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


 
                      MARKUP OF 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

                               __________

                              MARKUP HELD
                             MARCH 15, 2011

                               __________


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            Small Business Committee Document Number 112-005
          Available via the GPO Website: http://www.fdsys.gov

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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, Deputy Staff Director
                     Barry Pineles, General Counsel
                  Michael Day, Minority Staff Director

































                            C O N T E N T S

                              ----------                              
Opening Statements:
    Graves, Hon. Sam.............................................     1
    Velazquez, Hon. Nydia M......................................     2

                                APPENDIX

Views and Estimates of the Committee on Small Business on Matters 
  to be set forth in the Concurrent Resolution on the Budget for 
  Fiscal Year 2012...............................................     4
Statements for the Record:
    Cicilline, Hon. David N......................................    23
    Clarke, Hon. Yvette D........................................    26
    Chu, Hon. Judy...............................................    28


  MARKUP OF THE SMALL BUSINESS ADMINISTRATION FISCAL YEAR 2012 BUDGET

                              ----------                              


                        TUESDAY, MARCH 15, 2011

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:34 p.m., in Room 
2360, Rayburn House Office Building, Hon. Sam Graves [chairman 
of the Committee] presiding.
    Present: Representatives Graves, Coffman, Mulvaney, Tipton, 
Fleischmann, West, Ellmers, Walsh, Barletta, Hanna, Velazquez, 
Schrader, Altmire, Clarke, Cicilline, Owens, and Keating.
    Chairman Graves. We will go ahead and call this markup to 
order.
    Two weeks ago, the Committee heard from Administrator Mills 
about the Small Business Administration's budget for 2012. The 
Committee now has the opportunity to provide its opinion on the 
budget for the SBA. The Views and Estimates considered today 
will be transmitted to Chairman Ryan for incorporation into the 
Congressional budget resolution.
    The past few years have been very difficult for small 
businesses. They have had their credit lines cut, they have 
lost customers, and they have laid off workers. And these 
businesses have had to reduce their expenses, including 
overhead.
    The federal government faces very similar constraints, and 
the chasm of the deficit requires tough choices to be made. 
There appears to be no effort put forth by the Administration 
to eliminate duplicative programs that are costing taxpayers 
millions of dollars.
    The Views and Estimates before us cut nearly $100 million 
from the SBA budget. Fourteen programs are defunded because 
they duplicate existing programs at the SBA or they are 
duplicated at other agencies. Other programs receive no 
recommendations of funds where there is an absence of any 
evidence that they are actually helping small businesses create 
new jobs.
    Despite these cuts, the core functions of the SBA--to make 
capital available, to provide advice, and to increase the 
utilization of small businesses as federal government 
contractors--is preserved. In fact, through some very judicious 
reallocation of funds, the services available to entrepreneurs 
will be improved over the SBA budget proposal that was given to 
us.
    The Committee recognizes the potential for fraud and abuse 
in various SBA programs. And, as a result, the Views and 
Estimates provide additional funds for modernizing the Loan 
Management Accounting System and the Office of Inspector 
General to address those very concerns.
    And, finally, but for the need to fund SBA guaranteed 
lending programs, without which small businesses cannot obtain 
needed capital to create jobs, the Views and Estimates under 
consideration today represents a $155 million cut in the SBA 
budget request for fiscal year 2010.
    I now recognize the ranking member for opening remarks.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Today's consideration of the Committee's Views and 
Estimates on the SBA budget proposal could not be happening at 
a more critical time. In recent months, it has become clear 
that the economy is showing progress on many fronts; however, 
employment gains are lagging. And it is in this respect that 
the SBA can play an important role.
    Unfortunately, the SBA continues putting its own 
unauthorized programs ahead of other proven initiatives. This 
includes seven initiatives, at a cost of more than $50 million. 
Yet, no performance metrics accompany these sizeable requests. 
We all need to tighten our belt, and it begins with proposals 
like this.
    Just as the administration is creating its own programs 
outside of the legislative process, it is defunding initiatives 
that have been documented to have a pattern of success. The 
SBDC programs, for instance, which saw its core budget cut by 
$10 million, produces nearly $3 in Federal revenue for every $1 
spent. It simply makes no sense to divert money from reputable 
programs and give it to the agency's untested projects.
    The SBA also continues picking which programs to administer 
and which to overlook. It sees fit to implement the 504 
refinancing and the intermediary pilot programs, even though 
they risk taxpayers' dollars excessively and offer little in 
the way of meaningful job creation. And over the past 5 years, 
the SBA has dumped millions into an ineffective IT system, the 
Loan Management Accounting System. But when it comes to other 
initiatives, such as the Increased Veterans Participation 
Program, which was passed into law 3 years ago, the agency 
cannot find any money.
    Little attention is also paid to solving SBA's most 
pressing problems, such as the ongoing fraud in its contracting 
and delegated authority in the lending programs. If we are 
going to spend additional money, it should go toward cleaning 
up waste and abuse so that the agency's existing programs 
actually work and help small businesses.
    With regard to the majority's Views and Estimates letter, I 
support several provisions. The letter recommends the 
elimination of several unauthorized pilot programs, as well as 
the questionable initiatives created in the Small Business Jobs 
Act of 2010. It is correct to terminate those programs if they 
have not demonstrated any value to the taxpayer.
    However, there are several areas of concern. By proposing 
to eliminate funding for the Veterans Business Outreach Center, 
it is limiting the ability of the 190,000 veterans from Iraq 
and Afghanistan to launch their own businesses. Veterans who 
have a high rate of entrepreneurship need more outreach, not 
less, regardless of the cost. As we seek to tighten the SBA's 
belt, we should not be doing so at the expense of those who 
have already sacrificed so much for our Nation. On this basis 
alone, Members should take pause in adopting these views.
    With regard to ending frivolous programs, we missed an 
opportunity to send a clear message on the administration's 
proposed SBIC subprograms. The Views letter sent inconsistent 
signals by first stating that funds should not be made 
available for these initiatives; then, it seemingly contradicts 
itself by stating that, if a new program is created, the SBA 
should do so with a separate credit subsidy rate. This gives 
the agency at least tacit approval to go forward with this 
unauthorized project. As a result, the Views are permitting the 
exact sort of wasteful spending that we are concerned with 
stopping.
    I am concerned regarding all other wasteful unauthorized 
programs in any form, and we will make this clear in our Views.
    As we all know, it is not uncommon to disagree on budget 
priorities. While the chairman and I may not fully agree on our 
Views, I think it is clear that we are both disappointed in the 
agency's priorities. The inconsistency in its funding request 
is indicative of an agency that needs to rethink its 
priorities.
    Just as the recent downturn required entrepreneurs to think 
more strategically, the SBA should be doing the same. What this 
Committee needs to see is a refocusing on initiatives that have 
positively impacted business owners while giving taxpayers a 
reasonable return on their investment.
    With that, I yield back.
    Chairman Graves. Thank you.
    Are there any other Members who wish to be recognized for a 
statement on the Views and Estimates?
    Mr. Cicilline.
    Mr. Cicilline. Thank you, Mr. Chairman. I do have some 
remarks that I would like to, with unanimous consent, ask be 
included in the record.
    Chairman Graves. Thank you very much. No objection, we will 
include them in the record.
    Any other Members wish to be heard?
    The Committee now moves to the consideration of the Views 
and Estimates letter.
    The clerk will read the title of the document.
    The Clerk. Views and Estimates of the Committee on Small 
Business on matters to be set forth in the Concurrent 
Resolution on the Budget for Fiscal Year 2012.

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    Chairman Graves. I would ask unanimous consent that the 
Views and Estimates letter be considered as read and open for 
amendment in its entirety.
    Does any Member seek recognition for the purpose of 
offering an amendment?
    Seeing none, the question is on adopting the Views and 
Estimates letter.
    All those in favor, please say, ``Aye.''
    All those opposed, say, ``No.''
    The ayes appear to have it. It is the opinion of the chair 
that the ayes do have it. The Views and Estimates letter is 
agreed to.
    And I now recognize the ranking member for a motion.
    Ms. Velazquez. Yes, Mr. Chairman, I want to provide the 
Committee notice that Democrats will be filing separate Views 
with the Committee on the Budget.
    Chairman Graves. Without objection, so ordered.
    And I would ask unanimous consent that the Committee be 
authorized to correct punctuation and make any other necessary 
technical changes in the document considered today.
    And, without objection, that is so ordered.
    I do want to, real quick, before we finish, welcome Mr. 
Hanna from New York and Mr. Barletta from Pennsylvania to the 
Committee, our brand-new members. And I appreciate them being 
here today.
    And, with that, the hearing is adjourned. Thank you.
    [Whereupon, at 1:44 p.m., the committee was adjourned.]

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