, 
representative of national figures, 98 percent of businesses 
are small.
    I think even more important from my perspective, of those 
98 percent half are sole proprietorships. They have one 
employee. As I think about the regulatory burden, if we were to 
bring in all of Colorado State regulations and stack them up 
beside of me, they would stand well over my head and they would 
way 100 pounds.
    If we coupled those with all federal regulations, the stack 
would be 50 feet high, almost to the ceiling here, weigh more 
than 1,800 pounds, and contain 167,000 pages. If you are a 
small business in Colorado, as I mentioned, half of those are 
sole proprietorships, I don't know of any way we can read 
through all those regulations, know what is in them, know how 
they are being changed constantly by the dozens and hundreds of 
state and federal government agencies.
    What we are trying to do in Colorado, what I would consider 
kind of regulation without representation, is develop a ground-
breaking Web site to make Colorado state government more user 
friendly, provide more useful information, and gather valuable 
feedback from small businesses on the regulatory structure of 
Colorado.
    Our new Web site allows any small business to go on and 
find out about new and existing regulations and how they will 
affect them, learn about state and federal regulatory policy, 
get a calendar of all upcoming state regulatory hearings if 
they want to attend them, and give us direct feedback as 
regulators, e-mail and link back directly to us.
    I think the most important part of this site is we have 
created the ability for small businesses to go in and sign up 
for regulatory alerts via e-mail, what we call Regulatory 
Notices, where they can click on any industry or subindustry of 
interest to them or that they operate in and with just a few 
quick clicks of the mouse they don't have to wade through a 
bunch of different state government agencies but one-stop 
shopping.
    They will, therefore, automatically be notified via e-mail 
anytime a new regulation is proposed. So if Congressman 
Beauprez wanted to know about any proposed bank regulation, he 
would get an automatic e-mail. If the small business owner 
wanted to know about any new health regulation, a restaurant 
owner, you would get an e-mail.
    What we are trying to do here is really empower small 
businesses who can't afford lawyers and lobbyists and the time 
and the energy to follow the regulatory process, to have an 
easy way to at least keep tabs on them and that way if 
something pops up of interest in their e-mail box that they 
really want to know about, then they can get involved and 
respond to us.
    It was Walter Bagehot who was the founding editor of 
Congress Magazine two centuries ago who said that, 
``Bureaucracy is sure to fake that its duties to augment 
official power, official business, or official members rather 
than to leave free the energies of mankind. It overdoes the 
quantity of government as well as impairs it quality. The truth 
is that a skilled bureaucracy, although it boast of an 
appropriate science, is quite inconsistent with the true 
principles of the art of business.''
    What we are trying to do with Colorado is ensure that we as 
regulators are listening to the people who are the real 
business experts, the business owners. We anticipate that this 
new line of communication we have built will help us have 
better regulation, possibly less regulation, and certainly 
regulation that does less harm to small business entrepreneurs.
    I think at the federal level you all have made great 
strides and have been active, the Small Business Regulatory 
Enforcement Affairs Act of 1996, the Congressional Review Act, 
and that is opening up the regulatory role. I think a final 
step would potentially be to implement at the federal level a 
similar system to what we have here in Colorado.
    We can empower small businesses by requiring all federal 
rulemaking entities to submit proposed rules and amendments to 
a central entity that can create an instantaneous opportunity 
for small business owners to receive regulatory news by e-mail. 
The technology is pretty simple and not very expensive to do 
that. It just requires creating a central clearing house where 
people can go to the federal level and learn about regulations 
as easy as they can at the state level.
    I think if we do state-by-state and then federally across 
the country, we would do a lot to reduce regulation without 
representation, get the business owners involved in the 
regulatory process which will help us ultimately have better 
regulation which will impact them less.
    So in closing, Mr. Chairman, I just want to again thank you 
for coming out here, for coming to Congressman Beauprez's home 
state, and look forward to answering any questions you might 
have.
    Chairman Toomey. Thank you very much, Mr. O'Donnell for 
your testimony. At this time I would like to welcome and 
recognize Mr. Jim Henderson, Regional Advocate of the SGA 
Region VIII.

  STATEMENT OF JIM HENDERSON, REGIONAL ADVOCATE, REGION VIII, 
               U.S. SMALL BUSINESS ADMINISTRATION

    Mr. Henderson. Thank you, Chairman Toomey and Congressman 
Beauprez. I really appreciate the honor to have a chance to 
testify today.
    My name is Jim Henderson. I am the Regional Advocate for 
the Office of Advocacy in the Small Business Administration. 
The Office of Advocacy was created back in 1976 by Congress to 
allow small businesses to have a voice within the federal 
government both in the legislative and the rulemaking process.
    My boss, Tom Sullivan, is a senate confirmed appointee and 
advocate champion of small business. You have covered in your 
opening statements some of my testimony and I appreciate very 
much the knowledge you already have.
    The Office of the Advocacy was created primarily because 
Congress understood that small business, as you so well pointed 
out, is being crushed by regulation and hurt by agencies that 
do not take small business into account as it developed 
regulations. We at Advocacy seek to listen to small businesses 
and bring those concerns to the rulemakers so that they can be 
taken into account.
    You titled today's hearing as ``Removing the Roadblocks to 
Success. How can the Federal Government Help Small Business 
Revitalize the Economy?'' I would like to hit on just two 
points. You have talked about the top concerns or impediments 
for small business. One that you have already touched on is the 
tax system and need for additional tax reform. The second is 
paperwork and regulatory burden relief.
    This administration and this Congress through the Jobs and 
Growth Act of 2003 has already done a lot for small businesses. 
The impact of those changes will be significant for small 
businesses as they begin to take advantage of some of the 
changes. Most significantly probably is the expensing 
provision, Section 179, which increased from $25,000 to 
$100,000.
    Another area was advancing the already in-place 2001 tax 
cuts dropping the individual rate from 38.5 down to 35 percent 
is tremendously significant for small business because 90 
percent of small businesses pay their taxes not at the 
corporate level but at the individual income tax level.
    But more needs to be done. Specifically we have two 
concerns that stand out. One related to the tax system. We need 
more simplicity and more permanence to the tax system. There 
was a study done by the Tax Foundation that showed that for 
most small businesses the cost of simply complying, trying to 
read through the tax system trying to figure out what they need 
to do to report taxes, was actually costing them more than the 
taxes they are paying. That is something we really have to 
address and turn around.
    The second area is predictability. On our staff we have a 
number of economist. One is a bright doctor, Radwan Saade. 
Radwan recently completed a study that showed that the fact of 
the inconsistency, inconsistency and lack of stability in the 
tax system, has a strong detrimental affect on the ability of 
small businesses to plan for the future and make business 
decisions that will allow them to get where they want to be.
    They not only have the unpredictability of the market place 
put the unpredictability of the tax system and those two 
complicate each other and make it much more difficult for small 
businesses to be successful and to plan.
    Now, taxes, unfortunately, are not the only problem for 
small business. We continually hear, as Chairman Toomey stated, 
about the paperwork burden. You have enacted the Paperwork 
Relief Act and the Small Business Paperwork Relief Act of 2002 
on top of the Paperwork Reduction Act.
    These are making some strides. We can cite some very 
positive things, but when you talk to the small businessperson, 
one of the things we consistently hear is ``There is just too 
much paperwork.'' We need to keep looking at that and we will 
keep bringing specific suggestions to you in that area.
    I think one of you already cited the Crain-Hopkins study 
that showed that small businesses in terms of the cost of 
regulatory burden--if you have less than 20 employees paying 
nearly $7,000 a year just to comply with the regulatory burden. 
We have got to turn that around.
    I would like to give a local example. Here in Colorado we 
are grappling with the U.S. Fish and Wildlife Service's recent 
designation of 31,000 acres, primarily private acres, in both 
southeastern Wyoming and down to Colorado Springs, as critical 
habitat. The Critical habitat designation was for what they 
called threatened Preble's meadow jumping mouse. I have been 
told it is quite a cute mouse unless it is on your property. If 
it is on your property it becomes the mouse that roared because 
it significantly impacts the cost of business.
    Just three weeks ago a construction outfit in Colorado 
Springs building an extension to a boulevard had to bring in a 
special crane that cost them an extra $200,000 because of the 
way it operated was going to have less potential impact on that 
habitat area.
    The vexing part of it was none of these threatened meadow 
mice have ever been found in that particular location but they 
anticipated that they could be in the eyes of the U.S. Fish and 
Wildlife Department.
    Other examples, there is a major housing development 
project in the northern part of Colorado Springs that has been 
held up for two years because the process of the designation 
under the Endangered Species Act.
    Entire communities are impacted. About an hour north of 
here, we have the city of Greeley. They had a reservoir that 
they developed, but they wanted to do an expansion on that 
reservoir. They have been in the process of doing that, but 
they have been held up again because next to that reservoir is 
part of an area that they designated as habitat where the mouse 
resides.
    It is slowing up the planning for that reservoir which 
without the water the city is constrained which means 
businesses there have more uncertainty which means jobs are not 
going to be created. All of this is an issue that we would want 
to see dealt with because there is still even a question 
whether the critical habitat designation really effectively 
protects some of these threatened species.
    Mr. Chairman, Congressman Beauprez, it is an honor to be 
here today and I stand ready to answer any questions.
    [Mr. Henderson's statement may be found in the appendix.]
    Chairman Toomey. Thank you very much, Mr. Henderson, for 
your testimony as well. I will start with some questions.
    Mr. O'Donnell, you referred to a new law that, as I 
understand it, requires that there be a review of the impact on 
I assume all business but, of course, like anywhere else in 
America that means mostly small businesses in terms of any new 
regulations. Have you seen any impact of this yet? Has it 
diminished, for instance, or slowed down any regulations that 
might have otherwise been implemented that would be adverse for 
job growth?
    Mr. O'Donnell. The law went into effect August 5th so we 
are just now----.
    Chairman Toomey. This year?
    Mr. O'Donnell. This year. I think one of the most pleasant 
things for us is when we went around the state agencies and my 
staff offered training to the people who write regulations and 
issued rulemaking. Several of the state agency employees 
commented, ``We had never thought before about the impact our 
regulations will have on the economy or small business before. 
We might have to think about this before we even propose the 
rules.''
    I think its impact at a minimum is going to get the 
bureaucracy in Colorado that hasn't really ever had to think 
about it before to think about it before it even goes forward 
with the rule. Some of the positive impact may be felt though 
it never comes forward which would be great.
    Chairman Toomey. I personally am sympathetic to the point 
of view of the founding editor of the Economist. It is the 
natural inclination of most organizations to grow and that 
includes bureaucracies. If legislation can change the culture 
within the bureaucracy and create a new mindset, I would think 
that could be very constructive.
    Another question I had regarded the Web site. What kind of 
traffic do you get on the Web site and how would you 
characterize either the number or the type or the frequency 
with which people sign up for these e-mail updates? I mean, how 
much are they being utilized?
    Mr. O'Donnell. Again, it is relatively new and has only 
come on line this month but we are going out to all the 
business organizations across the state and promoting in their 
newsletters and so forth to try to get them to get their 
members to go to the Web site. It is too early to really tell 
the type of people who are signing up for the regulars.
    Chairman Toomey. Great. I am looking forward to finding out 
how much use that gets.
    Mr. Henderson, just a couple of questions, thoughts. On the 
need for greater simplicity on the tax cut I just couldn't 
agree more. I was a small business owner for many years. I was 
in the restaurant business. The restaurant business is a pretty 
simple business when you think about it. You buy food, you cook 
it, you sell it. Generally you get paid right there on the 
spot. It is not very complicated.
    Every year my accountants would put together a stack of 
documents about this high and they would tell me to write a 
check, sign it, and hope for the best. It is really ridiculous 
but that is all you can do. It is not possible to understand 
what is in there. It is not possible to understand the various 
schedules. I am not sure they understand it. I certainly don't. 
This is just ridiculous and it is costly and it is 
counterproductive and I am glad you mentioned this.
    One of the things you touched on was Section 179, the 
expensing of this. This, of course, moves us at least modestly 
away from these very complicated depreciation schedules in the 
direction of expensing. I am wondering what your thoughts are 
about doing away with the depreciation schedules all together 
and moving to a tax code that allows expensing of capital 
purchases at the time they occur so we just get away from the 
complexity and the onerous burden of these depreciation 
schedules as well as the economic impact of being able to 
dispense these things up front.
    Mr. Henderson. Well, that strikes me as moving clearly in 
the right direction for small businesses because it is 
additional simplification. I, like you, have struggled when I 
did have a small business with those schedules. Invariably it 
seemed like we came back and had calculated it wrong.
    I think it is an excellent idea of moving or more expensing 
maybe would attract. I know what you just passed this year is 
just an incredible benefit for small businesses. In fact, 
seeing that continued as a permanent provision in the law would 
be one thing we would love to see.
    Chairman Toomey. Thank you very much. At this time I would 
recognize the gentleman from Colorado for his questions.
    Mr. Beauprez. Thank you, Mr. Chairman.
    Mr. Henderson, first of all, I will concur with my chairman 
on simplification of the tax code. I expect most of us in the 
room would. I think we did make some steps in the right 
direction with the bill that was passed this year.
    I would assume that you might agree with me that in many 
ways with either regulation or the onerous burden of our tax 
code that when we talk about--we at the federal government 
level--when we talk about wanting to create jobs and have an 
expanding economy, perhaps we actually disincent the very thing 
we say we want to and we really peel off the layers of 
government and what we have done to it. Would that be a fair 
characterization?
    Mr. Henderson. I think there can be some disincentive there 
but small businesses are very adaptive, very flexible and they 
will learn. If we can move in the direction of additional 
simplification, then they will go with us if I understood your 
question.
    Mr. Beauprez. We need to be. For example, at my little bank 
when we started we had just seven employees. I quickly figured 
out that we had to get big enough to be able to afford the cost 
of compliance and have to hire a compliance officer and support 
staff for that person and an enormous amount of the time and 
effort is make sure you are dotting the i's and crossing the 
t's.
    If I can shift over to Rick for just a moment, one of the 
things that I would site as an example of good government 
actually happened a few years ago through the Colorado Division 
of Banking. Of course, nobody seems to have a problem with 
banks being closely regulated. I am not sure why that is.
    The burden of on-site exams was just that, a huge burden. A 
team of six or eight examiners would often come in to even a 
little bank like ours was and basically occupy all of your time 
all day long of your key staff and you can't take care of the 
customers.
    They have figured out, and compliments to Richard Fulkerson 
and others, that they can do much of what they need to do off-
site and limit the amount of time in the bank. That is a huge 
savings and a real benefit ultimately to the customer because 
they are going to get better service from their bank. I am sure 
that insurance companies and others would say the same thing if 
it can be done.
    A question to you, Rick: Healthcare is a huge concern for 
our small businesses right now. I hope I am not catching you 
completely off guard because we haven't talked about this but I 
am wondering with your oversight, with your interactive role 
with the governor and state legislature, is the State of 
Colorado looking at opportunities to increase competitiveness, 
affordability access to all of those things, and especially 
small business are raising with us as questions and concerns 
about healthcare for their employees?
    Mr. O'Donnell. Congressman, we are. A very good question. 
We were able to pass in Colorado this year legislation which is 
the MEWA legislation, Multiple Employer Workforce Association 
which I know Congress has been trying to pass which would 
basically allow our associations to offer health insurance to 
all their members.
    We are implementing that legislation currently right now. 
We are hoping the Restaurant Association and Automobile Dealers 
Association and Chambers of Commerce or Realtor's Association 
will be able to pull together and band together the purchasing 
power for all their members. That is one area we are doing.
    The other area we are doing is we passed legislation this 
year to allow insurance companies to offer a basic healthcare 
plan. What happened in Colorado over the years is the 
legislature passed mandates that you had to have X coverage and 
Y coverage and Z coverage, that each one on their own seemed 
like an obvious thing you would want to have and you would need 
a health insurance policy.
    Over the years we added close to 25 mandates that together 
had significantly increased the cost of insurance. It was 
illegal in Colorado to sell health insurance policies without 
those. We have now made it legal for health insurers to offer a 
basic kind of cash plan without all the mandates at a lower 
price.
    The way we like to talk about it is we require that you can 
only sell Cadillacs so if you are a small business owner who 
can only afford to buy your employees Chevys, you are out of 
the market. We are hoping by offering Chevys that some of our 
small businesses will be able to continue to afford or begin to 
afford insurance. I would think at a federal level I know there 
are many health insurance mandates as well and maybe something 
to look into could be incurred at the federal level as well, a 
low-cost basic health plan to make it more affordable.
    Mr. Beauprez. Last question to either one of you. Do either 
of you have in your mind an estimate of what are costs of tax 
compliance? Not how much we pay in taxes but the cost of 
figuring out how much we do pay? Does either of you know what 
that number is estimated to be?
    Mr. Henderson. I do not. I know that we do have a new study 
in this arena at the Office of Advocacy so I will explore and 
see when that is going to be completed to make sure that we get 
that information do you.
    Mr. Beauprez. Let me shorten your effort. The number I have 
heard, and the Chairman may have a different number, but the 
estimate I hear is somewhere between $200 and $300 billion a 
year. Again, that is to figure out how much we owe. Does that 
make any sense to anybody? You add that to that regulatory 
burden cost we have now and you just went north of what 10 
percent of our total economy.
    Mr. Chairman, I yield back. Thank you.
    Chairman Toomey. Thank you. I would like to thank the 
witnesses on our first panel very much for your testimony and 
for your answers to our questions. At this time I would invite 
the witnesses on the second panel to take their seats at the 
witness table.
    I would like to welcome our witnesses to the second panel 
and at this time I will recognize the gentleman from Colorado 
to provide us with introductions of our distinguished 
panelists.
    Mr. Beauprez. Thank you, Mr. Chairman. We have with us Dr. 
Rebecca Hea. Dr. Hea represents the management team for the 
Denver Children's Home. DCH is the oldest nonprofit in all of 
Colorado and provides residential and day treatment to abused 
and neglected children. Dr. Hea is a recognized leader in 
psychological treatment of children working with at-risk kids 
over 18 years. Welcome, Dr. Hea.
    Dr. Hea. Thank you.
    Mr. Beauprez. We also have with us in the center Mr. 
Patrick Hilleary. He is the Director of Denver Operations for 
Brookfield Properties. Patrick is responsible for the 
management of three commercial office projects in downtown 
Denver including the 56-storey Republic Plaza, the World Trade 
Center's Twin Towers, and the Colorado State Bank Building. In 
all total over 3 million square feet. Mr. Hilleary has many 
years of active service in his trade association, the Building 
Owner's and Manager's Association.
    To my right, your left, my good friend Bert Weston. Bert is 
the President and Chief Executive Officer of Inner-City 
Community Development Corporation. Among her many achievements 
are the following. She has developed and wrote a city loan 
program for women in minority owned business, contractors 
bidding on Denver's new International Airport.
    She is the founder and owner of West-Co, Ltd., a mortgage, 
banking, and brokerage company that is specialized in economic 
development and small business lending, counseling and 
management.
    In 1992 she chartered Inner-City Community Development 
Corporation, the only comprehensive community development 
corporation in northeast Denver. Bert is also very active as a 
community citizen and a very dear personal friend. Welcome to 
the entire panel.
    Chairman Toomey. I would like to extend my welcome to the 
panel and at this time recognize Ms. Hea for her testimony and 
remind all of our witnesses that if you could keep your 
testimony to five minutes, we will proceed with questions after 
each of you have testified.

 STATEMENT OF REBECCA HEA, M.D., SENIOR ADMINISTRATOR, DENVER 
                  CHILDREN'S HOME, DENVER, CO

    Dr. Hea. Thank you, Mr. Chairman, and members of this 
committee for the opportunity to present testimony on the 
roadblocks hurting small businesses.
    I am Dr. Rebecca Hea and I am Senior Administrator at 
Denver Children's Home, the oldest nonprofit in the State of 
Colorado. We were founded in 1876 as an orphanage and now we 
are residential and outpatient treatment facility for children 
and families with mental health issues. Our clients come from 
county human services agencies.
    I am thankful for the opportunity to discuss the impact of 
excessive paperwork on our small nonprofit business. I would 
like to briefly highlight some of the problems created by 
governmental demands for documentation and the inefficiencies 
that result for our staff, taking valuable time away from 
effectively treating children and containing costs.
    We began receiving Medicaid funds in 1994 when our agency 
status changed from a Residential Child Care Facility to a 
Residential Treatment Center. While this increased our funds 
for treatment, it also meant that three extra clinicians and 
one clerical staff person were needed to manage the increase in 
documentation for our 60 residents.
    Currently we are required to complete paperwork at intake. 
We do an admission summary. We do a 10-day staffing report. We 
have to log all individual, group, and family sessions, all 
critical incidents, and all phone communications related to the 
case.
    The clinical staff average more than 8 hours a week 
documenting the work they do. Forms to report critical 
incidents are not standardized and the information required 
differs for reporting to the state and the county causing 
redundancies and inefficiencies.
    There is currently a Medicaid audit proposal that would 
eliminate a full day's treatment reimbursement for any 
documentation missing on that day. for example, if a note for 
an individual therapy session is not completed and logged, we 
would lose a whole day's pay despite all of the other services 
that are given on that day.
    The penalties are huge but the documentation is nearly 
impossible to complete considering all of the responsibilities 
to keep the children safe and provide intensive treatment.
    Documentation problems also impact our business office as 
well. For residential clients we have multiple funding sources 
including Medicaid for treatment, counties for room and board, 
Colorado Department of Education for per pupil operating 
revenue, federal school lunch program, and specific school 
districts for all students identified with special education 
needs.
    The constant need to track our many families that 
frequently move is burdensome. for our small business it means 
that funds are delayed and require extensive collection 
efforts. Unfortunately, funds are transferred into our bank 
accounts and the detail may follow three days to three weeks 
later.
    Then there are often numerous discrepancies, not well 
defined, that cause the counties to adjust payments for months. 
Attached is an example of three clients from Jefferson County. 
As you can see in these cases, the adjustments span several 
months and multiple transactions for a net effect of $47.00. 
The amount of time for our accounting staff and the counties' 
accounting staff is not being utilized efficiently when so much 
time is devoted to debit/credit memos that can be exchanged 
back and forth for months.
    The process required for billing starts with tracking 
individual clients on a daily basis including Medicaid number, 
date of birth, caseworker (which changes frequently), county 
and school district. More than 50 percent of our bookkeeper's 
time is spent untangling the billing nightmare. Tracking down 
paperwork from numerous sources (internal and external to the 
agency) takes so much time that we had to hire a bookkeeper to 
manage that task.
    Even though our residents are located in one place, one 
facility, they have highly transient families and if the family 
moves to a different school district or county, then billing is 
contested and payment delayed further. Nothing is easy or 
automatic. HIPAA that is now in effect is adding this much more 
documentation for every child we treat and every vendor that 
helps us provide services including a lot of small businesses.
    While our budget has decreased due to funding crises in 
referring counties, and we have fewer referrals, our paperwork 
demands continue to increase. These burdens compromise our 
ability to directly provide quality care and contain costs.
    If you do anything as a result of this hearing, I ask that 
you streamline our paperwork and compliance requirements so 
that we can spend less time filling in forms and more time 
treating children. Thank you.
    [Ms. Hea's statement may be found in the appendix.]
    Chairman Toomey. Thank you very much for that testimony.
    At this time I will recognize Mr. Hilleary.

   STATEMENT OF PATRICK HILLEARY, BROOKFIELD PROPERTIES, AND 
DENVER METRO BUILDING OWNERS AND MANAGERS ASSOCIATION, DENVER, 
                               CO

    Mr. Hilleary. Thank you, Mr. Chairman. I am sure you are 
sitting there thinking, ``What is this guy doing in a small 
business meeting?'' I will explain that. The Denver Metro 
Building Owners and Managers Association is a not-for-profit 
organization that represents commercial office buildings, 
service industries that provide services to those buildings, 
and several government buildings in the Denver area.
    We are known in the industry as BOMA and we are part of a 
federation of similar organizations all over the U.S. and 
Canada that collectively represent about 9 billion square feet 
of buildings. Many of the BOMA members are small businesses, 
owners or managers of buildings, or allied members who provide 
services to those buildings including such things as 
construction companies.
    In addition, BOMA indirectly represents America's 
workforce. It is a bit of hyperbole injected by our PR people 
but there is a lot of truth in that if you think about it. 
Almost every small business pays rent to somebody unless they 
happen to own their building in which case they are a building 
owner. Anything that affects our cost of operating buildings 
indirectly affects all those tenants because they pay most or 
all of the operating costs of the buildings that they inhabit.
    Since I am speaking to so many individuals and companies, I 
am going to narrow the focus of my talk to three specific 
issues that are important to us now and are national issues. 
Personally, I spend most of my time doing regulatory issues on 
the local level but there are some national things that affect 
us all.
    We are talking about taxes. Let us talk about leasehold 
depreciation. A change in tax policy that BOMA has pursued for 
years concerns the schedule for depreciating the improvements 
on our properties. The depreciation period currently dictated 
by tax laws is 39 years. Thirty-nine years is probably an 
appropriate time period for the structures themselves.
    However, that same schedule is applied to improvements made 
inside the buildings, things like carpeting, paint, wall 
coverings, even the interior walls. These things have practical 
lives of much less than 39 years, as you can imagine. Most of 
those things are replaced every three to five years. Even the 
walls, we typically would completely tear down and replace at 
least every 10 years as leases roll.
    As a result, deductions for depreciation that we are 
entitled to during the life of those improvements are not 
representative of the actual decline of the value of the 
properties. BOMA strongly supports House Bill 1634 which was 
introduced by Representative Clay Shaw. This would reduce the 
depreciation period to 10 years for lease hold improvements 
which, in our opinion, is a lot fairer. We also support the 
identical Senate Bill S. 576 introduced by Senator Conrad.
    A second very timely topic: power is the life blood of 
American businesses, I am sure we are all well aware, certainly 
after last Friday on the east coast. BOMA calls upon the 
federal government to enact a national energy policy that 
ensures that all consumers have access to adequate supplies of 
reasonably priced energy by addressing the energy challenge 
from both the demand and supply perspective.
    As both energy consumers and aggregators of energy use, the 
members of BOMA spent a great deal of time and effort to 
address the energy challenge through conservation and demand 
reduction. In this effort, we look to the government as a 
partner in research and education on the efficient use of 
energy. However, we want to make clear that we are not going to 
solve the problems of power in the United States through energy 
efficiency and conservation alone.
    The federal government must implement a national energy 
policy that guarantees all consumers access to adequate, 
reliable supplies of reasonably priced energy. We believe this 
goal can only be achieved if the federal government takes a 
leadership role in five things.
    First is identifying reliable sources of domestic and 
renewable energy. Second is eliminating unreasonable regulatory 
burdens and restrictions that inhibit the develop of those 
energy sources. Third, identifying and eliminating regulatory 
structures that impose artificial pricing schemes.
    Fourth, providing a federally controlled modern, robust 
transmission and distribution system and, speaking from a local 
level, looking at a national business. We all understand now 
that what we have is a mishmash of little transmission systems 
that are linked and there is no general oversight to ensure 
that one part of the country's problem doesn't affect the rest 
of us.
    Finally, we look to the government to protect consumers 
from price gouging in the cases where competitive market forces 
are absent. Part of the transmission distribution problem is an 
outgrowth of deregulation and retail electric sales in some 
parts of the country. There have been other parts, Colorado is 
a perfect example, where there is a strong move to deregulate 
the electric power industry. What we would have ended up with 
in most of Colorado is a nonregulated monopoly because of 
constraints on transmission into and out of Colorado.
    The final thing I would like to talk about is the topic of 
ADA notification. Our industry strongly supports the objectives 
of the Americans with Disabilities Act and the various codes 
and standards that have evolved out of it. However, we believe 
there have always been issues of fairness in the way that the 
act has been enforced.
    Since the ADA is itself civil rights legislation, most of 
its enforcement has been through the courts, and some building 
owners and managers' first knowledge of alleged ADA infraction 
comes in the form of a legal notice that we have been sued. The 
technical requirements of the ADA guidelines are very detailed, 
so sometimes defendants in ADA lawsuits are truly unaware of 
some of the deficiencies in their buildings.
    In other cases, an older building--this one is a perfect 
example--may suffer from a multitude of ADA compliance issues 
and an owner has to prioritize which of those issues he is 
going to fix and in which order. If a complainant comes on the 
property and disagrees with that priority, the lawsuit can be 
the result.
    Congressman Mark Foley has for the second time this year 
introduced the ADA Notification Act, which is H.R. 728. This 
would give building owners 90 days from notification of an ADA 
violation to make corrections before a suit could be brought. 
BOMA supports the concept and the legislation. Such a notice 
period will allow owners a reasonable time to remedy ADA 
relieved deficiencies with their buildings and save all parties 
the cost of the lawsuit.
    Chairman Toomey. Thank you very much for your testimony.
    At this time I would like to welcome and recognize Ms. 
Weston.

 STATEMENT OF BERT WESTON, PRESIDENT/CEO, INNER-CITY COMMUNITY 
              DEVELOPMENT CORPORATION, DENVER, CO

    Ms. Weston. Thank you, Mr. Chairman and also Congressman 
Bob Beauprez, my very good friend whom I have lots of respect 
and admiration.
    Thank you for inviting me to appear here this morning 
before you. I would like to add that I am also an honorary 
chair of the Small Business Advisory Council for the National 
Republican Congressional committee. I have also owned and 
operated a for-profit mortgage brokerage company for 10 years.
    I bring today my unique testimony as a previous owner of a 
for-profit business and as a current CEO of a not-for-profit 
business who has been directly impacted by government policies 
and regulations. I am not here in any official capacity and 
should not be regarded as representing the position of the 
Business Advisory Council for the National Republican 
Congressional Committee.
    Today I would like to share what I believe are three 
roadblocks hindering the success of small businesses and 
provide the Subcommittee with possible strategies to remove 
these roadblocks.
    The first roadblock that I would like to discuss this 
morning is the issue of affordable insurance, both healthcare 
and bonding. Bonding for small businesses, particularly 
construction contractors with weak financial statements and 
limited borrowing experiences face a major barrier in obtaining 
bonding. Also in getting contracts of scale both public and 
private. In addition, affordable health insurance is a 
challenge that I face personally.
    Since the terrorist attacks on September 11th, healthcare 
prices have continued to escalate. Furthermore, the aging 
workforce, who may have more health issues, can cost employers 
80 percent more than a younger less experienced workers. This 
dilemma can put some employers in the position of not hiring an 
older person or have to fire an older person because of the 
higher expense.
    Moreover, some business owners have told me that their 
health insurance costs are sometimes now equal to 30 percent of 
their employee's salaries. All of these factors make it very 
difficult to obtain good employees because small businesses 
cannot compete with big businesses and their healthcare 
package. I believe legislation like the Small Business Health 
Fairness Act, House Bill 660 is the direction that the federal 
government needs to take to address this issue.
    My second point is the issue of locating a skilled and able 
workforce. My business is the developer of the former Air Force 
Finance and Accounting Center, a 37 acre parcel that was 
previously blighted property located in the inner city where 
poverty is high and education levels are low. Unemployment is 
approximately four time the Denver 6.5 average.
    According to the most recent census, the neighborhood where 
the inner city is located, nearly 58 percent of the adults, 25 
and older, have not completed their high school diploma or 
equivalent. This is compared to the Denver average of 21 
percent. Furthermore, only 12 percent of adults 25 and older 
have a college degree compared to 40 of 25 and older adults of 
all different neighborhoods.
    This not only poses a problem for me and my company but all 
businesses that occupy space in our development, both the 
incubator businesses and the established businesses who may 
want to hire individuals from the neighborhood to meet the 
residency requirement of the HUBZone program.
    I propose that the federal government increase the presence 
of one-stop workforce development centers in neighborhoods 
where residents are socially and economically disadvantaged. 
Moreover, these centers should work hard to understand the 
workforce needs of small business owners and train residents to 
occupy these positions. A lot of time and attention is focused 
on training these individuals to work in entry-level positions 
at large corporations, but little attention is given to train 
them to work in small businesses.
    The last issue I would like to discuss is access to capital 
and specifically the Section 108 loans. As the committee is 
aware the Section 108 loan is a financing vehicle for small 
businesses that is administered from city government. In my 
role as president and CEO of Inner-City CDC I have found the 
rules of the Section 108 loan to be extremely rigid.
    The primary problem with the loan is the inflexibility of 
the repayment requirements. This can penalize the city as well 
as the small business without a mechanism that takes into 
consideration a slump in the economy like the one we are 
currently facing where vacancies are double digits and rental 
rates are declining.
    My recommendation is that the repayment terms mimic that of 
the private banking industry, which allows borrowers to 
restructure their payments, thus preventing a possible 
foreclosure, bankruptcy or overall business failure. Or forcing 
the city to step in either to manage the property, the 
business, or facilitate the sale of the property which could 
alter the intended public benefit.
    I do believe that Community Development Block Grant (CDBG) 
funds are a great vehicle for small businesses, however, 
exception should be made for a business that has an excellent 
business plan but due to extenuating circumstances are unable 
to borrow the matching funds. In cases such as these, the 
entire loan should be funded by the agency administering the 
funds.
    In addition, I would like to address the point of non-
traditional not-for-profit businesses that have a mission that 
is not just social, but more geared toward economic 
development, such as my organization inner-city Community 
Development Corporation. There should be recognition of such 
organizations, and more room should be allowed to offer 
operational support and not just programmatic support from 
possibly OCS and/or HHS.
    I would like to add that in addition to the Section 108 
inflexibility in rewriting loans, there is also the burden of 
Davis Bacon Wages. Currently the trades salaries/wages are 
equal, and sometimes in excess of, Davis Bacon Wages and having 
to fill out all the papers that go along with recording the 
Davis Bacon Wages sometimes increase the bid by 5 to 10 
percent.
    I thank you much for the opportunity to participate here 
today.
    [Ms. Weston' statement may be found in the appendix.]
    Chairman Toomey. Thank you very much for your testimony as 
well.
    Let me begin the questions with Dr. Hea.
    Just so that I understand this, Dr. Hea, is the former HCFA 
now called CMS, the entity that promulgates the regulation that 
you referred to?
    Dr. Hea. They do but there is also state regulations, 
county regulations, and regulations for Medicaid which have 
federal and state matched funds.
    Chairman Toomey. So you have multiple regulators, each of 
which requires its own unique set of paperwork which has not 
been standardized amongst the various regulators, and you have 
to fill out multiple forms for----.
    Dr. Hea. For each one of them.
    Chairman Toomey.--with respect to each patient in each 
service.
    Dr. Hea. Exactly.
    Chairman Toomey. Now, in your professional opinion, does 
filling out all of this paperwork enhance the quality of the 
healthcare that is provided to your patients in any meaningful 
way?
    Dr. Hea. Absolutely not.
    Chairman Toomey. No. Does it really amount to just a 
mechanism for ensuring payment?
    Dr. Hea. It doesn't even ensure the payment because we are 
always at risk if somebody has moved. When they say, ``That's 
not our responsibility anymore.'' It just becomes a very 
tangled mess. It is so burdensome that both the paperwork and 
the tracking in order to get payment is really hurting us as a 
small business.
    Chairman Toomey. Now, do you have a ballpark estimate of 
what percentage of all your total workforce time of all your 
staff is spending complying in filling out these redundant and 
inconsistent paperwork requirements?
    Dr. Hea. My best guess would be 20 to 25 percent of the 
time that the staff has is spent documenting and trying to meet 
regulations instead of directly treating and caring for 
children and families.
    Chairman Toomey. So couldn't you make the argument that all 
of this--25 percent is an enormous chunk of time. Couldn't you 
make the argument that this actually detracts from the quality 
of the healthcare you provide because of the amount of time it 
takes away from patients?
    Dr. Hea. Yes, and that is increasing instead of decreasing.
    Chairman Toomey. And that is increasing, especially with 
the latest privacy regulations that you alluded to as well.
    Dr. Hea. Exactly.
    Chairman Toomey. Have you had occasions in which there have 
been disputes with HCFA or CMS regarding the appropriate 
reimbursement level because the coding or the description of 
the services were, in your mind, ambiguous? You did the best 
you could in trying to define the services provided and request 
the appropriate reimbursement but then there was some dispute?
    Dr. Hea. Yes. And what is currently happening is they 
implemented new regulations and rules and now they would like 
to go back and audit us for a year ago and say, ``You are not 
in compliance with new rules.''
    Chairman Toomey. New rules that were not in effect at the 
time?
    Dr. Hea. Exactly. Now as they audit they say, ``You should 
have been doing it this way.''
    Chairman Toomey. Wait a minute. Should have been that which 
they had not yet developed regulations for?
    Dr. Hea. Yes, sir.
    Chairman Toomey. So they look at you and say, ``You should 
have anticipated what was in our minds and what we might do at 
some future date. You should have complied with what was the 
requirement at the time, of course, because that was the law, 
but you should also have separately in addition anticipated 
what we might do.'' Might there be many versions of what they 
might have done that you should have on file?
    Dr. Hea. I would imagine. What is so difficult is that they 
actually come in and they penalize residential treatment 
centers and they give funding back for not being in compliance 
with rules that they have just implemented.
    Chairman Toomey. The rules that were not in effect at the 
time which the service was provided?
    Dr. Hea. I know it sounds crazy but that----.
    Chairman Toomey. It sounds so ridiculous that it could only 
be the government. I am sorry. This is outrageous.
    Dr. Hea. It is outrageous.
    Chairman Toomey. It is outrageous that a regulator would 
come in and expect you to have complied with regulations that 
were not in effect at the time. I think this is something that 
we ought to pursue further. It is obviously impossible to 
anticipate regulations that have not yet been promulgated. And 
to in anyway impose a penalty or burden for that is just simply 
outrageous.
    I would like to follow up with you on the specifics of this 
instance because I think there are some regulators that ought 
to be made to explain and defend and justify exactly why it is 
that they would retroactively impose regulations. It is bad 
enough what they do prospectively but to do it retroactively is 
simply absurd.
    I have a question for Mr. Hilleary. You referred to Clay 
Shaw's bill that would allow for the depreciation of lease hold 
improvements over 10 years rather than the 39 years which is 
current law and I think that bill is definitely a step in the 
right direction.
    Do you see any economic or business reason why it would be 
detrimental to allow full expense of home improvements? Is 
there a good rational reason why there ought to be some 
depreciation period for these kinds of investments?
    Mr. Hilleary. My understanding is the 10-year schedule is a 
compromise that our position was that we should be able to 
expense these things over the years that is spent and it was 
represented as an impossibility.
    Chairman Toomey. So you would agree that ultimately the 
ideal would be allow expensing the year and its purchase. As 
you are probably aware, there are proposals for broad overhauls 
of the tax code that would, in fact, have exactly that kind of 
treatment. I think there would be enormous post-economic growth 
if we allow businesses to acknowledge the expense at the time 
in which it occurred rather than force this to be deferred over 
many years. Also that the government can collect a little more 
money in the meantime.
    My last question is for Ms. Weston. You talk a little bit 
about the challenge of affordable healthcare. I was wondering 
if you would just react to an idea. It strikes me that by 
virtue of what I think is a flaw in our tax code, a flaw which 
allows employers to fully deduct the cost of health insurance 
that they purchase for their workers but which does not provide 
that same benefit for employees, we have created an anomaly, an 
aberration, in which there is an economic incentive for 
employers to provide health insurance for employees and an 
economic disincentive for employees to obtain it themselves.
    One of the consequences of that is that it actually makes 
economic sense to have an overly generous health insurance 
policy. For instance, if it makes economic sense to compensate 
people in the form of a generous health insurance plan which is 
not taxable to the individual rather than to provide that 
person with money because that is taxable to a worker, I think 
it is not a coincidence that we have many, many people who are 
relatively healthy, have relatively healthy families, have 
relatively modest medical needs that could easily be covered 
out of pocket.
    But we have these very loaded deductibles and we put them 
into this insurance system right out of the block and, 
therefore, this becomes a very expensive insurance policy 
because it covers not dollar one. It covers a cost after a very 
low deductible.
    It seems to me that what most people really need is 
catastrophic health insurance so that if you get into an 
accident or you have a serious illness, you could never be 
wiped out by the cost of that, but that routine medical 
expenses could be paid out of pocket and it might make more 
sense.
    Do you think that is an idea that has some merit to 
encourage the development of a marketplace where individually 
based health insurance products which might have higher 
deductibles and, therefore, lower premiums?
    Ms. Weston. Mr. Chairman, as we look at what are 
deductibles now on our taxes, as we look it being basically 
interest on mortgages and then we look at charitable donations, 
and as we look at an older population that is going possibly 
from home ownership into retirement places where they all rent 
versus having ownership but still having some income, I think 
it would be a good thing to look at in terms of having that as 
a deductible for the employee.
    Also, as we look at small businesses struggling with trying 
to provide coverage and often times using insurance or 
deducting or dropping insurance coverage as a means of 
maintaining your employee base, I think it would be an 
excellent thing to look into providing the tax payer, the 
employee, with the opportunity of deducting the insurance.
    Chairman Toomey. Thank you very much. I recognize the 
gentleman from Colorado.
    Mr. Beauprez. Thank you, Mr. Chairman. I want to begin in 
the same order you followed, first of all, with Dr. Hea. I want 
to go back to your introduction. I want to make sure that I 
didn't miss something here. The DCH provides residential and 
day treatment for abused and neglected children. Would I be 
correct in assuming that almost anything you can do to change 
the environment that these children are coming from is going to 
be an improvement?
    Dr. Hea. Yes. Our goal is to provide them a safe 
therapeutic environment so they can heal and we hope to disrupt 
the generations of abuse by stopping and treating the children 
now so that we are not dealing with the next generation of 
traumatized and abused kids.
    Mr. Beauprez. And not to just be cute but so rather than 
the kids suffering pain, the federal government inflicts pain 
and suffering on you?
    Dr. Hea. Yes.
    Mr. Beauprez. Okay. It is a transfer of the pain. It really 
does, Mr. Chairman, sound very bizarre and I am reminded--we 
talk about the cost of care and if I could expand the good work 
that you do to healthcare. I am reminded of a study that is 
still laying on my desk the American Hospital Association 
provided me where in ER rooms because of HIPAA and other 
regulations as much as one hour of patient time corresponds to 
one hour of paperwork directly proportional.
    One scratches their head obviously if you happen to be an 
ER nurse, you happen to be an ER doc. ``I came here to take 
care of patients. I didn't come here to push paper.'' We have 
to find a way, Mr. Chairman, on behalf of business, on behalf 
of healthcare, on behalf of America to do a better job. It is 
pretty mindless.
    Mr. Hilleary, two days ago I had the privilege of chairing 
a hearing here in Colorado on the question of natural gas and 
it expanded to energy which you talked at great length about. I 
think it is a little bit of the silent threat or the hidden 
threat that many people aren't fully aware of.
    I want to explore that with you just a little bit further. 
If, for example, natural gas which fires virtually all of our 
electric generating power stations now. If that cost were to 
rise, if the cost of energy were to rise, what does that do to 
an industry like yours especially in times like this?
    Mr. Hilleary. It does two things. Depending on the finances 
of the building owner it either puts our property out of the 
market if we can't afford to absorb the additional cost of the 
energy or it reduces our profit. There are huge buildings even 
in the city that don't make any money because by the time you 
take the operating cost and the debt service out, you are not 
even covering the rent.
    My company has net leases which means that we charge rent 
and we charge the operating costs, but we compete in a gross 
market. The tenants don't care whether they are paying rent or 
operating cost. All they care about is the size of that check 
so for all of us, every single increase in those costs is 
either going to come out of our pocket or we are going to have 
to pass it on to the consumer. It is such a shock to us and is 
so uncontrollable.
    Energy in Denver went up 15 percent January 1, 2003. 
Electricity went up another 10 percent in July of this year. 
Steam from the local utility went up 16 percent in January and 
it went up another 10 percent in March. Collectively we are 
looking at 25 to 30 percent increases in energy cost.
    Just, for example, the building you can see out the window, 
Republic Plaza, of our operating costs the single largest item 
is property taxes. About $2.65 a foot. Energy is now over a 
$1.50 a foot. The two largest operating costs in the building 
are absolutely beyond our control.
    Mr. Beauprez. We had testimony Monday from a farmer from 
the San Luis Valley, a potato farmer. Thirty-five percent of 
his total operating costs are energy to run his electric pumps, 
to irrigate, his tractors, his equipment, fertilizer which 
comes from energy, of course, natural gas, 35 percent of his 
overhead. Similar to you really. Business is business. The 
margin continues to get squeezed and at some point you go 
upside down and you are done.
    Mr. Hilleary. You can't budget because you can't predict.
    Mr. Beauprez. Right. I think you touched on that, the 
predictability. In fact, I think what I am really referencing 
is comments made by Mr. Henderson in the last panel. The 
permanence of, or the lack of permanence with our tax code 
especially makes it nearly impossible for business to plan or 
bankers to finance because you don't know what the repayment 
source is going to be.
    Which leads me to my last question. You spoke about 
something that sparked my memory and my experiences. Well, many 
things actually but I'll just pursue bonding. I think for small 
business especially--I don't think, I know--that it is a very 
serious problem. You tell me if this is correct.
    Typically you bid on a project and you have to 
collateralize that loan somehow. Often times it might be the 
building itself or what have you, or your own assets. If it 
happens to be, say, a $5 million project, you've got to go get 
a bond for the same amount. You basically have to collateralize 
it twice. That is your experience?
    Ms. Weston. That is my experience.
    Mr. Beauprez. And for small companies, which is the subject 
we are talking about today, at least it has been my experience 
as a banker when they come to me saying, ``I would like to get 
this financed,'' I say, ``Well, that looks like a great deal. 
You have a contract with the government, the county government, 
the state, the local school district,'' or whomever. ``Let 
looks like a great deal. Go do the work and we will finance 
it.''
    Then they throw out the tough question, ``Oh, by the way, I 
need a bond of the same size.'' How do we do that? That is my 
question to you. The problem is a fairly obvious one to me. 
What can we do that is still fiscally responsible that can work 
that can provide bonding opportunity to companies, the 
contractors who legitimately could utilize that to get this 
economy going, to create jobs without jeopardizing, I guess, 
fiscal responsibility. Have you got any ideas how we might be 
of assistance?
    Ms. Weston. That is a very good question and a very tough 
question. We looked at that and we were trying to involve 
contractors at DIA. It was a major problem. How do you get 
bonding for a small contractor whose financial statement is 
weak who has not done a job of this scale, does not have the 
assets to collateralize that bond.
    What we looked at there was having the city put aside X 
amount of dollars that would ensure that a smaller contractor 
could be bonded, or having the smaller contractor work as a sub 
or a co-contractor to a larger company. But what happens there 
is that the small contractor continues to work in the shadow of 
the larger contractor and is very slow in acquiring the 
financial strength in order to get his or her own bond.
    Again, what we suggested before was that the government 
look at putting aside enough funds, resources in an institution 
that underwrites bonding and using those funds in order to 
increase the net worth of the contractor in order that company 
might acquire the bond that was necessary to perform that job. 
Doing it over a period of time in which that contractor would 
become strong enough where he or she would not need to utilize 
the underwriting of the government.
    Mr. Beauprez. Last question. Davis Bacon, you brought it 
up. Are you suggesting that in some cases Davis Bacon need not 
apply or what exactly were you saying to us?
    Ms. Weston. Yes, I am saying that there are cases where 
Davis Bacon need not apply. There was a time when the wages 
were not in line, did not equal, did not exceed what they are 
now. That is not the case.
    Often times the trade wages are far in excess of the Davis 
Bacon Wages. But when you have to do all the reporting that it 
increases the cost of the job simply because of the reporting, 
it does not change the amount of pay that is going to the 
subcontractors. All it does is add another layer of reporting 
which cost the developer money at the end of the day.
    Mr. Beauprez. Jobs training. I said it was the last 
question but it is not. Jobs training. I am familiar with your 
neighborhood, of course. I took from your testimony that we 
don't need to train everybody now to be an expert computer 
technician. What kind of jobs do we need to train them for in 
neighborhoods like the one you are working in?
    Ms. Weston. Receptionist. It is hard to find someone that 
has the telephone skills or life skills. Knowing that they need 
to be at work at a certain time, that you don't get up at the 
hour that you are due at work. Just very simple skills in 
addition to how to dress for the job. And how to carry yourself 
in an office.
    Sometimes it is just things that we take for granted. But, 
more simply, the front office jobs are the ones that are 
available at first and if the person has been taught those life 
skills and a minimum amount of office skills, then they can 
walk in the door and start off with a company that is small and 
have those kills expanded and increased.
    Mr. Beauprez. Thank you, Mr. Chairman. I yield back.
    Chairman Toomey. Thank you. Thank you to the witnesses for 
the second panel. I appreciate your testimony and your answers 
to our questions.
    At this time I would welcome the third panel to take their 
seats. We appreciate you being here this morning and, at this 
time, I will once against recognize the gentleman from Colorado 
to provide introductions.
    Mr. Beauprez. Thank you, Mr. Chairman. Beginning from my 
left to right we have Bob Piper. Bob is Vice President of 
Corporate Operations and partner of Piper Electric who opened 
in 1983 as a small shop with a modest workforce of 15 people 
and today retains approximately 170 employees. Bob has been 
extremely active in his trade association which is the 
Association of Builders and Contractors for many, many years 
and is a great civic activist as well.
    Next to Bob is Susan Cirocki-Trujillo. Susan is the 
President of Arrow Sheet Metal Products. She was appointed 
president after the untimely death of her father and founder, 
Fred Cirocki in November of 1997. Arrow, which is located in 
Denver, currently employs 19 people with annual sales revenues 
of $1.5 million and has been incorporated since January of 
1976. Welcome, Susan.
    Cedric Tyler. Cedric is CEO of BusinessGenetics, a company 
providing break-through technology to business and government 
to increase productivity and streamline regulation. He is a 
leading expert in business and IT solutions. He pioneered the 
creation of business process and requirement engineering. 
BusinessGenetics opened for business earlier this very year and 
already employs over 60 people.
    Last, certainly not least, is John Ziegler. John is the 
owner and chairman of Jackson's All-American Sports Grill 
located here in the Denver metropolitan area as well as in 
Greeley and Fort Collins. John opened his first Jackson's in 
1977, was elected to the Board of Colorado Restaurant 
Association in 1986, was elected their president in 1991. I 
know from personal experience that John is still extremely 
active with that trade organization.
    Welcome to all four of you and thank you for being here.
    Chairman Toomey. Okay. At this time I would welcome and 
recognize our first witness from Panel 3, Mr. Piper.

 STATEMENT OF ROBERT PIPER, REGIONAL VICE-CHAIRMAN, ASSOCIATED 
BUILDERS AND CONTRACTORS (ABC), AND VICE-PRESIDENT OF CORPORATE 
      OPERATIONS, PIPER ELECTRIC COMPANY, INC., ARVADA, CO

    Mr. Piper. Good morning, Chairman Toomey, Congressman 
Beauprez, and other distinguished guests. My name is Bob Piper 
and I am with Piper Electric, an electrical contractor in 
Arvada. I currently serve as the Regional Vice-Chairman for the 
Associated Builders and Contractors. I would like to thank 
Chairman Toomey and the members of the Subcommittee for this 
opportunity to speak.
    For over 20 years Piper Electric has been in business in 
the city of Arvada. We have offered dedicated customer service 
through our employees. We pride ourselves in our field, our 
innovation, our design, and our reputation. We have built our 
reputation through providing quality workmanship for our 
clients and safe, healthy worksite for our employees. We do 
work from small home repair to new commercial buildings to 
automated industrial processes. Client satisfaction is 
ingrained in Piper's culture.
    For the last 18 years we have been members of Associated 
Builders and Contractors. The construction industry which 
represents about 12 percent of the gross national product and 
approximately 9 percent of the gross domestic product is an 
industry of small businesses. 94 percent of all construction 
companies are privately held and 1.3 million construction 
companies are not incorporated.
    As the nation's second largest employer with over 6 million 
workers the construction industry continues to create new and 
beneficial jobs each year. To remain at this present level of 
activity the construction industry needs an additional 250,000 
workers per year to replace its aging and retiring workforce.
    One of the key elements in attracting and retaining workers 
are the quality of benefits that we offer, one of those 
benefits being health insurance. I know we have addressed the 
issue here earlier, but I would also like to speak on the 
Association of Health Plans.
    Piper Electric in the year 2001 to 2002 to 2003 our health 
insurance premium costs have gone up 54 percent. To keep it at 
a 54 percent increase, we have dropped our coverage the last 
three years raising our deductibles, that type of thing. 
Basically we are paying more and we are getting less.
    At this current rate I can see the day coming very soon 
where Piper Electric will not be able to offer health insurance 
as a benefit for our employees. That concerns me greatly due to 
the number of uninsured Americans that we have. Today there are 
42 million uninsured Americans with 60 percent of them employed 
and are employed by small businesses. That is a fact that small 
businesses are not able to offer their employees health 
insurance so it is not just the unemployed that is creating 
that number of uninsured.
    I think association health plans would be a great step in 
helping to solve that. I would like to thank Chairman Toomey 
and Representative Beauprez for their support with the House 
Bill 660. I think that goes a long way in helping it but I have 
a real concern that is not going to make it through the Senate 
and that troubles me. I don't want to stand at the front of our 
employees on a day and tell them that we are not able to offer 
them insurance anymore as a benefit.
    Association health funds, I think, would enable small 
businesses to provide an affordable healthcare to their 
employees significantly reducing the number of uninsured 
Americans.
    There are a couple of other issues that I would just like 
to touch on briefly that affect. I feel any issue that affects 
my employees affects us as a company being a successful company 
and continuing our success in the future.
    President Bush signed an executive order when he came into 
office on project labor agreements against--banning project 
labor agreements. I am not sure of the exact process of that 
but I also know that those executive orders, the first thing 
that happens when a new administration comes in is those 
executive orders are changed. We would like to see that become 
law, that project labor agreements are done away with. I 
believe that projects should be given and these refer to 
projects that have government funding, that they go to the 
lowest qualified bidder. It should not have any--it doesn't 
matter what their affiliation are with associations or labor 
organizations. It should go to the lowest qualified bidder.
    Another issue that is important to us are 401(K) retirement 
plan. We would like to see the government not restrict our 
employees in the percentages that they are able to put into 
their retirement funds. I would think our government would 
encourage people to prepare for their retirement instead of 
limiting the amount that they can do on 401(K) retirement 
plans.
    Another issue you were talking about earlier is tax 
preparation, anything that the government can do to cut back on 
the paperwork that we have to do. This year our company spent 
$9,000 in having our taxes prepared to determine that we are 
paying the right amount of tax. To me that seems like a 
tremendous amount to pay just to determine if we are paying the 
right amount of tax.
    I have no problem with paying my fair share of tax but I 
think the paperwork that it takes is something that we as a 
business are not qualified. We have to go outside to qualify 
people that can do that for us.
    The last issue that I have would be the death tax. I don't 
even know where to start with that. It just seems bizarre to me 
that our government feels the need to tax in a state where 
those dollars have already been taxed once if not two or three 
times. Then the family has to pay tax on them again. I would 
definitely like to see that death tax be eliminated for obvious 
reasons.
    I would like to thank the committee for this opportunity to 
address them and look forward to any questions you may have.
    [Mr. Piper's statement may be found in the appendix.]
    Chairman Toomey. Thank you, Mr. Piper.
    At this time I would welcome and recognize Ms. Trujillo.

  STATEMENT OF SUSAN CIROCKI-TRUJILLO, PRESIDENT, ARROW SHEET 
               METAL PRODUCTS COMPANY, DENVER, CO

    Ms. Cirocki-Trujillo. Thank you, Mr. Chairman and 
Congressman Beauprez for this opportunity to participate in 
this hearing today.
    Again, I am Susan Cirocki-Trujillo, President of Arrow 
Sheet Metal Products located here in Denver. I am one of the 
small businesses of less than 20 employees. I have 19 
currently. It was staggering to find out the amount of money 
that I pay to comply with everything per employee which 
explains why a lot of my overhead costs are difficult to 
overcome.
    I am speaking to you today only on a couple of issues out 
of the many challenges that really small businesses face that 
could have a permanent effect on the future as well as what we 
have to overcome today. I am expressing my opinions based on my 
personal experiences and those of my closest peers.
    The first issue that I would like to address, again which 
has been discussed over and over this morning, is the 
healthcare. We need to really take a look at that. Just to 
enforce again, my percentages have 60 percent over five years, 
an average of 12 percent a year.
    And, again, to try to control the costs I have done the 
same as Mr. Piper, and that is to have less coverage so 
currently the goal was to provide insurance that was at least 
cost effective for my employees to go in and see the doctor, 
pay the allocated amount, and then get medication.
    If they should have to go to hospitalization, the minimum 
deductible is $3,000 and then the maximum is about $10,000. 
These are blue collar workers. They are not the higher paid 
white-collar workers that I am working with. It is very 
difficult to put that into place but it was just more and more 
difficult to overcome.
    Recently, actually just yesterday, I had to make an 
unpopular decision and I informed my employees I could no 
longer afford dental insurance. Just health insurance is 
costing me enough and at least I can provide that. I am looking 
at policies for them to purchase on their own if they can and 
we will see how that goes. I understand there is no quick fix 
to the problem and there is a huge commitment and undertaking 
by Congress but one that I think is worthy and necessary to do.
    A couple of reason laws that were introduced in Colorado, I 
think the intent was they don't see the benefits right off. It 
is the ``Cover Colorado'' and House Bill 02-1353. The intent is 
good, however, my medical insurance premiums are higher for 
those of my employees and their rolling dependents to cover the 
expenses of those who cannot afford health coverage insurance.
    There will come a time when those individuals who choose 
not to have health insurance will still need to require 
healthcare due to poor health, pregnancy, etc. Again, it 
becomes an additional burden on small businesses that we pay 
and the regular taxpayers as well.
    House Bill 02-1353 is typical in the fact that my company 
is very small and I have one individual that covers a lot of 
the administrative duties including human resources, accounts 
payable and receivable, purchasing, etc. To miss terminating an 
employee at the time of termination with the healthcare 
insurance companies, we could get hit with an additional couple 
months of premium which is already a high expense alone 
covering an employee.
    Congress, I would ask that you could go further on the tort 
reform and controlling frivolous law suits. Look at putting 
maximums on law suits along with what types of cases can be 
tried.
    The other thing to look at is how insurance companies are 
rating small businesses to provide some other alternatives. 
Again, Colorado House Bill 11-64 which will be effective 
September 1st I believe was designed to promote competition and 
to reduce the insurance company's high premiums. However, after 
speaking to my personal broker, it really depends on the health 
of your employees and rolling dependents.
    I know for a fact that I at least have one employee that 
has heart disease so I am probably not a likely candidate to 
see much of a discount, if any. I have submitted my census. We 
will see how it comes because I am doing everything that I can 
just to try to control my P&L statement.
    Again, I would like to piggyback on the comment by Ms. Bert 
Weston on the seniors. They are a great resource to bring onto 
the workforce with their experience and their knowledge. 
However, we do see the effects they have on our healthcare 
premiums when rated on a whole as a company based on their age 
and their healthcare. My age group ranges anywhere from 20 
years of age to 55 years of age so I have run the gamut on that 
whole thing.
    The second issue that I would like to address is the 
American Trade----.
    Mr. Beauprez. I was just observing that 55 is not old.
    Ms. Cirocki-Trujillo. No, I just--but I had--yes. Never 
mind.
    Mr. Beauprez. Never mind exactly.
    Ms. Cirocki-Trujillo. The second issue I would like to 
address is the American trade. I would do a disservice to my 
company and my employees if I did not mention the challenges we 
face today in manufacturing. To be a small manufacturing 
company in the U.S. is extremely difficult to remain 
competitive when we are saddled with, again, regulations, EPA, 
healthcare, worker's compensation, unemployment, Medicare, 
Disabilities Act, Social Security, tariffs, and other state and 
federal burdens.
    OSHA regulations alone are a huge expense. That is my 
industry. That is my company. It is getting to the point, 
though, that we are almost looking at hiring a full-time person 
to handle again the paperwork mandatory to stay current. We 
have the safety meetings. We are going through cost 
containment.
    We are doing everything we can to try to control that and 
workman's compensation insurance as well. Still, that is one 
more additional overhead cost which does not fall to the bottom 
line easily. My money is made on the production floor and 
actually producing a part and send it out the door. The more 
overhead cost that I have, the less there is to squeeze out of 
profit at the end.
    Arrow Sheet Metal has been very fortunate. We have not had 
to compete directly overseas but I have been affected 
indirectly with just some of my customers. I work with many 
local machine jobs, stamping houses, contract manufacturers, 
and high tech companies. I serve currently on the Board of the 
Rocky Mountain Sheeting and Tooling Association, a division of 
NTMA which is the National Tooling Machine Association.
    Several of my peers monthly when we meet together as a 
board announce that they have lost a manufacturing job to 
overseas due to price. These are jobs they have been producing 
for many, many years. Their quality and delivery records have 
been exceptional We as a group try to help one another, network 
with one another, off load some excess work that we can help 
them out with or introduce them to new customers to keep their 
doors open.
    Arrow has been a great resource to stamping houses alone. 
We can fabricate the small initial production runs while 
allowing the stamping houses to design and fabricate the 
tooling that is necessary for hired runs. If more of those 
opportunities were them are lost, that is another market 
segment that I no longer provide for.
    Over the last couple years there has been a decrease in 
revenue due to the high tech sector. Some of my customers 
simply could not compete even with their unique products that 
they have against the larger companies that have moved their 
manufacturing overseas.
    Here in Colorado there has been a decrease of about 30 
percent of raw material consumption which is actually 12 
percent overall sheet metal industry decrease. Many, many of my 
competitors and peers have either downsized or simply closed 
the doors because they could no longer compete with the costs.
    At one time both Hewlett Packard and Storage Technology 
were customers of Arrow Sheet Metal. However, I think the 
success to us still being here has been able to diversify 
ourselves. Both of those have been large players in the market 
and, again, a lot of their manufacturing has moved to overseas.
    I feel strongly more and more that if manufacturing 
continues to go off shore, the stronger trickle-down affect 
will affect me and my company and my employees on future jobs. 
Many of my peers I share business with may not be around much 
longer. A solution suggestion, it is actually more complicated 
than one I can actually provide, only that for Congress to be 
very conscious of the decisions you make and new regulations 
you may impose on my industry.
    Our state policy needs to be sensible and fair. I know 
tariffs are a hot topic. It is a bit confusing to me as well 
except that on a personal note I get several calls a day from 
my customers asking what is going to happen to future products 
with reading all this news about the tariffs and how much extra 
they will have to pay for the raw materials.
    I have one customer which is very sizable, about 10 percent 
of my annual revenues, that we go out every year and do a 
guaranteed price for a 12-month period. I had a difficult time 
getting a phone number from a metal supplier because they were 
unclear as to what was gong to happen with the tariffs and what 
the costs were gong to be and they weren't willing to negotiate 
a flat rate or flat price per year.
    In theory then my customer chose to do small contract for a 
couple months versus a 12-month period. We are still 
negotiating the 12-month but still the unknowns of the tariffs 
and how it is going to affect material costs is still there.
    In closing, I hope my testimony has provided you some 
insight on small business and what challenges Arrow Sheet Metal 
and others face today. No doubt we have suffered greatly to 
keep our doors open and our employees employed through the 
recession, 9/11, rising insurance costs, overseas competition.
    As the voice of a small business, I would like to again 
sincerely thank you for this opportunity to be heard.
    [Ms. Cirocki-Trujillo's statement may be found in the 
appendix.]
    Chairman Toomey. Thank you for your testimony.
    Mr. Tyler.

         STATEMENT OF CEDRIC G. TYLER, BUSINESSGENETICS

    Mr. Tyler. Thank you. From my perspective, I would like to 
start off by saying it is a great honor and privilege to be 
here. Especially, as you can ascertain from the funny way I 
talk, this really is truly a monumental occasion for me so I 
thank you for the privilege.
    I come to speak to you today from a number of perspectives. 
The first is to issue, I guess, a warning. I have looked in two 
economies which I view as being in decline. I view them as 
being in decline as a direct consequence of overburden some 
legislation which stifled productivity and creativity. From my 
perspective, as I say, I consider myself somewhat of a refugee 
from that environment.
    Having been in these great United States for the past 
decade, I have become concerned about the slow and insidious 
nature of laws and regulations creeping up onto the business 
and stifling the creativity and productivity of small business. 
One issue, as I say, a warning. In fact, I thought this morning 
I would come here today and talk about revolution because I 
believe that is what we need. We need to kind of look at this 
from a revolutionary perspective.
    But having considered my background, the audience, and the 
esteemed folks on the panel, I thought I wouldn't insight a 
revolution today but merely put the thought out there that I 
believe what we need is not more legislation to deregulate, but 
we need to start repealing acts on a massive scale is what I 
would advocate.
    I will talk a little bit about some of the issues and 
complexities that confront us in business. But I would also 
like to focus on what are we going to do about it because I 
don't believe passing more regulation to deregulate is an 
effective mechanism or means as we have seen with the 
telecommunications industry and countless others, and now the 
healthcare industry.
    I also want to say that what I see today in terms of the 
massive amount, the sea of regulation and legislation that 
confronts the small business owner in the United States, what 
we have mentioned today unfortunately is only the tip of the 
iceberg.
    When Mr. O'Donnell mentioned up to the ceiling of federal 
regulations and pages and pages of state regulations, there are 
more unfortunately. There is county legislation. There is city 
ordinances. I have property governance and covenants that I 
have to comply with and the cost just goes on and on.
    In fact, I assert at this very point in time we are 
advocating a culture of noncompliance. In fact, I believe not 
only it is impossible for a small business to be compliant and 
consequently we are all law breakers unintentional. Of course, 
government passes most of these laws and legislations with the 
finest of intent.
    In fact, in one of our cities in these great United States 
I saw a city ordinance which, again, with all good intentions 
mentioned that we should check--this is a city ordinance and if 
you are noncompliant, there is a penalty--you must check all 
fire hydrants one hour before fires. Again, good intents but 
just absolutely impossible to be compliant with something as 
ludicrous as that.
    And so we foster more and more legislation but we never sit 
back and stop and say, ``Enough. How do we stop this and repeal 
on a revolutionary scale if possible?'' The culture of 
noncompliance has two consequences, one being we cannot--I just 
can't even understand or comprehend. If I take some of the 
legislation in the handout I provided, there is a couple of 
pages.
    I just picked on one, the Department of Labor alone. In 
fact, the Department of Labor, the Federal Department of Labor 
is the first to admit that they do not comprehend all the 
legislation and issue a warning to small business on their Web 
site saying, ``We apologize if this is incorrect but we kind of 
don't know what the laws are anymore. We have lost track.''
    When we reach a point of absurdity of that nature when 
federal agencies are no longer able to understand, comprehend 
and be compliant, something is systemically wrong. As I say, 
major reform and appeal in my opinion is the only way out if we 
want to avoid the decay of some of the economies I've seen and 
lived through.
    Let me move on to the solution aspect. The first is please 
try and avoid the temptation of deregulation by yet more 
regulation. It is just absurd to try to understand the affect 
of the deregulated regulations. Repeal is probably the best way 
to approach reform.
    I would also strongly advocate the use of more advanced 
methods and technology such as the ones Business Genetic has 
already provided to the federal government. Worked closely with 
Mr. Tenney and others at the USDA level and Chief of the Forest 
Service and we have helped them with pretty sensitive 
environmental legislation which inhibited that agency, in fact, 
from being productive.
    I worked with folks in the field and the various ologists I 
work with that actually do the real work here in Colorado on a 
restoration product. We are totally cynical about what they 
were supposed to do for the agency. Their view was, ``Well, 
whatever we do it is going to be repealed. It is going to be 
objected anyway. There is going to be an objection so we may as 
well just go through the motions and wait for the objection.'' 
The laws even governing some of the agencies have got to a 
point of absurdity.
    So what we have done is invented a method of bridging what 
I call the legislative divide by putting legislation and laws 
out for even small business to review is not going to--it is, 
again, a noble thought but trying to interpret the legal 
terminology is not a forte or skill of small business. I can 
read about a balance sheet, an income statement, a business 
plan. If you give me a set of laws and regulations, that is not 
my forte for the average business person.
    There is technology, as I mentioned, available which can 
take this legal terminology, synthesize the complexity, and 
present it in a very business centric set of pictures which we 
can then look at from a compliance perspective, from a resource 
perspective to ascertain what kind of resources and costs are 
going to be required, and to ascertain if we are in compliance. 
It is kind of a barrier between the raw legislation or law and 
the small business owner.
    In the interest of time, that is all I want to say. To 
summarize, I believe the problem is far bigger than the 
gentleman in this panel even believes. It is massive. If I take 
all those layers beyond the federal, the state, the county I 
believe we are going to stifle small business if we continue 
down this path. I believe we need unprecedented reform and we 
need to do this in a manner which uses technology and the 
latest thinking to synthesize and distill this complexity into 
something which is comprehensible to the average small business 
owner.
    That concludes my testimony. I thank you again. It has been 
a tremendous privilege for me as a transplant to come in and 
provide my inputs and I hope it has added some value.
    [Mr. Tyler's statement may be found in the appendix.]
    Chairman Toomey. Thank you very much for your testimony.
    At this time I'll recognize Mr. Ziegler. As I alluded to 
earlier, I was in the restaurant business myself. Specifically, 
I owned and operated two sports-themed restaurants so I am 
particularly looking forward to his testimony.

STATEMENT OF JOHN ZIEGLER, OWNER, JACKSON'S ALL-AMERICAN SPORTS 
   GRILL, AND REPRESENTATIVE, NATIONAL RESTAURANT ASSOCIATION

    Mr. Ziegler. Thank you very much, Chairman Toomey and 
Congressman Beauprez for holding this hearing here in Colorado 
and, of course, for the honor to appear before a fellow 
restauranteur.
    My name is John Ziegler. I am the owner of Jackson's All-
American Sports Grills. I am testifying here today on behalf of 
myself as a small business person, and for the Colorado 
Restaurant Association and the National Restaurant Association 
which is the leading business association for the restaurant 
industry.
    Together with the National Restaurant Association Education 
Foundation, the Association's mission is to represent, educate, 
and promote a rapidly growing industry that is comprised of 
870,000 restaurant and food service outlets employing 11.7 
million people around the country. As a member of the Board of 
Directors of the National Restaurant Association and the 
Colorado Restaurant Association, I am proud to say that our 
nation's restaurant industry is the cornerstone of the economy, 
careers and community involvement.
    Mr. Chairman, I am living the American dream. I have over 
40 years of experience in the restaurant industry. I am the 
owner and chairman of Jackson's All-American Sports Grills 
located here in Denver and in Greeley and Fort Collins, 
Colorado.
    When I started 26 years ago I had four employees. My 
business now operates seven locations and employs approximately 
400 people. Due to negative economic conditions in our 
community I was forced to close two of my restaurants last year 
eliminating about 100 jobs.
    As I understand it, the purpose of today's meeting is to 
examine how government can remove obstacles to help small 
businesses to succeed. I would offer several suggestions and 
observations in that regard. First, the tragic events of 
September 11, 2001, had a dramatic impact on all aspects of 
American society. The economic harm to the restaurant industry 
resulting from the terrorist attacks has been substantial, 
particularly on fine dining restaurants, airport concessions, 
and restaurants located in urban and rural travel destinations, 
including Denver, Colorado.
    The downturn in business travel has also impacted an 
airline with a significant local presence, United Airlines, 
which has a hub at Denver International Airport. Fewer 
travelers arriving in Denver on airplanes results in fewer 
people staying in Denver hotels, decreasing that employment, 
which results in fewer people eating in Colorado's many 
excellent restaurants, including my own.
    This year, Congress appropriated $50 million to the 
Commerce Department and authorized the Secretary of Commerce to 
create a United States Travel and Tourism Promotion Advisory 
Board. While these funds are an important first step in 
promoting the United States as an attractive destination, the 
National Restaurant Association hopes that Congress will 
consider a longer term authorization to capture these travelers 
that our economy desperately needs.
    Mr. Chairman, moving on to another important topic, the 
United States legal system is deeply troubled. Recent class-
action lawsuits filed in New York City by an attorney who says 
restaurant companies should be held liable for his clients' 
obesity-related health problems may be among the most egregious 
examples of problems in the U.S. legal system, but they are not 
out of the ordinary. The U.S. House passed a series of common-
sense reforms to the nation's class-action system on June 11 by 
a vote of 253 to 170. The measure is now pending in the U.S. 
Senate.
    With restaurant profit margins averaging around four 
percent, a single frivolous lawsuit is enough to put a small 
restaurant out of business. High-priced liability insurance and 
out-of-court settlements have become a permanent cost of doing 
business in the restaurant industry. The National Restaurant 
Association strongly supports class-action reform as a first 
step toward meaningful lawsuit reform.
    Regarding our nation's ongoing economic recovery, the 
economic growth package passed by Congress earlier this year 
contains provisions that are helping to build the nation's 
recovery by stimulating consumer spending, freeing up resources 
for businesses to expand and create jobs, and promoting long-
term growth.
    the new law includes a boost for small businesses through 
increased expensing limits. The new law lets business owners 
who spend $100,000 a year and gives this option to any business 
owner whose annual investment in the business is under 
$400,000. That is a big incentive for a restaurateur to grow 
his or her business by pumping money into such investments as 
new kitchen equipment, hardware and software upgrades, or 
dining room furniture.
    The law also includes a boost for businesses through a 
``bonus depreciation'' allowance which provides an allowance 
equal to 50 percent of what they spend on qualified equipment 
between May 5, 2003, and January 1, 2005. In addition to 
equipment purchases, the bonus write-off applies to 
improvements made to leased properties.
    An important note. Congress can do even more by making 
business meals fully deductible as a legitimate business 
expense. This is a critical issue for all small businesses. 
Many Democrats including past fellow waiter from my Hawaii 
days, Neil Abercrombie, believes strongly on this issue.
    Exploding healthcare costs is another key issue which has 
been addressed by almost everyone here and certainly is a key 
issue for the restaurant industry. Restauranteurs want to 
provide health benefits for their employees and many do. For 
those who do not, however, surveys show that skyrocketing costs 
are the main reason. Table service restaurant operators have 
seen health plan costs increase an average of 23 percent in 
each of the last two years.
    In the restaurant business this is an acute problem. Seven 
out of 10 eating and drinking places are single unit operations 
and, thus, have a particularly tough time finding affordable 
high-qualify health insurance. In most states, as in Colorado, 
a handful of insurance companies dominate the small business 
market.
    The Bush Administration and members of Congress from both 
parties have endorsed Association Health Plans (AHPs) as an 
important way to provide more Americans access to affordable 
health care. Through AHPs, small and medium sized employers can 
join together across state lines to buy health insurance 
through a recognized membership organization such as the 
National Restaurant Association.
    The House of Representatives passed AHP legislation (H.R. 
660) in June and we hope the Senate will act soon on companion 
legislation, S. 545.
    Another regulatory issue important to the restaurant 
industry is pending at the U.S. Department of Labor, the DOL. 
DOL is proposing to revise its ``white-collar'' overtime 
regulations which determine ``professional, executive or 
administrative'' employees' eligibility to receive overtime 
pay. Written in 1949, the old labor regulations are now 
outdated and include job classifications that no longer exist.
    The National Restaurant Association believes that the 
current regulations are no longer relevant to the 21st century 
work place and workforce and should be updated so the small 
business including restaurants can determine how to classify 
their managerial employees without having to hire an attorney 
or an outside expert.
    Mr. Chairman, I want to thank you again for the opportunity 
to appear before you today and I would be happy to answer any 
questions.
    [Mr. Ziegler's statement may be found in the appendix.]
    Chairman Toomey. Thank you very much for your testimony.
    Let me being the questions with Mr. Piper.
    First of all, let me just recognize that I think that the 
association that you belong to, ABC, Associated Builders and 
Contractors, have for years done an outstanding job in 
advocating for a free enterprise system that levels the playing 
field for merit shops. I am a big fan of the work that they 
have done and that you members have done to try to advance to 
some common-sense fairness in the way the construction industry 
contracts are awarded and other aspects of the issues you 
addressed. Congratulations on the great work you folks do.
    Let me just touch briefly on another point. You had 
mentioned concern about the death tax. You voiced well a view 
that I have that it is just an outrageously unfair tax in the 
first place. You also, I think, alluded to the importance of 
having the repeal which is currently on the books become 
permanent because, as we all know, this tax is repealed and I 
think it is 2011 or something. Then it promptly comes back in 
full force in 2012.
    Just for the record, I just would like to make it clear 
that there is a reason for that. It is not a good reason but I 
want people to understand when it came to passing this tax 
relief package that President Bush proposed and that the House 
of Representatives enthusiastically embraced, it was by virtue 
of the rules of the United States Senate, dead on arrival had 
we not put in a provision that would allow it to pass with a 
simple 50 votes instead of being subject to a filibuster which 
would then require 60 votes. There is no way we would get 60 
votes for this.
    Now, because of the arcade rules, and I apologize for 
getting into this minutiae but I think it is important to 
explain this. The rules of the Senate are such that the only 
way you can have legislation regarding taxes that cannot be 
filibustered and, therefore, can be passed with 50 votes is if 
it applies for only 10 years. Hence, the need to put a sunset 
provision on the entire tax relief package.
    We did that as the unfortunate but necessary way to get 
this passed and I share your view that we should be working 
very diligently to make this permanent. It is an outrageous tax 
in the first place and it is even more egregious that 
businesses cannot plan and people don't know whether or not 
there will be a death tax. I appreciate that input.
    You had talked about association health plans and your 
advocacy thereof. I am just wondering--I am with you on that. I 
think it makes perfect sense and I support that legislation. 
Have you thought about or looked into other ways of making 
health insurance more affordable such as medical savings 
accounts and flexible spending accounts and other mechanisms 
that would help in addition to association health plans?
    Mr. Piper. We are actually doing that this year with the 
renewal of our insurance assuming that we are going to have a 
sizable increase again this year. That is one thing we are 
looking at. We are looking at other options to be able to 
provide insurance for our employees.
    Chairman Toomey. So you think that will be an important 
part?
    Mr. Piper. Yes, it would be a very important part.
    Chairman Toomey. Okay. It seems to me that we want to 
create an environment where there are as many options as 
possible for individuals, small employers, and large employers 
to obtain health insurance. It seems there is a menu that we 
ought to make available.
    Mrs. Trujillo, you had mentioned tort reform as one of a 
number of issues that you think are important. There are a lot 
of--obviously civil litigation covers an enormously broad 
spectrum and I want to believe we need a lot of tort reform. 
Are there any particular areas that you think need special 
priority? For instance, medical malpractice reform. Is that a 
particular issue that concerns you, or are there other 
components of tort reform that you would put as a higher 
priority?
    Ms. Cirocki-Trujillo. No, I would agree with that. I have 
some friends that are in that industry and some disturbing news 
that I heard is more and more people are choosing not to go 
into that profession because when they get out, they are not 
able to afford the malpractice insurance and be specialized. I 
don't know about you but I have been affected by people that 
have had cancer, heart disease, those types of things which are 
all in specialized fields. We are getting older. The 
generations are getting to where we may not have that knowledge 
to help us with our diseases. It is a big concern of mine.
    Chairman Toomey. Mr. Tyler, you made some interesting 
observations which I find myself very sympathetic with. I think 
one of the problems with many of my colleagues honestly in 
their enthusiasm for new regulation is a lack of appreciation 
of how well markets work and how much businesses feel the need 
and, in fact, do need to be responsive to their customers and 
to provide the services in a responsible way for the sake of 
their own business. You may be aware of that.
    You talked about the decline of some economies that you 
attribute to excessive regulation. I think you are exactly 
right. You may be aware of the annual Heritage Wall Street 
Journal publication where they create an index of economic 
freedom. There are 20 or 30 objective criteria for evaluating 
how free an economy is. That includes things like 
convertibility of currency, level of taxes, the extent of 
regulation but they are objective measures.
    They rank countries based on the extent of the economic 
freedom in their economies. Then they plot on the same graph 
the average annual economic growth over the last, say, 10 
years. Now, what you see is this enormous correlation, a very 
high correlation with prosperity and growth and economic 
freedom, which is to say lower regulation. I think you are 
absolutely right. There is a huge cost.
    When we talk about the 10 percent or so of our GDP that 
goes to complying with regulation, it is a huge, huge sum of 
capital that is not being put to productive use. It is being 
put to fundamentally unproductive use. We systematically cost 
our society jobs and higher wages and a better quality of life 
by virtue of these regulations. I share your frustration in 
saying how do we get this out there.
    I guess my question for you is do you have any suggestions 
as to how we change the culture, the mindset, so that the focus 
is on how do we maximize economic growth and prosperity so that 
everyone has a better life and more fully lives the American 
Dream rather than how do we constrain and control people.
    Mr. Tyler. I am a strong advocate of strong leadership and 
I believe the current administration has a tremendous window of 
opportunity to show the leadership that I think you are sharing 
here today to help us and make the right kind of steps in the 
right direction to introduce new processes for reviewing 
regulations and laws, and for putting stage gates in place to 
go through certain due diligence before we pass laws. When I 
say due diligence, I mean with regards to the regulatory impact 
on small businesses before we pass them and have a scramble to 
try and recover. I think leadership is part of the solution at 
getting the message out, communicating it, as well as reviewing 
the processes that we use in the legislative system. I think it 
is time for them to be looked at and improved and streamlined 
for the right reasons.
    Chairman Toomey. Thank you. My last question for Mr. 
Ziegler. You also mentioned tort reform, the importance of 
that. As I mentioned, I am very sympathetic to that. In my 
restaurant we were more than once sued by people who have 
alleged to have slipped and fallen in the restaurant and our 
attorneys were convinced that these people never stepped foot 
in the restaurant. But, of course, it is very hard to prove a 
negative and this is the kind of abuse that is egregious.
    My question for you is of all the kinds of things we can do 
in tort reform whether it is class action reform, product 
liability reform, repeal of certain liability, medical 
malpractice reform, do you have a sense of what would be an 
important priority for your industry? Which of these many tort 
reform measures would be most helpful for the restaurant 
business?
    Mr. Ziegler. Well, eliminate the liability to the 
individual restaurant owner/operator with third party 
situations. You have seen that in the liquor liability area. 
There are many others. We are the third party. We are 
responsible because you overeat. We are responsible because you 
over consume alcohol. We are responsible for many of these 
third party issues. Just to limit the liability that a third 
party has would help. Proving a negative is real tough, like 
you say, and live under all these regulations.
    This gentleman to my right pointed out the different levels 
that we all have to deal with going down to the local community 
is extremely difficult for all us. But eliminating the 
liability and exposure that we have would help a lot.
    Chairman Toomey. Thank you very much. I will yield to the 
gentleman from Colorado.
    Mr. Beauprez. Thank you, Mr. Chairman. I have great empathy 
and sympathy and camaraderie with all four of you having run 
businesses myself. As I sit here, several thoughts are racing 
through my mind relative to tort reform.
    We seem to have fallen into a time in our culture where 
there is a prevailing mentality out there that it is up to 
others of us such as the four of you to save us from ourselves 
whether we over eat, over drink, over whatever we do. That 
somehow people like yourselves have a responsibility to make 
sure that we vent those excesses or simple accidents. That is 
kind of bizarre in my mind.
    Also, I would love if one of you, maybe all four of you 
even, want to take a shot. Ms. Trujillo, it crossed my mind you 
might want to be the one. Of the many, many costs that have 
been outlined, insurance, energy, regulation, taxation, is 
there not also a very real cost to business, a cost I will call 
the fear of litigation cost? Some have an acronym called CYA 
that they attach to that. Is that or is that not a real cost of 
doing business today, fear of litigation?
    Ms. Cirocki-Trujillo. Oh, yes, definitely. I didn't talk 
about that as an issue but when you talk about the tort reform, 
another one that I am personally going to renew is workman's 
compensation. You do everything that you can to provide a 
healthy environment for your employees and I feel that we have 
done that. I have two cases that are going through, both 
different injuries.
    One is going through just fine and the other one is I have 
to watch consistently what I say and how I react to this 
employee. I have had several appointments with attorneys to 
make sure that I am dotting my i's and crossing my t's not 
knowing how it is going to end and not knowing if it is going 
to come back to me unjustly after it has ended. My father has 
had a couple of those. He is no longer with me for advice.
    However, I am going through my first one and it is probably 
the most painful thing that I have yet to experience with 
running a business. It certainly makes you wonder if you can 
trust what is going on out there and you are trying to do the 
best that you can. Yet, you have somebody where--you know, 
Colorado is a very claimant state. Workmen's comp insurance is 
high compared in relationship to the nation for those reasons.
    I am constantly having to be on the phone to my claims 
adjuster handling the employee's questions. I can't even 
explain it. A big portion of my time and money is spent 
covering my ass hoping this is going to flip the other way and 
will I be in business two years from now when my insurance 
premiums go up even further for something that I feel we did 
everything to prevent the accident.
    Mr. Beauprez. Reasonableness does not always seem to be a 
legitimate standard anymore or the appropriate standard.
    I pick up on another point that you made, Ms. Trujillo, the 
insurance ratings for small businesses. Would I be correct in 
assuming that one of the strong arguments for association 
health plans is just that. I recall when my bank was very small 
and we had a handful of employees, we had a teller that I think 
was 60 plus or minus and had a little heart problem. Our 
insurance costs went through the roof as you can imagine.
    You are sitting there faced with a horrible, an absolutely 
impossible group of choices. Do you let her go? You can't do 
that. You bite the bullet and pay the fee? That is what you end 
up doing. All bad choices. If you can combine in large enough 
groups, am I correct? Such as association health plans.
    Ms. Cirocki-Trujillo. I just learned about that today 
because we were talking. When my renewal came around I looked 
into it. I thought this has got to be the way to do it. At the 
time it was not more cost effective but it has got to be if you 
can work together as an association. Again, in the past of 
Arrow Sheet Metal my father, again, had some employees, senior 
employees, people that he trusted who had worked very hard for 
him who had serious illnesses, cancer and whatnot, and the 
choice was having to let them go.
    Morally and ethnically it is against us to do that but you 
have got to keep the business alive to look at the greater good 
of employer and employee so that has happened. I am looking 
forward to the opportunity at my renewal to do that because I 
will look at every option that I can to try to keep at least 
the cost down to something that is affordable to our employees.
    Again, it is the skilled workforce. The first question out 
of their mouth when they come in to interview is, ``What is 
your healthcare and how much does it cost?'' Then I am looking 
at the wages that I am afforded to pay them to be competitive 
in my marketplace and it is very difficult for them to come 
work for me. Right now I pay 100 percent of my health 
insurance. That probably won't happen very much longer. I don't 
ever see ever being able to afford or even them being able to 
afford the other portion of that.
    Mr. Beauprez. It is a huge catch 22. I recall my oldest son 
worked for a company that had the same challenges that you are 
talking about, especially relative to healthcare. They decided 
to self-insure. They were big enough. If you know who they 
were, you would agree that maybe they could self-insure. Even 
at their size the same year my son got cancer another employee 
got cancer and it nearly bankrupted what you would think was a 
very healthy company.
    Mr. Piper, if I might, are you familiar at all with a new 
acronym out there HSAs, health savings accounts?
    Mr. Piper. Yes.
    Mr. Beauprez. Opine on that if you would. In essence, what 
a health savings account allows one to do is put tax-free money 
into an account, roll it over from year to year if you don't 
spend it. More specifically, it would allow other relatives 
such as children to assist with their parents to contribute to 
that account tax free. Even an employer who might, for example, 
want to contribute to a retired key employee into their 
retiring years also provide that as a deductible item. An 
opinion, please.
    Mr. Piper. One thing that we do is we also offer a 
cafeteria plan which allows the employees--it does not allow us 
to put money in but it allows the employee to set money aside 
before taxes when they have fixed medical costs whether it is a 
prescription every month or treatment when they know what the 
amount is going to be. That money is deducted out of their 
check, put into this plan before taxes.
    I think that is similar to what that savings account is but 
it is on a very limited basis that they are able to do that. 
There are some real restrictions as far as if they have $1,000 
and they only spend $500, they don't get that other $500 back. 
There are some real limitations to encouraging the employees to 
participate in that cafeteria plan. Out of our employees we 
only have three that participate in it.
    Mr. Beauprez. Mr. Tyler, I am very curious what other 
economies and countries have you had your painful experience 
with that we should try not to emulate?
    Mr. Tyler. The first was the United Kingdom. The major 
issue I had there was labor laws. It became almost impossible 
to fire even justifiably an employee. It was just an unworkable 
situation. I became very reluctant to hire folks in the 
business.
    I had a brief excursion into France which was to say the 
least. I also opened an operation in South Africa for a few 
years which was initially quite successful and as the business 
grew became more and more constraining. I just felt intolerable 
and unfair in a lot of instance so I decided to come to the 
bastion of economic freedom. I want to stay here so I urge 
policy makers to bring some sanity back.
    Obviously we still have a fantastic environment. I have the 
luxury of having worked outside of this theater and seen what 
occurs in other countries. Al things considered this is a 
fantastic place to do business. However, the warning signs are 
there and I would urge us not to proceed in the direction we 
appear to be proceeding in and to reform as much as possible.
    Mr. Beauprez. I appreciate that. I will give you one other 
tidbit of information. There is some--there are probably many 
pieces of legislation that I think we are looking at to perhaps 
improve the situation. One is called the Congressional--I think 
it is called. I hope I am right in this--the Congressional 
Responsibility Act.
    Mr. Chairman, did I get close? I think that is the right 
phrase. Anyway, what it would mandate is that law, rule, the 
stuff you have to deal with everyday, actually be originated by 
Congress where the lawmaking ought to reside, not with the 
bureaucracies. I think that might be a very good step in the 
right direction. At least you have a mechanism to hold the 
likes of the Chairman and myself accountable every two years.
    Mr. Ziegler, I will close quickly with you. This is 
something that had not come up until your testimony but 
something that I think is very real. We talk about regulation 
taxation, cost of insurance, cost of energy and all those are 
very real. But if we talk about the health of the economy, the 
impact of an event like 9/11 should not go unnoticed by the 
business community or anyone else.
    If God forbid that something like that happened again or 
worse events similar to that would become more the norm than 
the exception, what would be the impact to businesses such as 
yours?
    Mr. Ziegler. When 9/11 happened, as you probably are all 
aware, business travel fell 50 percent. With the latest news 
about the preponderance of shoulder-fired missile capability, 
if one airplane is shot down--and this was brought up in our 
last board meeting--that travel will stop.
    When the business travel went down 50 percent here in 
Colorado, our business, the restaurant business, fell off 
significantly in all levels, primarily the fine dining where 
the more expensive meals were. But as the travel fell--by the 
way, other issues that happen in the tourism, and that is why I 
did bring up the tourism issue which, obviously is connected 
with travel in a significant manner.
    As the tourism fell, as the travel fell, and, of course, 
hotels were not occupied, I didn't think I was directly hooked 
into the tourist business but because of the cutbacks in just 
people bringing money to our community, although we are not 
located in the mountain exactly, the trickle down situation and 
it has been very devastating.
    We are not a necessary expenditure. You can cook a 
hamburger on your hot plate at home so, consequently, it was 
devastating. God forbid another issue related to 9/11 or if an 
airplane got shot down, I am afraid to say what would happen to 
our economy.
    Mr. Beauprez. A lost observation, Mr. Chairman, before I 
yield back. I think I can speak for many of the members of our 
committee and hopefully many in Congress. We labor a lot with 
job creation. We have been spending a considerable amount of 
out attention in this Congress on that, and rightfully so. But 
I have opined before--I will commend the four of your and 
others just like you as employers.
    I have opined that we cannot always be just for employees 
if at least once in a while we are not for employers who hire 
those employees. There does have to be balance and I think that 
is a good share of the reason why we are here today. I commend 
you for the testimony that you brought to us and the job you do 
on a daily basis.
    Thank you, Mr. Chairman. I will yield back.
    Chairman Toomey. Thank you very much. I would like to thank 
all of the witnesses who testified today. I think we heard some 
very interesting, very important and compelling testimony which 
will inform our judgment and which we will bring back to our 
full committee and to our deliberations in Congress.
    I look forward to working with Mr. Beauprez in particular 
to pursue the issues raised by Dr. Hea, some truly egregious 
situations that I hope we will be able to address. I look 
forward to coming back to Colorado at some point in the future. 
Thank you all very much. The hearing is adjourned.
    [Whereupon, at 12:23 p.m. the Subcommittee hearing 
adjourned.]

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