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




 
                     FULL COMMITTEE MARKUP OF VIEWS
                       AND ESTIMATES OF THE SMALL
                   BUSINESS ADMINISTRATION'S PROPOSED
                      BUDGET FOR FISCAL YEAR 2009

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

                      COMMITTEE ON SMALL BUSINESS
                 UNITED STATES HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 27, 2008

                               __________

                          Serial Number 110-74

                               __________

         Printed for the use of the Committee on Small Business


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


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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman


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

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

               Kevin Fitzpatrick, Minority Staff Director

                                 ______

                         STANDING SUBCOMMITTEES

                    Subcommittee on Finance and Tax

                   MELISSA BEAN, Illinois, Chairwoman


RAUL GRIJALVA, Arizona               VACANT, 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


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

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

                                  (ii)

  
?

           Subcommittee on Regulations, Health Care and Trade

                   CHARLES GONZALEZ, Texas, Chairman


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

                                 ______

            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              DAVID DAVIS, Tennessee
HANK JOHNSON, Georgia

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, PENNSYLVANIA, Chairman


CHARLIE GONZALEZ, Texas              VACANT, Ranking
RAUL GRIJALVA, Arizona               LYNN WESTMORELAND, Georgia

                                 (iii)

  
?

                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Chabot, Hon. Steve...............................................     2

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................     5
Chabot, Hon. Steve...............................................     7
Altmire, Hon. Jason..............................................     8

                                  (v)

  


                     FULL COMMITTEE MARKUP OF VIEWS
                       AND ESTIMATES OF THE SMALL
                   BUSINESS ADMINISTRATION'S PROPOSED
                      BUDGET FOR FISCAL YEAR 2009

                              ----------                              


                      Wednesday, February 27, 2008

                     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 Velaquez 
[chairwoman of the Committee] presiding.
    Present: Representatives Velaquez, Grijalva, Lipinski, 
Altmire, Clarke, Ellsworth, Johnson, Hirono, Chabot, Bartlett, 
Musgrave, Davis and Buchanan.

           OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ

    Chairwoman Velaquez. I am pleased to call this morning's 
markup to order.
    Today the Committee will consider its views and estimates 
of the Small Business Administration's FY 2009 budget. The task 
comes before us at a time when our nation is in dire need of 
the job creation and growth that are hallmarks of the small 
business economy.
    Across America consumers are spending less on goods and 
services. Credit markets are tightening. And in the wake of the 
prime mortgage crisis, people are losing their homes. The 
situation calls for prompt action, and small businesses are 
ready to do their part to get the economy back on track.
    Unfortunately, the Administration's budget for FY 2009 is 
little different from those of the past eight years. It lacks 
new ideas, and instead chooses to continue the systematic 
eradication of the Small Business Administration. During the 
1990s, the agency had a seat at the President's elbow and a 
budget of $1 billion. The Small Business Administration 
expanded essential services to entrepreneurs and helped them 
lead one of our nation's greatest periods of economic 
prosperity.
    Today, the agency is a shell of its former self, as 
evidenced by the low morale of its employees. And its budget 
has been cut by more than 50 percent. For FY 2009 alone, 18 out 
of 26 core programs have been cut, flat-funded, or terminated 
all together. For instance, despite a demonstrated need for 
expanded technical assistance, the Administration cut the Small 
Business Development Centers and the Women's Business Centers. 
Funding is also slashed for the 7(a) loan program, and its 
lender fees are increased to the highest allowable level.
    These would be questionable decisions in an average year, 
but they are especially troubling when 80 percent of banks are 
tightening lending standards, and the economy has called out 
for an immediate infusion of capital.
    A wrong-headed approach is taken where the Microloan 
program is concerned. Whereas entrepreneurs of the past, 
including women and minorities in low-income areas, could look 
to this initiative for capital, the Administration's budget 
turns its back on them. In fact, instead of fostering the 
growth of small entrepreneurs, it raises interest rates on 
those who can least afford to pay them.
    It is all remarkably short-sighted, considering that many 
of these programs have been shown to put $2 into the Federal 
Treasury for every dollar invested. In other words, investing 
in small businesses is not only good for the economy, it helps 
reduce the deficit. Clearly, small businesses and the American 
people, as a whole, deserve far better than the President's 
budget.
    I, for one, believe it is time for the Small Business 
Administration to step up to the plate and draw on its lending, 
entrepreneurial development, and contracting programs to spur 
the economy. The views and estimates we have before us today 
take needed steps to remedy eight years of shortfalls and focus 
on fostering the type of growth that will bring us back from 
the brink of this looming recession.
    Our recommendations include $150 million for the 7(a) 
program, which will allow the agency to do over $20 billion in 
lending. We also encourage fully funding the SBDCs and WBCs, 
bringing small firms the professional support they require to 
succeed.
    We have an important opportunity to do the right thing for 
small businesses and the country this morning. In light of 
that, I urge each of you to support the Committee's views and 
estimates.
    I will now yield to Mr. Chabot for any comments he may 
have.

                OPENING STATEMENT OF MR. CHABOT

    Mr. Chabot. Thank you. Good morning, and I would like to 
thank the Chairwoman for holding this markup today on the 
Committee's views and estimates of the President's proposed 
Small Business Administration budget for Fiscal Year 2009.
    The budget submission for 2009 is not substantially 
different from the submission for the last fiscal year. The 
Chairwoman's views make some salient criticisms, and I concur 
with those. 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 country's fundamental economic strength. Despite agreements 
with the Chairwoman, I cannot fully concur with her views and 
estimates and will be filing separate views with the Budget 
Committee.
    I believe that the President's budget request proposes 
realistic funding levels, given the budgetary constraints 
facing the country. I think that the budget accomplishes a good 
deal by providing additional resources to train SBA employees, 
hire more workers that can provide assistance to small 
businesses seeking Federal Government contracts, and increase 
outreach to America's veterans. However, not everything in the 
SBA budget request comports with my stated objective that the 
agency have the resources available to meet the needs of small 
businesses and prospective entrepreneurs.
    For example, when inflation is taken into account, the 
ability of the SBA's entrepreneurial development partners to 
meet the needs of their clients could be called into question. 
Similarly, an increase in the number of procurement center 
representatives is a start, but an insufficient one in my 
estimation. The SBA needs to allocate more personnel for this 
vital role in increasing small business participation in the 
federal procurement system.
    Finally, the SBA, yet again, requested a zero subsidy for 
the Microloan Program. As a supporter of microlending and the 
benefits that accrue to low-income areas, I believe that the 
small amount in the budget devoted to microloans is well worth 
it. That being said, I must respectfully disagree with the 
concept that simply having more money thrown at a problem will 
solve it.
    Administrator Preston has tackled a number of problems from 
disaster loan backlogs to employee morale. He has done so 
within severe budget constraints. Sometimes all it takes is 
asking the right question and someone who wants to find a 
solution to the problem. Developing those solutions takes 
brainpower--something that federal budgetary resources cannot 
buy.
    It is my firm belief that Administrator Preston will 
continue to strive to make the agency the best it can be before 
he leaves it to the next Administrator. I certainly respect the 
Chairwoman's passion and devotion to the interests of small 
businesses. However, if it is true that the SBA remains a 
troubled agency, pouring more money into it may not be the 
optimal solution for America's small businesses and budding 
entrepreneurs.
    And I yield back, Madam Chair.

    Chairwoman Velaquez. Thank you, Mr. Chabot.
    Are there any other members that wish to be recognized on 
the views and estimates?
    [No response.]
    The Committee now moves to consideration of the views and 
estimates of the Small Business Administration's FY2009 budget. 
The Clerk will report the title of the document.

    The Clerk. A letter to the House Committee on the budget, 
expressing the Small Business Committee's views and estimates 
on the Fiscal Year 2009 budget for the U.S. Small Business 
Administration.

    Chairwoman Velaquez. I ask unanimous consent that the views 
and estimates document, in its entirety, be open for amendments 
at this time. Does any member seek recognition for the purpose 
of offering an amendment?
    [No response.]
    Seeing no amendments, the question is on agreeing to the 
views and estimates. All those in favor, say aye.
    [Ayes.]
    All those opposed, no.
    [Nos.]
    The ayes have it, and the views and estimates are agreed 
to.
    Yes, sir.
    Mr. Chabot. Madam Chair, just for the record, I wanted to 
note that we will be filing Republican views on the budget.
    Chairwoman Velaquez. Without objection.
    I ask unanimous consent that the Committee be authorized to 
correct punctuation and to make other necessary technical 
corrections on the document considered today. Without 
objection, so ordered.
    This markup is now adjourned.
    [Whereupon, at 10:22 a.m., the Committee was adjourned.]
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