[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 

  HEARING ON THE SMALL BUSINESS ADMINISTRATION FISCAL YEAR 2012 BUDGET
=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             March 2, 2011

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 



            Small Business Committee Document Number 111-059
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                              __________


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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                       ROSCOE BARTLETT, Maryland
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                      CHUCK FLEISCHMANN, Tennessee
                         JEFF LANDRY, Louisiana
                   JAIME HERRERA BEUTLER, Washington
                          ALLEN WEST, Florida
                     RENEE ELLMERS, North Carolina
                          JOE WALSH, Illinois
                       LOU BARLETTA, Pennsylvania
                        RICHARD HANNA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        MARK CRITZ, Pennsylvania
                      JASON ALTMIRE, Pennsylvania
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                     DAVID CICILLINE, Rhode Island
                       CEDRIC RICHMOND, Louisiana
                         GARY PETERS, Michigan
                          BILL OWENS, New York
                      BILL KEATING, Massachusetts

                      Lori Salley, Staff Director
                       Paul Sass, Staff Director
                     Barry Pineles, General Counsel
                  Michael Day, Minority Staff Director
                            C O N T E N T S

                              ----------                              
                                                                   Page
        OPENING STATEMENTS

Graves, Hon. Sam.................................................     1
Velazquez, Hon. Nydia M..........................................     2

             WITNESSES

Mills, Hon. Karen G., Administrator, United States Small Business 
  Administration, Washington, DC.................................     3

             APPENDIX

Prepared Statements:
Mills, Hon. Karen G., Administrator, United States Small Business 
  Administration, Washington, DC.................................     5


  HEARING ON THE SMALL BUSINESS ADMINISTRATION FISCAL YEAR 2012 BUDGET

                              ----------                              


                        WEDNESDAY, MARCH 2, 2011

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:00 p.m., in room 
2360, Rayburn House Office Building. Hon. Sam Graves (chairman 
of the Committee) presiding.
    Present: Representatives Graves, Chabot, Coffman, Ellmers, 
Herrera Beutler, Fleischmann, Landry, West, Velazquez, 
Schrader, Critz, Altmire, Clarke, Chu, Cicilline, Richmond, 
Owens, and Keating.
    Chairman Graves. I will call this hearing to order, and I 
want to welcome everybody today.
    At today's hearing we're going to hear about the 
President's proposed fiscal year 2012 budget for the Small 
Business Administration. I would like to welcome Administrator 
Karen Mills back to the Committee.
    The mission of the SBA is to promote the growth of small 
businesses throughout the United States and in doing so, the 
agency tries to be all things to all small businesses, from a 
start-up in the inner city to a mature business in remote areas 
of rural America.
    Given the importance of the small business to the American 
economy, the breadth of the mission is laudable. In a different 
time, we might be able to afford funding for this broad mission 
but unfortunately we do not have that luxury. The government's 
fiscal situation is dire. Even agencies and programs that we 
view as valuable will need to do their part in reducing 
unsustainable federal expenditures.
    The fiscal situation requires that the mission of the SBA 
be pared back to core objectives, enabling small businesses to 
obtain capital in credit so they can create jobs, assisting 
small businesses and penetrating the federal procurement arena, 
and counseling America's entrepreneurs. In assessing these core 
functions, we must focus on those programs that are most 
efficient in helping small businesses create jobs while 
reducing the financial risk to the federal taxpayers. Programs 
that do not meet these objectives are going to have to be cut, 
and programs that meet these standards should be strengthened.
    I look forward to hearing the Administrator's testimony and 
explanation of the President's budget and how it meets these 
core missions of the SBA while recognizing the current fiscal 
constraints facing the Federal Government today. And again, I 
welcome you and I will now turn to Ranking Member Velazquez for 
her opening statement.
    Ms. Velazquez. Thank you, Chairman Graves. And welcome 
Administrator Mills.
    As we begin our consideration of SBA's budget request, it 
is critical that we do so with one eye on the small business 
economy. Due to the financial crisis beginning in 2007 and 
ensuing recession, small firms have faced challenges on several 
fronts. However, it now appears that small firms are poised to 
turn the corner. Importantly, credit conditions have eased and 
optimism concerning revenue growth and the general economy has 
improved. This result in increased business confidence suggests 
small firms will increase employment within the next year. Ten 
years ago, in fiscal year 2002, small businesses were facing 
extremely similar challenges during a period of fiscal 
restraint. As the country began to emerge from the recession 
that began in early 2001 the SBA stood by ready to help. At 
that time the agency spent $973 million, only one percent less 
than its request of $985 million for fiscal year 2012.
    Today we find ourselves in a familiar position trying to 
make sure that small businesses have the tools they need to 
succeed and create jobs, but also doing so in a manner that is 
responsible to the taxpayer. With this in mind I am troubled by 
the agency's continued use of limited budget authority to fund 
unauthorized pilot programs. For fiscal year 2012, the SBA 
proposes to operate seven such initiatives. This includes the 
Small Loan Advantage Program, the Community Advantage Program, 
the Impact Investing Fund, the Early Stage Innovation Fund, 
Regional Clusters, the Distance Learning Program and the 
Emerging Leader Programs. The cost of the last three alone 
makes up nearly 10 percent of the SBA's non-credit programs' 
budget submission.
    Most worrying is that these programs were launched without 
the public hearings and legislative record that accompanies 
statutorily authorized programs. Therefore, it is impossible to 
understand why these programs were created and whether or not 
they are a good investment for the taxpayer. In addition, 
several of these programs are clearly duplicative of other 
agency offerings.
    The reality is that these are lean times. Everyone has to 
tighten their belt and this includes the SBA. Instead of using 
these resources for pet projects, the agency should instead be 
focusing on addressing the priorities raised by its own 
inspector general. The first two programs the IG raises in its 
own budget submission are especially critical and if addressed 
properly will save taxpayers' money by reducing waste, fraud, 
and abuse.
    The first program the IG identifies is regarding the SBA 
loan programs. It finds that the agency faces a heightened risk 
of loss due to expedited loan processing initiatives and its 
considerable reliance on outside financial institutions. It 
further notes the majority of loans made under the 7(a) program 
are made with little or no review by the SBA prior to loan 
approval because SBA has delegated most of the credit decisions 
to lenders.
    Numerous IG criminal investigations have identified fraud 
by borrowers, loan agents, lenders, and other participants in 
SBA's business loan programs. In addition, the IG raises 
concern about the award of contracts under the SBA programs. In 
2009, $97 billion in prime contracts were awarded through these 
programs. However, IG audits, as well as GAO investigations, 
have identified numerous instances where firms that do not meet 
this program's eligibility criteria were improperly given 
contracts anyway.
    These two issues are of such significant magnitude that 
instead of being buried in the back of the budget submission 
they should be front and center. I intend to work with members 
of this committee to change this.
    As part of the budget process, this committee is required 
to submit its views and estimates to the Budget Committee. Per 
tradition, the minority will be submitting its own letter, and 
in it we will be recommending that the funding requests for all 
pilot projects be either denied outright or made available to 
reduce fraud and waste in the SBA programs. Doing so is but a 
small step, but it is essential as we try to balance the 
objective of being fiscally responsible while ensuring that 
small businesses have the resources they need. This is a 
challenge but it is imperative that we overcome it. If we can, 
small firms will have the tools they need to succeed and create 
jobs, while taxpayers can be assured that their money is being 
managed responsibly.
    In advance of her testimony, I want to thank Administrator 
Mills for appearing here today and providing her insight into 
the agency's funding for fiscal year 2012.
    Thank you. And I yield back.
    Chairman Graves. Thank you very much, Ms. Velazquez. And 
now I will turn it to Administrator Mills, who is here as--I 
talked to her about I guess it was a month ago or so about 
coming in and talking to us, the committee, about what is 
working, what is not working. And Administrator Mills, I will 
turn it over to you and you have all the time you need.

 STATEMENT OF KAREN MILLS, ADMINISTRATOR, UNITED STATES SMALL 
                    BUSINESS ADMINISTRATION

    Ms. Mills. Well, Thank you very much. Chairman Graves, 
Ranking Member Velazquez, and members of the committee, I am 
very pleased to testify before you.
    Small businesses are the backbone of our economy. They 
create nearly two out of three new jobs and more than half of 
working Americans either own or work for a small business. The 
SBA is a small agency but we have a big mission. We put the 
maximum possible resources directly into the hands of small 
businesses, focusing on the three Cs of capital, contracting, 
and counseling. Last year we helped over 50,000 small 
businesses get the capital to grow and hire. We helped put 
about 100 billion in federal contracts in the hands of small 
businesses, and we counseled more than a million small 
businesses across your districts and throughout the country.
    We put these resources in their hands while providing 
taxpayers a big bang for their buck. For example, after credit 
froze in 2008, the Recovery Act and the Small Business Jobs Act 
supported more than 42 billion in SBA loans at a cost of just 
1.2 billion in subsidy. Many small businesses suffered greatly 
during the recession. Our job is to support them as they grow 
and create jobs and that job is not done.
    The President's proposed fiscal year 2012 budget for the 
SBA of $985 million will support up to 27 billion in loan 
guarantees, as well as many other tools and resources to help 
them do just that. At the same time this budget reflects a 
commitment to tighten our belts, streamline our processes, and 
eliminate duplication. This includes some of your ideas. For 
example, we looked hard at our technical assistance programs 
and as a result we proposed eliminating the Prime Program. With 
the work of our micro lenders and new efforts to recruit 
community-based lenders, we can continue to provide this 
important technical assistance but in a more cost effective 
way.
    In addition, due to process reengineering, our disaster 
loan operations are now much more efficient. We can preserve 
our level of preparedness with a steady stayed core staff level 
of 850 instead of 1,000 along with our 2,000 reservists. The 
largest increase in this budget reflects the fact that we have 
reached the statutory limit for fees that we can assess. We 
request additional subsidy because losses, including those from 
loans approved when collateral such as real estate was 
inflated, have pushed up subsidy costs. We also request a 
legislative fix to return to near zero subsidy. We also request 
incremental increases for the new women's contracting program 
and continued efforts to remove waste, fraud, and abuse in 
contracting.
    Overall our priorities are twofold. Our focus is on SBA 
programs that put money and support directly into the hands of 
small business owners in the places they live, and we will 
continue to invest in oversight to preserve the integrity of 
these programs and to protect the interests of taxpayers.
    I look forward to working with all of you to continue to 
ensure that small businesses are succeeding because as you 
know, when they succeed, America succeeds. Thank you very much.
    [The statement of Ms. Mills follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Chairman Graves. We will now obviously move into questions, 
and in fact, I am going to go ahead and start with the ranking 
member and then move through the members because I know a lot 
of times they are trying to get out of here. I have budgeted 
the afternoon so I can ask my questions at the end. So ranking 
member.
    Ms. Velazquez. Ms. Mills, Administrator, the SBA budget 
proposes spending $161 million more than it did in fiscal year 
2010. However, while the overall budget is increasing, it 
proposes to reduce core SBDC funding and microloan technical 
assistance, while also eliminating the PRIME program. At the 
same time it is flat funding the Women's business center and 
veterans' business development programs. These cuts make it all 
the more strange that the agency has found millions of dollars 
to spend on seven programs that are unauthorized and untested. 
To me it sounds like this is capricious. Why cut programs that 
we know work and instead put the money in initiatives that are 
unproven and lack any performance measures to even know if they 
actually work?
    Ms. Mills. Thank you, Ranking Member Velazquez, for this 
question.
    Let me start with our cutting the PRIME program. As you 
know, it is very hard for us right now in this fiscal era. 
Everyone has to tighten their belts. And so we are looking 
across all of our technical assistance programs and our 
counseling programs and looking for where we can identify 
programs that are duplicative.
    Ms. Velazquez. My question is not for you to come and 
justify these programs or not justify those programs. My 
question is why are you cutting programs that we have measured 
metrics and it tells us that they work. Every member of this 
committee can talk to us about the role that small business 
development centers, the women's business development centers 
play in their district, and yet, you are cutting those programs 
that are working and creating seven new programs that have not 
been authorized by this committee, by the Congress, that are 
untested. So what is your rationale to cut those that have a 
proven record versus those pilot projects that you are 
creating?
    Ms. Mills. Right. On an incremental cost basis we are 
looking at all the places where we can tighten our belts.
    Ms. Velazquez. Well, we, too. We are looking. And I will 
strongly recommend to the Chairman and I will do my part on my 
end that we recommend to cut all those new programs that are 
untested, that do not have any proven record since we have to 
act in a fiscally responsible way. My question to you----
    Ms. Mills. Can we just come back to--go ahead.
    Ms. Velazquez. In the grant announcement for the Jobs Act, 
SBDC grants, the SBA states that this funding has the primary 
objective of supporting job creation and retention. Based on 
your testimony, however, you suggest that the Jobs Act funding 
will be used to make up for the $10 million reduction to the 
SBDC funding in fiscal year 2012. So my question is, is this 
now the position of the agency that SBDCs can use the Jobs Act 
funding to pay for core SBDC operations and in doing so satisfy 
the job creation requirements?
    Ms. Mills. As you point out, small business development 
centers are a critical and important and valued part of our 
activity at the SBA. And as you know, counseling is one of our 
critical activities. We have many other places that we do 
counseling, also as you point out, that are supported in this 
budget, including the women's business centers. It is a very 
hard decision where to tighten our belts. After much thought 
and analysis we have lots of great programs. We note that the 
$50 million that was given to the SBDCs in the Jobs Act was for 
job creation.
    Ms. Velazquez. I just need a yes or no answer. My question 
to you is----
    Ms. Mills. It is not----
    Ms. Velazquez. Is it now the position of the agency that 
the SBDC can use the Jobs Act funding to pay for core SBDC 
operations?
    Ms. Mills. It is not the position of the agency to change 
anything in the Small Business Jobs Act direction for that $50 
million.
    Ms. Velazquez. In a release yesterday by GAO, they found 
that the SBA has not yet developed outcome measures that 
directly link to the mission of the HUBZone program. Nor has 
the agency implemented its plan to conduct an evaluation of the 
program based on variables tied to its goal. Furthermore, when 
GAO inquired about the effectiveness of the program, SBA 
provided a copy of an Office of Advocacy Report from May 2008 
that stated that the program has had limited effect. So what 
outcome measures and data can you provide us that will show 
that this program is accomplishing its mission?
    Ms. Mills. As you know, we have focused very hard on the 
HUBZone program in a number of ways. The first focus, and I 
think it was something that this Committee raised with me from 
the beginning, was on eliminating fraud, waste, and abuse in 
that program. And that we have attacked with great vigor. We 
have reengineered the upfront criteria for that program to make 
sure it goes to the intended recipients. We have increased our 
oversight of the program on an ongoing basis. We used to, the 
year before I came, do seven visits. This year we will do over 
1,000 and we are implementing, as you know, enforcement. So we 
are cleaning up that program.
    Ms. Velazquez. And so what are the bases for the GAO report 
yesterday? So are you telling me that their conclusions are 
wrong?
    Ms. Mills. We are in ongoing evaluation of all programs. We 
track all kinds of metrics about the HUBZone program which we 
are pleased to share with you and GAO. But the priority when we 
came in, and I think this was shared by a number of members in 
this committee, was to get after the fraud, waste, and abuse. 
And that has been our first priority.
    Ms. Velazquez. When do you think you will be able to come 
before this committee--and you have been here before, 
specifically and particularly about the HUBZone program--when 
do you think you will be able to provide reliable information 
as to whether or not this program is effective?
    Ms. Mills. Happy to take that back and come back to you 
with a proposed timing for exactly that.
    Ms. Velazquez. Well, last year you were here before us and 
if we could go back to the congressional record of this 
committee we will find the same question with the same answers.
    With that, Mr. Chairman, I yield back.
    Chairman Graves. Mr. Fleischmann.
    Mr. Fleischmann. Thank you, Mr. Chairman. Ms. Mills, thank 
you. I am Chuck Fleischmann. I represent Chattanooga, Tennessee 
3 and was privileged yesterday to speak on the House floor 
about our great job creation and small business in Chattanooga. 
And I thank you for being here today.
    I just have one question. What additional resources, if 
any, does the SBA need to root out potential fraud in the SBIR 
program?
    Ms. Mills. The SBIR program, as you know, is something that 
we oversee with 11 agencies participating. We have just 
instituted what we call SBIR 2.0, where we have done a number 
of things to improve the technical information gathering on 
that program and also to improve the websites and the 
accessibility of information on that. And we are engaged in I 
think bringing the SBIR program forward in a more coordinated 
way across the 11 agencies because each one implements it 
slightly differently. And we believe that small businesses with 
ideas to commercialize have really had a very strong record 
from the SBIR program. About a quarter of R&D Magazine's top 
100 innovations were actually funded by SBIR. So we are looking 
at and continuously right now on an improvement track for that 
entire program, particularly the data aspects of it.
    Mr. Fleischmann. Thank you. Mr. Chairman, I yield back.
    Chairman Graves. Mr. Cicilline.
    Mr. Cicilline. Thank you, Mr. Chairman. And thank you, 
Administrator Mills. Welcome to the committee. It is great to 
see you.
    I am a new member of this committee and very interested in 
doing everything that we can to work with you and the agency in 
supporting small businesses. As you know, I am from Rhode 
Island and we estimate there are 96,000 small businesses in 
Rhode Island and it really is the backbone of our economy. And 
I want to compliment your staff in Rhode Island. The SBA office 
has been a terrific partner in the work that I have done as 
mayor of the capital city. And I have worked very closely with 
Mark Hayward and others and I just want to compliment you on 
the staff in Rhode Island.
    I am particularly interested to know about the Small Loan 
Advantage program and the New Markets Venture Capital program. 
I recognize there is some interest in continuing existing 
programs that our ranking member has discussed but I am also 
interested in the SBA's ability to respond to kind of the new 
economy and to particularly this venture capital approach. I 
think as we are trying to build the knowledge economy and be a 
state and a country of entrepreneurs and innovators, access to 
capital in those early stages is very difficult and not an area 
I think that government has traditionally been involved and 
certainly the SBA. So it sounds as if you are responding to 
that kind of new part of our knowledge economy. And I would 
like you to know that in Rhode Island there is a very active 
and thriving small business effort in a number of places that 
our office interacts with.
    Ms. Mills. We have announced, as part of a government-wide 
program called Start Up America, several initiatives around 
high growth, high impact, innovative companies. And we know 
that job creation is really centered in a relatively small 
number of very high growth companies. We also are serving Main 
Street companies. You know, when a restaurant opens and a 
restaurant closes on Main Street, we will be there for them. 
But these high growth companies, we have a capital gap and our 
SBIC program has traditionally been in that area. Now, this is 
a zero subsidy program so it does not increase taxpayer cost, 
but we have announced two funds focused on having an impact in 
this area. One in early stages where there is a capital gap. I 
think that this Committee has talked about this capital gap. 
And the other in areas that are regions in transformation or 
particular sectors in transformation. So there will be $2 
billion of SBIC funds, which is within the existing authority 
limits at zero cost to taxpayers going--available for public-
private partnerships to address these small businesses.
    Mr. Cicilline. Thank you. In addition, I am particularly 
interested in whether or not there are any initiatives underway 
that are focused specifically on manufacturing. I think the 
issue of both tax and trade policies obviously have a huge 
impact, but we have a very robust manufacturing cluster in 
Rhode Island and I am really committed to figuring out how we 
help small businesses that are doing manufacturing. How do we 
strengthen the manufacturing sector in our economy? And I don't 
know if there is anything specific that the SBA is doing in the 
area of manufacturing, but if there is I would love to know 
more about that as well.
    Ms. Mills. Well, we would be happy to come and talk to you 
about an array of things that we do across our SBA programs. I 
come from a manufacturing background. Manufacturing in this 
country is not dead and we have many, many small businesses 
doing innovative manufacturing in every single state. I visited 
lots of them, you know, from metal steel slitting in Cleveland, 
which we still--we just supported with a machinery loan. So we 
are very actively engaged in supporting our manufacturers. In 
addition, many of them have export potential, so our export 
programs also give them the opportunity to get more sales and 
create more jobs here.
    Mr. Cicilline. Thank you so much. I yield back the balance 
of my time.
    Chairman Graves. Ms. Ellmers.
    Mrs. Ellmers. Thank you, Mr. Chairman. And thank you, Ms. 
Mills, for being with us today. It was a pleasure seeing you in 
our office a couple of weeks back. And as a small business 
owner I know what a vitally important piece to the puzzle you 
are contributing to us here in this economy today and getting 
things back on track. So thank you.
    And I have a kind of a specific question for you in the 
area along the fraud, waste, and abuse side, one that some of 
my constituents have brought to me who are in the business of 
getting government contracts. Basically, my understanding, and 
maybe you can help me with this, as far as reaching out to the 
certain percentage of Small Business Administration efforts, 
grants and whatnot to women, minorities, in helping them to 
gain some of the government contract positions, and then having 
another entity actually, almost as a front and then another 
entity coming forward and actually taking over the work section 
of that, can you shed a little light on that and maybe what the 
Small Business Administration is able to do to alleviate this 
bit of fraud and abuse?
    Ms. Mills. Fraud, waste, and abuse has been a primary focus 
for the SBA since I took over because of exactly the reason 
that you mention. These programs are intended for the small 
businesses; they are not intended for the big business 
masquerading as small businesses or for some pass through. We 
have gone after that quite aggressively. We have a three-prong 
strategy. We look at every single program, and what we do is we 
try to strengthen the upfront criteria that they have to meet. 
Then we are looking after the ongoing evaluations, the audits, 
to make sure that they are small businesses performing the 
tasks that are supposed to be performed. And the third is we 
enforce against bad actors. And you have seen us act 
aggressively on all three of those activities.
    In addition, the President's task force on procurement 
addressed this specific issue and it was further addressed in 
the Small Business Jobs Act. We have also clarified in the new 
8(a) Regulations, the first redo of the regulations in 10 
years, exactly what--and closed loopholes so that when a small 
business gets the contract they are performing the anticipated 
amount of the work.
    Mrs. Ellmers. Thank you so much, Ms. Mills. And Mr. 
Chairman, I yield back the rest of my time. Thank you.
    Chairman Graves. Mr. Critz.
    Mr. Critz. Thank you, Mr. Chairman. Ms. Mills, it is good 
to see you. Thanks for coming in.
    I do have some concerns, and I think the ranking member 
brought up some of the concerns that I have. Being based in 
rural Pennsylvania, rural America, is that with reducing or 
leveling funding for programs like SBDCs, WBCs, Veterans 
Assistance, these are programs that have worked very well, I 
believe, in our part of the world. And I have three SBDCs that 
aren't actually in my district but they are just outside and I 
know scores of people that go to them. And as we are leveling 
or reducing funding for these, we are increasing funding for 
programs that are actually unauthorized programs or programs 
that are not authorized by this committee. So I am reading them 
to see, because I am a reasonable human being, what a regional 
innovation cluster is, which I see that is one of the programs 
that is receiving funding. And, you know, what is unfortunate 
for my area of the world is that when you talk about clusters, 
rural America is not usually a place where you are going to 
have a cluster. It is not someplace that unless something major 
happens like the discovery of a natural gas deposit, that you 
are going to see things like this. So it is hit or miss for us.
    And then I also read another program which is called the 
Emerging Leaders program, which is a great program training 
executives in inner city urban areas, Native American, but let 
me tell you. In rural America we have poor people, too. And we 
have people that could use help and that are underserved. And 
you are pulling money out of programs that help folks in my 
neck of the woods to go to other programs. I am just curious 
what the rationale is for that.
    Ms. Mills. Well, let me clarify, number one, that clusters 
exist absolutely in rural America. My first involvement with 
clusters was in rural Maine, which is my home state. And the 
cluster was the Maine Boat Builders. And there is probably 
nobody less likely to cluster than Maine Boat Builders but in 
fact they did. And the Maine economy, which had been relying on 
textiles and shoes and pulp, is now----
    Mr. Critz. If I may interrupt one second. So you had the 
Boat Builders already there. So there already was a cluster of 
companies that were trying to form together. See, in my area 
there is nothing like that. It is a very diverse group of 
people who are really just scraping by sometimes to get the 
work. So I am sorry to interrupt but I think there is, like I 
said, there is something there already that provided the 
impetus for the cluster.
    Ms. Mills. But once again, across rural America, and I just 
did a call yesterday with Secretary Vilsack and we are very 
strongly partnered with USDA in a number of areas. We just did 
a MOU with them on exactly the kind of activities you talk 
about, which is to engage in rural America with our joint 
programs and activities. But I will tell you that one of the 
clusters that we awarded with the funding that we just did a 
competition on is in the agriculture area. Do not make the 
mistake of thinking that these are urban cluster activities. 
They go everywhere from Akron, Ohio. They go from the Gulf 
Coast in Louisiana. They are in the smart grid. They are in 
upper Michigan. There is a Green Aviation Coalition. They are 
everywhere. They are everywhere, including rural America. The 
reason why they are important is that they use the assets on 
the ground of the small businesses and the small business 
development centers who are generally at the heart of these 
cluster activities. And they link, leverage, and align 
resources around collections of small businesses. Small 
businesses do not have the power to access research and 
development, community college curriculum in the way that big 
businesses do. They don't have the market power until they 
cluster together. That is what we learned in rural areas, as 
with the Boat Builders. And they may have existed but they were 
not part of the economy in an active way. When they cluster 
together we got research on composites from the university 
driven to that cluster. That is how you access resources in a 
region and develop a transforming economy. So these are 
critical programs.
    We used to do our programs, our fabulous programs in silos. 
Now to get more bang for the buck you need to link, leverage, 
and align all the things that are happening on the ground. That 
is what happens in a cluster for very, very small investments.
    Mr. Critz. And before I run out of time I want to bring up 
one item that is very near and dear to my heart is the veterans 
of our country. And President Obama authored or had the 
Military, Reservists and Veterans Small Business 
Reauthorization Opportunity Act, and I noticed in the budget 
that there is no request for funding to help our veterans who 
are experiencing, especially from Iraq and Afghanistan an 
inordinate amount of unemployment. And we have a lot of smart 
people in our military and I want to just get that out there. I 
am out of time. I yield back but it seems that we are missing 
an opportunity here.
    Chairman Graves. Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman.
    My question is what programs that you have right now do you 
think are most effective in terms of job creation that the SBA 
does? Give me a single program that you think is the most 
effective right now.
    Ms. Mills. We have a three-pronged approach we call our 
three Cs. Capital, contracts, and counseling. And they go 
together. Our most, largest program is actually making sure 
$100 billion of government contracts go into the hands of small 
business. Our most known program I think is the 41 billion that 
we put in the hands of small business at a time when they could 
not get credit at a cost of only 1.2 billion. But in fact, 
counseling pulls it all together, and sometimes if you give a 
small business the money and you do not give them the advice 
and the counseling that they need it is not a complete formula.
    Mr. Coffman. And let me just say, Madam Secretary, these 
people who do counseling, when I was in small business I 
noticed that some of them really did not have the kind of 
business background that were helpful to me. Are all the people 
that do this kind of work former small business entrepreneurs?
    Ms. Mills. We have a series of activities that help small 
business in all different kinds of counseling. They range from 
our small business development centers to our retired 
executives who are in our SCORE activity who generally have 
come out of entrepreneurship or business, to our microloan 
technical assistance intermediaries who help and counsel and 
advise and provide technical assistance to those in our women's 
business centers and our veterans centers. And in the large 
part they are day-to-day very well versed not only in how 
business operates but in what is available.
    Mr. Coffman. What percentage would you say that, let us 
take the SBDC, what percentage of those folks would you say 
were former small business owners?
    Ms. Mills. I am happy to provide that to you.
    Mr. Coffman. Could you? Thank you very much.
    And then I have a question about the 8(a) program. And I 
think it was raised by Congresswoman Ellmers about the fraud 
issues in the program. And I think you said, and I am happy to 
hear it, that since you have been Administrator of the SBA, 
that in fact you have been very focused on these issues of 
fraud where you have these shell entities come in and engage in 
fraud. Can you give me, you might not be able to do it today; 
but I would like to know how many successful investigations 
there have been on fraud? Once these 8(a) designations are 
made, how many successful entities have been investigated? 
Because I think that this is rampant. And I know when I had 
competitors in small business going for government contracts, 
some of the things that they did. So I am wondering if you 
could get back to the committee on some specifics on that.
    Ms. Mills. I will be happy to get back to you, and I will 
be happy to tell you that the number of investigations is going 
up.
    Mr. Coffman. Mr. Chairman, I yield back.
    Chairman Graves. Mr. Schrader.
    Mr. Schrader. Thank you, Mr. Chairman. Just appreciate all 
the work that Director Mills has done particularly in the fraud 
area. It has been a breath of fresh air compared to what had 
been going on, I guess, in previous administrations. So I 
appreciate all the heavy lifting in that area.
    I would, however, also reiterate the ranking member's 
concern about the SBDC program being reduced and new programs 
coming on. And maybe there is an opportunity in the future for 
you to line out the comparative advantages and disadvantages 
that led the Department and you to that decision because they 
are a big source of advocacy and a good source of knowledge for 
a lot of people who have lost their jobs who are now out there 
creating their new businesses. And so we want to make sure the 
SBDCs are still out there able to do their good work.
    A question I guess I have is one of the changes that we had 
made in the 7(a) program last time. We increased the loan 
subsidy amount available, go up to $5 million. And a little 
concerned. We had talked about that at the time. There was 
concern from my part and others about, you know, these bigger 
loans squeezing out lots of loans for smaller small businesses. 
And my information would indicate almost two-thirds of the 
loans went to businesses, you know, wanting between a million 
and $5 million worth of revenue or loan. And wondered, you 
know, if you had figured on that amount when you raised the 
loan ceilings for the program.
    Ms. Mills. Yes. We pay a lot of attention to the small loan 
size. And in fact, as we look at the numbers what we see is 
that small loans, prior to any raising of the loan limits, but 
small loans are the last to recover because they are more 
expensive to deliver from the banks. And that is why we 
introduced two programs under the 7(a) rubric so that they live 
and are authorized as 7(a) programs. But the first is called 
Small Loan Advantage and the second is called Community 
Advantage. Small Loan Advantage is designed to make sure that 
banks give small loans. And it streamlines our paperwork. And 
as you and I have discussed before, streamlining our paperwork 
is good for borrowers, it is good for processing, and it keeps 
the same underwriting standards so that we can deliver a more 
streamlined product but more cost effective in the small loan 
size. So we have taken Community Advantage, as well as the 
program for small loans. That is designed to make sure that 
institutions that are in underserved markets, community 
development financial institutions (CDFIs), CDCs, can have 
access to SBA's 7(a) program. And a limited number of 
experienced CDFIs will come into the program, providing more 
points of access for small loans. Those are critical programs 
to give access and opportunity on the small loan size while 
still preserving the ability for a large manufacturer to get a 
larger loan.
    Mr. Schrader. All right. Is it possible at some point to 
get for the current budget that you are proposing subsidy 
breakouts, the fee portion versus the increased loan portion 
versus the defaulted loan portion? Is that possible at some 
point in the future?
    Ms. Mills. We would be happy to answer any of your 
questions.
    Mr. Schrader. Good. We also passed a bill last session on 
performance-based budgeting and wondered what actions the SBA 
has taken to implement performance-based budgeting along all 
its different program areas.
    Ms. Mills. As you know, we are very metrics-oriented and we 
track the outcomes of all of the budget areas. And you will see 
some of them in your budget book. But the focus is on a higher 
level to put as much money in places where it is delivering 
value into the hands of small business. So overall that is the 
first line of assessment.
    Mr. Schrader. I just would encourage you to set targets, 
you know, for the various programs, whether it is the fraud, 
waste, and abuse or a certain amount of loans, not just 
counting loans out but jobs created and that sort of thing. I 
think that helps sell the programs to at least this group here 
and hopefully to the American public.
    With that I yield back, Mr. Chairman.
    Chairman Graves. Mr. West.
    Mr. West. Thank you, Mr. Chairman and Madam Ranking Member. 
Ms. Mills, good to see you again.
    In light of the GAO report, the 345 page report yesterday 
that came out with the duplicitous programs, on page 103 of the 
budget submission the SBA lists a variety of programs in which 
the agency is attempting to improve coordination of services. 
My question is has the SBA considered whether these programs 
are duplicative, and if so, are you seeking to eliminate any of 
them? Thank you.
    Ms. Mills. Overall, as I said earlier, this is a time where 
everybody has to tighten their belts, streamline as much as 
possible, and eliminate duplication. We are on continuous watch 
for that. And we have taken some programs that we like and we 
care about to a lower level because we find that we think we 
can find a more cost-effective way of delivering those services 
and we are working very, very closely across all our programs 
with everybody from the U.S. Department of Agriculture and 
their operations and Department of Commerce, the export 
operations, the import-export bank, to make sure if somebody 
else can do it better and we can pull back, that is what we are 
going to do.
    Mr. West. Mr. Chairman, I yield back the balance of my 
time. Thank you.
    Chairman Graves. Ms. Chu.
    Ms. Chu. Ms. Mills, I am from Los Angeles. It is a port 
city and there are many who are interested in exports. And I am 
glad to see that according to a U.S. Commerce Department 
report, California's exports climbed 19.3 percent in 2010 to 
143 billion. And these are levels that are close to pre-
recession levels. But most of California's exporters are small 
and do not venture too far. They go to Mexico and Canada. These 
are the top two countries for the state's exports. So in order 
to grow these industries even more the businesses will have to 
start looking towards other markets beyond North America and 
they will have to find trusted overseas partners to handle 
distribution and sort out complicated shipping logistics and 
import duties. There are multiple agencies involved with the 
National Export Initiative, including the SBA, but of course, 
Commerce International Trade Administration, the Minority 
Business Development Agency. But which is the lead agency and 
what is the exact role that SBA will play in this initiative? 
And how will you monitor and assess its progress?
    Ms. Mills. Thank you, Congresswoman.
    We lead the small business working group for the Combined 
Trade Promotion Coordinating Committee of the federal 
government around exports. And that is an interagency effort to 
make sure small businesses' share of exports grow. Right now 
small businesses are about 30 percent of exports. There is only 
about 250,000 small businesses who export out of the six 
million that have employees and the two million who potentially 
could. So there is much room for growth. Small businesses are 
the fastest piece of growing piece of it, and we have a goal of 
doubling exports as you know over the next five years.
    So we have initiated a series of activities around this 
coordinated small business approach which involve our major 
role in the frontend which is we try to get more small 
businesses into the funnel and then we try to direct them to 
some of the resources that are available everywhere, including 
the commercial service and the import-export bank, our loan 
programs. We are counseling a very, very high number and 
increasing number of small businesses on just entry into export 
right now.
    Ms. Chu. I notice that in SBA's budget your agency is, in 
fact, stating that it is committed to enhancing the ability of 
those small businesses to export. How does your new budget 
structure, how is it structured to help the business person? 
For instance, I have many business persons that come and ask 
for help and assistance in navigating export regulations. How 
exactly would your budget help them?
    Ms. Mills. Right. In addition to our budget, which funds 
the core operations, it is not visible here that the Small 
Business Jobs Act added significant resources around exports, 
including $30 million annually for something called step grants 
which are state-based grants that we will give out, we just 
announced them, that will help support small business activity 
in state export organizations. Generally, they would also be 
coordinated with our export people and our small business 
development centers. So most of the activity in the funding for 
the incremental efforts actually is in the Small Business Jobs 
Act.
    Ms. Chu. Some business groups have also voiced some fear 
that their intellectual property will be stolen if they sell a 
product overseas. Does the SBA's budget have some means of 
handling this or at least to strengthen relationships between 
the Department of Justice and the U.S. Trade Representatives' 
Office so that these businesses can feel more confident about 
exporting?
    Ms. Mills. This is a very big issue for small businesses 
who are exporting, and we have a coordinated effort with 
Commerce who runs the intellectual property and the patent 
issues to make sure that these things are very, very, very 
strongly addressed.
    Ms. Chu. Okay. Thank you. I yield back the balance of my 
time.
    Chairman Graves. Mr. Landry.
    Mr. Landry. Thank you, Mr. Chairman. Ma'am, in looking 
through your budget I noticed that some of the cost savings you 
are calculating is in a decrease of about 150 employees in a 
disaster program. And being that my district seems to be the 
epicenter of disaster over the last five years I am concerned 
about the sacrifice the employees who are on the ground working 
with my constituents after a disaster will be limited while 
there may be too many bureaucrats here in Washington. The 
Department of Agriculture employs more than 90,000 people and 
its secretary has just 13 people in his office. Secretary Gates 
is running two wars in Afghanistan and has a mere 15 people in 
his office. The Department of Energy has both a deputy 
secretary and a chief operating officer serving in a dual 
capacity. You all employ about 3,400 people if I am correct, 
but you all have two separate people serving as a deputy 
secretary and a chief operating officer. Is that correct?
    Ms. Mills. No, sir. We eliminated the chief operating 
officer position.
    Mr. Landry. Oh, good for you. I hadn't gotten that far. 
Thank you.
    Do you know how many currently are in your personal staff?
    Ms. Mills. I don't have a particular number for you on that 
but I would be happy to follow up.
    Mr. Landry. Okay. Well, my point is just I want to make 
sure that we are examining how heavy we are up here before we 
start sacrificing people on the ground.
    Ms. Mills. Well, I totally agree with the principle that 
the most important priority is to get people on the ground who 
are actually helping small businesses one by one by one. And 
that is one of the two critical priorities for the budget. 
Making sure the resources that are most effective that are on 
the ground are the number one priority. And the second priority 
is going after fraud, waste, and abuse and making sure our 
programs have integrity.
    Mr. Landry. Are you going to go back and make sure that if 
we have some problems and disasters, it might not even be in my 
district but others, that do you have a way to increase those 
number of field agents in an emergency?
    Ms. Mills. Yes, we do. And I just want to assure you that 
the reduction that I described is in the steady state of 
readiness. We fluctuate up and down depending on how many 
disasters there are and how severe. And sometimes we are in as 
many as 40 areas of the country so we employ a ready reserve 
staff of 2,000 who are not on the payroll but they are ready to 
go on the payroll and get on a plane and get down to the area 
when necessary. So the reason we believe we can make a 
reduction in our average steady state and maintain the same 
level of preparedness is that we worked very hard to reengineer 
our disaster processing centers so that we were more efficient 
on average. But you should expect us to deliver and be ready to 
deliver what you need in those times of disaster and to 
maintain the new level of preparedness that we have come to 
post-2005.
    Mr. Landry. Thank you, ma'am. Mr. Chairman, I yield the 
balance of my time.
    Chairman Graves. Ms. Clarke. Sorry for the delay.
    Ms. Clarke. Thank you, Mr. Chairman. And thank you, Ranking 
Member. Administrator Mills, I would like to warmly welcome you 
back to the committee today and I would like to just let you 
know that I, too, share a lot of the concerns that were raised 
by Ranking Member Velazquez with respect to SBDCs and HUBZones.
    I hope that you will revisit your thinking with regard to 
your support for the SBDCs. It appears to me that perhaps there 
are places where these SBDCs have been much more effective than 
maybe other places in the nation, and perhaps there needs to be 
some level of comparative analysis so that we can focus the 
resources where they, you know, you get the best bang for the 
buck. And I hope that you will also dedicate some of your staff 
time to the reform of the HUBZone program so that you can 
report back to the committee sooner rather than later.
    But I would also like to take this opportunity to express 
my appreciation to you and the Small Business Administration 
for your willingness to work on issues relating to economic 
development in underserved communities, as well as minority, 
women, and veteran-owned businesses. In the 111th Congress, I 
introduced H.R. 3771, which would have established mentorship 
and assistance programs for minority, women, and veteran-owned 
businesses, and I appreciate President Obama's budget request 
for the SBA to promote investment in these people-based 
entrepreneurial initiatives. I have applauded your announcement 
of the implementation of Women-owned Small Business Federal 
Contract program, which increases access for women-owned 
businesses to federal contracts, and I was also encouraged by 
your announcement of the Community Advantage program, which 
provides community development financial institutions as an 
avenue to participate in 7(a) loan programs. As I understand 
it, the transition from the ineffective Community Express 
program to Community Advantage also saves $10 million.
    During my time in Congress I have been a champion for the 
CDFI program at the Treasury Department. And when the long-term 
CR revealed a $200 million cut to that program, I, along with 
16 of my colleagues, sent a letter to the majority leadership 
requesting that they restore that funding. As we all 
understand, our economy will not fully recover unless there is 
a robust recovery amongst all of our small businesses. So given 
the strides that we have made thus far, can you say that the, 
or make comments on whether the agency feels that it has taken 
the right steps in ensuring that the cuts to the budget will 
not come at the expense of the economic development of these 
disadvantaged areas that I have been so concerned about?
    Ms. Mills. We, too, are very focused. I want to thank you 
for your leadership in this area. We are very, very focused on 
underserved markets. And as you know from the data, these areas 
were very, very hard hit in the recession. Small businesses in 
these areas have not yet recovered and we felt it was very 
critical to get as many points of access into these communities 
to our main programs as possible. That is why we are opening up 
our program to selected CDFIs and CDCs who are operating in 
that community, who provide not just capital but often 
technical assistance and other support, and we are looking 
forward to I think some better penetration of these communities 
with these numbers because the small businesses in these 
communities create the jobs in these communities and we need to 
be there to support them.
    Ms. Clarke. Again, I would like to emphasize perhaps 
another glance at the SBDC infrastructure because certainly in 
a place like New York City that has become almost a brand for 
small business. With the challenges that we are facing with the 
banks and the lending for small business, the access to 
capital, the lines of credit, those SBDCs help those business 
owners to really navigate this very choppy water that we find 
ourselves in financially. And it becomes very difficult for 
individuals to sort of reorient themselves once they become 
accustomed to a particular brand. I stick with Crest; I don't 
move to Colgate.
    Thank you, Madam Chair, and I yield back the balance of my 
time.
    Chairman Graves. Mr. Keating.
    Mr. Keating. Thank you, Mr. Chair. And thank you to the 
Ranking Member, Madam. And thank you, Administrator Mills for 
being here.
    I have one question I would like to focus on. In 
Massachusetts, there are 400,000 veterans in the state. My 
district happens to have the largest number of those veterans, 
and according to the U.S. Department of Veterans Affairs, there 
are more than a million unemployed veterans in our country and 
as many as one-third of them want to start their own 
businesses. I would like to know, you know, your views on what 
SBA is doing, what success they are having, to assist these 
unemployed entrepreneurs.
    Ms. Mills. Well, veterans are a very big focus actually at 
the SBA because as you just mentioned, veterans over index in 
wanting to start their own business or in having their own 
business. So we have, from the beginning over the last two 
years, developed very strong relationships with the Veterans 
Administration so that we can cross-educate our people and our 
small businesses as to all the programs and the resources that 
are available to them. Our notion is that every single point of 
access, whether it is a district office or an SBDC or a SCORE 
representative, should be able to point a veteran to some of 
the particular counseling and contracting programs.
    We also did incremental programs. One was the service 
disabled veteran and women veteran entrepreneurial boot camp 
through the Syracuse University. It is just a fabulous program. 
The stories are really strong. But we are focused on this day-
to-day. We have a joint task force with General Shinseki that 
he and I run, which is focused on making sure that we keep 
these veterans' interests understood and a priority throughout 
both of our organizations and make all the changes that we can 
to provide access and opportunity.
    Mr. Keating. Do you happen to know, too, that among those 
other veterans organizations, whether vet centers, I know 
they're usually, you know, for counseling and other purposes, 
but are they included too as an access point? Are you aware of 
that?
    Ms. Mills. Yes. We have veteran centers, a limited number. 
And we also believe that we want to have that expertise in 
every center, our 900 small business development centers, our 
district offices as well.
    Mr. Keating. Great. Thank you, Administrator. And Mr. 
Chairman, I yield my time back.
    Chairman Graves. Mr. Richmond.
    Mr. Richmond. Thank you, Mr. Chairman and Ranking Member. 
Madam Administrator, I would just echo the concerns that my 
colleague, Congressman Landry, talked about in terms of making 
sure that as we cut personnel and we streamline our disaster 
department that we do not sacrifice timeliness in terms of the 
response to people who need that assistance when the time 
comes.
    One thing I would like to do is in conversations with at 
least two of my local entities convey to you what they 
expressed to me in both instances. They were very positive and 
they wanted to thank you. One was Vaughn Fauria, who runs 
NewCorp CDFI business development center in Louisiana who 
bragged about how accessible your office is and the fact that 
they can give you ideas and that you all understand how 
important it is for them to get money to small businesses in a 
time of need, but also the technical assistance and those other 
things that you provide so that their customers and their 
client base can succeed.
    And the other one would be Zena Tech, which is a Baton 
Rouge-based company who your export express loan allowed them 
to expand their business and trade, really to sell their 
product overseas which while the recession was hitting here and 
their clientele dropped in the United States, they were able to 
expand to a new market that kept them afloat. And both of those 
companies wanted to--wanted me to do that so I thought I would 
take this opportunity to do it.
    One quick question. When you talk about, and a lot of the 
initiatives that I see including the New Market Tax Credit 
program and others in the state legislature, a lot of times we 
would get a detailed analysis back even on New Markets, 
although it was a federal program we had a state piggybank, the 
return on investment that we receive from each of those 
programs in terms of every dollar that we invest in it what 
we're getting back in terms of tax dollars created, jobs 
created and so forth. Do you have reports like that on 
different programs within your department?
    Ms. Mills. Yes. In fact, we have a number of metrics about 
jobs created, about activity created. And some of them are in 
the budget book and I would be happy to provide any others you 
might wish.
    I appreciate your comments, and as you know, I have been to 
Louisiana a number of times in a number of circumstances. And 
it is good to see the small businesses flourishing there. We 
have a terrific cluster we funded in Geospatial, right in the 
area which I think will provide some interesting new job 
opportunities and create some innovation and small business 
success.
    Mr. Richmond. The other thing I would like to talk about is 
just a better coordination between departments. And I will give 
you an example. Because you mentioned just as the President 
mentioned in the State of the Union, that he would like to 
double exports over the next five years. If you look at the 
mouth of the Mississippi, which exports in terms of agriculture 
and grain, 60 percent of all products in the country come 
through the mouth of the Mississippi when we export, when we 
are trading. However, if we do not dredge the mouth of the 
Mississippi it significantly impacts the ability to load ships 
to an economic level. So if we are not dredging and the Corp is 
not dredging the mouth of the Mississippi, then we are really 
tying our hands behind our backs in terms of trade. And we have 
a trust fund, which is the Harbor Maintenance Trust Fund. So as 
you continue to help us create products so that we can trade 
overseas and trade around the world, we have to make sure that 
the Corp is dredging our waterways because that is our 
superhighway and how we are going to get our goods to market. 
So I don't know if you can help me there but I can tell you 
that we can create the product, but if we cannot be competitive 
in terms of shipping then we are still tying the hands of our 
American businesses.
    And I will yield back. Thank you, Mr. Chair.
    Chairman Graves. Thank you. I have a couple of questions. 
One of them deals with the Office of Advocacy, which falls 
under--and I am curious. I want you to explain to me how that 
relationship works. Because I was talking to them this morning 
and they said some of the number one things that they do is 
dealing with the Regulatory Flexibility Act which you all do 
not really have anything--any part of.
    Now, explain to me why they are under your budget. And, I 
am just looking for places to find some savings. And talk to 
me, too, about the fact, you requested an additional $10 
million, I think, for overhead and costs for them and I think 
your overhead is $56 million, which is 20 percent of your total 
overhead. Well, my question is how much of Office of Advocacy 
do you actually have a part of? And why are they under your 
budget if you do not have a part of them? And let us go through 
that for a little bit.
    Ms. Mills. So under the first there is no additional 
request for $10 million of additional overhead.
    Chairman Graves. I think it just suggested that. But 
regardless, talk to me about, because I am having trouble 
figuring out, exactly, who they answer to.
    Ms. Mills. The Office of Advocacy is independent and it 
operates under our umbrella. And this year, because of a 
provision in the Small Business Jobs Act, it has a separate 
budget line item. But the amounts are relatively the same. So 
they are just broken out as per the mandate in the Small 
Business Jobs Act. They do have a very strong role in 
regulatory fairness. We also are extremely active in making 
sure that the excess costs of regulations do not unduly affect 
small businesses. We have our ombudsman activity, which deals 
with that issue on a one-on-one basis as well.
    Chairman Graves. Okay. Because it is frustrating to me. If 
one of their biggest focuses, and they like to talk about the 
Regulatory Flexibility Act, but it does not seem to me like 
they are doing it or doing a very good job at least of pointing 
those things out. But it is frustrating to me. And we can come 
back to that, too.
    I also want to talk just a little bit about when we changed 
the amount of fees you all can recover, which I think is 
essentially zero now, is not it? Did not we zero out the fee 
structure for anyone, at least on some of the loan programs? Or 
at least we reduced them to almost nothing. How much is that 
costing you now? Because I don't think you can cover--are you 
covering your costs when it comes to administering these loans 
and stuff? I mean, that has got to be a big problem right now.
    Ms. Mills. The program that you refer to where we took the 
fees down to zero in many places has terminated. It was $41 
billion we were able to do under that program. It was part of 
the Recovery Act, the extensions and the Small Business Jobs 
Act. A request to continue to do that is not included. Now we 
are back to charging fees. You know, it is a difficult fiscal 
time and we are determined to bring these programs as close to 
zero subsidy as we can so it will not be a cost to taxpayers.
    Chairman Graves. Which is perfect. And that is what I asked 
you for. In fact, I am very happy that I asked you to bring us 
some suggestions on cuts, which you have, and I appreciate that 
very much.
    I am concerned though about and this is another issue all 
together, and Mr. Keating brought up. I am just going to use 
the veterans' programs for a minute. I mean, how much 
duplication is there with that? I know they have got counseling 
programs and then you all have counseling programs. In fact, 
there is a lot of counseling programs out there with different 
agencies. And how much of that is duplicated? How much of that 
could we shrink down or transfer? Let them do it. If they are 
doing a better job of it, let them do it; if you guys are doing 
a better job of it then let us get them out of the business of 
doing it. I am not saying we take away these programs; I am 
saying why do we have two agencies doing counseling for the 
same thing? And that would be an area that has been brought to 
my attention that we should be looking at for instance. I mean, 
how much duplication is out there? We can just talk about the 
veterans' programs.
    Ms. Mills. We are in continuous look for duplication and 
what we have done in our coordination with the Veterans 
Administration is, you know, share back and forth where we can, 
you know, get more bang for the buck. And we are trying to take 
on the small business aspect of veterans because they really do 
when they come back have a very, very high interest in starting 
small businesses. So we provide a lot of the entrepreneurship 
training. It is just our core counseling program. So if we can 
bring them into our structures as they are and they feel 
comfortable and have access and opportunity under our core 
counseling programs, that is a very good effective use of 
money.
    Chairman Graves. Well, I think that I would love--just have 
to figure out how to figure this out because there is no reason 
to have all this duplication. I just assumed you all were doing 
it as have it spread out over every other agency. I cannot 
believe that they would not be interested in transferring that 
out, which is one area that again I want to take a look at.
    And I do worry a little bit, too. I know you talked a 
little bit about streamlining some of the programs and you 
specifically mentioned, somebody asked the question under some 
of the micro loan programs when you streamline. I am a little 
concerned because it seems like every time you streamline a 
program then the default rate tends to go up and we do not want 
to see that. I am just voicing that as a concern overall. What 
is your default rate, what is it running approximately overall? 
Just percentage-wise?
    Ms. Mills. The default rates, as you mentioned, in our 
credit programs are up, as they are in actually all. The 
cohorts that are defaulting you should know are the 2005, 2006, 
2007, and some of the 2008 cohorts. And the issue there is that 
those loans were done at a very frothy time with very high real 
estate collateral. High real estate values used as collateral, 
and that value does no longer exist in some of that real estate 
and that is causing losses.
    Chairman Graves. What is the percentage? Do you know just 
overall?
    Ms. Mills. We have it by cohort and by activities and by 
program as you please.
    Chairman Graves. Just overall by, I mean, you know, what is 
your percentage?
    Ms. Mills. We do not have one percentage so I can----
    Chairman Graves. 7(a).
    Ms. Mills. 7(a)? I would really rather give you the correct 
number because there is----
    Chairman Graves. Why don't you give me that because I would 
like to see it.
    Ms. Mills [continuing]. Because we have it by cohort. We 
have it by everything. I am happy to give it to you. We have 
more than----
    Chairman Graves. Because that is obviously very important. 
And to be quite honest with you, I have seen some of those 
numbers and I was surprised that it was not higher, which is--
--
    Ms. Mills. Yes.
    Chairman Graves. And I understand. You are working with 
these banks and the banks have to make the decision obviously 
but keeping that default rate down is obviously a big part of 
this. We have got to make good loans out there making bad 
loans. And I also understand, too, that the real estate value 
in a lot of cases is much lower now than it was before, which 
brings me to another question. When it comes to liquidation of 
these assets when there is a foreclosure, I know in some cases 
the banks handle that. In some cases the SBA handles that. Do 
you have any suggestions on that on what we could do different 
there? Is it better in the private sector or is it better 
through you all just out of curiosity from your point of view?
    Ms. Mills. Well, once again, this is something that we 
spend a lot of time on. And we are pushing very hard because, 
as I said, a lot of these collateral values that were higher, 
you know, in the high real estate times are not there. Are not 
there. So we are looking at ways that we can get the most back.
    Chairman Graves. Well, that is, I mean, again, it comes 
back to we have got to figure out if we are better off just 
doing it all through the private sector or if unless I have a 
compelling argument to tell me that you all would do it better. 
But we obviously have to do the best we can recovering those.
    Ms. Mills. We have to do the best we can and I do not think 
that there has been one single answer to that question but we 
are working hard on it.
    Chairman Graves. I hate to dominate the time. I have got 
more questions but I know we have got a vote and I will lose 
everybody once the vote is over.
    So Ms. Herrera Beutler, if you have a question. Do not have 
one?
    Unidentified Speaker. Thank you, Mr. Chairman. As to the 
veterans' benefits assistance, Lieutenant Colonel Allen West, 
Retired United States Army just left the room but I know that 
he would agree with me that members of the United States Army 
leaving need substantial help where members of the United 
States Marine Corps leaving are highly self-sufficient. And if 
you take that into account I would really appreciate it. Thank 
you.
    Ms. Mills. Thank you.
    Chairman Graves. We need to work that out because we are 
showing an increased request for the Office of Advocacy. And 
again, I have a real problem with the Office of Advocacy and 
just exactly what they do and who they answer to. And I am 
frustrated by where they are falling underneath your budget 
because I would much rather see that money going to business 
startups and loan programs, things that work. And we are going 
to be pouring over that. I will be working with the Ranking 
Member and the rest of the Committee to go over the budget 
requests and all. And I do appreciate you coming in and giving 
us your suggestion with the PRIME program. I do not know what 
we are going to suggest when it comes to the Budget Committee 
yet but I am afraid that if we come back we are going to lose 
all the committee so I will probably adjourn at this point. But 
again, I do appreciate you coming. We will ask you back. I 
promise you that. We will ask you back and ranking member, I 
appreciate your questions.
    So with that the hearing is adjourned and I ask that each 
of the members have five legislative days to correct the record 
if they so like. This hearing is adjourned.
    [Whereupon, at 2:16 p.m., the committee was adjourned.]
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