[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                        FULL COMMITTEE MARKUP OF 
                       VIEWS AND ESTIMATES ON THE 
                    SMALL BUSINESS ADMINISTRATION'S
                      PROPOSED BUDGET FOR FY 2008

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

                      COMMITTEE ON SMALL BUSINESS
                 UNITED STATES HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 28, 2007

                               __________

                         Serial Number 110-2.1

                               __________

         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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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman


JUANITA MILLENDER-McDONALD,          STEVE CHABOT, Ohio, Ranking Member
California                           ROSCOE BARTLETT, Maryland
WILLIAM JEFFERSON, Louisiana         SAM GRAVES, Missouri
HEATH SHULER, North Carolina         TODD AKIN, Missouri
CHARLIE GONZALEZ, Texas              BILL SHUSTER, Pennsylvania
RICK LARSEN, Washington              MARILYN MUSGRAVE, Colorado
RAUL GRIJALVA, Arizona               STEVE KING, Iowa
MICHAEL MICHAUD, Maine               JEFF FORTENBERRY, Nebraska
MELISSA BEAN, Illinois               LYNN WESTMORELAND, Georgia
HENRY CUELLAR, Texas                 LOUIE GOHMERT, Texas
DAN LIPINSKI, Illinois               DEAN HELLER, Nevada
GWEN MOORE, Wisconsin                DAVID DAVIS, Tennessee
JASON ALTMIRE, Pennsylvania          MARY FALLIN, Oklahoma
BRUCE BRALEY, Iowa                   VERN BUCHANAN, Florida
YVETTE CLARKE, New York              JIM JORDAN, Ohio
BRAD ELLSWORTH, Indiana
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

               Kevin Fitzpatrick, Minority Staff Director

                                 ______

                         STANDING SUBCOMMITTEES

                   MELISSA BEAN, Illinois, Chairwoman


RAUL GRIJALVA, Arizona               DEAN HELLER, Nevada, Ranking
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana              STEVE KING, Iowa
HANK JOHNSON, Georgia                VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania             JIM JORDAN, Ohio

                                 ______

               Subcommittee on Contracting and Technology

                      BRUCE BRALEY, IOWA, Chairman


WILLIAM JEFFERSON, Louisiana         DAVID DAVIS, Tennessee, Ranking
HENRY CUELLAR, Texas                 ROSCOE BARTLETT, Maryland
GWEN MOORE, Wisconsin                SAM GRAVES, Missouri
YVETTE CLARKE, New York              TODD AKIN, Missouri
JOE SESTAK, Pennsylvania             MARY FALLIN, Oklahoma

        .........................................................

                                  (ii)

  


           Subcommittee on Regulations, Health Care and Trade

                   CHARLES GONZALEZ, Texas, Chairman


WILLIAM JEFFERSON, Louisiana         LYNN WESTMORELAND, Georgia, 
RICK LARSEN, Washington              Ranking
DAN LIPINSKI, Illinois               BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois               STEVE KING, Iowa
GWEN MOORE, Wisconsin                MARILYN MUSGRAVE, Colorado
JASON ALTMIRE, Pennsylvania          MARY FALLIN, Oklahoma
JOE SESTAK, Pennsylvania             VERN BUCHANAN, Florida
                                     JIM JORDAN, Ohio

                                 ______

            Subcommittee on Urban and Rural Entrepreneurship

                 HEATH SHULER, North Carolina, Chairman


RICK LARSEN, Washington              JEFF FORTENBERRY, Nebraska, 
MICHAEL MICHAUD, Maine               Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana              DEAN HELLER, Nevada
HANK JOHNSON, Georgia                DAVID DAVIS, Tennessee

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, PENNSYLVANIA, Chairman


JUANITA MILLENDER-McDONALD,          LOUIE GOHMERT, Texas, Ranking
California                           LYNN WESTMORELAND, Georgia
CHARLIE GONZALEZ, Texas
RAUL GRIJALVA, Arizona

                                 (iii)

  





































                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Chabot, Hon. Steve...............................................     2
Moore, Hon. Gwen.................................................     3

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................     7
Chabot, Hon. Steve...............................................     9

                                  (v)

  


                      FULL COMMITTEE MARKUP OF THE
                       VIEWS AND ESTIMATES ON THE
                    SMALL BUSINESS ADMINISTRATION'S
                      PROPOSED BUDGET FOR FY 2008

                              ----------                              


                      Wednesday, February 28, 2007

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:00 a.m., in Room 
2360, Rayburn House Office Building, Hon. Nydia Velazquez 
[chairman of the Committee] presiding.
    Present: Representatives Velazquez, Jefferson, Shuler, 
Gonzalez, Larsen, Grijalva, Lipinski, Moore, Altmire, 
Ellsworth, Johnson, Sestak, Chabot, Bartlett, Akin, 
Westmoreland, Heller, Fallin, Buchanan and Jordan.

           OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ

    Chairwoman Velazquez. The Committee is called to order.
    Today, the Committee fulfills its responsibility under the 
Budget Act with our consideration of the views and estimates 
for the SBA fiscal year 2008 budget. The views before us today 
make it clear that the administration's request is simply not 
the right priorities for the future of our small businesses.
    The budget simply does not do enough to help our businesses 
face the challenges of the 21st century. The proposed funding 
continues the six-year decline in federal small business 
programs. SBA expenditures have now been cut nearly in half in 
those six years. As such, this represents the lowest percentage 
of federal discretionary spending on small business programs in 
decades.
    We have heard over and over again that you cannot measure 
the agency's success purely by its funding, yet it is not 
coincidence that these cuts have occurred at the same time that 
we have seen a number of mishaps at the SBA. Loans intended to 
ease the 9/11 tragedy have gone to the wrong businesses. Small 
business contracts are being awarded to some of the world's 
largest corporations. Allegations of fraud in the agency's 
lending programs, and the debacle that was Katrina, still 
continues.
    At a time when entrepreneurs are facing historically high 
health care and energy costs, and unprecedented competition 
from overseas, it would seem appropriate to invest in programs 
designed to assist small businesses. However, 17 out of 26 core 
programs in the SBA are being cut, flat funded, or terminated 
by the President's budget. No one program receives any 
significant increase.
    Small business development centers, women's business 
centers, and SCORE are all flat funded, while being directed to 
provide additional services. Under this budget, the women's 
business center program will have seven centers eliminated, 
though it served the fastest-growing sector in our economy.
    The administration also proposes elimination of the funding 
for the microloan initiative and its technical assistance 
programs, which provides small loans to low-income communities. 
These attacks on the program are despite the fact that the 
microloan program has had only two defaults in 10 years, yet 
the cuts could cost a small borrower $4,000 over the life of 
the loan and reduce demand.
    The budget provides nothing to reduce the cost of the 7(a) 
loan guarantee program for small business borrowers. This comes 
at a time when the number of participating lenders is 
declining, and the average loan size has fallen by about 40 
percent in four years. It also fails to provide funds to reopen 
the agency's venture capital program. This will leave many 
entrepreneurs without the resources to grow and expand their 
businesses.
    I believe that Administrator Preston wants to run a helpful 
agency and to be candid and straightforward in working with 
Congress. I know each one of us aims to help SBA do better, but 
rebuilding takes more than good intentions and hard work. It 
also takes faith and some investment in the future of our small 
businesses.
    We can start that process today by adopting these views and 
estimates and recommending a budget that charts a course 
towards accountability and recovery for our small business 
program.
    I look forward to working with my colleagues on the 
Committee and the administration to see to it that the SBA has 
the resources it needs to assist our future entrepreneurs.
    And now I will recognize the Ranking Minority, Mr. Chabot, 
for his opening statement.

                OPENING STATEMENT OF MR. CHABOT

    Mr. Chabot. Thank you, Madam Chair. Thank you. I'd like to 
thank Chairwoman Velazquez for holding this markup today on the 
Committee's views and estimates of the President's proposed 
budget for the Small Business Administration.
    While I am in agreement with the Chairwoman on aspects of 
the majority's views and estimates document, I will be filing 
separate views in the next day or so. One of the most important 
things we can do as a Committee is to ensure that the SBA has 
the tools it needs to fulfill its mission to help small 
businesses--the backbone of our nation's economic prosperity 
and recovery.
    I believe the President's budget request proposes realistic 
funding levels and would strengthen budget authority levels for 
most SBA programs. The budget request proposes to cut fees, 
hire more procurement center representatives to help more small 
businesses obtain federal contracts, and increases services to 
veterans.
    However, as I said at our budget hearing, not everything in 
the SBA's budget request is perfect. For example, I believe 
that many of the entrepreneurial development programs at the 
SBA should have received at least an inflationary increase. If 
the SBA can receive more than an inflationary increase to pay 
for higher staff salary costs and rent, I believe that small 
business development centers and women's business development 
centers deserve similar increases, because they face identical 
pressures. Furthermore, I support additional increases in the 
number of personnel allocated to the function of procurement 
center representative.
    Beginning with tomorrow's hearing on increasing access to 
capital for our nation's small businesses, this Committee will 
begin taking the first steps towards reauthorizing the SBA and 
its programs--a process that hasn't been completed since 2002. 
It is important that the SBA and its programs be thoroughly 
reviewed and evaluated to improve what is working and to fix 
what isn't.
    I look forward to beginning the reauthorization process and 
yield back the balance of my time.
    Chairwoman Velazquez. Thank you, Mr. Chabot.
    Does any other member wish to be recognized on the views 
and estimates? Ms. Moore is recognized for five minutes.

                 OPENING STATEMENT OF MS. MOORE

    Ms. Moore. Thank you so much, Madam Chair and the Ranking 
Member, for your very sage comments. I was very pleased--very 
pleased to associate myself with the response of you, Madam 
Chairwoman, to the Budget Committee. I think that this document 
really lays out with a great deal of clarity some of the 
problems with the SBA loan programs.
    I think it is probably a very worthy goal of SBA to try the 
zero subsidy program and have the programs pay for themselves. 
But what we have seen is that our economic engine in this 
country--everybody agrees that 90 percent plus of our 
businesses--our small businesses--they simply cannot thrive 
without--even as the Ranking Member has said, without an 
inflationary increase at a minimum.
    Our biggest program--the 7(a) loan program--we have seen 
the fees passed on to both borrowers and lenders, substantially 
increasing, as you've pointed out, the cost of these programs 
to borrowers. And, of course, lenders don't have any incentive 
to work in these programs.
    Some of our other programs that are very popular with non-
profit, and so forth, again, with the zero-based subsidy there 
is a huge disincentive for intermediaries to get involved with 
these loan products. And the consolidation into the S&E lines 
of some of the programs that serve many minority programs is 
very troubling as well.
    I think that we can't have it both ways. My Mom would say 
you can't talk out of both sides of your mouth. You can't say 
on one hand that you want to help small businesses, and then 
basically cut all of the resources that you would have.
    I think that there are many programs in the United States, 
in the Federal Government, that we can fund, but this is an 
investment in SBA. It is an investment that will--that with the 
multiplier effect will be seen by the growth in job development 
that we create.
    Thank you. I yield back.
    Chairwoman Velazquez. Thank you. Does any other member wish 
to be recognized on the views and estimates?
    [No response.]
    Seeing no other members wishing to be recognized, we will 
now move that the Committee adopt the views and estimates. All 
those in favor say aye.
    All those, say no.
    In the opinion of the chair, the ayes have it.
    Mr. Chabot. Madam Chair?
    Chairwoman Velazquez. Yes.
    Mr. Chabot. I ask for a recorded vote.
    Chairwoman Velazquez. A recorded vote is requested. The 
Clerk shall call the roll.
    The. Clerk. Ms. Velazquez.
    Chairwoman Velazquez. Aye.
    The. Clerk. Ms. Velazquez votes aye.
    Mrs. Millender-McDonald.
    [No response.]
    Mr. Jefferson.
    [No response.]
    Mr. Shuler.
    Mr. Shuler. Aye.
    The. Clerk. Mr. Gonzalez.
    Mr. Gonzalez. Aye.
    The. Clerk. Mr. Larsen.
    [No response.]
    Mr. Grijalva.
    Mr. Grijalva. Aye.
    The. Clerk. Mr. Michaud.
    [No response.]
    Ms. Bean.
    [No response.]
    Mr. Cuellar.
    [No response.]
    Mr. Lipinski.
    [No response.]
    Ms. Moore.
    Ms. Moore. Yes.
    The. Clerk. Mr. Altmire.
    Mr. Altmire. Aye.
    The. Clerk. Mr. Braley.
    [No response.]
    Ms. Clarke.
    [No response.]
    Mr. Ellsworth.
    Mr. Ellsworth. Yes.
    The. Clerk. Mr. Johnson.
    [No response.]
    And Mr. Sestak.
    Mr. Sestak. Yes.
    The. Clerk. Mr. Chabot.
    Mr. Chabot. No.
    The. Clerk. Mr. Bartlett.
    [No response.]
    Mr. Graves.
    [No response.]
    Mr. Akin.
    [No response.]
    Mr. Shuster.
    [No response.]
    Ms. Musgrave.
    [No response.]
    Mr. King.
    [No response.]
    Mr. Fortenberry.
    [No response.]
    Mr. Westmoreland.
    [No response.]
    Mr. Gohmert.
    [No response.]
    Mr. Heller.
    [No response.]
    Mr. Davis.
    [No response.]
    Ms. Fallin.
    Ms. Fallin. No.
    The. Clerk. Mr. Buchanan.
    [No response.]
    Mr. Jordan.
    Mr. Jordan. No.
    Chairwoman Velazquez. Any other member who wishes to cast 
their vote or change their vote?
    Mr. Akin. How am I recorded?
    The. Clerk. Mr. Akin, your vote?
    Mr. Akin. Is no.
    Mr. Orban. Mr. Westmoreland is here now, too.
    The. Clerk. Mr. Akin votes no.
    Mr. Westmoreland.
    Mr. Westmoreland. No.
    Mr. Orban. Roscoe Bartlett is also here.
    The. Clerk. Mr. Bartlett.
    Mr. Bartlett. No.
    The. Clerk. Mr. Bartlett votes no.
    Mr. Orban. Mr. Heller is also here.
    The. Clerk. Mr. Lipinski.
    Mr. Lipinski. Aye.
    The. Clerk. Mr. Johnson.
    Mr. Johnson. Aye.
    The. Clerk. Mr. Johnson votes aye.
    Mr. Orban. Mr. Heller.
    Mr. Heller. No.
    The. Clerk. Mr. Heller votes no.
    Chairwoman Velazquez. Any other members who wish to cast 
their vote or change their vote?
    [No response.]
    If not, the Clerk will report.
    The. Clerk. Madam Chair, the total ayes are 10, with 
total--or 12, with total 6--
    Mr. Orban. Madam Chair, could I ask how Mr. Buchanan is 
recorded?
    The. Clerk. Mr. Buchanan had not voted. Mr. Buchanan.
    Mr. Buchanan. No.
    The. Clerk. Mr. Buchanan votes no.
    Mr. Larsen.
    Mr. Larsen. Yes.
    The. Clerk. Mr. Larsen votes yes.
    Chairwoman Velazquez. Any other members wish to be recorded 
or change their vote?
    [No response.]
    If not, please, the Clerk will report.
    The. Clerk. Madam Chair, the ayes 13, the nays 7.
    Chairwoman Velazquez. Well, the Committee agrees to the 
views, and should be submitted to the budget. I recognize Mr. 
Chabot for the purpose of a motion.
    Mr. Chabot. Thank you, Madam Chair. We will be offering a 
separate view in the next day or so.
    Chairwoman Velazquez. Thank you. Well, let the record 
reflect that this meeting is now adjourned. Thank you.
    [Whereupon, at 10:19 a.m., the Committee was adjourned.]

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