[Senate Hearing 111-57]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 111-57
 
 CONFIRMATION HEARING OF KAREN GORDON MILLS TO BE ADMINISTRATOR OF THE 
                     SMALL BUSINESS ADMINISTRATION

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



                                HEARING

                               BEFORE THE

            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                        WEDNESDAY, APRIL 1, 2009

                               __________

    Printed for the Committee on Small Business and Entrepreneurship


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                                 senate
            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP



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                     ONE HUNDRED ELEVENTH CONGRESS

                              ----------                              
                   MARY L. LANDRIEU, Louisiana, Chair
                OLYMPIA J. SNOWE, Maine, Ranking Member
JOHN F. KERRY, Massachusetts         CHRISTOPHER S. BOND, Missouri
CARL LEVIN, Michigan                 DAVID VITTER, Louisiana
TOM HARKIN, Iowa                     JOHN THUNE, South Dakota
JOSEPH I. LIEBERMAN, Connecticut     MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington           JOHNNY ISAKSON, Georgia
EVAN BAYH, Indiana                   ROGER WICKER, Mississippi
MARK L. PRYOR, Arkansas              JAMES E. RISCH, Idaho
BENJAMIN L. CARDIN, Maryland
JEANNE SHAHEEN, New Hampshire
KAY HAGAN, North Carolina
           Donald R. Cravins, Jr., Democratic Staff Director
              Wallace K. Hsueh, Republican Staff Director


                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Landrieu, The Honorable Mary L., a United States Senator from 
  Louisiana......................................................     1
Snowe, The Honorable Olympia J., a United States Senator from 
  Maine..........................................................     2
Shaheen, The Honorable Jeanne, a United States Senator from New 
  Hampshire......................................................     7
Bayh, The Honorable Evan, a United States Senator from Indiana...    17
Cardin, The Honorable Benjamin L., a United States Senator from 
  Maryland.......................................................    20
Hagan, The Honorable Kay, a United States Senator from North 
  Carolina.......................................................    22

                           Witness Testimony

Mills, Karen Gordon, Nominee for SBA Administrator...............     8

          Alphabetical Listing and Appendix Material Submitted

Bayh, The Honorable Evan
    Opening Statement............................................    17
    Questions to Karen Mills.....................................    18
Bond, The Honorable Christopher S.
    Prepared Statement...........................................    31
    Post-Hearing Questions.......................................    32
Cardin, The Honorable Benjamin L.
    Opening Statement............................................    20
    Questions to Karen Mills.....................................    20
Collins, The Honorable Susan M.
    Prepared Statement...........................................     3
Hagan, The Honorable Kay
    Opening Statement............................................    22
    Questions to Karen Mills.....................................    22
Landrieu, The Honorable Mary L.
    Opening Statement............................................     1
Mills, Karen Gordon
    Testimony....................................................     8
    Prepared Statement...........................................    10
    Answers to Post-Hearing Questions............................    33
Shaheen, The Honorable Jeanne
    Opening Statement............................................     7
    Questions to Karen Mills.....................................    16
Snowe, The Honorable Olympia J.
    Opening Statement............................................     2


 CONFIRMATION HEARING OF KAREN GORDON MILLS TO BE ADMINISTRATOR OF THE 
                     SMALL BUSINESS ADMINISTRATION

                              ----------                              


                        WEDNESDAY, APRIL 1, 2009

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:03 a.m., in 
Room 428-A, Russell Senate Office Building, Hon. Mary L. 
Landrieu (chairman of the committee) presiding.
    Present: Senators Landrieu, Bayh, Cardin, Shaheen, Hagan, 
and Snowe.

OPENING STATEMENT OF THE HONORABLE MARY L. LANDRIEU, CHAIRMAN, 
               AND A U.S. SENATOR FROM LOUISIANA

    Chairman Landrieu. Good morning. I would like to bring the 
confirmation hearing to order for the nomination of Karen 
Gordon Mills to be Administrator of the SBA. Welcome, Ms. 
Mills, to our committee.
    I would like to also welcome all those in the audience. I 
am sure many are family and friends, in particular I understand 
that Barry Mills is with us today and we welcome the husband of 
our nominee.
    I am looking forward to the more official introduction by 
my colleague, Senator Snowe, who has known you, I understand, 
for many years and will be doing the official introduction, but 
I do have a brief opening statement for the record.
    I know that those here in attendance understand the 
extraordinary work that is before Ms. Mills, coming into an 
agency that has been, in my view, almost dangerously 
underfunded in the last administration and at a time of 
extraordinary challenge for our small businesses across the 
country. But if there was ever a nominee up for the task, I 
believe this nominee most certainly is.
    She graduated Magna Cum Laude from Harvard University with 
a degree in economics. She is going to need to rely on all of 
that good training to lead this effort. She started out working 
as a project manager for General Mills and then segued into 
what was to become her true passion, growing new businesses. 
She was a founding partner and managing director of Solera 
Capital, a New York-based venture capital firm run largely by 
women. She currently serves as President at MMP Group, Inc., a 
private equity investment and advising firm, and she has served 
in that position since 1993.
    Senator Snowe will give more details in her introduction. 
Ms. Mills demonstrated her leadership potential in many 
activities in Maine, but has also been involved nationally and 
internationally. The scope of her work has been very, very 
broad.
    In my several meetings with Ms. Mills, I am happy to share 
that she and I have a great deal in common in terms of our 
views and passion about the work that she is undertaking. We 
want this agency to expand and to be more robust, a more 
muscular, reliable, and trustworthy partner to community banks 
and other lending entities to help our small businesses and our 
entrepreneurs, which really are the pride of America, in their 
efforts to lead us out of this recession.
    She has a particular interest, of course, in assisting 
women and minority entrepreneurs, which is something the 
Ranking Member and I share.
    Senator Snowe. Thank you.
    Chairman Landrieu. I also want to say that in our meetings, 
we have also talked about the SBA reaching out to being a 
stronger partner with more of our community banks as we work 
for job creation in America.
    And finally, we discussed an emphasis on quality, not just 
the quantity of our work, but the quality of our work, to make 
sure that the programs in the SBA are structured and focused in 
a way that we can measure results and make sure that this 
agency is really a model, not just for our country, but for the 
world as other nations look to see how their governments can 
partner with growing businesses.
    Let me just add that the SBA was not part of the last 
administration's cabinet. Under the previous administration, 
the budget was slashed by 28 percent. I am pleased to say that 
Senator Cardin, a member of our committee, has already 
established a much higher number in the budget allocation for 
the Small Business Administration and I want to thank Senator 
Cardin, who will be with us later this morning.
    But in conclusion, I believe that President Obama's 
nominee, Karen Mills, has the right mix of experience, 
education, passion, and a willingness to serve that will be a 
true benefit to the entrepreneurs and small businesses of 
America today. So I look forward to the rest of this hearing 
and I would now like to turn it over to our Ranking Member, 
Olympia Snowe from Maine.

  OPENING STATEMENT OF THE HONORABLE OLYMPIA J. SNOWE, A U.S. 
                       SENATOR FROM MAINE

    Senator Snowe. Thank you. Thank you, Madam Chair, for 
calling this hearing today and for your leadership in all 
respects, and particularly in moving forward swiftly at this 
critical juncture to consider the President's nomination of Ms. 
Karen Gordon Mills to be the next Administrator of the Small 
Business Administration.
    Despite the fact that today happens to be April Fool's Day, 
you are not in for any April Fools pranks, but with Congress, 
you never know. [Laughter.]
    Senator Snowe. Also interesting, in thinking about the fact 
that the President has nominated a woman to lead the Small 
Business Administration, it comes at a time, actually, when 
Chair Landrieu and I have made history, because for the first 
time in the entire history of the Congress, a Chair and Ranking 
Member have both been women for a standing committee. So I 
think that women are going to be leading the way.
    Senator Shaheen. I agree with you.
    Senator Snowe. And I also want to recognize, speaking of 
women leaders, my colleague, Senator Collins, who is 
regrettably unable to be here today because of a critical 
hearing at the Senate Armed Services Committee, but I want to 
include her full statement in the record.
    [The prepared statement of Senator Collins follows:]
             Prepared Statement of Senator Susan M. Collins
    I am honored to support Karen Mills' nomination to be the next 
Administrator of the U.S. Small Business Administration (SBA). Karen 
has exactly the skills needed to lead the SBA at this critical time.
    As this Committee is well aware, small businesses play a critical 
role in our nation's economy. In Maine alone, we have 154,000 small 
businesses. About 112,000 are self-employed individuals, and another 
42,000 of these small businesses have employees. These Maine 
entrepreneurs created nearly 5,000 new jobs in 2007 alone. During the 
last decade, America's small businesses have created about 70 percent 
of all new jobs.
    Our economic recovery ultimately depends on our nation's small 
businesses. To boost small businesses, strong and effective leadership 
is required. As a former New England Regional Administrator of the SBA, 
I know how essential this agency is to our nation's economy. Karen 
Mills has exactly the experience and background to lead the U.S. Small 
Business Administration in these tough economic times.
    Karen's ties to Maine are particularly strong, and she has worked 
hard to strengthen the small business sector of our State.
    I can speak from first-hand knowledge of Karen's drive, 
determination, and dedication to helping small businesses based on our 
work together on legislation last year. Karen was instrumental in 
helping craft the ``The National Innovation and Job Creation Act of 
2008,'' which former Senator Clinton and I introduced. This bill aims 
to spur the adoption of new technologies and practices that can 
accelerate economic growth and build a secure foundation for good, 
high-paying jobs. It would also facilitate the creation of cluster 
developments--geographic areas where inter-related economic activity is 
taking place. Businesses that locate in clusters build the foundation 
they all rely on to succeed, even as they compete with one another. 
Because of this, clusters are often at the heart of strong regional 
economies.
    Karen has been a champion of cluster development in Maine. She 
helped Maine secure $15 million in WIRED funding to further develop the 
composite and boatbuilding clusters, a project with the potential to 
create 2,500 high-quality Maine jobs over the next five to seven years. 
She is the Chair of the Governor's Council on Competitiveness and the 
Economy.
    In 2006, Karen applied her leadership to the initiative for a $50 
million competitive research and development bond, which passed the 
Maine Legislature with strong bipartisan support and was approved by 
public referendum. She also sits on the Governor's Council for the 
Redevelopment of the Brunswick Naval Air Station, which recently went 
on the BRAC closure list, and serves on the boards of the Maine 
Technology Institute and the Maine chapter of the Nature Conservancy.
    To anyone who knows Karen, her community leadership is no surprise. 
She has been a leader in the private equity and venture capital 
industry since 1983. She has taken a leadership role in the growth of 
more than 20 companies in consumer products, food, distribution, 
textiles, manufacturing and industrial component sectors. Karen was a 
co-founder and managing director of Solera Capital. She served as Chief 
Operating Officer of E.S. Jacobs and Company, a private equity firm 
with investments of almost $600 million, 4,100 employees, and 32 
plants. Karen truly shares the spirit and know-how of small business 
owners.
    If confirmed as SBA Administrator, Karen will be charged with 
managing many of the new tools provided for SBA as part of the American 
Recovery and Reinvestment Act. This stimulus package of investment and 
tax relief has many provisions to help America's small businesses 
recover, grow, and expand. It provides more than $730 million to SBA to 
make changes to the agency's lending and investment programs. Of that 
amount, $375 million will be directed to reduce or eliminate fees on 
SBA loans and to increase the SBA guarantee on certain loans. These 
funds will help small businesses keep their doors open and thaw 
secondary markets for SBA-backed loans.
    I strongly support Karen's nomination to be the next Administrator 
of the SBA and look forward to working with her to address the many 
challenges confronting ournation's small businesses.
    I urge the Committee to approve her nomination.

    Senator Snowe. I join the Chair in welcoming Ms. Mills' 
husband, Barry, who has quickly earned a sterling reputation 
for his incomparable vision in leading Bowdoin College as the 
President of that college. There is no question that he has 
done an extraordinary job for this venerable 215-year-old 
institution. And no, I wasn't there at the founding, thank you 
very much. [Laughter.]
    Senator Snowe. Together, Barry and Karen have truly been 
both halves of a remarkable duo, with three exceptional sons, 
as well, who although they are not here today, I certainly want 
to recognize them. William, we are so thankful to learn that he 
is making a tremendous recovery from his surgery and he 
continues to be in our thoughts and prayers. George is in 
Brunswick High School, and I am sure he wishes he was here 
today rather than in school. And Henry, who is at Williams 
College, who also excelled as an intern in my Portland office.
    Let me also acknowledge what a pleasure it is to have some 
additional honored guests in the audience. One of Karen's good 
friends and good friends of mine, Mary Herman, who is the wife 
of Maine's second independent Governor, Governor Angus King, 
and my immediate successor as a former First Lady of Maine. She 
has made exceptional contributions to our State with tireless 
efforts across the board in her championship and advocacy for 
women and for children, for breast cancer awareness, for 
teaching and nursing. She did so much in so many ways, so it is 
great to have you here.
    And to Katy Longley, the former Commissioner of 
Professional and Financial Regulation for Governor King during 
his administration and currently Senior Vice President of 
Finance and Administration and Treasurer of Bowdoin College. So 
we welcome you all and everybody here today.
    Madam Chair, it truly couldn't be a greater pleasure to 
personally introduce Ms. Mills, not only because she hails from 
my home State of Maine, but because I could not believe more 
strongly that she is precisely the right person at this pivotal 
moment for our economy to assume the reins of the agency 
responsible for America's preeminent job generators, which is 
of course small businesses, the very entities that are going to 
lead us out of the morass and ultimately forge a path towards 
recovery.
    As her record and her testimony will demonstrate, Karen 
Mills is a champion of creating business success. Not only does 
she have a stellar depth and breadth of experience that comes 
from a State where over 97 percent of firms are small 
businesses, Maine is also a true microcosm and laboratory for 
the issues affecting small businesses across this great nation.
    And I can tell you firsthand from the many conversations 
that Karen and I have had as friends and talking about the 
state of small business, she brings a panoply of skills and 
talents to this cornerstone position on President Obama's 
economic team, and that is why I am very proud to have 
recommended Ms. Mills as our next Administrator of the SBA.
    For Ms. Mills, entrepreneurship is quite literally in her 
blood. Her grandfather was a box supplier to Tootsie Roll, who 
during the Great Depression took over controlling interest in 
the company, which he later passed on to his family and which, 
by the way, is still run by her parents, who are remarkably in 
their 80s.
    And Ms. Mills determined early on to forge her own path of 
excellence, as the Chair has indicated, earning a Bachelor's 
degree at Harvard in economics, a Master's in business 
administration from Harvard, as well, where she was a Baker 
scholar. After obtaining her MBA in 1977, Ms. Mills began her 
30-year career in business as Product Manager with General 
Foods Corporation, subsequently going to work for McKinsey and 
Company, which provided management consulting for various 
businesses.
    But it was in 1983 as Chief Operating Officer that Ms. 
Mills began to focus on investing in small businesses and 
managing their operations, where she also had operating control 
of businesses with more than $600 million in sales. But she 
understood the challenges. She understood what it was going to 
require for them to weather the economic storm. Indeed, during 
the harsh recession of the early 1990s, she oversaw multiple 
small manufacturing firms whose products ranged from hardwood 
floors to refrigerator motors to plastic injection molding. At 
that time, she spent countless hours on the shop floors helping 
manufacturers institute innovative methods to become more lean, 
thereby increasing their efficiency and productivity, not to 
mention their survival during that very difficult economic 
time.
    In the late 1990s, Ms. Mills joined with two other women 
partners in forming Solera Capital, where she was also not only 
the co-founder, but Managing Director. It was a venture capital 
firm that focused heavily on investing in women-owned small 
businesses like Annie's Homegrown, an organic food company, and 
Latina Media Ventures, a mixed media company, all the more 
relevant to leading the SBA's women-owned businesses, which as 
we all know are the fastest-growing segment of our entire 
economy.
    Ms. Mills was critical to these businesses' success, 
helping them to expand their product lines, find ways to become 
more efficient and grow their markets, and since helping to 
form Solera, Ms. Mills spent the next decade in various 
positions and capacities helping to provide financing and 
venture capital for small businesses in America.
    In 2001, Karen and her husband, Barry, moved to Maine, when 
he became President of Bowdoin College, and it wasn't long 
before Ms. Mills' talents commanded notice. In fact, the 
current Governor, Governor John Baldacci, recruited her to 
serve as a member of the Governor's Council for the 
Redevelopment of Brunswick Naval Air Station, an instrumental 
role for our State given the loss of an estimated 6,500 jobs in 
the surrounding areas when that base ultimately and regrettably 
closes.
    As is always her fashion, she hit the ground running, 
helping to spearhead successful efforts to secure a $15 million 
grant from the Department of Labor to provide workforce 
training and development in composite boat building within the 
Brunswick region. Since then, Maine has become a leader in 
building boats and marine products with new composite 
materials.
    In 2006, Ms. Mills provided invaluable support to the 
Brookings Institute in developing a report charting Maine's 
future, an action plan for promoting sustainable prosperity and 
quality places. During that process, she traveled across the 
State with authors who were intrigued by her economic 
development proposals, which included the concept of using 
cluster networks or geographic concentrations of interconnected 
firms and supporting organizations that share knowledge and 
resources to innovate, create higher-wage employment, and spur 
regional economic growth.
    Following the successful release of that report, Ms. Mills 
was asked to author another renowned Brookings report that 
focuses on the way the Federal Government can foster economic 
growth through the development of cluster networks throughout 
the entire nation.
    Indeed, Ms. Mills has been a crucial advocate for the 
development of innovative jobs, serving as the Chair of 
Governor Baldacci's Council on Competitiveness and the Economy. 
Inspired by the success of the boat building in the Brunswick 
region, she recommended the passage of a $15 million Maine 
Research and Development Bond to spur economic growth and 
innovation, and thanks to her work and to the work of others, 
that was a successful initiative in 2007.
    So unquestionably, Ms. Mills' nomination could not be more 
well-timed, given her academic background, her private sector 
experience, and her extraordinary efforts over the past three 
decades in which she has been fully and totally immersed in the 
challenges of building businesses and creating jobs.
    Let me also say, and one of the concerns that I have had 
and I know the Chair has, as well, all too often, small 
businesses are overlooked in the role that they play in our 
nation's economy. Frankly, that is something that we hope that 
you will be elevating in terms of that profile, because I 
happen to believe that small businesses, given the fact they 
represent half of all the workforce in America and half of the 
non-farm gross domestic product, that too few people recognize 
the role that they do play. They are underappreciated, they are 
unrecognized, and they are certainly unsung heroes of our 
economy, and that was a message that we conveyed to the 
President during the course of his Business Summit that he 
convened last month, in which the Chair and Ms. Mills attended, 
as well, and conveyed that sentiment, which is really crucial.
    That is why Chair Landrieu and I feel very strongly in 
advocating for elevating the SBA Administrator position to 
cabinet-level status. It is vital to have a consistent, 
persistent, and constant voice at the table with the President, 
because it will give small businesses the economic stature and 
standing that they deserve in the nation's economy.
    Karen Mills grasped what must be accomplished, that we must 
act aggressively to thaw the frozen credit markets, which is 
something we will discuss here this morning, as well, that is 
obviously inhibiting small business economic growth and also 
inhibiting our ability to pursue a path of recovery. SBA 
lending has been particularly hard hit. While the SBA typically 
guarantees $20 billion on an annual basis, that lending has now 
declined to less than $10 billion. So Ms. Mills' vast 
experiences in venture capital and providing capital to 
struggling businesses and turning them into prosperous entities 
cannot be overstated, especially since it is long past time we 
begin to shore up SBA's flagship program, the 7(a) loan 
program, the 504 loan program that focuses on job creation, as 
well as the Microloan program.
    In conclusion, while the undertakings at hand are 
monumental, I am totally confident that Ms. Mills will excel 
because of her impressive private sector experience, her 
passion in promoting innovation and competitiveness, and I have 
no doubt that she will lead the SBA into a new level that the 
small businesses deserve in this country and ultimately will 
benefit everyone in our nation, and particularly at this very 
transformational time.
    So Madam Chair, I urge my colleagues on this committee to 
strongly support this nomination and I will also hope, and I 
know the Chair shares this sentiment, that we can confirm her 
nomination this week before we recess for the April break.
    Thank you.
    Chairman Landrieu. Thank you for that very thorough and 
beautiful introduction. It is our hope that we can conduct this 
hearing this morning and move very swiftly before the break for 
your confirmation by the full Senate.
    Let me now turn to our colleague, Senator Shaheen.

   OPENING STATEMENT OF THE HONORABLE JEANNE SHAHEEN, A U.S. 
                   SENATOR FROM NEW HAMPSHIRE

    Senator Shaheen. Thank you very much, Madam Chair. I will 
be very brief this morning, but I wanted to echo your words of 
welcome to our nominee, Karen Mills, and to all of the Mainers 
who are here with you this morning, and of course to your 
husband. As a neighboring State, we share many of the same 
concerns and a special commitment to small business that I know 
both Maine and New Hampshire share. I am delighted to be able 
to welcome you this morning and I share the enthusiasm that we 
have heard from Chair Landrieu and Ranking Member Snowe for 
your nomination. I was very impressed when we had the 
opportunity to meet in my office in early February by your 
commitment to small business, by your understanding of the 
challenges that they face, and by your vision for what the SBA 
could become in the future.
    You are taking over at a particularly critical time, as has 
been said. The challenges facing small business and the role of 
small business in the country are particularly critical right 
now. As I look at New Hampshire and the challenges that 
business in New Hampshire face and remember our history, in the 
early 1990s, it was the SBA that really kept so many small 
businesses afloat during our recession. Unfortunately, many of 
the resources and the personnel that were available at that 
time are not available today. So I appreciate your commitment 
to rebuilding a robust Small Business Administration and the 
importance that will have in getting the economy moving again.
    I certainly want to commend the President for your 
nomination and for elevating the SBA to a cabinet-level 
position. I am going to stop there because I want to allow more 
time for questions, but I just want to point out that one of 
the things we did was to ask on our website small business 
people from New Hampshire what questions they would like to 
have me ask of you this morning, so I have a number of very 
good, very thoughtful questions.
    I will stop there so we can get to that aspect of this 
morning's discussion. Thank you.
    Chairman Landrieu. Thank you, Senator. Excellent idea.
    Now, if you would stand, Ms. Mills. Our committee rules 
require that the nominee testify under oath, so if you would 
raise your right hand.
    Do you solemnly swear to tell the truth, the whole truth, 
and nothing but the truth, so help you God?
    Ms. Mills. Yes.
    Chairman Landrieu. Please be seated.
    Thank you. Should you be passed by this committee and 
confirmed by the Senate, you know that you will be asked to 
testify on a variety of different matters from time to time, to 
provide information to this committee and to others. Are you 
willing to appear and testify before any duly constituted 
committee of Congress when requested to do so?
    Ms. Mills. Yes.
    Chairman Landrieu. And I am going to ask you one other 
question, then we will get to your opening statement. Just to 
follow up and to reiterate how important Senator Snowe and I 
feel about this, we have sent not one, but two letters to 
President Obama requesting that he issue an Executive Order 
within the first 100 days to elevate the SBA to a cabinet-level 
position. Considering this is day 72, we have 28 days left. My 
question is, have you talked to him about this personally, and 
if so, can you give us a sense of what the response was, and if 
not, do you intend to speak with him personally about it?
    Ms. Mills. It is the President's decision about who he 
wants in his cabinet. He has assured me that, as you know, I 
will be part of the NEC, the National Economic Council, and be 
very much a part of all of these discussions and that small 
business will be very much a part of the agenda.
    Chairman Landrieu. Thank you. We will hear your opening 
statement at this time and then resume the questioning.

 TESTIMONY OF KAREN GORDON MILLS, NOMINEE TO BE ADMINISTRATOR, 
               U.S. SMALL BUSINESS ADMINISTRATION

    Ms. Mills. Thank you very much. Chair Landrieu, Ranking 
Member Snowe, members of the committee, I am honored to be 
under consideration to be the head of the Small Business 
Administration. I would like to thank Ranking Member Snowe for 
her kind introduction and also Senator Collins, who could not 
be here today, for all her support. I would also like to 
express my appreciation to President Obama for this opportunity 
to join his economic team at this time of historic challenge.
    Building and growing a small business has been a defining 
tradition in America. Many of us are children and grandchildren 
of hard-working immigrants, men and women who are able to start 
and grow their own business. Small business is at the heart of 
the American economy. There are over 26 million small 
businesses in this country and they create 70 percent of the 
new jobs. This means that to find our way out of the current 
economic crisis, we have to find ways to help small businesses 
stay in operation and even expand.
    There are at least two kinds of small business that are 
served by the Small Business Administration. The first are the 
small businesses of Main Street, and these are the dry cleaners 
and the restaurants and the car repair operations that are part 
of our daily lives. They depend on the credit from the SBA's 
7(a) and 504 programs and from advice from over 14,000 SBA 
affiliated counselors.
    The second type are the high-growth, high-impact businesses 
which have the potential to grow to the next American giants. 
Did you know that Federal Express, Apple, and Intel were all at 
one time supported by the SBA? Others include AOL, Ben and 
Jerry's Ice Cream, and UnderArmor, which is a company that 
makes high-performance sporting clothes which my family 
purchases in great quantity in this season, which is lacrosse 
season. And it was started in a basement in Georgetown, not far 
from here. For all these enterprises, from Main Street shops to 
the next potential Intel, we know one thing. If the SBA can 
help these small businesses grow and prosper, jobs will be 
created and America will be able to compete anywhere in the 
world.
    Today, however, small businesses face an uncertain future. 
The recession has reduced demand for their goods and services. 
With the credit crisis, it is increasingly difficult for them 
to find the financing they need for normal business activities. 
Currently, loan guarantees from the SBA are down over 50 
percent. There are several reasons for this decline and they 
are interrelated: Lower creditworthiness of borrowers, tighter 
lending standards, lack of liquidity in bank balance sheets, 
and a frozen secondary market for SBA guaranteed loans.
    The Congress and this committee deserve great praise for 
recognizing these problems and for incorporating important 
measures for small business in the Recovery Act. And as you all 
know, on March 16, the President committed $15 billion from the 
Troubled Asset Relief Program to be available to purchase SBA 
guaranteed paper in the secondary markets. This effort, in 
conjunction with the SBA's 90 percent guarantees and fee 
reductions, will go a long way to unlocking the credit small 
businesses need.
    Senators today, small businesses are suffering and the SBA 
has lacked the leadership and the resources to help them. These 
are problems we can fix. If confirmed, I will work on three 
important fronts.
    First, the SBA must continue to execute the plans in the 
Recovery Act.
    Second, we must reinvigorate the agency by attracting a 
strong and passionate leadership team and investing in the 
information technology the agency needs to operate.
    Finally, we must, and I will, act as an advocate for small 
business across the administration. As Chair Landrieu and 
Ranking Member Snowe have suggested, I will coordinate with 
other agencies, including Commerce and Labor and Energy, whose 
programs also affect small business.
    As Senator Snowe mentioned, I have a long history of being 
deeply involved in small business. I was there on the factory 
floor in Arkansas and in Ohio, working to weather the recession 
of the early 1990s. That is why I understand what our small 
businesses need today to survive this downturn and to prosper 
in the years ahead.
    The sum of my experience is this. I am a believer in 
American small business. I am a believer in America's ability 
to manufacture goods and services that can compete across the 
world. And I am a believer in America's spirit of 
entrepreneurship. This spirit is one of our country's greatest 
assets and we need to cultivate it today, now more than ever.
    Thank you for considering my nomination to head this agency 
during these difficult times. If confirmed, I pledge to pursue 
these tasks with the utmost energy and to be your partner in 
giving small business the help they need to thrive, to grow, 
and to put Americans back to work.
    I know that Senator Snowe has already introduced my family. 
My husband, Barry, who is the President of Bowdoin College, is 
here today, and we do have three boys, George, who is back at 
Brunswick High School, Henry, who is at Williams College, and 
our son William graduated from Columbia and, as Senator Snowe 
said, is recovering from an operation and doing quite well and 
I want to thank you for all your kind thoughts and prayers.
    Thank you very much, and I would be happy to take 
questions.
    [The prepared statement of Ms. Mills follows:]
                Prepared Statement of Karen Gordon Mills
    Chair Landrieu, Ranking Member Snowe, and Members of the Committee, 
I am honored to be under consideration to become the Administrator of 
the Small Business Administration. I would like to thank Senator 
Collins and Ranking Member Snowe for their kind introductions. I would 
also like to express my appreciation to President Obama for this 
opportunity to join his economic team at this time of historic 
challenge.
    Building and growing a small business has been a defining tradition 
in America. Many of us are the children and grandchildren of hard-
working immigrants--men and women who were able to start and grow their 
own businesses. This is a legacy I am proud to be part of and want to 
promote for our future.
    Small business is the heart of the American economy. There are over 
twenty-six million small businesses in this country and they create 70 
percent of the new jobs. This means that to find our way out of the 
current economic crisis, we have to find ways to help small businesses 
stay in operation and even expand.
    There are at least two kinds of small businesses that are served by 
the Small Business Administration. The first are the small businesses 
on Main Street--the restaurants, the drycleaners, and the car repair 
operations--that are a part of our daily lives. These businesses depend 
on credit from the SBA's 7a and 504 programs and advice from more than 
14,000 SBA affiliated counseling centers.
    The second type are the high growth, high impact businesses which 
have the potential to grow into the next American giants.
    Did you know that Federal Express, Apple and Intel all were at one 
time supported by the SBA? Others include AOL, Ben and Jerry's Ice 
Cream and UnderArmor--a company that makes high-performance sports 
clothing which my family purchases a great quantity of this time of 
year during lacrosse season--it was started not far from here in a 
basement in Georgetown.
    These businesses all started out getting an SBA loan, a government 
contract or an SBIC investment.
    For all of these enterprises, from Main Street shops to the next 
potential Intel, we know one thing: if the SBA can help these small 
businesses grow and prosper, jobs will be created, and America will be 
able to compete anywhere in the world.
    Today, however, small businesses face an uncertain future.
    The recession has reduced demand for their goods and services. With 
the credit crisis, it is increasingly difficult for them to find 
financing for normal business activities and expansions.
    Currently, loan guarantees from the SBA are down by over 50% from 
their levels a year ago. There are several causes of this decline--and 
they are inter-related: lower creditworthiness of borrowers, tighter 
lending standards, lack of liquidity in bank balance sheets, and a 
frozen secondary market for SBA guaranteed loans.
    The Congress and this Committee deserve great praise for 
recognizing these problems and for incorporating important proactive 
measures for small business in the Recovery Act. This Act reduces fees 
to both borrowers and lenders, increases the guarantee percentage on 
SBA loans and works to unfreeze the secondary markets. In addition, 
many viable but struggling businesses will get a $35,000 lifeline to 
bridge them for 6 months of interest and principal payments--which the 
SBA will fully guarantee.
    As you all know, on March 16th, the President committed $15 billion 
from the Troubled Asset Relief Program to be available to purchase SBA 
guaranteed paper in the secondary markets. This effort in conjunction 
with the SBA 90% guarantees and the fee reductions will go a long way 
to unlocking the credit small businesses need.
    If confirmed, I pledge to work as a partner with this Committee to 
fully implement these important recovery programs.
    Senators, today small businesses are suffering and the SBA has 
lacked the leadership and the resources to help them. These are 
problems we can fix.
    If confirmed I will work on three important fronts:
    First, the SBA must continue executing the plans in the Recovery 
Act and get capital flowing again through the core SBA loan programs.
    Second, we must reinvigorate the Agency by attracting a strong and 
passionate leadership team and investing in the information technology 
the agency needs to operate.
    Finally, we must--and I will--act as an advocate for small business 
across the administration. As Chair Landrieu and Ranking Member Snowe 
have suggested, I will coordinate with other Agencies, including 
Commerce, Labor and Energy, whose programs also affect small 
businesses.
    I have a long history of being deeply involved in small businesses. 
In the mid 1980s, I was responsible for a number of traditional 
manufacturing businesses--from plastic injection molders in Ohio--to a 
sub-fractional motor company in Arkansas.
    I was there on the factory floor when we had to weather the 
recession of the early '90s. Those experiences give me a deep 
understanding of what our small businesses need today to survive this 
downturn and to prosper in the years ahead.
    Since then I have helped grow companies in organic food, and 
women's media, and spent time in rural Maine helping our boat builders 
use composite technology to help them compete throughout the globe.
    The sum of my experience is this: I am a believer in American small 
business. I am a believer in America's ability to manufacture goods and 
services that are world class, and I am a believer in America's spirit 
of entrepreneurship. This spirit is one of our country's greatest 
assets and we need to cultivate it today, more than ever.
    Thank you for considering my nomination to head this crucial agency 
during these difficult times. If confirmed I pledge to pursue these 
tasks with the utmost energy, and to be your partner in giving small 
businesses the help they need to thrive, to grow and put Americans back 
to work.
    Before taking your questions I would like to introduce to the 
Committee my family. My husband Barry is the president of Bowdoin 
College and is here with me today. We have 3 boys. George is 16 and is 
home at Brunswick High School. Henry is 20 and is at Williams College. 
William--our eldest and a graduate of Columbia University is home 
recovering from an operation as some of you know and is doing quite 
well. We would like thank everyone for your kind thoughts and prayers 
on his behalf.

    Chairman Landrieu. Thank you very much.
    Let me begin. This issue was raised in the Post this 
morning, so we would just as soon start off with the efforts 
that our committee has made along with the House committee to 
work closely with the administration to make suggestions about 
what should be included in the stimulus package in thawing the 
credit markets for our Main Street businesses. And one of the 
things that quickly came to our attention in a variety of 
different ways was how the secondary market was frozen, and we 
congratulate and commend the President for quick action to set 
aside or to allocate $15 billion for that effort.
    But all the details of that have not yet been worked out 
and we want to make sure that that program actually works, gets 
the job done. What suggestions would you have to us and to the 
President to make sure that that money is allocated 
appropriately for that effort, which is very, very significant 
in our number one job right now, which is to get this credit 
market moving for Main Street businesses?
    Ms. Mills. Well, as this committee noticed and spoke about 
as early as last December, one of the main problems and 
impediments to getting credit to small business is that the 
secondary markets are frozen. And as it turns out, all of the 
roundtables and groups and hearings have pointed to this issue 
as being fundamental to the problem that banks have, and that 
is because if banks, particularly community banks, lend and 
they have loans on their balance sheet, usually they are able 
to sell them into a fluid, liquid secondary market, and that 
secondary market is not operational despite the fact that all 
the paper in it has SBA guarantees.
    So one of the important first priorities needs to be, as 
you all pointed out in the Recovery Package and in other 
methods, is to unstick that market. Fifteen billion dollars has 
been allocated by the President from the Troubled Asset Relief, 
the TARP program, to go into that market and provide a 
guaranteed market for loans that are going to come--that are 
going to be made by banks, community banks, and thereby giving 
them fresh capital to lend to small businesses.
    So I think we are focused on exactly the right issue, the 
right problem, and the capability will be there. The details of 
that program have actually not yet been announced, so they will 
be forthcoming, and I know that Treasury is working very 
closely now with the SBA and others to make sure--and the 
marketplace to make sure that this program will be successful 
and I have every confidence that it will be.
    Chairman Landrieu. Well, one of the immediate benefits of 
your swift confirmation would be that you will have a seat at 
the table to make sure that those details are worked out in a 
way that is as beneficial as we hope it could be when we 
suggested it for the small businesses across the country that 
are really waiting for that relief.
    Let me ask you, in the stimulus package, as well, there 
were provisions for raising the guarantee from 75 percent to 90 
percent and eliminating some of the fees associated with 
borrowing. In your mind, are those things going to have an 
immediate impact on the situation and is there anything in 
addition that we could suggest as we move forward with 
additional stimulus support and help?
    Ms. Mills. Once again, thanks go to this committee for 
putting those fee reductions and the 90 percent guarantee into 
the Recovery Act. In fact, on March 16, while at the same time 
as the President announced the $15 billion, he also announced 
that those programs from the SBA, the 90 percent guarantee and 
the fee reduction, would be operational. And, in fact, they are 
operational and we have already--the SBA has already made loans 
of $1.4 billion under those new programs.
    Chairman Landrieu. Okay. I would like to talk for just a 
moment about the size of the SBA, and as we focus on quality, 
but in some measure, the strength of an organization, I mean, 
you can only accomplish your work with the right number of 
staff and I think we all recognize that the agency has been 
reduced from 2,800 full-time employees in 2001 to around 2,000 
full-time employees now. In fact, in the District Office in New 
Orleans, we had 21 employees. Now, we are down to about ten. We 
had an unprecedented challenge for small businesses before the 
recession hit around the country, since we were fighting our 
own economic downturn with the results of the storms of Katrina 
and Rita.
    To ensure that we can reenergize this agency, I would like 
to know what some of your specific plans are as you have been 
working with the transition team and have been looking at this 
position for some time. Can you share with us the particular 
program areas that you would like to see upgraded or improved? 
I would like you to share at least two or three of those 
initiatives with us at this time.
    Ms. Mills. Well, thank you, Senator. This is a great 
agency. It has, you know, a bone structure that goes across the 
country. It does $84 billion of loan guarantees in its 
portfolio. It has 14,000 counselors. It has over 100 district 
operations and offices. So it has enormous reach.
    But as you all know and have noted, it has been underfunded 
over the last eight years. So the personnel in the agency have 
gone from 3,000 to 2,000 and the budget, as you mentioned, has 
been cut by 28 percent. Thank you for the attention and the 
budget memo, I think that you all wrote, which would raise that 
amount in this next budget coming up.
    There are a number of things that can be done to make these 
operations more robust. A couple of them that I think are 
really critical. The first, of course, is the core loan 
operations and getting those core loan operations more 
distributed around the country. And we have talked about this, 
but one of the key objectives will be to add to the number of 
banks that we have that are SBA lenders. This number has been 
going down. We are apparently in about 50 percent of the 
Federal banks, but in a very low percentage of the State banks 
and the community banks and we can have greater penetration. So 
that would be one objective.
    The other is to improve our front end, which is our 
connection to borrowers, as well as to lenders, using all of 
the technology that the new information systems might be able 
to give us and the web and to make the program more accessible, 
more seamless, more paperless, and easier to use.
    And one of them that I just have to mention that I think 
you have given us money for in the Recovery Act that I would 
like to put some focus on is the Microloan program. At this 
time, we can, I think, reach some very important 
constituencies. Women tend to be high users of Microloans, and 
I think we can use them for veterans, as well.
    Chairman Landrieu. Thank you. I have some additional 
questions, but I want to make sure that the other members have 
an opportunity, so I would like to turn to Ranking Member 
Snowe. And let me welcome Senator Bayh and Senator Cardin, who 
have been very active members of this committee, and 
particularly congratulate again Senator Cardin for his good 
work on the Budget Committee to try to at least reserve some 
room for the SBA to grow and expand and to get much better 
under your leadership, Ms. Mills. Thank you, Senator Cardin.
    Senator Snowe.
    Senator Snowe. Thank you, Madam Chair.
    Ms. Mills, I couldn't agree with you more in terms of the 
order of your priorities as you assume this position in the 
SBA. Executing the provisions of the stimulus plan have to be 
front and center, as you have indicated. Truly critical, and 
like the Chair in indicating concern about the TARP program, I 
believe this illustrates sometimes the difficulties of getting 
these programs up and running.
    In looking at the schedule of the various provisions that 
are in the stimulus plan, there are only two that had a 
mandated implementation date. One has been implemented in the 
7(a) guarantee. The other one is the Business Stabilization 
Loan, which concerns me because obviously that is a lifeline 
for small businesses who are viable but otherwise need some 
Federal assistance in order to get through these very difficult 
times.
    My question to you is, in looking through all of these 
various provisions, from the 504 job creation requirements, the 
504 refinancing, the expansion of Microloans, the secondary 
markets, and so on, all of these provisions have yet to be 
implemented. Now, some have been designated between April 3 and 
16, or the end of April, some for the end of May. I believe 
those deadlines are far too long. Frankly, they all should be 
implemented within a month. I strongly advise that you ensure 
these provisions are implemented very quickly, because I don't 
think that we can afford an economic vacuum when it comes to 
small businesses who already, as you well know, are shuttering 
their doors all across Main Street in America.
    And so it concerns me that there is going to be this lag 
time, and now coupled with the TARP problem, and I will get to 
that in a moment, but I was wondering what would be your view 
in terms of getting these initiatives up and running within a 
month. We need to have an aggressive time table, and when I see 
the dates on the projected implementation, from the end of 
April to the end of May and so on, and one that was on March 
5th for the Business Stabilization Loan, it truly does concern 
me that we won't do the things that these programs are designed 
to accomplish immediately and urgently.
    Ms. Mills. Senator, I absolutely agree that we must make 
our first priority to implement these provisions in the 
Recovery Act. As you know, there are a number of them, but one 
of the ones that you just mentioned, this Business 
Stabilization Loan, or the ARC loan, is going to be very 
important. It is $35,000 of, we call it the bridge over 
troubled water, bridge financing, which would pay for interest 
and principal to a loan where the business is viable. So it is 
sort of the bridge from this difficult time through another six 
months. And that is a new program. It is absolutely in the 
process of being designed and regulated, and one of the tricky 
things, of course, is to interpret what is viable and make sure 
that those loans go out in a responsible way, and that is going 
to be something that I will make an absolute first priority 
when I join.
    Senator Snowe. I appreciate that, because in just talking 
to some Maine bankers yesterday, they were indicating that some 
of these initiatives will be truly effective and crucial and 
helpful to small businesses, and I believe it is key is to 
getting them up and running as quickly as possible, and I am 
always concerned about bureaucratic inertia. There are always 
things that take your ultimate objectives in the bureaucracy, 
and so you have to be the driver of this engine. I just want to 
make sure that this money is available and also that these 
initiatives are fully implemented as soon as possible because 
of the critical time and trying to avert job losses, as well.
    Now, with the TARP program, based on this morning's story 
in the Washington Post, it was suggesting that somehow a body 
be created outside the government to purchase these loans as a 
way of getting around the restrictions that had been posed on 
TARP recipients regarding executive compensation. How would you 
view that, creating a body outside government?
    Ms. Mills. Well, at this time, as you know, the $15 billion 
of TARP money is designed to be the purchaser of any loan that 
the SBA would make so that any bank would have the ability to 
sell to a buyer and know that the government would be there to 
purchase that loan. It is already SBA guaranteed. So it would 
be a purchase of an already guaranteed piece of paper.
    The details of this program are not yet final, but they are 
very well along and in process and I would, as I heard the 
Chair ask me to before, want to be immediately active in 
constructing exactly the right--these are complicated 
provisions and regulations, and so it would have to be within 
the bounds of those. But I am very confident that a set of 
terms are going to be announced that will be positive for the 
market and that we will unstick this market.
    Senator Snowe. The President mentioned at the White House 
Summit that all of these initiatives were the first step, not 
the only step. Do you have ideas in terms of what should be the 
next steps beyond this? I mean, first, do you think that these 
will be effective and successful in and of themselves, or 
should we go further in taking additional steps, as the 
President indicated?
    Ms. Mills. Well, first, I think we need to not only 
implement the steps that we have, but measure the progress. So 
for the secondary market, we will know if we have unstuck it 
and we will know if new loans are being created. So there are a 
number of metrics that I believe might be very good benchmarks 
for the committee and for ourselves to look at on a routine 
basis, for instance, the number of new loans being made, the 
volume in the secondary market, and these are metrics that we 
track now and that are public. So these will be important.
    It is quite possible that we will need to think about 
additional measures that would either reach banks that are not 
only SBA lenders, so that is one of the reasons we talked about 
finding ways to broaden our reach.
    And the second area that we have talked a lot about is what 
do we do about the high-growth, high-impact companies which 
need different kind of capital to grow and perhaps in the seed 
and angel areas, those capital sources are drying up. So that 
would be a second area, I think, to worry about.
    Senator Snowe. Thank you. Thank you, Madam Chair.
    Chairman Landrieu. Thank you.
    Senator Shaheen.
    Senator Shaheen. Thank you.
    One question, a variation of which I got from businesses 
from Strafford County down to Nashua, had to do with government 
contracting. As the SBA website notes, the world's largest 
buyer of goods and services is the Federal Government, with 
purchases totaling more than $425 billion a year. Federal 
agencies are required to establish contracting goals for small 
business with at least 23 percent of all government buying 
targeted to small firms. However, a number of our small 
businesses have expressed concern that every year, billions of 
dollars in those Federal contracts that are intended for small 
business are diverted to large businesses, including Fortune 
500 corporations. What can the SBA do to make sure that those 
government contracts really do go to small business?
    Ms. Mills. Well, I am a believer in the government 
contracting program for small business because I believe it is 
a win-win situation. It is very good for small businesses to 
have that set of contracts that allows them to get to the next 
level, and after that they can build their commercial business, 
their export business. And I believe it is good also for the 
purchaser of those goods and services, because when you 
contract with a small business, you can get the most innovative 
products, you can get the CEO and the leadership to work with 
you, and many women-owned businesses and other minority-owned 
businesses get a good start in this, as well.
    So I think this is win-win. I think the programs are for 
small business. They are not for big business. So we have to 
ensure that we do not have slippage and that we monitor and 
have transparency about who is getting the contracts and make 
sure that the small business set-aside is for small business.
    Senator Shaheen. Thank you. As I am sure you know, Congress 
recently passed a temporary extension of several SBA programs, 
including the Small Business Innovation Research Program, a 
program that has been very important to a number of New 
Hampshire businesses, from Crearie in Hanover to Vtech down in 
Nashua. The program across the country has enabled over 17,000 
small businesses to conduct R&D projects, creating 1.5 million 
high-wage jobs. They have led to more than 55,000 patents and 
thousands of innovations that have met critical national needs 
at Federal agencies and resulted in commercialized products.
    So the concern among some of those businesses in New 
Hampshire is what is your commitment to support long-term 
reauthorization of the SBIR program in its current form, which 
they and I think many people would agree has been very 
successful?
    Ms. Mills. Well, I have to agree, and I know you have just 
said many statistics, but I have to just say a couple more 
because this is an extraordinarily successful program, and over 
its time, you know, small businesses in general make 12 to 14 
times the number of patents per employee as large companies. 
This is where our innovation comes from. Over 50 percent of the 
SBIR Phase II companies have a product that goes to 
commercialization. So how do we turn innovation into jobs? SBIR 
plays a critical role.
    And there is also data--I know the National Academies have 
a very good study out recently supporting this program and 
saying it meets the objectives of Congress and also has very 
strong success in creating innovation, creating jobs, but is a 
great metric that says the SBIR companies do four times the 
number of jobs and grow four times as fast as in a comparable 
sample. So that was a separate study that I thought was really 
powerful.
    So we would want to--they also say that the form that it is 
in now, where it is distributed into agencies, there is some 
flexibility on how each agency does it, and it is competitive, 
is also very powerful. So I would be very supportive of 
continuing this program.
    Senator Shaheen. Thank you. I guess--I am sure you are 
aware that one of the concerns about the program ongoing is 
whether small businesses in which venture capitalists have more 
than a 49 percent stake should be eligible for SBIR. Given your 
background, I am sure you have particular thoughts about that 
particular provision. Can you reassure people who may be 
concerned about changes there what you would support relative 
to that issue?
    Ms. Mills. Yes, I can. I think there are two important 
principles that we have to think about. The first is that this 
program is for small businesses. It is not, once again, for big 
businesses, and we can't do something that crowds out the small 
business. On the other hand, the second principle is that we 
want the very best businesses. So we don't want to somehow, 
because of arbitrarily or in some way restrict ourselves from 
small businesses who somehow get excluded, but they are some of 
the most promising businesses and should be included.
    In those two principles, I think using those principles, I 
don't have a fixed view, but I do know that the National 
Academies is coming out with a suggestion and that this 
committee has in the past looked at various suggestions which 
include thresholds of restricting what percentage of the 
allocations in various areas can go to venture capital 
majority-owned businesses and thereby not have the crowding out 
program.
    So I do not have a fixed point of view, but I do think 
those two principles should guide us as we think it through.
    Senator Shaheen. Thank you.
    Chairman Landrieu. Senator Bayh.

 OPENING STATEMENT OF THE HONORABLE EVAN BAYH, A U.S. SENATOR 
                          FROM INDIANA

    Senator Bayh. Thank you, Madam Chairman.
    Ms. Mills, welcome once again. I can't begin to tell you 
how delighted I am at the prospect of your taking the helm at 
the SBA. I noted your academic background, with double degrees 
from Harvard, which we in the Midwest, Madam Chairman, would 
refer to as the Indiana University of the East. [Laughter.]
    Senator Bayh. So your academic credentials are impeccable 
and I really enjoyed our discussion about how you intend to 
modernize and streamline the management of the operation. As 
you say, there is a great bone structure there, but it needs to 
be updated, and I think the consumers, the constituents, the 
small businessmen and women, the entrepreneurs who utilize 
those services will really appreciate your effort to make it 
more responsive to their needs. So I want to thank you for 
that.
    And finally, I note with great interest that in addition to 
all of that, you have a Hoosier on your staff, so you are 
hiring the best and we appreciate that.
    Three quick questions. Madam Chairman, I want to follow up 
on something that you mentioned at the beginning and that was 
that it is important for our small businessmen and women to 
have a seat at the table, and I certainly agree with that. You 
outlined the budget cuts. Several others have mentioned the 
budget reductions that took place under the last 
administration. I think something like 27 percent of the budget 
was cut under the previous administration, not exactly placing 
a priority on the needs of small businesses and entrepreneurs. 
The Department was also demoted in status from a cabinet-level 
position to a non-cabinet-level position.
    I would like to ask your opinion, Ms. Mills. Do you think 
it would be important and appropriate to elevate once again the 
role of the Small Business Administration to full cabinet-level 
status to give you a seat at that cabinet table?
    Ms. Mills. Well, Senator, I am delighted to be here and I 
also want to say I enjoyed our conversation, particularly about 
innovation, where you have been a leader in the clusters and in 
other innovation activity and in your fairs and your job fairs 
that you have in Indiana.
    Small business is related to so many of the other 
activities that happen around the administration and it is an 
important part of the economic policy because, of course, that 
is who creates many of the jobs. It is important because a 
trained workforce is critical for small business. At Veterans, 
we have connections with our programs to veterans. We want to 
do many things with Commerce in innovation as well as in trade, 
where they have trade missions. In Agriculture, many of the 
small business programs overlap.
    So it is important that there be--that small business be 
part of the discussion in all of those areas. Those discussions 
will take place many places. I think one of the critical 
tables, as I understand it, is at the National Economic 
Council, which I will be a member of.
    Senator Bayh. I understand this is ultimately a call for 
the President and it would sound a little selfaggrandizing for 
you to come out and agree with it just to my question. 
However---- [Laughter.]
    Senator Bayh [continuing]. On behalf of most of us here, we 
want to help you out because we think it is important. Ninety-
seven percent of the businesses in Indiana are small 
businesses. The vast majority of Hoosiers work for smaller 
companies. And as you point out, they are among our most 
innovative and most rapidly-growing companies. So at least 
speaking for myself, I would like to see small businesses 
represented at that cabinet table, so we are trying to give you 
a little wind at your back, and I know you can't comment about 
that.
    You mentioned innovation, and Senator Shaheen rightfully 
brought it up. As you know, I have worked in that area, as have 
you. There is a proposal to try and double the amount of money 
that goes to the set-asides by government entities for small 
business innovation, from 2.5 percent to five percent, to 
really focus on those most rapidly-growing companies where a 
lot of the innovation does take place. I would like to ask if 
you have an opinion about that proposal, to double the amount 
of resources going to small business innovation.
    Ms. Mills. As I said earlier, the SBIR is an incredibly 
successful program and it does seem that we could have greater 
capacity, that we could use greater capacity in many of the 
areas. So it would be something that I would like to work with 
the committee on and see what the appropriate level would be.
    Senator Bayh. Thank you. Finally, before my time expires, 
it was really--I thought it was a nice symmetry. The President 
made his last stop before the election in Indianapolis, 
Indiana. He made his first trip outside of Washington as 
President back to Indiana. That was the good news. He did not 
forget us.
    The unfortunate news was that he came to Elkhart because we 
have the highest unemployment rate of any county in the country 
in Elkhart County, Indiana. It is above 18 percent right now. 
That is because we make manufactured housing there, which is 
struggling. It is also because Elkhart is the center for RV 
production in the country, and that has been hard hit. I think 
the unemployment--about half the people in the industry have 
been laid off now, so it is really quite severe.
    You pointed out, and I want to congratulate you for some of 
the steps that have already been taken to get business loans to 
small businesses out the door already and to reduce the fees. 
There is one thing that would be particularly helpful for the 
small businesses, the working men and women who work in the RV 
industry in Elkhart County, and that is to make the loans 
eligible to purchase floorplan inventory. That would be very 
helpful for a time when they are struggling. I understand they 
are now not eligible for that. I would like to ask for your 
help in making them eligible for that. Do you have an opinion 
about whether we can do that?
    Ms. Mills. Thank you, Senator. The floor plan inventory in 
the RV industry is a very important question and it is also a 
parallel question in the automotive sector, as well, because 
the same issue is happening with the car dealership inventory, 
and I would be very interested to look at that quickly on 
joining and see what the possibilities are to help.
    Senator Bayh. Thank you, Ms. Mills. My time is expired, 
Madam Chairman, but I would just say this. These people are 
hurting. The President came to Elkhart, wanted to help. This is 
one way we can provide real relief for these people right now, 
so I would like to work with you to make that happen.
    Chairman Landrieu. Thank you, Senator, and I would like to 
follow up as I recognize Senator Cardin. We had some very 
moving testimony in this committee just two weeks ago by some 
small business owners and one of them was a car dealership, 
very proud to have run his business, which he created with his 
wife, for over 20 years. Senator you raised an excellent point 
because there is a real need for us and the SBA to focus on 
dealerships, particularly as Congress reaches out to provide 
help to the manufacturers. The dealers and the small businesses 
and the parts suppliers that are down the food chain don't feel 
like they are getting a great deal of attention.
    So I know that it is hard to pick out one sector because 
there is so much shared pain across the country, but I am glad 
that Senator Bayh raised that point and I wanted to just 
reiterate and ask you to focus particularly on that industry.
    Senator Cardin.

 OPENING STATEMENT OF THE HONORABLE BENJAMIN L. CARDIN, A U.S. 
                     SENATOR FROM MARYLAND

    Senator Cardin. Well, Madam Chair, thank you very much. Ms. 
Mills, it is a pleasure to have you before the committee and I 
appreciate your responses today.
    Let me underscore a couple points that have been made. I 
have had recent town hall meetings and meetings with small 
business owners in Maryland, and they are very well attended. 
There is a common theme that small businesses in Maryland and 
around the nation are in trouble and they are in desperate need 
of an SBA that is going to be their advocate, that will be very 
open with the administration and Congress as to what we need to 
do to expand opportunity for small businesses in our country. 
They raise issues from the availability of credit to how 
government contracts work, what obstacles are in the way, the 
use of bundling and prime contract issues to negate some of the 
effectiveness of our set-aside laws.
    Several of us have mentioned this, but let me just put my 
expectation on the table, that we will have an Administrator 
who will be the advocate for small business, not just within 
the administration, but with Congress, and that you will not 
only look for ways to use the tools that you have available 
directly, such as guaranteeing loans, but also that you will 
work aggressively with Federal agencies on the procurement 
laws.
    There is every excuse imaginable used, particularly in 
tough budget times, and procurement officers in agencies will 
say, well, we have a comfortable relationship with this 
contractor, and by the way, there are subcontracts going to 
these smaller companies, when in reality it is really bundling 
that is denying the direct contracts that are important for 
small business growth.
    So I hope that you will look at this position as being an 
advocate and providing independent information that at times 
may differ from what we receive from other Federal agencies, so 
that we can do our job in Congress and make sure the small 
businesses are, in fact, getting the benefits of the laws that 
we pass.
    I will just mention one other area and I will invite your 
response. When you have a growing pie, it should be easier. And 
now we have passed the American Recovery and Reinvestment Act, 
which presents enormous opportunities for contracts around the 
country. There should be a Federal agency that is charged with 
saying, did small business get its fair share of this economic 
opportunity?
    Ms. Mills. Well, Senator Cardin, I think we really have to 
give you many thanks for what you did on surety bonds in the 
Recovery Act, because surety bonds are a way that small 
contractors are able to come and bid on the infrastructure, and 
for various reasons in the tight credit markets, surety bonds 
were less and less available and also the limits were too low. 
And I know that you made an enormous effort to--and were 
successful to raise those limits and to have surety bonds be an 
important part, and they are getting very good reception in the 
marketplace already. So hopefully this is already taking place. 
We have anecdotal information and hope to have more metrics, as 
well.
    I am a believer that government contracting and government 
contracting for small business, and as I said, I think it is 
win-win. I think that small businesses win, but I also think 
that the agencies win because you get the most innovative 
products, you get--but sometimes agencies don't know how to buy 
from small businesses. It is more troublesome. It is more work. 
What if they go out of business?
    So one of the things that we might think about is improving 
and increasing the number of procurement reps and the training 
for the agency procurement officials. And the President has put 
out a big initiative on procurement and I would hope and will 
work to make small business an important part of that new 
initiative so that we can get the most innovative products and 
services to our Federal agencies.
    Senator Cardin. Let me mention the second issue that is 
also under your portfolio, which is to make sure we do what is 
right for minority businesses, women-owned businesses, veterans 
businesses, and I am going to be asking from the SBA 
statistical information as to how well we are doing in meeting 
our obligations for these businesses. This is to put you all on 
notice. We could do a lot better. We made some progress, by the 
way, in the last Congress, and I want to see us continue to 
make progress to help vulnerable small businesses.
    The last point is the HUBZone issue. I would like to get 
your view on that. There has been a critical GAO report as to 
how the program is operated. I think the HUBZones are 
critically important for underserved and vulnerable 
communities, and the program provides unique opportunities for 
diversity within the small business community and in our 
neighborhoods. It needs attention, and I would just urge you to 
take a look at this program and come back to us with ways that 
we can maintain the HUBZones, but make them even more 
effective.
    Ms. Mills. Well, thank you, Senator, and I am glad to hear 
that you mentioned statistics, because I am a metrics-oriented 
person and will look for ways to be communicative using those 
kind of metrics so that we know what kind of progress we are 
making, particularly in these critical areas of both the 
minority and the business and also in making sure that we solve 
the problems that were in that report on HUBZones.
    Senator Cardin. Thank you. I appreciate it.
    Thank you, Madam Chair.
    Chairman Landrieu. Thank you.
    Senator Hagan.
    Senator Hagan. Thank you, Madam Chairman.

 OPENING STATEMENT OF THE HONORABLE KAY HAGAN, A U.S. SENATOR 
                      FROM NORTH CAROLINA

    Ms. Mills, it is a pleasure to have you here today and I am 
very thrilled that you have accepted this nomination for the 
small business. It was great to meet you in March and I think 
that we share a commitment to really help small business 
throughout America. We have got to work together on this. We 
have got to be sure that we can provide targeted assistance to 
small employers, which to me is a central element of the short-
term economic recovery and long-term American reinvestment.
    I am from North Carolina and recent SBA data indicates that 
there are more than 173,000 small businesses in North Carolina. 
They represent 98 percent of the State's employers and 48 
percent of the private sector employment. And most importantly, 
in recent years, the small business area created 55 percent of 
the State's net new jobs.
    So many of these small businesses, though, are in serious 
trouble. Many of them have closed their doors. In particular, 
the Eastern part of North Carolina, where they have been so 
dependent on the textile industry, a lot of the small suppliers 
to those industries are no longer in business. And obviously, 
as our national economy continues to struggle, I hear every day 
from small business owners throughout North Carolina that they 
have fallen victim to forces pretty much outside of their 
control. And with consumers tightening their belts and reducing 
spending, I think these small businesses have lost previously 
reliable lines of credit, and we heard that in testimony just 
last week, and obviously access to the capital financing 
required to maintain and expand their businesses and 
operations.
    While this committee has moved swiftly to provide 
additional tools to the administration to provide immediate 
relief to these small employers, I think it is essential to 
promote and deploy these new provisions as quickly as possible, 
and obviously I am concerned about what was written in the 
Washington Post just this morning.
    But beyond these short-term fixes, I am anxious to be sure 
that we strengthen key SBA programs and ensure that you have 
the staff and the resources that you need to ensure that you 
can serve as a champion for small businesses across our 
country.
    I do have just a few questions. I want to follow up on 
Senator Cardin's question on the contracts for small business, 
and in particular minorities. I met with a group of minority 
contractors just this past weekend in North Carolina and they 
are very concerned that they want to be sure that they have 
access to the jobs under the TARP and the infrastructure, and I 
was just curious if there is any way we can facilitate anything 
to help them, one, with the bonding requirements that I am sure 
are necessary--that has been a huge problem for minority 
contractors in the past-- and if there is any sort of training 
and outreach that can be provided on a State-by-State regional 
basis to help in particular minority contractors.
    Ms. Mills. Thank you, Senator. I enjoyed very much our 
visit, as well, and particularly on something that you had 
mentioned to me, a firm called Self Help in your area, which we 
looked into and does do Microloans and a whole lot of things 
with whom we are going to try to establish a relationship, so 
thank you.
    Senator Hagan. Very good.
    Ms. Mills. Thank you for that.
    On some of your questions, how do we get some of these 
contracts to minority contractors and others to make sure small 
business has their share of the new activity? Senator Enzi is 
not here, but he had a program that I hope he doesn't mind if 
we use as a model going forward where he invites a number of 
outside contractors, large companies who are going to do--or 
large Federal contractors to the State and he has small 
business fairs to make matches between them. And it would be 
interesting in some of these major contracts that are going to 
be let to see if we can learn from his model and sort of 
proactively, maybe as the SBA, sponsor some of these fairs 
along the same lines.
    Senator Hagan. I think that would be critical, because 
these companies are very anxious to have a seat at the table 
and to get obviously some of this business.
    Also, Senator Shaheen talked about the Small Business 
Innovation Research. That, as well as the Small Business 
Technology Transfer, those two programs are particularly 
important in North Carolina's high-tech industry. An indication 
of the essential role these businesses play in my home State, 
the one North Carolina small business program awards State 
matching funds to North Carolina businesses that have received 
either an SBIR or an STTR program award by the corresponding 
U.S. Government program. And between 1999 and 2005, those 
awards more than doubled, from 56 to 106, and the dollars 
tripled from $14 million to $41 million. And the State saw a 78 
percent increase in the Phase I Federal SBIR awards to our 
small businesses in 2008.
    You have talked a little bit about working with the-- what 
your goals are in this area, but my question relates to how do 
you plan to work with the Department of Health and Human 
Services to ensure that the stimulus funding provided recently 
by Congress for critical health research is utilized in keeping 
with the SBIR and STTR requirements.
    Ms. Mills. As I understand it, the new funding does not 
have the same SBIR set-aside, and one of the things that is 
before us now is to try to do what I talked about, to show in 
those competitions that the benefits of including small 
businesses proactively, you know, the numbers are very strong 
in terms of patent production. They really lead the 
commercialization.
    One of the things we care about when we care about job 
creation is not just to spend money on research and development 
but actually to take it through commercialization and create 
jobs, and that is a place that small companies actually have a 
very important role.
    So I think in this case, it will be a matter of leveraging 
some of the existing programs that are out there and the 
infrastructure that is out there already for SBIR which allows 
small companies to get support and access to some of these 
grants and to know that they exist, even if there is no formal 
set-aside.
    Chairman Landrieu. Thank you. I think we have time for a 
short second round. I do have a few more questions I would like 
to ask.
    One is on an issue that this committee has spent a great 
deal of time on over the last several years and that is the 
issue of health care for small businesses. As you know, it is a 
primary focus of this new President to provide a system of 
health care that is affordable and accessible to all Americans. 
Small businesses continue to testify before our committee and 
say, yes, the credit market is an issue, but consistently on 
every panel they raise the health care issue as well, whether 
we ask the question or not. They indicate that they need help 
with spiraling health care costs.
    So I am assuming that one day, we are going to move through 
this recession and be back to normal business in America. We 
remain hopeful. But even when that happens, if we don't tackle 
this health care issue, it still is going to be a burden on 
small business. Do you have any suggestions as to how we might 
proceed specifically, and if not, would you care, though, to 
comment about your understanding of the situation and let this 
committee know at this time what kind of role you intend to 
play in helping shape some of those policies for small 
businesses that are depending on us to come up with some 
solutions for them.
    Ms. Mills. Thank you, Senator. Health care does come up now 
as the number one or two issue in pretty much every small 
business survey, and that is because, as you know, small 
businesses depend on this relationship with their employees and 
they need to provide these kind of benefits in order to have 
strong, well-trained employees that stay with them. And the 
costs are just unaffordable. They pay much higher rates because 
they don't have any economies of scale.
    So I am very excited. The President has made this a 
priority, to fix health care, and in that has a very strong 
awareness and understanding about the issues about health care 
that relate to small businesses. And so there are a number of 
possible provisions. These plans remain to be fully 
constructed. But a couple of them that have been discussed in 
earlier versions have been pooling of the ability of smaller 
businesses to buy health care in a more integrated way that 
lowers the costs. That is something that clusters have thought 
about for a long period of time. And the other is some kind of 
tax relief for small businesses that provide health care, 
because many, many of the uninsured currently work for small 
business. That is another way to solve those problems.
    But the President sees this, as you know, as an important 
priority and he clearly understands small business, as well, 
and the interrelationship between health care and small 
business's difficult cost structure.
    Chairman Landrieu. Well, I just want to reiterate to this 
committee, and I have spoken to the Ranking Member on several 
occasions about this, that as Chair, I intend to remain focused 
on this area. I hope that we can work out a bipartisan solution 
to access to health care for the country and have this 
committee continue to be a voice urging some bipartisan 
compromise to give relief to our small businesses in America, 
which cannot sustain the rising cost and inaccessible terms of 
the current health care system.
    And the passion, or I guess the emotion that runs through a 
small business owner when he or she is trying to provide health 
care to an employee that not only is an employee but an often 
dear friend when their child has cancer or gets a disease, that 
is very difficult on both the employee and the employer. It is 
very, very hard to take--you know that from personal 
experience. This is a real issue to people across the nation. 
And so I know that you will provide the leadership that is 
necessary to really meet this challenge.
    And my second question is this. I just listened to Senator 
Bayh describe a county that has 16 percent unemployment, I just 
left a parish--we don't have counties, but a parish in 
Louisiana that is on the opposite end of the scale. We have a 
2.9 percent unemployment, even in this time. Almost everyone 
that wants to be employed is employed in this county. It is 
basically the heartbeat of America's domestic energy industry.
    So my question is this. Are you aware that there are 
counties that have 1.5, 2.5, well below the national average 
unemployment, and what they are threatened with now are 
potential taxes to a domestic oil and gas industry that 
threaten that viability. While this isn't the number one 
subject of this committee, are you aware of the contributions 
that the domestic oil and gas and domestic energy industry play 
to the small business viability of this nation and would you 
care to comment in any way? I hope you will come down and visit 
some of our parishes in the near future.
    Ms. Mills. Well, thank you, and as you know, I was hoping 
for an invitation and would very, very much like to come.
    Chairman Landrieu. The food is excellent, by the way, so-- 
[Laughter.]
    Chairman Landrieu. I don't have to twist your arm, I hope, 
to come.
    Ms. Mills. No. I would look forward to it. And I know that 
these--well, first of all, it is great to hear about a county 
with very low unemployment. It makes me think, well, we should 
think about the business opportunities to go there or move 
there and how to go forward on that.
    I would look forward to coming. I know that small 
businesses have an important activity in oil and oil services, 
as well, and it is one of the places that has traditionally 
been a strong Southwestern and also in Alaska, so there is lots 
and lots of small business activity in this sector as well as 
big business and it would be important to help.
    Chairman Landrieu. Thank you so much.
    Senator Snowe.
    Senator Snowe. Thank you, Madam Chair.
    Just to follow up on what Chair Landrieu was indicating 
about health insurance, it truly is a crisis for a small 
business and it has been consistently and persistently for many 
years. Unfortunately, we haven't been able to reach a consensus 
in Congress on how to address that issue. In the last Congress, 
we introduced an initiative on a bipartisan basis that would 
have reformed insurance markets and created national networks 
so small businesses and the self-employed can access more 
affordable insurance. That bill actually has brought in a 
number of organizations that now support it across the 
spectrum. So it would be useful for you to look at that 
proposal, the Small Business Health Options Program Act, or 
SHOP Act, as we begin to grapple with health care reform.
    In fact, the Finance Committee, of which I am a member, is 
going to begin to take up the issue in April with the 
expectation of marking up legislation to overhaul the 
healthcare system in June, so I invite your comments and 
thoughts on that as we proceed, particularly in conjunction 
with small business and the tax credits and sort of level the 
playing field. The self-employed alone have to buy into the 
individual markets. They don't get the tax write-offs or 
anything. So it is really crucial that we address that as part 
of it, and particularly during the course of this recession.
    To follow up on a couple of issues, on HUBZones, which I 
have been a strong proponent of, although last year I did urge 
the GAO's recommendations to follow up with greater oversight 
and transparency in this program. I truly did have some 
concerns that ultimately manifested itself in the recent report 
that was issued in the Wall Street Journal.
    What was troubling about it is that the SBA had failed, in 
essence, to monitor this program. People weren't located at 
specific addresses. There were non-certified HUBZone firms. 
Lack of SBA internal controls to verify business information, 
no onsite visits, the list goes on.
    And so what I would urge you to do is to really look at 
that report and to quickly implement and adopt those 
recommendations, because otherwise it is going to jeopardize 
this program. On the other side of the Capitol, there are those 
who are opposed and would like to remove the program 
altogether. I see a value to it, frankly, so businesses in 
high-unemployment areas can utilize the Federal contracting 
office if they are certified HUBZones. But this report was 
deeply troubling and so we had better address the flaws in this 
program and make sure that the SBA has the type of controls to 
monitor that.
    Ms. Mills. Well, this report was of great concern and I 
promise you that we will look at it immediately.
    Senator Snowe. And, you know, what was interesting, as well 
in this article, it raised the specter of the ability of the 
SBA to monitor the stimulus provisions. That is something that 
we want to really be on top of with respect to having the types 
of oversight management of all of these programs. It is crucial 
that the question as to whether or not it would be possible in 
the numerous stimulus programs benefit small businesses and so 
we must ensure that there is through oversight.
    On government-wide contracting, consistently, government 
agencies have failed to live up to the 23 percent goal. They 
came in at 22 percent last year. It has already been mentioned 
this morning but it is a pretty abysmal picture about agencies. 
And when you talk about one of your three goals, which are 
absolutely right on target, to work across agencies, this is 
one area where you truly can, because they are required to meet 
a statutory goal, and repeatedly the agencies have failed to do 
it. And 50 procuring Federal agencies in 2000 alone, they 
failed to meet the five percent goal. The Department of 
Defense, well, they have just about the worst record. They 
spend less than three percent of the $269 billion that are 
eligible for small business procurement dollars.
    And so what we have got to do is to make sure that these 
agencies are living up to the statutory requirements. If you 
look at the goals that are required under law, the only one 
that has been fulfilled has been small business disadvantaged 
businesses. They are up to now 6.6 percent. Women-owned, 
HUBZones, service disabled veterans goals have not been. In 
fact, it has been eight long years just to get the 
implementation of women-owned businesses, and they finally did 
come out with a rule last year that fell far short of 
expectations, limited to a few categories for women-owned 
businesses. So it was de minimis and it simply wasn't going to 
work. So we put a hold on that rule in the stimulus plan, as 
you probably know, because it wasn't good enough and it does 
not fairly reflect what the agency needs to do to implement an 
effective and meaningful woman's contracting program.
    So I would urge you to use all of your leadership and power 
within your agency to work across agencies in making sure they 
live up to those goals, because when you think about the 
potential for contacting, for example, and SBA estimates that 
every $140,000 of contracting dollars creates a job. Last year, 
if you think about the number of contracting dollars that went 
out in prime and subprime contractors and still falling below 
the level, they were able to save or create 1.1 million jobs.
    So this is money that is going to be spent by the Federal 
Government. It is not as if we have to spend more. It is making 
sure these agencies do their jobs and uphold their statutory 
obligations. So using your voice and persuasive powers will be 
truly instrumental in creating jobs, and particularly in high-
unemployment areas.
    One other issue. On the U.S. Trade Representative, Chair 
Landrieu and I have advocated and communicated that to the new 
Trade Representative, Ron Kirk, about creating a position 
within USTR for small business exporters, because small 
businesses are overlooked in trade negotiations. They are not 
even part of the equation and we think that small businesses 
should be fairly represented in these trade negotiations. The 
only way you can accomplish that is to have somebody within 
USTR that is representing small business and an advocate for 
small business. Is that something you would consider 
supporting?
    Ms. Mills. Well, first of all, Senator, on all of these 
issues that you have urged us to go across agencies, we will 
make that an important part of this new administration of the 
SBA, that these linkages with other agencies to comply with 
contracting and also in this critical area of exporting. I 
would say that I also would include Commerce in this sort of 
linkage on the export side because they have the network of 
trade activities that very often support trade missions for 
small business. So I would want to go and look at what the best 
method would be of making sure that small business is at the 
table in trade, in discussions and also in sort of missions and 
implementation, because this is how small businesses are going 
to grow. They are going to grow globally.
    Senator Snowe. Thank you.
    Chairman Landrieu. Thank you.
    Senator Shaheen.
    Senator Shaheen. Thank you.
    I would like to pick up on Senator Bayh's comments about 
floorplan financing for automobile dealers. He talked about RVs 
in particular, but I met earlier this week with a group of 
automobile dealers from New Hampshire who are very concerned 
about a number of lenders exiting the market. They are banks 
that are owned by overseas corporations and they are getting 
out of that lending market. These are companies that have good 
business plans. They have been operating at a profit. Their 
bills are all paid up. These are not businesses who are in 
trouble. These are businesses who contribute to the community, 
employ over 13,000 people in the State, and yet they are 
concerned about what is going to happen if their financing gets 
pulled.
    It is my understanding that--well, just to back up a little 
bit, I also then met with some community bankers who said that 
while they haven't been in this lending market, if SBA got in 
to provide some assistance to these auto dealers, that they 
would really look at then being able to provide the credit that 
these businesses need.
    So my question is, what can SBA do? It is my understanding 
that there are no statutory prohibitions from SBA making the 
changes that would allow you to help with some of this 
financing and that you would need to change the definition of a 
small business to reflect the fact that auto dealers generally 
have very high gross revenues but much smaller net revenues, 
and two, that you would need to make floorplans eligible for 
SBA guarantees.
    Now, I know that back in 1980, President Jimmy Carter 
actually directed the SBA to provide liquidity to auto dealers 
to meet a similar credit crisis. So would you be willing to 
look at making these kinds of changes on a temporary basis 
until floorplan financing could become available to auto 
dealers?
    Ms. Mills. This is an area that has been raised now 
recently in a number of places and I would commit to this 
committee that we will look at it very quickly and also try to 
coordinate with those working on the auto rescue to see what is 
the best way to go about solving this issue.
    Senator Shaheen. Thank you. I spoke to someone in the 
administration yesterday who was working on this very issue and 
we talked about the potential to provide some assistance. As 
Senator Snowe said earlier relative to some of the stresses 
that small businesses are facing, this is an area that is 
quickly rising to a level of a crisis if we can't provide some 
help to some of these auto dealers. So anything that our office 
can do to work with you to address this issue, we would be 
happy to do that.
    There has been--a number of people have mentioned the 
provisions in the Economic Recovery and Reinvestment Act and 
implementing those and how important that will be. I certainly 
appreciate the leadership of Senators Snowe and Landrieu in 
increasing the support that was in that Act for small 
businesses and the funding to allow SBA to temporarily 
eliminate the fees for 7(a) and 504 loan guarantee programs.
    A concern has been raised with me by some folks in New 
Hampshire about how the SBA is implementing the fee waiver for 
the 504 loan program. It is my understanding that SBA plans to 
pay certified development companies two-thirds of the 
processing fee at the time that the loan is authorized. Right 
now, I also understand that up to 20 to 25 percent of all 
authorizations issued by SBA end up not closing.
    So my concern is that if we are paying two-thirds of those 
costs up front and a fifth to a quarter of those loans never 
close, are we not spending money that we really shouldn't be 
until we know that the loan is actually going to close? I 
appreciate that you may not have an answer to that right now, 
but I would urge you to look into this, because as we have all 
said, we want to make sure that the funding that was in the 
stimulus package is used to the very best benefit possible and 
this is one area where I think we want to make sure that every 
dollar is going to help the business. Thank you.
    Chairman Landrieu. Thank you. That was an excellent point 
to raise.
    As we conclude this hearing, I am going to ask a couple 
more questions. I asked you the necessary question about 
appearing before any committee of Congress. You declared that 
you would. I must also ask you if you are willing to provide 
any information requested by a committee of the House or the 
Senate. Are you willing to provide information as requested of 
you?
    Ms. Mills. Yes, I am.
    Chairman Landrieu. Thank you. Let me say for the record 
that the record of this committee will remain open until 2:00 
p.m. this afternoon. I would like to ask that we keep these to 
a minimum because our intention is to try to process this 
nomination quickly, either today or tomorrow.
    This committee will hold a markup on this nomination about 
15 minutes prior to a vote this evening, which will likely be 
around 6:00. We need a majority of the members present, so I 
wanted to give notice now.
    We will also include in the record the many letters of 
congratulations and recommendation that we have received on 
your nomination, Ms. Mills.
    Chairman Landrieu. I believe this hearing has gone very 
well this morning.
    Is there anything else, Senator Snowe, that you would like 
to add?
    Senator Snowe. No. I want to thank you, Madam Chair, for 
certainly handling this nomination in such an expeditious 
fashion because it is so important to this country and SBA and 
the nation requires the leadership of Ms. Mills as the next 
Administrator of the Small Business Administration. So I really 
appreciate all that you have done to accomplish this hearing 
today and to move it forward quickly this week. Hopefully, she 
can be confirmed so we can move forward in this critical area, 
so thank you.
    Chairman Landrieu. Well, that is our goal because we need a 
captain of this ship. Thank you very much.
    Meeting adjourned. Thank you.
    [Whereupon, at 11:37 a.m., the committee was adjourned.]
                      APPENDIX MATERIAL SUBMITTED

                              ----------                              

     Senator Christopher S. Bond, Committee on Small Business and 
Entrepreneurship, April 1st Committee Hearing on ``Confirmation Hearing 
 of Karen Gordon Mills to be Administrator of the U.S. Small Business 
                            Administration''
                        statement for the record
    Thank you, Madam Chair for holding today's confirmation hearing on 
President Obama's nominee for the Administrator of the U.S. Small 
Business Administration (SBA). I also thank the Committee's staff for 
closely reviewing her background, financial and tax history, and 
professional activities to ensure that she meets the Committee's and 
Senate's standards and requirements.
    It is my understanding that Ms. Mills is strongly supported by many 
small business advocacy groups and it is no surprise. Ms. Mills has an 
impressive background of business experience and management skills and 
expertise--especially in the area of venture capital, which will be 
valuable in the Small Business Research Innovation (SBIR) program. 
Further, I am impressed that she has been engaged in policy and 
advocacy issues important to small businesses. For these reasons, I 
strongly support Ms. Mill's nomination.
    If confirmed, Ms. Mills will be facing several significant 
challenges. First, the financial credit crisis remains a major 
challenge to the viability and competitiveness of small businesses 
despite unprecedented government assistance from the Federal Reserve, 
FDIC, and the Treasury Department. As everyone here knows, our economic 
success significantly hinges on the success of small businesses. That 
is why we must unfreeze the credit markets so small businesses can 
purchase supplies, invest in new equipment, meet payroll needs, and 
create new jobs.
    While the government has taken important steps to address credit 
needs for small businesses through changes to the SBA's loan guarantee 
programs and the Federal Reserve has launched the Term Asset-Backed 
Securities Loan Facility, those steps are simply not enough and will 
likely only provide limited improvements in small business lending. 
Unlocking the financial system is the most important step the 
government can take to enable small businesses to recover from the 
current economic downturn and reach their full potential.
    In terms of the SBA, I strongly believe that Ms. Mills must build 
on the previous Administration's efforts to address the agency's long-
standing management deficiencies. Under the SBA's former leadership--
especially under former SBA Administrator Steve Preston--the agency 
made significant progress, and it is critical that management reform be 
continued and sustained so that the SBA can better meet its mission.
    Management improvements are especially needed for the HUBZones 
program. The U.S. Government Accountability Office (GAO) recently 
identified a number of significant problems with the administration and 
oversight of the HUBZones program. While I am troubled about the GAO's 
findings, I strongly support mending, not ending, the program. This 
program is a critical resource in creating good jobs in the poorest 
communities across the Nation; and in this economic downturn, 
terminating the program is simply unwise.
    In response to the GAO's findings, the SBA has taken a number of 
important management and programmatic steps. Further, Ranking Member 
Snowe introduced legislation last year to improve the program, and I 
strongly support her efforts. I have already indicated to Senator Snowe 
that I will be an original co-sponsor to her bill and urge my 
colleagues on both sides of the aisle to also support it when it is re-
introduced during this session.
    In addition to HUBZones, I have been a strong supporter of the SBIR 
program. I believe that with Ms. Mills' experience as a venture 
capitalist, she will bring important leadership to this program, and I 
am hopeful that she will be able to address a particular issue of 
concern to me.
    The research community, especially small biotechnology and medical-
device companies were dealt a major setback when the SBA determined 
that small venture-backed companies could no longer participate in the 
SBIR program due to administrative changes. This meant that small 
biotech and medical-device companies that had been backed by venture 
capital investment and produced some of the most cutting-edge 
technology could no longer participate in the program.
    The results of this decision have been severe, particularly in the 
biotech and medical-device industries where the National Institutes of 
Health has seen a drastic decrease of SBIR applications since this 
decision.
    Cutting-edge companies rely heavily on venture capital investment. 
For a small biotech company working to bring a product to market it is 
a necessity, not a luxury. If confirmed, I strongly urge Ms. Mills to 
revisit this decision and allow small businesses that have majority 
investment by venture capital firms to be eligible to compete again in 
the SBIR program.
    Finally, while the SBA's programs provide valuable resources to the 
small business community, programs and activities outside the agency 
also play a major role in the success and failure of small businesses. 
That is why I strongly believe that the SBA Administrator should have a 
seat at the table on important economic and financial matters in the 
Administration. If confirmed, I believe that Ms. Mills could bring a 
strong, credible, and constructive voice on how various Administration 
policies will affect small businesses, job creation, and the greater 
economy. I am pleased that Ms. Mills' statement mentions her commitment 
to act as an advocate for small business across the Administration.
    One particular area in which I strongly urge Ms. Mills to 
participate is taxes. While I understand that the Treasury has primary 
responsibility for tax policy, the Treasury Department could benefit 
greatly from Ms. Mills expertise and insights.
    It is my strong belief that we must not increase the tax burden on 
small businesses, especially since many operate on thin profit margins. 
Unfortunately, the Administration's budget proposes to increase taxes 
on small businesses by raising the top two tax rates. The 
Administration is trying to sell this massive tax increase as a tax 
hike on the rich who can afford to pay more, but the Administration 
conveniently overlooks the fact that thousands of small businesses pay 
their taxes on the owner's individual tax return. A 2008 estimate from 
the Department of the Treasury found that about 70 percent of tax 
returns that were subject to either of the top two tax rates are flow-
through business owners--that's about 1 million Main Street small 
businesses. Raising taxes on small businesses is the last thing we 
should do when the economy is struggling, small businesses are facing a 
severe credit crunch, and most Americans are worried about losing their 
jobs.
    In closing, I strongly support Ms. Mills and urge the Committee to 
report favorably her nomination. Thank you.

                      questions from senator bond
    Question 1. SBIC Administrative Problems
    It is my understanding that you plan to address challenges in the 
Small Business Administration's (SBA) investment programs, including 
the Small Business Investment Companies (SBIC) program and the New 
Markets Venture program. As you may know, administrative problems with 
the SBIC program are crippling it when we need it the most. For 
example, getting a license can take a year or longer, even for 
successful repeat SBICs.
    Do I have your commitment to provide my office with periodic 
reports as to how many SBIC license applications are pending, how long 
the applicants have been waiting, and what is causing these delays?

    Question 2. Improving SBIC to Address Credit Crisis
    Small businesses are suffering from the credit crisis. A big part 
of this problem is that equity investing has dried up, and without 
equity, banks will not lend.
    As the Congress considers reauthorizing the SBA, will you support 
and provide suggestions on reforming and improving the SBIC equity 
program to provide more investment for our small businesses?

    Question 3. Capital Gains Taxes on Small Businesses
    President Obama mentions in his budget the elimination of capital 
gains on small businesses. Unfortunately, that proposal would really 
only affect a small number of so-called C corporations that would 
qualify for this special relief.
    Wouldn't a lower capital gains rate on investments in all U.S. 
small businesses keep investments from going offshore and direct the 
capital to our best job creators? Would you support a lower capital 
gains tax for investments in small businesses?

    Question 4. HUBZones
    The SBA's Historically Underutilized Business Zones program or 
``HUBZones'' is designed to stimulate economic development and create 
good jobs in America's poorest urban and rural communities. These jobs 
are especially vital in the current economic downturn. The U.S. 
Government Accountability Office (GAO) completed two reports within the 
last year in which they uncovered a number of management and 
operational deficiencies with the program. For example, the GAO 
identified problems with ensuring eligible firms that met required 
qualifications were participating in the program. It is important to me 
that this program receives adequate management attention and the 
resources necessary to operate properly so that the program meets its 
economic-development mission as intended by the Congress.
    If confirmed by the Senate, will you work with me, Senator Snowe, 
and other interested parties to address the GAO's findings and ensure 
resources are provided to ensure that the program can meet its intended 
mission and provide the attention and oversight necessary to ensure 
that only firms who actually meet the program's qualifications receive 
HUBZone contracts and funding?

    Question 5. SBIR
    One of the programs that Congress will likely reauthorize this year 
is the Small Business Innovation Research Program (SBIR). This program 
was created in the early 1980s to ensure that small, innovative, 
technology-oriented companies had access to federal research dollars, 
and it has been very successful in helping small businesses to 
commercialize new technologies. The program, however, has not been 
working as well for many industries that rely on venture capital 
investment. In 2003, the SBA's Office of Hearings and Appeals 
determined that small companies that are majority owned by multiple 
venture-capital firms did not qualify under the SBIR eligibility rules. 
Since that time, we have seen a precipitous drop in SBIR applications 
at agencies such as the National Institutes of Health (NIH).
    The current restrictions on venture capital investment run counter 
to the goal of helping innovative small companies commercialize new 
technologies. Many industries that rely on venture capital investment--
such as biotechnology, medical technology, clean fuel technologies, and 
others--are disproportionately excluded from the program due to the 
current rules.
    Will you pledge to work with me, the members of this committee, and 
other stakeholders to ensure that the SBIR reauthorization legislation 
modifies the current venture capital restrictions to ensure that a 
broader range of our nation's most cutting-edge small companies are 
eligible to participate?

      responses to senators bond and enzi from karen gordon mills
    Senator Bond:

    Question 1. SBIC Administrative Problems
    It is my understanding that you plan to address challenges in the 
Small Business Administration 's (SBA) investment programs, including 
the Small Business Investment Companies (SBIC) program and the New 
Markets Venture program. As you may know, administrative problems with 
the SBIC program are crippling it when we need it the most. For 
example, getting a license can take a year or longer, even for 
successful repeat SBICs.
    Do I have your commitment to provide my office with periodic 
reports as to how many SBIC license applications are pending, how long 
the applicants have been waiting, and what is causing these delays?
    Yes, you have my commitment. I look forward to working with you.

    Question 2. Improving SBIC to Address Credit Crisis
    Small businesses are suffering from the credit crisis. A big part 
of this problem is that equity investing has dried up, and without 
equity, banks will not lend.
    As the Congress considers reauthorizing the SBA, will you support 
and provide suggestions on reforming and improving the SBIC equity 
program to provide more investment for our small businesses?
    Yes, and I look forward to working with the Committee on ways in 
which the SBIC equity program might be made more effective and to look 
into any other alternative investment programs that might be proposed.

    Question 3. Capital Gains Taxes on Small Businesses
    President Obama mentions in his budget the elimination of capital 
gains on small businesses. Unfortunately, that proposal would really 
only affect a small number of so-called C corporations that would 
qualify for this special relief.
    Wouldn't a lower capital gains rate on investments in all U.S. 
small businesses keep investments from going offshore and direct the 
capital to our best job creators? Would you support a lower capital 
gains tax for investments in small businesses?
    President Obama has included in his budget proposal the elimination 
of capital gains on small business stocks if they're held for 5 years 
or more and gross assets were initially below $50 million. And, as you 
know the Recovery Act increased the benefit to 75 percent from 50 
percent for two years. The President's 100 percent elimination proposal 
in the budget builds on the existing Section 1202 in current law, 
making it more generous. I would support considering other possible 
ways of reforming Section 1202 that may provide further tax benefit for 
small businesses beyond C corporations.

    Question 4. HUBZones
    The SBA's Historically Underutilized Business Zones program or 
``HUBZones'' is designed to stimulate economic development and create 
good jobs in America's poorest urban and rural communities. These jobs 
are especially vital in the current economic downturn. The U.S. 
Government Accountability Office (GAO) completed two reports within the 
last year in which they uncovered a number of management and 
operational deficiencies with the program. For example, the GAO 
identified problems with ensuring eligible firms that met required 
qualifications were participating in the program. It is important to me 
that this program receives adequate management attention and the 
resources necessary to operate properly so that the program meets its 
economic-development mission as intended by the Congress.
    If confirmed by the Senate, will you work with me, Senator Snowe, 
and other interested parties to address the GAO's findings and ensure 
resources are provided to ensure that the program can meet its intended 
mission and provide the attention and oversight necessary to ensure 
that only firms who actually meet the program's qualifications receive 
HUBZone contracts and funding?
    The HUBZone program serves an important role in creating jobs in 
some of America's economically distressed communities by helping secure 
government contracts for companies who are located in these areas and 
who hire residents of these communities. As the GAO report highlighted, 
there have been gaps in the HUBZone certification and auditing process, 
and as a result some companies were improperly certified as HUBZone 
companies and/or awarded HUBZone contracts. The SBA takes these 
instances of fraud and abuse very seriously. As indicated in the GAO 
report, the SBA is in the process of working with outside experts to 
re-engineer the HUBZone program and examine all operations and 
potential risks. We would certainly welcome working with you and other 
members of the committee to drive the necessary program changes to 
minimize program risk and ensure that the HUBZone program achieves its 
laudable goals.

    Question 5. SBIR
    One of the programs that Congress will likely reauthorize this year 
is the Small Business Innovation Research Program (SBIR). This program 
was created in the early 1980s to ensure that small, innovative, 
technology-oriented companies had access to federal research dollars, 
and it has been very successful in helping small businesses to 
commercialize new technologies. The program, however, has not been 
working as well for many industries that rely on venture capital 
investment. In 2003, the SBA's Office of Hearings and Appeals 
determined that small companies that are majority owned by multiple 
venture-capital firms did not qualify under the SBIR eligibility rules. 
Since that time, we have seen a precipitous drop in SBIR applications 
at agencies such as the National Institutes of Health (NIH).
    The current restrictions on venture capital investment run counter 
to the goal of helping innovative small companies commercialize new 
technologies. Many industries that rely on venture capital investment--
such as biotechnology, medical technology, clean fuel technologies, and 
others--are disproportionately excluded from the program due to the 
current rules.
    Will you pledge to work with me, the members of this committee, and 
other stakeholders to ensure that the SBIR reauthorization legislation 
modifies the current venture capital restrictions to ensure that a 
broader range of our nation's most cutting-edge small companies are 
eligible to participate?
    The SBIR program has proven to be enormously effective and a 
valuable way to turn innovation into jobs. A recent report of the 
National Academies said that the SBIR program is ``sound in concept and 
effective in practice'' and that it meets its major Congressional 
objectives. In addition the SBIR program is ``increasing innovation, 
encouraging participation by small companies in federal R&D, providing 
support for small firms owned by minorities and women, and resolving 
federal questions for mission agencies in a cost-effective manner.''
    There are two guiding principles to consider as we discuss 
reauthorization: 1) that the SBIR program is for small businesses and 
they should not be crowded out of the competition for these dollars; 
and 2) it is a competitive program for the most promising companies and 
it would be unfortunate to exclude those small, high-potential 
companies inadvertently.
    I look forward to working with the Committee to ensure that the 
SBIR reauthorization takes into consideration these two guiding 
principles and that the most promising, small companies can be a part 
of the process and continue to drive innovation and job growth across 
the country.

    Senator Enzi:
    I was pleased to hear you mention the Procurement Conference I host 
each year in Wyoming at your nomination hearing. I think that there is 
significant potential for growing government purchasing from small 
businesses by applying the model we have in Wyoming on a wider basis. I 
would like to ask you about your intentions as Administrator to ensure 
that the designated small business funding from the stimulus bill goes 
only to small businesses. At my last Procurement Conference both 
contractors and local SBA officials expressed their concerns to me 
about how the SBA would be able to meet the demands of the stimulus 
bill.
    What are your plans to ensure that stimulus efforts get to small 
businesses quickly but also maintain accountability to ensure that only 
legitimate small businesses benefit from these efforts?
    The procurement conference that Senator Enzi hosts in Wyoming is an 
interesting model for growing government purchases from small 
businesses. We will pledge, with the Senator's permission, to examine 
this model and its best practices and look to apply them on a wider 
basis.
    Additionally, ensuring that small businesses obtain their 
appropriate share of government contracts is part of the SBA's core 
mission. Small businesses and the jobs they create are central to 
economic recovery. I am committed to seeing that the SBA works to 
ensure that small businesses get their share of the contracts through 
the Recovery Act and they are given the chance to create jobs and help 
get Americans back to work.
  

                                  
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