[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



                                                   S. Hrg. 102-000 
 
      LEGISLATIVE SUPPORT TO OUR SMALL BUSINESS OWNERS IN UNIFORM
=======================================================================

                                HEARING

                               before the

            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                   WASHINGTON, DC, SEPTEMBER 29, 2005

                               __________

                           Serial No. 109-33

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
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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
SAM GRAVES, Missouri                 DANIEL LIPINSKI, Illinois
TODD AKIN, Missouri                  ENI FALEOMAVAEGA, American Samoa
BILL SHUSTER, Pennsylvania           DONNA CHRISTENSEN, Virgin Islands
MARILYN MUSGRAVE, Colorado           DANNY DAVIS, Illinois
JEB BRADLEY, New Hampshire           ED CASE, Hawaii
STEVE KING, Iowa                     MADELEINE BORDALLO, Guam
THADDEUS McCOTTER, Michigan          RAUL GRIJALVA, Arizona
RIC KELLER, Florida                  MICHAEL MICHAUD, Maine
TED POE, Texas                       LINDA SANCHEZ, California
MICHAEL SODREL, Indiana              JOHN BARROW, Georgia
JEFF FORTENBERRY, Nebraska           MELISSA BEAN, Illinois
MICHAEL FITZPATRICK, Pennsylvania    GWEN MOORE, Wisconsin
LYNN WESTMORELAND, Georgia
LOUIE GOHMERT, Texas

                  J. Matthew Szymanski, Chief of Staff

          Phil Eskeland, Deputy Chief of Staff/Policy Director

                  Michael Day, Minority Staff Director

            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

W. TODD AKIN, Missouri Chairman      MADELEINE BORDALLO, Guam
MICHAEL SODREL, Indiana              ENI F. H. FALEOMAVAEGA, American 
LYNN WESTMORELAND, Georgia           Samoa
LOUIE GOHMERT, Texas                 DONNA CHRISTENSEN, Virgin Islands
SUE KELLY, New York                  ED CASE, Hawaii
STEVE KING, Iowa                     LINDA SANCHEZ, California
TED POE, Texas                       GWEN MOORE, Wisconsin

                     Tom Bezas, Professional Staff

                                  (ii)


                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
Elmore, Mr. Bill, Associate Administrator, Veterans Business 
  Development, Office of Veterans Affairs, US Small Business 
  Administration.................................................     3
Winkler, Dr. John, Manpower and Personnel, Office of the 
  Secretary of Defense, Department of Defense....................     5
Holtz-Eakin, Dr. Douglas, Director, Congressional Budget Office..     6

                                Appendix

Opening statements:
    Akin, Hon. W. Todd...........................................    17
Prepared statements:
    Elmore, Mr. Bill, Associate Administrator, Veterans Business 
      Development, Office of Veterans Affairs, US Small Business 
      Administration.............................................    19
    Winkler, Dr. John, Manpower and Personnel, Office of the 
      Secretary of Defense, Department of Defense................    22
    Holtz-Eakin, Dr. Douglas, Director, Congressional Budget 
      Office.....................................................    30

                                 (iii)
      



      LEGISLATIVE SUPPORT TO OUR SMALL BUSINESS OWNERS IN UNIFORM

                              ----------                              


                      THURSDAY, SEPTEMBER 29, 2005

                   House of Representatives
    Subcommittee on Regulatory Reform and Oversight
                                Committee on Small Business
                                                     Washington, DC
    The Subcommittee met, pursuant to call, at 10:36 a.m. in 
Room 2360, Rayburn House Office Building, Hon. Todd Akin 
[Chairman] presiding.
    Present: Representatives Akin, Bordallo, Sodrel, Poe 
    Chairman Akin. The hearing will come to order. I just 
wanted to say officially welcome, everybody, and thank you for 
taking time out this morning to join us, and with that, I will 
go ahead and get started with an opening statement, and then 
also I will recognize the Ranking Member for an opening 
statement as well.
    I would like to extend a warm welcome to those of you who 
have taken time. I have already done that. That is important. 
As you know, this past June, we held a hearing to discuss the 
current obstacles that prevent veterans' access to capital, as 
well as the barriers that self-employed reservists and 
Guardsmen face in maintaining financially solvent businesses 
during deployment.
    As we had learned at the previous hearing, small businesses 
employee approximately 18 percent of all reservists who hold 
civilian jobs. Moreover, the Congressional Budget Office 
estimates that out of the 860,000 reservists in the selected 
reserves, approximately 9 percent are self-employed. Many 
reservists and guard members experience economic hardship, both 
during deployment and after their tour of duty. According to 
one Department of Defense survey, 22 percent of reservists who 
had recently been activated said that the damage done to their 
business was a serious or very serious problem.
    While there are several federal programs that have been set 
up to assist these small businesses, on Tuesday, I introduced a 
bill called the Entrepreneur Soldiers Empowerment Act, which is 
H.R. 3898, which I hope will further help these brave men and 
women and their families back home obtain the assistance they 
need for their continued professional success.
    This piece of legislation will eventually do two things. It 
will codify in law the establishment of veteran business 
outreach centers in each SBA regional office, as well as 
technical mentoring assistance Committees in each SBA regional 
district.
    Mr. Elmore, it is very nice to see you again. I appreciate 
the time all of you have taken to participate in our numerous 
events on this issue.
    Dr. Holtz-Eakin, I appreciate your taking time out of your 
schedule as well to join us. I am excited to hear what you are 
here to discuss, this year's CBO report on the effects of 
Reserve call-ups on civilian employees.
    Dr. Winkler, thank you for joining us. I know the welfare 
of our nation's guard and reservists is a top priority for both 
you and the secretary.
    Witnesses, I thank you for coming.
    And last, but certainly not least, I would like to greet my 
distinguished colleague from Guam, Ranking Member Congresswoman 
Bordallo, and invite her to say a few words.
    [Chairman Akin's opening statement may be found in the 
appendix.]
    Ms. Bordallo. Thank you very much, Mr. Chairman, and good 
morning, gentlemen. I want to thank you, Mr. Chairman, for 
holding today's hearing on providing business assistance when 
our reservists and National Guardsmen are called up to active 
duty.
    So often these service members have answered the call to 
protect our nations in time of need and are ready to deploy 
whenever and wherever they are needed. They have served their 
communities and countries with great honor, with the 
flexibility of being able to attend college, own businesses, 
and pursue full-time careers. But success does not always come 
easy. This group of entrepreneurs faces a myriad of challenges 
in starting and running their businesses, including access to 
capital, providing health care, and securing federal contracts, 
coupled with the fact that many veteran small business owners 
are either being deployed themselves, or their employees are 
being sent overseas. The challenges of running a small business 
only multiply when a small business owner or his or her 
employees received orders to deploy.
    Today, our service members are asked to make great 
sacrifices, whether it is fighting in Iraq or Afghanistan or 
providing relief in the wake of natural disasters, such as 
Hurricanes Katrina and Rita. These brave Americans always meet 
the challenge. Clearly, given the sacrifice that these men and 
women continue to make, it only makes sense to provide our 
nation's soldier entrepreneurs with the resources they need to 
keep their businesses successful while they are serving us at 
home or abroad.
    Over the years, a number of programs have been designed to 
promote entrepreneurship and provide assistance to our nation's 
reservists and guardsmen, including the Small Business 
Development Centers [SBDC]. These centers provide critical, 
one-stop services to small firms by providing a wide variety of 
information and resources. In concert with the national SBA and 
the SBDC network, Veterans' Benefits Outreach Centers [VBOC] 
provide still another source of business and technical 
assistance for this important community of small business 
owners. This Committee also created the Veterans Corporation 
that was designed to exclusively cater to the needs of veteran 
entrepreneurs.
    It is my understanding, then, that the legislation we are 
reviewing today, the Entrepreneur Soldiers Empowerment Act, 
will expand this network and solidify the work of the VBOCs. I 
am interested in learning how the proposed program will work, 
and, additionally, I want to ensure that we are maximizing the 
use of resources to serve these businessmen and women. As our 
economy continues to experience challenges, it is important to 
provide substantial assistance to veteran entrepreneurs and all 
sectors of the small business community. America's small 
businesses are capable of pulling us out of this period of 
economic uncertainty and creating the jobs that we so 
desperately need.
    So I look forward, gentlemen, to hearing your testimonies 
today. Your thoughts and concerns are very important to us as 
we review this proposed legislation. Thank you.
    I would also like to recognize Mr. Sodrel. He has possibly 
a comment or two here, just that we do not have that many 
congressmen here. So, Mike, if you want to run for a minute or 
two, we will get started right after that with the witnesses.
    Mr. Sodrel. I would like to thank you all for coming this 
morning. I have more than a passing interest in the subject, 
being a former noncommissioned officer in the First Battalion, 
151st Infantry, of the Indiana Army National Guard and being a 
former small business person, and I have stayed pretty close to 
the unit.
    Lieutenant Colonel Paul Grube is the current commanding 
officer of the One of the 151. They were deployed to 
Afghanistan. In between the training prior to departing the 
country or being deployed and the one-year deployment,--he was 
gone for about 15 months--he was a small business person, had a 
restaurant, and found that the strain of being deployed in 
Afghanistan and having a restaurant back home was really too 
much for him, so he had to sell the restaurant basically while 
he was still deployed in Afghanistan.
    So I really look forward to the testimony here this 
morning, and I thank you for coming.
    Chairman Akin. Thank you, Mike.
    Our first witness is going to be Bill Elmore,-- Bill, you 
have been with us before--Office of Veterans Affairs, Small 
Business Administration. We are going to try and stick with the 
lights. Remember the light drill here. Green means go, and 
yellow means you have got one minute left, and then red means 
you are supposed to wrap it up. Thank you.

STATEMENT OF BILL ELMORE, VETERANS BUSINESS DEVELOPMENT, OFFICE 
    OF VETERANS AFFAIRS, U.S. SMALL BUSINESS ADMINISTRATION

    Mr. Elmore. Thank you. Chairman Akin, distinguished members 
of the Subcommittee, I am Bill Elmore, the associate 
administrator for Veterans Business Development at the SBA. 
Thank you for the opportunity to testify here today to express 
SBA's views on the Entrepreneur Soldiers Empowerment Act. SBA 
is grateful for your continued support, and we appreciate the 
opportunity to share our views. Let me begin with a brief 
overview of SBA's present outreach activities for veterans of 
the U.S. military and reserves.
    S.B.A. opened four Veterans Business Outreach Centers in 
1999 to expand SBA outreach and assistance to veterans. In the 
first five years of operation, we have refined this program by, 
among other things, increasing outreach to Reserve component 
members of the U.S. military. Last year, legislation enabled 
the SBA to include reservists in our definition of 
``veterans,'' assuring them access to our programs and 
services. This resulted in significant steps to enhance 
outreach and assistance to reservists through our Vet Business 
Outreach Centers, SBA's two primary technical assistance 
programs, SCORE and SBDCs, and SBA's district offices.
    SBA recently recompeted the VBOC grants. We expressly 
included Reserve component members as part of the target for 
service delivery and evaluated proposals for the VBOC program 
grants based on the applicant's ability to reach reservists. 
SBA has also enhanced the SCORE and SBDC programs through 
outreach to reservists who are self-employed or small business 
owners. SBA's intake and data collection and reporting firms in 
the district offices were updated to include questions on 
veterans, service-disabled veterans, and Reserve and National 
Guard status of program participants. Data collection helps us 
measure our success in reaching our veterans' outreach goals.
    I would now like to discuss the proposed legislation. While 
SBA is supportive of the underlying goals of these proposals, 
i.e., increased outreach to veterans, the agency cannot support 
this legislation, which redirects resources from existing 
programs which are designed to reach similar objectives.
    The Entrepreneur Soldiers Empowerment Act would require SBA 
to expand the VBOC program to a minimum of one center per 
geographic region. SBA does not believe this is the most 
efficient method to provide the required assistance to veteran 
entrepreneurs. SBA's current VBOC locations are based on the 
population of veterans and reservists in the host state. Our 
current centers are in the four most populous states for 
veterans: California, Florida, Texas, and New York, with a 
fifth center due in Pennsylvania. Establishing VBOCs based on 
geography instead of population may result in states with 
smaller veterans populations receiving centers before states 
with more significant veteran populations. Furthermore, SBA 
believes the chain of new VBOCs will disperse small business 
expertise and dilute SBA resources.
    The underlying intent of the bill to provide additional 
information and outreach to businesses affected by mobilization 
is worthwhile; however, we are not supportive of the means 
sought to achieve that end. Utilizing preexisting resources to 
achieve the objectives of this legislation would be a better 
use of taxpayer dollars and a faster, more efficient method of 
providing the services needed. SBDCs and SCORE already provide 
these essential programs and services. Our VBOCs provide 
supplemental assistance in the most veteran-population-heavy 
states. Establishing new VBOCs is unnecessary and will create a 
competing redundant organization.
    The legislation also requires SBA to establish technical 
and mentoring assistance Committees that would be responsible 
for recruiting local volunteers to serve as veteran business 
mentors. SBA supports the involvement of volunteer business 
counselors and mentors for veterans and reservists and their 
families, but this proposal is problematic from a budgetary 
perspective. SBA would be required to establish TMACs in each 
district and allocate $20,000 per Committee, costing more than 
$1 million annually.
    This proposal is unnecessary. Presently, SBA's district 
offices are authorized to establish local veterans' business 
mentors, and this is an effective service-delivery approach. To 
mandate private and public volunteers would be duplicative.
    S.B.A. previously managed a plan called the Veterans 
Business Resource Councils. That approach was more flexible and 
depended on the local veterans' business community to organize 
their own community-based Committees. Using those Committees to 
assist and support outreach, training, and seminars for 
veterans, they served as a basis for our district office 
outreach program that is voluntary and relies on coordination 
between our district offices and the SBA's local resource 
partners like SBDC and SCORE. This is a better model, based on 
the resources and commitment of local veteran business owners.
    This concludes my testimony. I welcome any questions you 
may have.
    [Mr. Elmore's testimony may be found in the appendix.]
    Chairman Akin. Thank you, Bill, for your testimony. We will 
proceed with our second witness here. John, would you please 
proceed?

STATEMENT OF JOHN D. WINKLER, Ph.D., OFFICE OF THE SECRETARY OF 
              DEFENSE, U.S. DEPARTMENT OF DEFENSE

    Dr. Winkler. Good morning. Mr. Chairman and distinguished 
members of the Subcommittee, I would like to thank you for 
allowing me to testify before this Committee on a very 
important topic.
    We know that small business owners face significant 
challenges when a reservist is called to active duty for an 
extended period. We are working to understand their needs and 
develop policies and programs that meet them.
    We must have the support of employers if we are to sustain 
a strong, viable Reserve force. Recognizing the important role 
of employers, the Department has implemented a number of 
policies aimed at encouraging employer support and helping 
mitigate some of the challenges that employers face.
    First is the policy of judicious and prudent use of the 
Guard and reserve, using reservists only when needed or as 
short as needed, and to perform meaningful work.
    Second is to limit frequency and duration of mobilization. 
Under the current mobilization authority, we limit the period 
of involuntary service to a total of 24 cumulative months, and 
we have established a one-year-in-six planning factor for 
involuntary activations.
    Finally, we strive to provide employers with as much 
advance notice of pending mobilization as possible. The goal is 
at least 30 days' notice.
    These policies are intended to provide employers with as 
much predictability as possible so they can better plan for the 
absence of a reservist employee. We all want to help employers, 
but we also need to understand better who employs Guard and 
Reserve members and what will really help them. I am familiar 
with the CBO study that addresses the effects of Reserve call-
ups on civilian employers and identifies several possible 
courses of action: employer tax credits, subsidized loans, 
business insurance, and exempting certain reservists from 
mobilization.
    Their findings parallel an Institute for Defense Analysis 
study, which the Department sponsored, on small businesses and 
the self-employed. One of the recommendations in that study was 
for the Department to conduct a survey of employers to gain 
further insights into impacts of activation on employers and 
policy options for addressing problems they may experience. We 
are currently working with the Office of Management and Budget 
to field a large-scale employer survey.
    We also now require reservists to provide information about 
their civilian employer. As of this date, 77 percent of 
reservists, amounting to approximately 570,000 service members, 
have provided employer information to the Department of 
Defense, and we are beginning our analysis of these data. This 
will provide a more detailed understanding of reservists' 
civilian occupations and the makeup of their employers. The 
information that we derive from these initiatives will help us 
focus our efforts where they will have the most impact.
    Finally, we are developing a much closer working 
relationship with the Small Business Administration. The 
Military Reservists Economic Injury Disaster Loan program, 
passed by Congress in 1999 and administered by the SBA, was the 
first financial-assistance program targeted at small business 
owners affected by the military service of an employee and 
self-employed reservists. We are working with the SBA to 
determine what more may be done.
    Again, I would like to thank the Committee for holding this 
hearing, and I look forward to answering any questions.
    [Dr. Winkler's testimony may be found in the appendix.]
    Chairman Akin. Thank you, Doctor. I did not give you the 
proper title, but just for information, you are manpower and 
personnel under the Office of the Secretary of Defense, 
Department of Defense. So we will get that down for the record. 
Thank you very much, John.
    And let us go ahead, then. Dr. Douglas Holtz-Eakin, 
director of the Congressional Budget Office. Please proceed, 
Doug.

 STATEMENT OF DOUGLAS HOLTZ-EAKIN, Ph.D., CONGRESSIONAL BUDGET 
                             OFFICE

    Mr. Holtz-Eakin. Mr. Chairman, Ranking Member Bordallo, and 
members of the Subcommittee, CBO is very pleased for the 
opportunity to be here today, and I want to also take this 
opportunity to thank both of the gentlemen to my right who 
provided extensive assistance to the CBO in producing the 
report that will be the focus of my oral remarks.
    I really want to make three points. The first is that 
Reserve mobilizations and deployments are large and unusually 
long at the moment; that the costs of such mobilizations are 
concentrated on a very few, and for that reason, they are not a 
significant impact on the national economy as a whole but have 
notable impacts on some small businesses and self-employed 
reservists; and, finally, that, in thinking about policy 
options, including the legislation that is under consideration, 
it is important to distinguish the importance of minimizing the 
overall costs of these mobilizations upon small businesses and 
the self-employed and then, for whatever costs are incurred, 
striking the right balance between employers, employees, and 
taxpayers as a whole, so let me do that.
    The first is simply to remind everyone that mobilizations 
are substantial and quite extended. A great many of the 
reservists have been mobilized through July of 2005. About 
455,000 reservists have been mobilized in the past four years, 
and, at present, about 36 percent of those forces in Iraq and 
Afghanistan are reservists. Their tours are much longer than in 
the past and likely longer than they anticipated when they 
joined the reserves. Prior to 9/11, a tour of over 180 days was 
somewhat unusual. Only about 15 percent of reservists 
experienced this length of mobilization, whereas since that 
time, the average tour has been over 300 days.
    These tours impose costs. There are a large number of 
reservists, either self-employed or employed in small 
businesses. I have a bit of information about these folks. 
There are 50,000 self-employed reservists and about 120,000 
reservists who are employed in small businesses, which, for 
this purpose, we define to be those private firms with fewer 
than 100 employees. Perhaps as not well appreciated is the fact 
that a large fraction, 36 percent, are employees of federal, 
state, or local governments. So there are significant impacts 
in the call-ups on both very small firms as well as the larger 
private firms, and, indeed, there are impacts on the government 
sector as well.
    In scaling the size of the problem, it is important to 
recognize that this is a small fraction of our national labor 
force, that there are about 5 million small businesses overall 
and about 15 million self-employed, with the result that only 
about 6 percent of employers are affected by call-ups, and only 
about half of 1 percent of the self-employed are affected in 
this way.
    Nevertheless, for those who are affected, there are 
important costs. Those costs take the form of uncertainty about 
when call-ups will take place and thus impose an extra layer of 
planning requirements on small businesses. They are the costs 
of vacancies or the costs of hiring replacements for those 
employees who are not available while they are away. There is a 
loss of skills, in some cases, quite significant skills. One of 
the focuses of the report was trying to document the degree to 
which those reservists who are employed by small businesses 
might be the highly skilled reservists who are necessary for 
the conduct of those businesses. Using a variety of judgments, 
we guessed it was on the order of eight to 30,000 such 
individuals.
    There is also just the loss of business income, and the 
scale of that loss is hard to know. CBO did its own survey, a 
far-from-representative survey, that we tried to use to shed 
some light on the problem, and I look forward to the results of 
the larger survey that is going to be available as a result.
    The last point I will make before closing is that, in 
thinking about the policy options, there really are the two 
steps. Step 1 is what are the costs of these mobilizations? 
Assuming that DoD does not change its use of reservists 
extensively, those costs can be minimized either by additional 
planning on the part of small businesses, and the CBO survey 
suggested many had not planned for the loss of their key 
employees, or by providing targeted exemptions for hardship 
cases, and that raises issues of fairness in conducting that; 
and then, for whatever costs are present, what is the right 
balance among the various stakeholders involved? In some cases, 
for example, with the existing law, the employer is asked to 
bear the cost of continuing to pay pension and health benefits, 
holding the job, and providing the employment. Is that the 
right balance? Is that a policy question? Or could those costs, 
in part, be shifted to taxpayers through tax credits, loans, or 
insurance vehicles which would take the costs out of the 
employer-employee relationship?
    These are important questions, and we are pleased to have 
the chance to be here today, and I look forward to your 
discussion.
    [Mr. Holtz-Eakin's testimony may be found in the appendix.]
    Chairman Akin. Thank you very much, Doug. It sounded like 
your analysis, from the questions, is very crisp and does raise 
some interesting questions. Who is really paying for some of 
these things? If you take a look at somebody that runs their 
own business, and they are going to be gone for 300 days, how 
many small businesses could take that kind of a hit, and who is 
really paying for that, then? Where does that put a lot of the 
load, and how do we absorb that as a society? Good questions, 
indeed.
    Let us see. I guess I will start with you, Bill. It seemed 
like, from what you were saying, your bottom-line concern is 
cost. Is that probably accurate to say?
    Mr. Elmore. I think it is a combination of cost and 
maximizing our already available, perhaps helping to focus even 
more intently the broader range of services we have through our 
Small Business Development Centers and through our SCORE 
counselors and chapters.
    Chairman Akin. So the concern is one of cost. In other 
words, are you saying that this makes you too specialized to 
deal with this one problem, too much resources in just one 
particular area where there are a lot of other things you are 
trying to do with those offices?
    Mr. Elmore. It is not so much that. As I read the draft of 
the legislation, there were sort of two parts of it. One was 
targeted to the self-employed Reserve and Guard members 
themselves. The second was targeted to the much broader issue 
of the small businesses that employ Reserve and Guard members, 
that 35 percent number. It is much bigger than the 6 or 9 
percent number, depending on how you look at that.
    So I think to try to take what is a pretty small focus 
specifically on veterans programs inside the agency and broaden 
it out into an area where SCORE and SBDCs already have a 
significant and ongoing expertise just, to us, did not make a 
lot of sense financially and from a program-planning 
perspective. Those programs are up and running. How we focus 
their effort into this community is, I think, more important 
perhaps than trying to create what might become a redundant 
system.
    Chairman Akin. Let me see if I understand what you are 
saying. This bill really is doing two different, separate 
things. You are saying that one piece of it is probably more 
logical than the other piece. Is that what you are saying?
    Mr. Elmore. Well, the other part of the question, I think, 
goes back to the district offices and the idea of these 
volunteer mentoring Committees, which is an idea we do support, 
but trying to fund volunteer Committees, we think, is 
problematic. Questions about everything from FACA to how do we 
create and ask volunteers to then help us design plans that 
would require approval, that would require allocation of 
resources that, at this point, we have not budgeted for is part 
of the problem.
    So there are really kind of two sides of it. One is the 
expansion of the VBOCs into additional areas and into 
additional service beyond specifically the veterans that 
presently we focus on. The other is the idea of mandating 
required local volunteer Committees when we have that authority 
to do that now, and most of the work I have done through our 
district office outreach effort has focused on developing not 
essentially official Committees but local collaborative 
approaches that approximate Committee work that do not have 
mandated resources allocated to them that have to flow through 
our district office.
    Chairman Akin. There are four Veterans Business Outreach 
Centers currently. Is that right?
    Mr. Elmore. Yes, sir. And there is a fifth being created in 
Pennsylvania right now.
    Chairman Akin. Do you think that is sufficient to provide 
services for the nation's veteran population, both 
mathematically and geographically?
    Mr. Elmore. Good questions. I can tell you that what we 
have tried to do with our centers, realizing all along that we 
had a limited number of locations that we could operate in, is 
we have tried to focus them into targeted services where they 
operate but also Internet-based services, and we have tried to 
promote the availability of all of our centers so that veterans 
across America, including reservists, will know about, 
hopefully, where these centers are, contact them, and then they 
do what I call ``directed referrals.''
    So if someone from Oklahoma contacts our Texas vet business 
center, the Texas center will direct that veteran back to a 
localized resource in Oklahoma, be it an SBDC, a district 
office, a SCORE counselor, a chapter, a women's business 
center, the full range of SBA services.
    Chairman Akin. Okay. I think, in November 2004, as I 
recall, in the SBA Office of Advocacy report, it was reported 
that the existence of useful government and private programs 
for entrepreneurs ranked second and third on the problem list 
of both service-disabled and nonservice-disabled veteran 
entrepreneurs, a high priority currently. If the services 
provided by SBA are currently sufficient for the veterans' 
population, how do you explain the fact that they projected 
this tremendous need?
    Mr. Elmore. Well, I think there are probably two parts, at 
least how I would think of that. The first is, obviously, not 
every veteran knows of SBA services and programs; hence, why we 
continue to conduct what I think is pretty aggressive and 
comprehensive outreach.
    The second is every year we are creating another 200,000-
plus veterans who discharge out of active service, and the 
other part of it would be, with the definitional change that 
you enabled us with with our reauthorization last fall, we do 
now include reservists in our internal definition of 
``veterans'' for purposes of all of our programs.
    So through that and through, for example, strengthening the 
Small Business Development Center program announcement, we are 
directing those Small Business Development Centers now to 
include outreach to Reserve and Guard members and Reserve and 
Guard units for purposes of business assistance, business 
planning, business preplanning, and also for post-mobilization 
planning after they have returned.
    Chairman Akin. Okay. I think I have probably used up my 
five minutes. Thank you very much, Bill. And the Ranking 
Member.
    Ms. Bordallo. Thank you very much, Mr. Chairman.
    Mr. Elmore, just a little aside here. The last time you 
appeared before this Subcommittee, you may recall that I was 
concerned that the military reservists economic injury disaster 
loans, the loans that we, in Congress, created to help 
returning reservists with their businesses, were not really 
before used to their fullest extent. In fact, at that time, you 
had made about 280 such loans in five years. That would be 
about one loan per state per year, and as long as you are here, 
can you give us a progress report on that program? You were 
going to make an effort, you said, if I recall, to publicize 
its availability, and we have heard testimony today that these 
reservists do need help. Have you increased the use of that 
important loan program during the summer? Could you give me 
some statistics, numbers?
    Mr. Elmore. Yes, ma'am. Actually, when we were up here in 
June at the hearing, it was 228 loans, as I recall, that we had 
approved at that point.
    Ms. Bordallo. Oh, I have inflated it a little. Okay.
    Mr. Elmore. What we have now, through August 31, 2005, and 
this is the latest report I have, we have had 400 applications, 
and we have approved 243 loans.
    Ms. Bordallo. In addition to the--
    Mr. Elmore. No, no. In total over four years--
    Ms. Bordallo. So that is just a few more, then. Right?
    Mr. Elmore. Yes, ma'am. The program was implemented August 
24, 2001.
    Ms. Bordallo. If there are that many applications, why so 
few, because you did say you were going to make it available?
    Mr. Elmore. Yes. There are two things. One is, typically, 
in our disaster loan program, only approximately 50 percent of 
the loan applications are approved. There is a whole range of 
reasons, everything from can the business show the ability to 
pay a loan back? That is one of the primary things that we have 
to look at because we are allocating the public's resources. So 
we are approving a higher percent of them MRIEDL than we do our 
other disaster loans.
    Now, I can give you some rudimentary information. For 
example, of those 400 applications, 63 of the applications were 
withdrawn by the applicant, another 90 were actually declined 
by SBA, and we have four, at least of August 31, 2005, that 
were pending. So there is a whole range of issues that come 
into this, everything from it may turn out that someone has a 
criminal background. If they have a criminal background, they 
are not going to be eligible for some of our loan programs. So 
there is a range of those things that enter into all of our 
programs.
    Ms. Bordallo. So, in your opinion, is this loan program 
really functioning as it should?
    Mr. Elmore. I think it is functioning as designed. If you 
sort of dig into the difference between a typical business loan 
and a disaster loan, a disaster loan, by its design, is not 
designed as a business loan, per se. You cannot consolidate 
debt, for example, and that is the way the statutes were 
written.
    So I think I suggested, even at the June hearing, that the 
loan program is very important for those that it fits, but 
additional debt for a business that has been impacted by an 
activation of the owner may not be the best solution. I think 
it really goes back to what the gentleman from CBO has 
suggested, is there a range of things. There is not--I think I 
said this in June at the hearing--there is not a one size fits 
all, and MRIEDL, while it is important, does not meet all of 
the needs that I think business owners--
    Ms. Bordallo. Mr. Elmore, how are you advertising the loan 
program, returning solders? Is it going out to everybody?
    Mr. Elmore. There is a full range of things we have done. 
We have had hundreds of thousands of what we call ``SBA Reserve 
and Guard fact sheets'' inserted into demobilization kits that 
are put together by the National Committee for Employers in 
Support of the Guard and Reserve. We have sent out hundreds of 
thousands of those fact sheets in addition to that. We have 
also produced business-mobilization planning guides.
    We have a post-mobilization business planning guide that we 
have sent out tens of thousands of copies to all of our 
partners through DoD, through DOL, through VA, through the 
American Legion,--the VFW has just asked me for 100 more 
copies--through states, the State Department of Veterans 
Affairs of Missouri, for example; and through lots of 
reciprocal Web efforts as well. The Army Family Support 
Centers, for example, in DoD; we have some reciprocal links 
that advertise the availability of these programs.
    We have also, and I have not passed them out yet because we 
only just received them in the last couple of days--we have now 
received our premobilization business planning guide. I am 
having 5,000 of these printed, and we also are having 5,000 CDs 
produced that reflect not only the contents here but also a lot 
of the other detailed program information that is in there.
    Ms. Bordallo. Mr. Chairman, I would like to have a copy of 
some of those fliers.
    Mr. Elmore. The only reason we have not provided them to 
you is literally, this morning, we are beginning distribution 
inside SBA to all of our program office heads so that they know 
of the availability, and they can ask my office for whatever 
number of copies that they need. We printed 5,000 
professionally, but we also have the ability to print these 
internally. So we are going to produce as many of these as are 
necessary. They are designed for all of our programs, all of 
our program partners, and specifically designed to try to 
assist Reserve and Guard members themselves with the things we 
believe they need to do to preplan before they are called.
    Certainly, I understand that no matter how well we design 
these things, no matter how good a job we do at putting the 
information out in the hands of the reservists, ultimately the 
work that has to be done rests, to a great degree, with the 
Reserve and Guard members themselves. If they do not take the 
steps to do the kinds of preplanning that are required, there 
are going to be too many instances of restaurant owners 
activated for 300 days that either are forced to be in a 
position where they have to sell their business, or they have 
to depend on someone else to try to manage them in their 
absence. Those are things that paper products and outreach can 
assist and support, but we cannot fix every instance. It really 
does take the Reserve and Guard members themselves to work with 
our resources.
    Ms. Bordallo. Thank you, Mr. Elmore. I do not know which 
one, perhaps Dr. Winkler. Do you have an opinion for this 
Committee on the level of success of these other 
entrepreneurial development programs in helping reservists? How 
are the others? Are they working because I think, especially 
you, Mr. Elmore, you are quite negative at the money situation 
and all for another new program, so how are the others working? 
Are they, in your opinion, a success?
    Dr. Winkler. I will really have to look into that and get 
back to you.
    Ms. Bordallo. Well, maybe, Mr. Elmore, you might be able to 
answer that.
    Mr. Elmore. I think what I see, and if you understand the 
structure of the agency, I do not manage the SBDC or the SCORE 
program; I work with them. They are a counterpart inside the 
agency. We have certainly seen, I think, a significant increase 
in activity out of our Small Business Development Centers into 
this arena. SCORE, for example, has increased their activity as 
well. They have created a special Web site, and they have e-
counseling specifically targeted to Reserve and Guard small 
business owners, and they have asked their 12,000 volunteers, 
who would like to sign up to additionally try to work with and 
support small business owners that are in the reserves?
    So we have seen that happen, and this is an example I can 
share with you. I received this actually by e-mail that today 
there is a Veterans Small Business Resource Day in the State of 
New York that one of our district offices, with our business 
outreach center, with SCORE, with SBDC, and with a number of 
other partners, are participating in to try to offer the full 
range of all of the SBA services and programs available to 
veterans, including Reserve and Guard. So I can share that with 
you.
    I cannot sit here and tell you that in every instance it is 
working. Of course, not. We have to build this, and that is 
what we have been trying to do, and there is a unique expertise 
that is developing inside SCORE and SBDC based on this. If you 
go back to the June hearing, we talked about the sort of dual 
responsibility business owners have. They have the 
responsibility that they have taken on to serve us and protect 
us in the Reserve and Guard, but they also have the 
responsibility to try to manage, maintain, and grow their 
business. So they do face unique circumstances and unique 
things that they need to deal with that most other small 
business owners do not.
    Ms. Bordallo. Thank you.
    Mr. Chairman, I have further questions on the next round.
    Chairman Akin. Thank you. I think our next questions come 
from Mike, and also we have been joined by Ted Poe, and you are 
just about in line for questioning next, Ted, so, Mike, why 
don't you fire away?
    Mr. Sodrel. Yes. A couple of things I left off my list of 
what I was. I am also a fiscal conservative, so you are getting 
my attention. As I was thinking through this, maybe being a 
facilitator more than a source of funds. The financial loss is 
the effect, not the cause. The cause is the person or persons 
have gone to military service. If you can avoid the financial 
loss, then no harm, no foul.
    I was just sitting here making a list: the SCORE, the 
Service Corps of Retired Executives,--
    Mr. Elmore. --of Retired Executives, yes, sir.
    Mr. Sodrel. --trade associations. You know, it may be that 
what we have here is the private sector really was not prepared 
for long-term deployments. When I was in the Guard, Company B 
of our battalion went to Vietnam on a long term, but mostly it 
was going to a flood like Katrina, tornado, some kind of civil 
disorder or something, where it was a two-, three-day, week, 
two-week deployment; it was not a long-term deployment. The 
unit went to Bosnia for longer term.
    So it seems to me that the mission of the Guard is changing 
over time, and people need to be more prepared. I think there 
are people out here that would volunteer to help the small 
business owner if they were prepared in advance and some system 
was put together. Maybe the SBA needs to be a facilitator more 
than a financier, working with the ESGR, SCORE, and trade 
associations, and whatnot being prepared in advance.
    I personally had to make a decision between small business 
and Guard service after seven years, and I chose the small 
business. I knew I could not balance both. But we have some 
really good people. We do not want to discourage them from 
serving in the Guard or Reserve just because they are a micro-
business.
    This is a really good piece, just a cursory look at it. Are 
there any funds available where you could be trying to 
facilitate, bring different groups together where we might 
prepare for this?
    Mr. Elmore. I think the approach that we have taken through 
the agency, and this really goes back to--it began in September 
2001, we reached out to Dr. Winkler's office, for example. My 
office did a little digging around and said, Who do we contact 
in DoD to try to begin to coordinate and collaborate? So we 
approached his office, and it was through his office and some 
meetings there that we began to engage in the broader side of 
DoD, the family support centers, for example, and ESGR.
    It was Dr. Winkler and his staff who said, Work with the 
National Committee for Employers in Support of the Guard and 
Reserve. They are, and I do not mean to speak for them, but 
they are representatives--they are a branch that engages into 
America's private sector on behalf of Reserve and Guard 
members. So a lot of the work we have done nationally has been 
to do that, to coordinate with them, to coordinate with the 
Department of Labor Veterans Employment and Training Service, 
with the president's National Hire Veterans Committee, for 
example; with the Department of Veterans Affairs through their 
Center for Veterans Enterprise; with ODEP and Department of 
Labor, which is a disability policy group focusing on those 
veterans that come back with disabilities.
    Those are the ones that I recall off the top of my head. At 
the same time, the district office effort and our business 
outreach centers have been directed to reach to these same 
communities locally. So when I work with a district office in 
Philadelphia, we ask that district office to touch base with 
and ask for the involvement of Labor, of VA, of ESGR to 
identify Reserve and Guard units themselves, to ask the state 
adjutant general to participate, to work with the state 
department of veterans affairs, to work with the American 
Legion to bring the VFW to the table, to really go out and try 
to bring what I think is sort of the veterans' side of the 
community into the mix because quite often it is their sons and 
daughters that are serving. Again, I expect you know that as a 
veteran yourself.
    So we are doing that now. This is a big country, and it 
does take a lot of work to do that. Each district office has a 
veterans business development officer inside SBA, and part of 
their job is to reach out to and engage vets, including now 
Reserve and Guard. That is where the district office outreach 
initiative comes into play, and if they give us a rudimentary 
plan on how they are going to include all of these potential 
partners, we will provide them resources out of my office to 
help them put those seminars, those programs, those outreach 
events like the one in New York together.
    Mr. Sodrel. Thank you, Mr. Chairman.
    Chairman Akin. Thank you, and let us see. Ted, I believe 
you are next.
    Mr. Poe. Thank you, Mr. Chairman. I appreciate all of you 
being here today. I was a former reservist in the United States 
Air Force Reserves and proud of it. I found, when I got to 
Washington, that everyone in Washington, D.C., outranked me and 
still outranks me, but I was proud to serve, and I am a big fan 
of the reserves and the Guard. I think that the country needs a 
stable Reserve and Guard, and we encourage young men and women 
to be in both as a national defense.
    I am concerned, over the years since when I served,--it has 
been a long time ago--the Guard and Reserve seem to be on the 
national scale and with government sort of the stepchild to the 
military. Their mission was not as important, or they were not 
as capable as the standing military. I do not know that that 
still is the perception or not. Be that as it may, it is very 
important to me that we do all we can here. It is better for 
the reservists when they go back home as our home Guard.
    I noticed that the SBA does not support the chairman's 
legislation, and one of the reasons is it would supposedly 
stretch the SBA's limited resources. Bottom line: How much more 
money would the SBA need to properly implement the Entrepreneur 
Soldiers Empowerment Act?
    Mr. Elmore. Is that a question, sir?
    Mr. Poe. Yes.
    Mr. Elmore. Well, if you do the math, and we were required 
to create another five centers funded at $200,000 each, 
presently we provide, maximum, $150,000 per center, so I think 
the math is pretty straightforward. The number of district 
offices that would require the local mentoring Committees would 
be $20,000 per location per year. In 2006, as I read the 
legislation, that would exceed a million dollars.
    I do not have the number at the top of my head, but 
obviously we are talking a couple of million dollars more, I 
think.
    Chairman Akin. I think the numbers that the staff provided 
me on that would be you have got 10 regions at $200,000 each, 
so that is $2 million, so that is one piece of it is $2 
million, and the other piece is really $1.3 million. So, Bill, 
you were right when you said it is just north of a million. We 
are looking at a total of $3.3 million, and the question is, is 
there a sufficient problem, and is there enough cost being 
picked up by families and people whose small businesses have 
been disrupted, whether this would be a good investment or a 
waste of money? That is what we have to figure out.
    Mr. Poe. Mr. Chairman, that is the only question I have.
    Chairman Akin. The second round of questions. Ms. Bordallo.
    Ms. Bordallo. Thank you very much, Mr. Chairman. I have a 
couple of questions here for Mr. Holtz-Eakin. Is that correct?
    Mr. Holtz-Eakin. That is correct.
    Ms. Bordallo. Are you familiar with the federal 
government's spending on veterans' programs, and if so, can you 
give the Subcommittee a general idea of how much money we spend 
on veterans' transition programs?
    Mr. Holtz-Eakin. I do not know off the top of my head. We 
could certainly get back to you with that for the record. I 
would be happy to.
    Ms. Bordallo. You do not have anything on the top of my 
head, ball park figure, really?
    Mr. Holtz-Eakin. No.
    Ms. Bordallo. Okay. Mr. Chairman, I might note here, just 
for the record, that I am very proud to be representing a small 
territory in the Pacific where we have more reservists and 
Guardsmen per capita than any state in the nation, and that is 
a fact.
    Now, the second part of the question: What is, in your 
opinion, the most important thing the Congress and the federal 
government can do to ease the burden of difficult deployments 
on small business? Should the Congress allocate more funds to 
current programs, or should the Congress seek to improve the 
functions and the programs themselves, or is it a combination 
of the two?
    Mr. Holtz-Eakin. I think it would be useful for the 
Congress to target solutions to particular problems, and two 
problems exist which get intermingled. One is the problem for 
business owners and the survival of those businesses while key 
employees are away. The second is income maintenance for those 
individuals who are actually deployed. Those are not 
necessarily the same thing. They get intertwined, particularly 
with the self-employed.
    So one set of solutions should be to do what is necessary 
to provide the ability to fill the economic hole with finances 
while the deployment is away,--that can maintain businesses--
and the second set of problems is coming up with appropriate 
ability for individuals to maintain their incomes while they 
are deployed, and that raises questions which spill over into 
appropriate manpower policy for the Department of Defense. Do 
you want to pay people differently who might have the same 
skills and the same job in the reserves because of their 
civilian occupations?
    So separating those, I think, is the first step, and then 
clearly one would want to make as effective a use of federal 
resources as possible. Planning would certainly be helpful in 
this regard so that, to the extent that there are disaster 
assistance loans available, there is knowledge of that, that 
people plan and think about the application in advance so that 
they can fill the hole the moment the reservist is called up.
    Those are the kinds of things that, I think, would make all 
of the existing programs more effective.
    Ms. Bordallo. Were there any others of the witnesses that 
want to elaborate on that question? I see a couple of you 
writing. Is there anything you wanted to share with us?
    Mr. Elmore. I was writing ``plan'' because I think it 
reiterates what we were talking about, is focusing our 
resources to make sure that the Reserve and Guard self-employed 
have the ability to take those steps to plan for what is going 
to happen in the event of an activation. I think, at its core, 
that is where the work, and the work primarily on the part of 
the owner, him or herself, has to take place. I think that is 
the best way to minimize whatever the damage or disruption may 
be.
    Ms. Bordallo. And getting back to your answer, are any of 
our current programs targeting those priorities that you 
mentioned?
    Mr. Holtz-Eakin. Certainly, the military reservists' 
economic injury disaster loans are about that problem. They are 
an attempt to fill the financial hole left in a small business, 
and the success of that program, I think, is one of the 
discussions we had earlier, whether enough people know about 
it--
    Ms. Bordallo. I do not think the numbers--I thought they 
would be much higher than they are. I am surprised. I did not 
know there were that many that withdrew that you do not 
approve, so that was kind of a disappointment to me. But I 
would like to have those figures, Mr. Chairman, for the 
Committee. Thank you.
    Chairman Akin. If we could get those numbers, that would be 
helpful. I think there were a few other questions that were 
prepared. I am not going to take everybody's time on those, but 
we may have a few additional questions for the witnesses.
    Any other questions? If not, the hearing is adjourned.
    [Whereupon, at 11:29 a.m., the Subcommittee was adjourned.]

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