[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]




 
                  THE LOCAL IMPACT OF ECONOMIC GROWTH

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

                                HEARING

                               before the

        SUBCOMMITTEE ON ECONOMIC GROWTH, TAX, AND CAPITAL ACCESS

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                           SEPTEMBER 27, 2018

                               __________

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                   

                               

            Small Business Committee Document Number 115-091
             Available via the GPO Website: www.govinfo.gov
             
             
             
                             _________ 

                U.S. GOVERNMENT PUBLISHING OFFICE
                   
31-559                   WASHINGTON : 2019                  
             
             
             
             
                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        TRENT KELLY, Mississippi
                             ROD BLUM, Iowa
                         JAMES COMER, Kentucky
                 JENNIFFER GONZALEZ-COLON, Puerto Rico
                    BRIAN FITZPATRICK, Pennsylvania
                         ROGER MARSHALL, Kansas
                      RALPH NORMAN, South Carolina
                           JOHN CURTIS, Utah
               NYDIA VELAZQUEZ, New York, Ranking Member
                       DWIGHT EVANS, Pennsylvania
                       STEPHANIE MURPHY, Florida
                        AL LAWSON, JR., Florida
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                       ALMA ADAMS, North Carolina
                      ADRIANO ESPAILLAT, New York
                        BRAD SCHNEIDER, Illinois
                                 VACANT

               Kevin Fitzpatrick, Majority Staff Director
      Jan Oliver, Majority Deputy Staff Director and Chief Counsel
                     Adam Minehardt, Staff Director
                     
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Dave Brat...................................................     1
Hon. Dwight Evans................................................     2

                               WITNESSES

Mr. Larry Lopez, President, Green JobWorks LLC, Baltimore, MD, 
  testifying on behalf of Associated Builders and Contractors....     3
Mr. Mansour Azimipour, President, A&K Development Corporation, 
  Locust Grove, VA...............................................     5
Ms. Brenda Jones Barwick, President and CEO, Jones Public 
  Relations, Oklahoma City, OK, testifying on behalf of Women 
  Impacting Public Policy........................................     7
Ms. Valarie J. Cofield, President and CEO, Eastern Minority 
  Supplier Development Council, Philadelphia, PA.................     9

                                APPENDIX

Prepared Statements:
    Mr. Larry Lopez, President, Green JobWorks LLC, Baltimore, 
      MD, testifying on behalf of Associated Builders and 
      Contractors................................................    17
    Mr. Mansour Azimipour, President, A&K Development 
      Corporation, Locust Grove, VA..............................    24
    Ms. Brenda Jones Barwick, President and CEO, Jones Public 
      Relations, Oklahoma City, OK, testifying on behalf of Women 
      Impacting Public Policy....................................    29
    Ms. Valarie J. Cofield, President and CEO, Eastern Minority 
      Supplier Development Council, Philadelphia, PA.............    35
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    IAHC - International Association for Health Coaches..........    43


                  THE LOCAL IMPACT OF ECONOMIC GROWTH

                              ----------                              


                      THURSDAY, SEPTEMBER 27, 2018

                  House of Representatives,
               Committee on Small Business,
                   Subcommittee on Economic Growth,
                                    Tax and Capital Access,
                                                    Washington, DC.
    The Subcommittees met, pursuant to call, at 10:00 a.m., in 
Room 2360, Rayburn House Office Building. Hon. Dave Brat 
[chairman of the Subcommittee] presiding.
    Present: Representatives Brat, Knight, Kelly, Gonzalez-
Colon, Fitzpatrick, Balderson, Evans, and Clarke.
    Chairman BRAT. Good morning. I would like to call this 
hearing to order.
    As I am sure you all know, I used to teach economics for a 
number of years, and on that note, I would like to welcome one 
of our college students out here. Kira came and she has got 
relatives on the panel. Thanks for being with us today.
    And I think this Subcommittee has done an excellent job 
this Congress of having both sides of the aisle coming together 
to examine and promote policies that promote economic growth 
and small business.
    At the beginning of this Congress, this Subcommittee held a 
hearing examining the state of small business economy. The 
economy had just come off a 1.6 percent growth rate in 2016. 
There are a lot of economists beginning to ask the question, 
have we reached a new normal? Can we rise above the 2 percent 
GDP growth that seems to characterize Europe?
    However, 2018 has marked a stark difference to those years 
of slow growth. In the second quarter of 2018, economic growth 
hit 4.2 percent according to the Council of Economic Advisors. 
GDP is on track to hit its highest mark since 2005 and the 
Atlantic Fed has us growing at I think 4.6 percent next 
quarter. So this Committee obviously wants to keep that 
rolling.
    This growth has also allowed companies to make long-term 
investments. According to UBS, capital spending, the primary 
variable that drives economic growth rose 21 percent in the 
first quarter and 24 percent in the second quarter this year, 
which are both the highest increase seen since 2011. Increased 
capital spending means that businesses are using more resources 
to make needed renovations, research the next great idea, and 
maximize economic growth. In economics, we also know that 
capital investment in the hands of workers increases 
productivity, and in macroeconomics, productivity is equated 
with wage growth. And in August we had 3 percent wage growth. 
So the capital investment is making people's lives better 
across the board.
    This recent expansion has not just benefitted a select few, 
but rather helped Americans in small businesses across a 
variety of economic and demographic backgrounds. Unemployment 
rates across every demographic are at or near historic lows, 
decade lows. Wage growth since the beginning of 2017 for 
nonwhite Americans has outpaced the national average. 
Furthermore, minority-owned small businesses are growing faster 
than the national average, and their impact will continue to 
grow even greater in the years to come.
    This morning, we have an excellent panel. I met with all of 
them--we discussed sports for a while--to discuss how the 
recent surge in economic growth and the policies and acts of 
this Congress have impacted minority-owned small businesses. By 
hearing their stories, we hope to further understand how 
Congress can continue to promote pro-growth policies to help 
small businesses of all industries and backgrounds.
    And I would now like to yield to the Ranking Member, my 
friend, for his opening statement.
    Mr. Evans?
    Mr. EVANS. Thank you, Mr. Chairman. And good morning.
    Minority entrepreneurs play a significant role in the U.S. 
economy. They own almost 8 million firms generating nearly $1.4 
trillion in revenue and employ over 7 million workers. I am 
glad we are here taking time today to talk about minority small 
business owners and how the entrepreneur successes are critical 
to the prosperity of the United States.
    Despite these impressive numbers, minority-owned businesses 
still face many barriers starting and growing their businesses. 
The policies of the Trump Administration have not helped 
minority entrepreneurs. Since the tax reform bill passed last 
December, it has become clear that the majority of the benefits 
from the tax reform bill go to larger corporations and the very 
wealthy. Some small firms are seeing, at best, marginal 
benefits. Many others have yet to see meaningful advantages.
    Additionally, the tax plan jeopardized health coverage for 
13 million Americans. The future deficit pressures could impair 
Social Security, Medicaid, and Medicare. Ultimately, ACA and 
vital Social Security net programs impose indirect costs on 
responsible entrepreneurs who want to do the right thing by the 
employees.
    Additionally, the Congress has played a critical role in 
ensuring regulations are not too burdensome while at the same 
time protecting the American public. It is, therefore, 
irresponsible for the legislative or the executive branch to 
haphazardly get rid of regulations without thoroughly looking 
at the impact and the long-term consequences. Although on its 
face, Executive Order 1371, which says that for every new 
regulation issued at least two prior regulations should be 
identified for elimination, may seem like a good idea, it has 
very real impact on the lives of small business owners. We must 
collaborate to thoroughly produce streamlined regulations for 
small firms, while keeping in mind our ultimate goal to protect 
consumers and public safety.
    If the Trump Administration truly wants to support minority 
businesses, they would not have eliminated the Minority 
Business Development Agency (MBDA) in the President's Fiscal 
2017 Budget Proposal. Even after objections from the business 
community, the Trump administration's proposed budget only 
resulted in $6 million for the MBDA. This number is 
significantly less than the $34 million appropriated in fiscal 
year 2017. How can they say we are serving the needs of 
minority businesses when the administration continues to attack 
the sole agency focused on the needs of minority-owned 
businesses? Trying to get rid of the agency is just 
irresponsible.
    And I would like to add that we sent a letter to the 
appropriators in the House and the Senate, along with my 
Pennsylvania colleague, Senator Casey, stressing the importance 
of the MBDA in Philadelphia, which is run by a woman by the 
name of Della Clark.
    Minority business owners offer an invaluable contribution 
to our economy and they need help.
    Today's hearing offers two opportunities to discuss how 
Congress can better help our nation's minority entrepreneurs 
prosper. I look forward to hearing from our witnesses on how we 
can ensure American minority entrepreneurs have the resources 
they need to grow and prosper.
    I want to thank the Chairman especially, and I yield back 
the balance of my time.
    Chairman BRAT. Great. Thank you very much, Mr. Evans.
    If Committee members have an opening statement prepared, I 
ask they be submitted for the record.
    I would like to take a moment to explain the timing lights 
for you. I doubt they will come into play.
    You will each have 5 minutes to deliver your testimony. The 
light will start out as green. When you have 1 minute 
remaining, the light will turn to yellow. Finally, at the end 
of your 5 minutes, it will turn red. I ask that you try to 
adhere somewhat within the parameters of that. If you go over a 
little, do not worry about it.
    And with that, I would like to start introducing our first 
witness with us today, Mr. Larry Lopez, President of Green 
JobWorks in Baltimore, Maryland. This morning, Mr. Lopez is 
testifying on behalf of the Associated Builders and 
Contractors, where he chairs their Diversity Committee.
    Thank you very much for being with us today, Mr. Lopez, and 
you may begin your testimony. Thank you.

   STATEMENTS OF LARRY LOPEZ, PRESIDENT, GREEN JOBWORKS LLC; 
  MANSOUR AZIMIPOUR, PRESIDENT, A&K DEVELOPMENT CORPORATION; 
     BRENDA JONES BARWICK, PRESIDENT AND CEO, JONES PUBLIC 
   RELATIONS; VALARIE J. COFIELD, PRESIDENT AND CEO, EASTERN 
             MINORITY SUPPLIER DEVELOPMENT COUNCIL

                    STATEMENT OF LARRY LOPEZ

    Mr. LOPEZ. Good morning, everyone. Chairman Brat, Ranking 
Member Evans, and members--well, we only have the two of you 
today but Committee, Subcommittee, and members of the 
Committee, Subcommittee on Economic Growth, Tax, and Capital 
Access. Thank you for allowing me to be with you today to 
discuss this positive impact that the Congress and 
administration's policies have had on my small business, and 
businesses of all kinds.
    As you stated, my name is Larry Lopez, and I am the 
President of Green JobWorks.
    Today, I am testifying on behalf of ABC, Associated 
Builders and Contractors. They are a national construction 
industry trade association, who were established in 1950, and 
they represent more than 21,000 members throughout the country. 
We were founded on the merit shop philosophy, and ABC and its 
70 chapters help members develop people, win work and deliver 
that work safely, ethically and profitably for the betterment 
of the communities which the members live and work in.
    So my company, Green JobWorks is a construction staffing 
company. We were founded in 2011 in Baltimore, and we provide 
labor to the industry. We really believe that we take the 
burden away from hiring people, which can be very challenging. 
We find the right people for the right job for our clients to 
help them deliver work the right way.
    We also have expanded and grown and developed several other 
divisions in our company in construction. So we do demolition, 
we move asbestos, and we do post-construction cleaning. So we 
kind of dip on both sides here.
    My company today, I wanted to tell you how it has 
benefitted from tax cuts and the regulatory changes that have 
happened. The Tax Cuts, and the Jobs Act, specifically, really 
helped my business. With the increase in the construction 
industry, all its growth, companies having higher profit 
margins, being more comfortable just really doing business and 
growing, it has really built up, I feel, a lot of confidence in 
the industry. And that specifically has helped my company grow 
and be able to reinvest that growth with benefits to my 
employees. So I have been able to implement annual raises from 
a staffing perspective, which is pretty unheard of. Pay 
increases for folks after working for me 30 days. We promote 
people internally. Positions like crew leaders on projects. We 
have obviously implemented more technology on our projects. We 
use iPads on job sites now. We use iPads to do applications and 
onboarding. So all the changes have really helped my company 
tremendously.
    And as far as the divisions that I mentioned earlier, the 
growth in my demolition, asbestos, and post-construction 
cleaning has been really kind of off the charts. At one point 
it was probably about 10 percent of my revenue and it is at 
around 30, 35, and it continues to grow.
    All this happens, in my opinion, due to the changes that 
have taken effect in the last year or so. Because of all this 
growth, obviously, I have had to hire more staff. We are 
continuing to even look to hire more. So given the challenges 
in the workforce, we believe that, you know, training is 
critical, on-the-job training even more so. So we are looking 
to create a full-time training position from a staffing model 
to allow our clients to have our employees trained on the job.
    The last point that I think is important as far as 
workforce is diversity. I would be remiss if I did not talk 
about--you mentioned that I was the Chair of the ABC Diversity 
Committee. I take that role very seriously. It is really 
important, I think, to make it clear that as a country, we are 
not going to make it if we do not understand the importance of 
the fact that we have to diversify our workforce. We have to 
diversify--we could go all day on it, but as the industry 
itself, I think it is critical that we understand we have to 
look at different places to find folks right now because of the 
workforce shortage. While it is great that unemployment is low, 
it is very difficult, I feel, to be able to fill all these 
positions if we do not start training people. And I know we 
talk about it a lot, but there is not enough.
    So what I will ask Congress is that continuing to pass 
legislation like H.R. 2353, which is the Strengthening Career 
and Technical Education for the 21st Century Act, that allows 
dollars to go to private organizations to do training, because 
that is really important if we are going to continue to 
backfill the workforce that is aging out right now.
    There are a lot more things I really wanted to say, but I 
will close by saying this: The contributions that Congress and 
the administration have made in the past year on tax reform and 
regulatory relief have unlocked the potential for my small 
business to create growth and opportunities for everyone.
    So I want to thank Chairman Brat, Member Evans, again, for 
inviting me today to participate in this hearing. I look 
forward to answering any of your questions about how my small 
business has benefitted from economic growth in my community 
and become more successful in this really competitive market. 
Thank you.
    Chairman BRAT. Thank you. It is not every day we have a 
good news Committee panel. So great to hear the good news that 
is happening out there.
    Our next witness is a business leader in my own community 
and a good friend over the years, Mansour Azimipour. And he is 
President of the Construction and Development Company, A&K 
Development Corporation in my district in Virginia. Mr. 
Azimipour also established the Economic Development Partners 
Group of Orange County, which actively works with new and 
existing businesses in the county to maximize investment and 
job creation. He is a good friend of the community. He knows 
how to make friends across the aisle, across every demographic 
and friendship group you can have. He is an ideal person to 
have testimony today.
    Thank you for being here with us, and you may now testify.

                 STATEMENT OF MANSOUR AZIMIPOUR

    Mr. AZIMIPOUR. Thank you, Mr. Chairman. Thank you, Mr. 
Evans. I am honored to be here today. I am talking on behalf of 
myself. I am not debt master with anybody.
    I am here and proud to be a part of Virginia small 
business, the state that is one of the top states to do 
business in and the best place for me to live in.
    My story starts from about 50 years ago, 50-plus years ago 
when I was just 9 years old when I started my corporate-like 
business hiring kids twice as much my age, teenagers, to sell 
my fireworks in neighborhoods and get their commission. And 
they were acting actually, because their livelihood depends on 
that money, they were acting like my bodyguard to make sure 
that I am safe to give them the product to sell. And I am proud 
of that time.
    And since then I am proud also to say that all these years 
I never received a paycheck from anybody. I am the one who 
actually provided paychecks to other people.
    I consider myself a live statute of American dreams and 
born to be an entrepreneur. I am proud to say in my entire life 
I have really done that.
    I served on a Board of Directors of a community bank for 7 
years from late 1990s to early 2000, and that experience was 
one of the best experiences I had because it has helped me to 
see the problems going through the financial situation and a 
slowdown in 2005. And that helped me to save my business and my 
life during the financial crisis.
    I am also a board member of a Board of Trustees of a 
private school of PK-12 in Virginia. And with a few local 
friends we made an economic partnership in Orange County that 
has been outstanding with the results we have. The economic 
development brings every month the leaders of the company at 
the same table. We have a Board of Supervisors, Planning 
Commission, elected officials, the Chamber of Commerce, a local 
community college, business leaders, a school board, and all 
the people who can make a decision, they come in and they make 
actually an informed decision and that helps the county to make 
an amazing result out of it.
    About a year ago, I asked you, Mr. Chairman, give me 
something that I would be happy for to get out and give it to 
my kids that they would be happy, and this is what you said: 
``The free market platform we have for small businesses and its 
owners in our system is what will help us to move forward at 
any time.'' And that was the best ever I got from my 
representative. And still I remember it because that was it.
    Small business owners take risk unlike other businesses. 
They take 100-plus persons of risk on all they have to make the 
business work. The risk is not an abstract concept for a small 
business. A small business is there to make it work. And 
always, when you get a loan, they want your personal guaranty. 
Even they do not give you enough money but they do that.
    My time is getting a little bit short. Okay.
    Many external factors impacted a level of risk the small 
business owner must take. Regulation, especially adding a new 
requirement that could not have been anticipated, greatly 
impact a small business. Regulation affects the ability to 
borrow, to start or expand a business. Regulation diverts times 
and resources away from the main business. Regulation can slow 
implementation of a new project or the movement of the new 
product to the market. I encourage all legislators to truly 
evaluate the risk that examines for new regulation imposed to 
the business climate, especially the regulation that crosses 
the line and adds risk to a level that discourages business 
startup or expansion.
    Small business is a critical part of our economy. In Orange 
County, Virginia, where I have my business, we have about 900 
employers. Over 90 percent of them employ less than 20 people. 
But that represents nearly 30 percent of the entire workforce. 
At the local level, the financial ability of a community and 
sensitivity to impact of rules and regulation are helping the 
environment that encourage investment by a small business 
owner. In the last 24 months, we have 84 new startup companies 
in Orange County.
    Availability of capital to a small business. To start this 
part of my testimony, I should say I believe most of the banks 
are almost closed when it comes to providing much needed 
capital to small businesses. Because that happened in our 
economy after 2007, banks are so afraid of making loans to a 
small business after they made millions of bad loans between 
2000 and 2006, which that was one of the reasons we had the 
financial crisis. The present banking behavior reminds me of 
two things that I heard from my parents. A person was standing 
on the flat roof of a high-rise. Someone told him, be careful, 
do not fall. He walked back and fell from the other side. And 
the banking underwriters are like someone who was bitten by a 
rattlesnake. And for their entire life they want to be afraid 
of black and white rope. And that does not really work.
    During the recession, most of the small business owners' 
credit got hit, and the banks that were giving loans to those 
businesses, up to more than 80 percent loan-to-value, now I 
have seen many cases that they are not even approving 30 to 40 
percent even if the owner does the personal guaranty with all 
of their assets. This is unfortunate that most of the available 
capital to small businesses are in the hands of the secondary 
market with 12 to 18 percent APR with very difficult terms 
which barely any small business owner can afford the 
consequences of that financing.
    My hope is to see the banks, which are one of the most 
tools of our economy growth, find a way to be able to help 
small business owners with the much-needed capital for their 
new and expansion ideas. About the taxes, I am not an expert. I 
just can tell you as a business owner, right now the tax 
dollars and the change is helping small businesses and the 
biggest help we got started from President Bush, and President 
Obama extended that when they said companies were making money 
and paying taxes between 2001 and after and they were losing 
money after 2006. They could go back and consider that. I 
believe that regulation saved tens of thousands of businesses 
by doing that. Thank you very much.
    Chairman BRAT. Thank you very much, Mansour. That was 
great.
    The next witness will be Ms. Brenda Jones Barwick, 
President and CEO of Jones PR in Oklahoma City, Oklahoma. This 
morning, she will be testifying on behalf of Women Impacting 
Public Policy. Jones PR helps clients in several industries 
with public affairs, corporate communications, and consumer 
marketing needs.
    Thank you very much for being here all the way from 
Oklahoma, and you may begin your testimony. Thank you.

               STATEMENT OF BRENDA JONES BARWICK

    Ms. BARWICK. Chairman Brat, Ranking Member Evans, and 
members of the Subcommittee. Thank you for the opportunity to 
testify today.
    My name is Brenda Jones Barwick, and I am President and CEO 
of Jones Public Relations, located in Oklahoma City, Oklahoma, 
and I am testifying today on behalf of the Women Impacting 
Public Policy, of which I am a board member.
    WIPP is a national, nonpartisan policy organization that 
advocates on behalf of women business owners. And when I 
started my business in 2001, not many people would have really 
given me much of a chance because I came primarily from a 
political background that included a position in the White 
House West Wing, and with U.S. Ambassador to Switzerland, among 
several other positions at several international agencies. This 
year, I am proud to say that my company, Jones Public 
Relations, is ranked the 109th largest PR agency in America.
    But I would like to set the stage by giving you a snapshot 
of Oklahoma's economy. 99.4 percent of all businesses are 
considered small, the majority of which are nonemployers or 
businesses without employees, and women-owned firms have an 
average of nine employees, which is lower than the male-owned 
counterpart companies. Small businesses created over 13,000 net 
jobs in 2015, with firms employing fewer than 20 employees 
experiencing the largest gains. As for the state and local 
economy, so far in 2018, Oklahoma City has hit a 10-year 
employment high, and this begs the observation that small 
business policy is not one dimensional. Policies affect 
companies differently depending on their size and their 
business purpose and their business segment.
    Tax policy, for example, affects every business in America, 
and yet, until this year's tax reform bill, the Congress only 
recognized C corps, and now for the first time, the tax bill 
treats income from businesses organized as pass-through 
entities as business income. So my company is organized as an S 
corp, and this change has allowed me to pay bonuses to my 
employees, hire more personnel, and increase salaries up to 10 
percent for all employees.
    Another difference that requires new rules but has 
tremendous consequences for small companies is how retirement 
is treated. More than one-third of small business owners do not 
have a retirement plan, and many small companies find offering 
401(k)s to be cumbersome and expensive. My company does offer a 
401(k) plan to its employees with an up to 4 percent match. 
However, rule changes are needed to specifically help small 
businesses remain competitive in their retirement plan 
benefits. President Trump's recent executive order and 
consequent legislation is beneficial, not only for the owner, 
but also for the employees of small businesses, and we applaud 
this effort.
    Additionally, health insurance continues to be one of the 
biggest financial challenges for small businesses, as it is 
expensive and often without many choices. Since its inception, 
WIPP has advocated for small business pools across state lines 
and we were encouraged to see that the Department of Labor 
supports the notion of association health plans, but we do not 
think these plans will work as long as the pool is limited by 
state boundaries. One brought spot on this issue has been 
recent House action to change the definition of full-time 
employees from 30 hours to 40 hours a week with respect to the 
required health insurance coverage. And WIPP has been pushing 
for this change since the ACA was enacted.
    WIPP has also long advocated for an end to the ``one size 
fits all'' approach to banking regulation. We applaud the new 
law enacted this year, which gives small and midsize banks 
regulatory relief. Access to capital continues to be 
problematic for women-owned businesses who only receive 16 
percent of all conventional small business loans.
    Regulations and compliance costs impact Jones PR in a 
couple of ways. We serve many clients in the energy and 
financial sectors, and as regulations are rolled back, it 
allows these companies to have more funds to invest in 
marketing. And second, Jones PR will be forced to hire an 
independent professional employment organization company in 
order to reduce our risks of being in compliance with federal 
regulations.
    While we have seen many positive changes initiated by this 
Committee, there is still more work to be done. The Federal 
Government has continued to miss its 5 percent goal of 
contracting with women-owned businesses, and the consequences 
of this missed goal means fewer dollars flowing to women-owned 
businesses and to their local economies. In addition, the 
government actively discourages small business growth for 
federal contractors, limiting these companies from reaching 
their full potential.
    So we applaud the passage of H.R. 6330. That is the 5-year 
look back legislation passed by this Committee to help address 
this problem.
    In summary, the economy is healthy and unemployment is at a 
record low. In today's regulatory landscape with recent 
legislative changes and a strong economy offers an environment 
for small businesses to thrive. And we especially want to thank 
this Committee for paying attention and playing such an 
important role in the success of small businesses in this 
country. Thank you.
    Chairman BRAT. Thank you very much for that testimony.
    And now I would like to yield to our Ranking Member, Mr. 
Evans, for the introduction of the final witness.
    Mr. EVANS. Thank you, Mr. Chairman.
    It is my pleasure to introduce Valarie J. Cofield, Chief 
Executive at the Eastern Minority Supply Development Council. I 
can tell you she is very active in my district and in the City 
of Philadelphia. Valarie's background includes expertise in the 
area of supply diversity, MBA, MBE, WBE, and WE business 
development. She has previously worked at INTECH Construction 
and the City of Philadelphia Minority Business Enterprise 
Council. Ms. Cofield is a board member of the Philadelphia 
Habitat for Humanity, member of the Philadelphia Board of Labor 
Standards, and an active member of the Girl Scouts, serving 
Girl Scout leaders of monthly level troop. She holds a 
bachelor's degree from Franklin and Marshall College in 
Lancaster, Pennsylvania, and we welcome you, Ms. Cofield.

                STATEMENT OF VALARIE J. COFIELD

    Ms. COFIELD. Thank you, Congressman Evans.
    Good morning, Chairman Brat, and Congressman Evans, and 
members of the Subcommittee. Thank you for the opportunity to 
provide testimony about the growth and development of minority 
businesses, particularly as it relates to three key areas: the 
economic impact and importance of development and growth of 
minority-owned businesses, the impact of H.R. 1, Public Law No. 
115-697, the Tax Cut and Jobs Act, and the continued funding of 
the Minority Business Development Agency.
    As previously stated, my name is Valarie J. Cofield, and I 
am the President and CEO of the Eastern Minority Supplier 
Development Council, EMSDC as I will refer to it going forward.
    EMSDC is headquartered in Philadelphia, Pennsylvania, with 
a satellite office in Pittsburgh, Pennsylvania. EMSDC is one of 
23 regional affiliates of the National Minority Supplier 
Development Council operating in Pennsylvania, Southern New 
Jersey, and Delaware. As the President of EMSDC, my mission is 
to ensure that all diverse businesses have access to and 
opportunity in the private sector and public supply chains.
    In March of 1969, recognizing the impact and importance of 
minority businesses, President Nixon signed Executive Order 
11458, requiring government agencies and their contractors to 
contract with minority-owned companies and to report the 
results against pre-established goals to the Office of Minority 
Business Enterprise, which became the Minority Business 
Development Agency in 1971. In 1972, as a result of several 
federal grants focused on private sector engagement of minority 
businesses, the National Minority Supplier Development Council 
was formed. Formation of NMSDC in 1972 represented a private-
public partnership to provide increased procurement and 
business opportunities for minority businesses of all sizes. By 
1974, the newly formed NMSDC contracted with the U.S. 
Department of Commerce's Office of Minority Business Enterprise 
to encourage major corporations to increase their purchases of 
goods and services from minority businesses. Today, NMSDC, a 
privately funded organization, represents over 1,400 Fortune 
100 and Fortune 500 businesses and over 12,000 certified 
businesses.
    EMSCD's foundation as an NMSDC affiliate directly aligns us 
with the most powerful minority supply organization in 
corporate America. EMSDC boasts corporate membership of over 
120 Fortune 100 and Fortune 500 companies either headquarter in 
or doing business in Pennsylvania, Southern New Jersey, and 
Delaware, all with organizational commitment to supplier 
diversity. Our corporate members' revenues are estimated to 
exceed $1.1 trillion annually.
    Corporations throughout America understand the value and 
importance of diversity and inclusion in business. On average, 
supplier diversity programs add $3.6 million to the bottom line 
for every million dollars in procurement operation costs.
    In 2017, EMSDC's MBEs, our 495 MBEs had average annual 
revenues of $7.8 million and collective revenues of $3.9 
million. That is in Pennsylvania, Southern New Jersey, and 
Delaware. In 2017, of our 495 certified businesses, we employed 
17,612 individuals, or an average of 35.6 employees per 
business, far outpacing the rate of employment for the average 
small business of 20 employees.
    Minority-owned businesses are growing at a much faster rate 
than that of the U.S. businesses overall. At the time of the 
2007 survey of businesses, minority-owned businesses accounted 
for 21.3 percent of the Nation's businesses, employed 5.8 
million persons, and generated $1 trillion in receipts.
    Given the rate of growth of diverse businesses, it is 
important to examine and understand the implications of H.R. 1, 
the Tax Cut and Jobs Act. The initial read of the benefits 
offers optimism as we have heard from the other witnesses in 
reduction of the effective tax rate for all businesses. The 
concern is the past-through deduction that is not equally 
applied to all businesses. The structure of H.R. 1 creates 
concerns because most small businesses, specifically diverse 
businesses, are not C corps and are passthroughs, and 
therefore, the effective tax rate of 21 percent will not apply 
to these businesses. Since small businesses are typically 
passthroughs, the impact is too soon to fully measure. There 
are several immediate observations, however, that can be made 
and must be reviewed. This disparate application of the 20 
percent pass-through bonus adversely impacts professional 
services businesses, which represent 40 percent of all small 
diverse businesses and therefore, may provide little to no tax 
saving to these business owners. Savings that will result in 
investment in new talent, technology, business development 
tools, and resources will not be necessarily realized for these 
businesses, and ultimately will negatively impact long-term 
growth and viability.
    The various business tax deductions and credits that have 
been eliminated will have a direct impact on small businesses 
as well, who use these deductions and credits to offset tax 
liability and provide additional benefits to employees. 
Further, the provisions of H.R. 1 are too short-term to have 
sustainable impact on small businesses as the potential for 
savings and investment will be mitigated by limited access to 
capital and rising healthcare costs.
    Pass-through businesses will bear the burden of H.R. 1 and 
receive the least benefit or relief. These businesses are 
disproportionately minority owned. The sustainable, 
immeasurable benefits to small businesses may ultimately be 
indirect and the result of increased demand from current and 
potential customers that may increase spending and seek their 
services due to their realized savings as larger C 
corporations. EMSDC and the NMSDC network, along with agencies 
like MBDA will continue to monitor and report on the impact of 
H.R. 1 to minority-owned businesses.
    Speaking of MBDA, MBDA has been the premier Federal Agency 
dedicated to supporting the expansion of minority and native-
owned businesses for over 45 years. Unlike the Small Business 
Administration and other Federal Agencies, their focus on 
broader demographic and emerging businesses, the MBDA's 
directive is focused on unique challenges and needs of 
minority-owned businesses. It is the only Federal Agency 
dedicated to growth and global competitiveness of our nation's 
minority business enterprises, which according to the U.S. 
Census Bureau contributed $1.4 trillion in total economic 
output and employed nearly 4 million Americans.
    MBA continues to be important because minority owned 
businesses are growing significantly faster than nonminority 
owned businesses. Their employment grew by 33 percent, their 
receipts by 57 percent, versus the shrinkage by nonminority 
firms of 5 percent. And yet despite these gains, MBEs overall 
receipts versus nonminority firms, that is 196K versus 650K on 
average, do not reflect a balance between the rate of growth 
and market share. While there has been an increase in the 
number of minority-owned businesses from 21 percent to 29 
percent, this growth has lagged behind the pace of growth of 
the nation's minority population.
    Currently, the administration's fiscal year 2019 budget 
blueprint recommends the reduction of the agency through the 
elimination of the network of MBDA centers nationwide. The 
elimination of these 40 business centers would reduce needed 
hands-on assistance and facilitate an access to capital and 
contract opportunities. It is important that MBDA remain fully 
funded and that the network of MBDA centers nationwide have 
adequate resources to support minority businesses doing work to 
assist these businesses in overcoming the barriers to growth 
and economic parity that they disproportionately encounter.
    You may ask why I am lobbying on behalf of MBDA. As you 
know, MBDA and NMSDC started at approximately the same time and 
we have worked in partnership as organizations bringing 
services to the minority business community. And while I do not 
personally operate an MBDA center, I work in collaboration with 
the Philadelphia-based MBDA center, as do my other council 
partners throughout the Nation.
    In conclusion, the sustainability of small businesses, 
particularly small diverse businesses, is bolstered by private-
public partnerships, programs, and initiatives. The NMSDC and 
its network of affiliate councils, including the EMSDC, is well 
equipped to support the continued development and growth of 
minority businesses.
    However, continued support is needed in the form of the 
MBDA from the Federal Government to ensure the small diverse 
businesses are well-positioned for continuous growth and long-
term economic impact. Through business development and access, 
supplier diversity fuels the broadest economic growth 
opportunities for diverse businesses by creating equity and 
equality in a marketplace and allowing diverse businesses to 
succeed while overcoming extraordinary barriers. Thank you very 
much.
    Chairman BRAT. Thank you very much for your testimony.
    At this time we will open it up for questions, and I think 
we will give ourselves about 5 minutes each.
    So I would just like to go down through the whole panel in 
a minute or so. If you had to rank the most important work we 
can do up here. Everybody mentioned capital access is pretty 
important, and everybody mentioned skilled workforce, the human 
capital side, and so if you had to focus on one or two things, 
what would they be? And I taught economics at the college level 
for 20 years, and so I was shocked that the incoming freshman 
class had not received significant economic and business 
training. Right? The kids did not know what a price was or a 
cost, accounting, profits, what an entrepreneur is. Half the 
kids coming out of high school will not go to college, and so 
the good news is education is still at the local level, 
primarily. Local and state. We do mandates up here and fund 
about 10 percent of it. So the good news is education is still 
in your hands at the local and state level. And so if you have 
got any comments on what we can all work on there to get the 
skills development going. But I am just curious, access to 
capital or education, human capital.
    And your comments, Mr. Lopez, we will start with you.
    Mr. LOPEZ. I am going to stick to the human capital side of 
things and I will say that I really think that just training 
dollars, somehow having on a national level, because this issue 
of the shortage of people out here, it is around the country. 
Being part of ABC on a national level, I travel around the 
country and I get the same conversation. You are a staffing 
company? Do you have people? Do you have an office here? I 
mean, it is a serious issue. So if you could somehow put some 
legislation in place that allows those organizations easier 
access to capital to train people so that these companies can 
actually hire them with some skills rather than have to figure 
out a way to do it on the job, that would be really, really 
helpful, I think.
    Chairman BRAT. Great. Thank you.
    Mansour?
    Mr. AZIMIPOUR. I believe we need to start to teach our kids 
at a young age, to show them how to look outside of the box. 
Unfortunately, all of our student kids, they have been framed 
with certain kinds of curriculum and there is nothing really 
you can expect out of it. When they come to college, they even 
do not know how to understand a credit card. Still, they are 
using parents' credit card.
    For someone like me that I bought my first house on my 18th 
birthday because that was the day I could sign it, I believe we 
need to help our kids to understand it. First, the school needs 
to make a platform for them to understand. They need to change 
some real-life curriculum to the system. They need to bring the 
expert on a regular basis to talk to them, show them how they 
can look out of what they just go after. They need to learn 
money management. That is the most important part of any 
education we can give our kids. They need to have communication 
skills, especially face to face. They need to go after their 
interests, their wishes. They need to try those ones.
    And one very good program that I have seen it, and it is in 
Culpepper County, some citizens, they made a group called E 
Squared. They are making the kids to come in and present their 
ideas, like Shark Tank, and show how valuable is that one. And 
this is about five or six years. I am familiar with that. So 
far, several of the high school kids, actually, they did go out 
and their ideas got to the point that investors have invested 
in their ideas. And if we can really put the foundation for 
those kind of stuff at the schools, I believe we are going to 
be a winner.
    Mr. BRAT. Thank you very much.
    I think we will circle back. I am going to let our Ranking 
Member go for 5 minutes on his round of questions and then we 
will get to other members as they may show up.
    Mr. EVANS. Thank you, Mr. Chairman.
    Valarie, I would like to start with you, then go down the 
list from what I heard you say, and I thought you gave 
excellent testimony.
    Obviously, the Chairman and the mission of this discussion 
is impact and review. We talked about tax policy, regulatory 
reform, obviously workforce, and you talked about MBDA. And I 
really want to get that message across from what I have heard 
you say in terms of its potential impact. Obviously, it was 
started under Richard Nixon, and here we are in the 21st 
century. So help me understand again the value that you think 
that entity is versus all the other things we talked about. I 
do not think it is an either-or on tax policy, regulatory, or 
workforce, but I heard you really emphasize that in terms of 
minority business development.
    Ms. COFIELD. So one of the reasons why those three issues 
bucket together very well is that MBDA is focused specifically 
on minority businesses. I want to go back to the point, it is 
the only Federal Agency that is focused on minority businesses. 
The Small Business Administration has programs that focus on 
veterans, on women, on the disabled, but they do not have a 
program that focuses on minority-owned businesses. So it is 
critically important to understand that. And while you have the 
8(a) program, the 8(a) program is for socially and economically 
disadvantaged individuals and minorities are presumed to be but 
it is not specifically only for minorities. MBDA is 
specifically designed to focus on the needs and challenges that 
minority-owned businesses have. And within that bucket, you are 
talking about access. You are talking about capital. You are 
talking about understanding the implications of tax reform for 
expansion and long-term sustainability. MBDA has 40 centers. 
That means that it is reaching every part of our Nation in 
providing services to minority-owned businesses. The growth 
that you see in our minority business community does not happen 
in a vacuum. It happens with the supportive services that come 
out of agencies like MBDA, like the National Minority Supplier 
Development Council, because each of those organizations, and 
we do this in partnership. I will let you know that nine of my 
counterparts run MBDA centers in partnership with the National 
Minority Supplier Development Council affiliates.
    Mr. EVANS. And your point, I heard you say your point is as 
a result of the administration's recommendation from a budget 
investment standpoint, you obviously see an impact?
    Ms. COFIELD. Absolutely. You are talking about 40 centers. 
Forty centers that are providing day-to-day services to 
minority-owned businesses. Whether they are helping them gain 
access to the Federal procurement process, whether they are 
helping them with access to capital, whether they are helping 
them with business development and business planning, those 
services now go away from a Federal standpoint and they go away 
as a resource in the various marketplaces.
    Mr. EVANS. Let me go to the next witness because you raised 
the issue about the Federal Government not getting to that 5 
percent. And you have heard just what Valarie said. You know, 
how do you juxtapose what I just heard, you know, in terms of 
working towards that objective of getting women?
    Ms. BARWICK. I believe the 5 percent goal is still not a 
priority within the departments. And, in fact, I met with a 
major federal agency 3 weeks ago and I had mentioned about the 
sole source for women-owned businesses that was passed, I 
believe, in December 2015, and the contracting officer was 
unaware of that, which stunned me. So when a lot of the 
contracting officers are not even aware of the sole source 
opportunity for women-owned businesses, that impedes reaching 
the 5 percent goal. And I believe it just has not been made a 
priority among the departments. And I would like to find a way 
to make it absolutely mandatory that the departments reach at 
least 5 percent. And that is a really small goal when you look 
at the complete landscape. WIPP is not asking for a lot, a mere 
5 percent, and there should not be any reason why they cannot 
meet that 5 percent goal.
    Mr. EVANS. Real quick, Val, what is your response to that, 
what you just heard? I mean, it sounds like even though we talk 
about tax policy, regulatory policy, workforce, you know, in 
two particular cases for minorities and women, it seems like it 
is going in the wrong direction.
    Ms. COFIELD. Well, absolutely. I mean, I agree. Five 
percent is not an aggressive goal, particularly when you look 
at the population distribution of our company. Five percent 
should be low-hanging fruit, as it should be for minority-owned 
businesses. The fact that we are still having to enforce goals 
in order to get access for minority and women-owned businesses 
in the Federal Government supply chain is alarming. And I think 
at this point, the importance of the programs out of the SBA 
for women and the importance of making sure that the Federal 
Government is doing their part. You see private industry 
stepping forward and taking more responsibility. We are your 
customers ultimately as your constituents. We are your 
customers and it needs to be a priority that diverse businesses 
have a seat at this table and are sharing in the opportunities 
that are presented through the Federal Government.
    Mr. EVANS. Thank you, Mr. Chair. I yield back the balance 
of my time.
    Chairman BRAT. If anyone wants to follow up on Dwight's 
question, feel free. We have a few minutes left.
    Ms. BARWICK. Mr. Chairman, may I follow up on your initial 
question regarding education?
    Chairman BRAT. Sure. You bet. Please.
    Ms. BARWICK. Thank you.
    There are thousands of entrepreneurs, future entrepreneurs 
sitting in high school and college right now, but they do not 
even know they are entrepreneurs. And they are not receiving 
any type of financial education. They do not even know what 
liabilities, assets, income. I mean, they have no concept of 
that. And I would say especially for young girls, I want to 
make a statement, but it seems like young boys, maybe because 
they have the influence of their fathers, seem to have an 
understanding of business, but young girls do not. And so when 
a young girl out of high school or college wants to start her 
own business, she is already handicapped because she does not 
have that knowledge. So I would love to see some kind of effort 
of getting small business, which will continue to fuel our 
economy, into high schools and colleges.
    And then I would also add on another point. In Oklahoma, 
our top two industries are energy and aerospace. And college is 
a great place to learn about energy and aerospace, but our 
career techs are booming. And young people can have amazing, a 
very livable life in the energy and aerospace industry by going 
through career techs. And especially for women as that being a 
more viable option. They do not always have to go to college, 
but we are desperately needing more people to come from the 
career tech area in aerospace and energy.
    Ms. COFIELD. Mr. Chairman, may I respond as well?
    Chairman BRAT. Please.
    Ms. COFIELD. It is interesting because in my position, 
education is critically important. And as you know, I have my 
daughter here, so she is getting her education. But what I want 
to say more importantly though is as we educate our young 
people, we need to educate them around entrepreneurship. We are 
talking about creating new talent in terms of a new employee 
base. But wealth is built through ownership. And 
entrepreneurship is that pathway to wealth. And when you talk 
about the lack of exposure of women, you also can speak to the 
diminished exposure that minorities have to entrepreneurship as 
being a viable opportunity for them to build wealth and to have 
that as a career path. And so that education of our young 
people is critically important, but also the education of 
adults. I mean, what do you do when you are unemployed? You 
know, entrepreneurship becomes a way of survival. You build a 
business, but how do you create a business that moves from 
being a lifestyle business to a legacy business? And that is 
what we need to be focusing on from my standpoint when you look 
at entrepreneurs is not only building lifestyle businesses that 
are not necessarily employers but building legacy businesses 
that are building wealth in communities and employing people.
    Chairman BRAT. Well said. And thank you very much to the 
entire panel.
    Dwight, do you have any other? You are good.
    I just want to thank you all for being with us. I think we 
are starting to zoom in on the end. There seems to be a 
consensus across the board on the capital and education side.
    I am on the Education Committee, K-12, just so you know, 
the Feds have been mandating high stakes testing for years now, 
and there is a consensus, kids surely do not like it, I have 
got a few myself. And the teachers do not like it, and the 
principals do not like it, and the incentives. And so we 
lightened that up somewhat. Now the mandate has been lightened 
from all the subjects to just math and English. So that fees up 
the states and localities. They may not know that. It is a 
little bit more play. And so when you go back to your local 
school boards, they have the latitude. Getting changes through 
bureaucracies is hard but there is a little play there. And 
then the higher ed, we did some good work on career and 
technical this year, and so there is some good news there as 
well.
    But most importantly, just follow up with us. Zoom in. We 
are all on the same page on these kind of things. So get 
exactly what you want and write up, help our staffs, work with 
our staffs to write up very specifically in terms of goals and 
what we can do, and we will all work together because I think 
we have shared goals in the room today.
    And so I just want to close by thanking all of the 
witnesses. Excellent job to everybody.
    I ask unanimous consent that members have 5 legislative 
days to submit statements and supporting materials for the 
record.
    Without objection, so ordered.
    This hearing is now adjourned, and thank you all again.
    [Whereupon, at 10:57 a.m., the Subcommittee was adjourned.]
    
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