[Senate Hearing 116-234]
[From the U.S. Government Publishing Office]
S. Hrg. 116-234
NOMINATION OF JOVITA CARRANZA TO BE
ADMINISTRATOR OF THE SMALL BUSINESS
ADMINISTRATION
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
DECEMBER 11, 2019
__________
Printed for the use of the Committee on Small Business and
Entrepreneurship
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
40-642 PDF WASHINGTON : 2020
COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED SIXTEENTH CONGRESS
----------
MARCO RUBIO, Florida, Chairman
BENJAMIN L. CARDIN, Maryland, Ranking Member
JAMES E. RISCH, Idaho MARIA CANTWELL, Washington
RAND PAUL, Kentucky JEANNE SHAHEEN, New Hampshire
TIM SCOTT, South Carolina EDWARD J. MARKEY, Massachusetts
JONI ERNST, Iowa CORY A. BOOKER, New Jersey
JAMES M. INHOFE, Oklahoma CHRISTOPHER A. COONS, Delaware
TODD YOUNG, Indiana MAZIE K. HIRONO, Hawaii
JOHN KENNEDY, Louisiana TAMMY DUCKWORTH, Illinois
MITT ROMNEY, Utah JACKY ROSEN, Nevada
JOSH HAWLEY, Missouri
Meredith West, Republican Staff Director
Sean Moore, Democratic Staff Director
C O N T E N T S
----------
Opening Statements
Page
Rubio, Hon. Marco, Chairman, a U.S. Senator from Florida......... 1
Cardin, Hon. Benjamin L., Ranking Member, a U.S. Senator from
Maryland....................................................... 2
Witness
Carranza, Ms. Jovita, of Illinois, nominated to be Administrator,
Small Business Administration.................................. 5
Alphabetical Listing
American Legion (committee insert by Cardin)
Letter dated December 2, 2019................................ 27
Cardin, Hon. Benjamin L.
Opening statement............................................ 2
Carranza, Ms. Jovita
Testimony.................................................... 5
Prepared statement........................................... 7
Responses to questions submitted by Chairman Rubio, Ranking
Member Cardin, and Senators Cantwell, Shaheen, Scott,
Markey, Booker, Coons, Hirono, Kennedy, Duckworth, and
Hawley..................................................... 36
Rubio, Hon. Marco
Opening statement............................................ 1
NOMINATION OF JOVITA CARRANZA TO BE
ADMINISTRATOR OF THE SMALL BUSINESS
ADMINISTRATION
----------
WEDNESDAY, DECEMBER 11, 2019
United States Senate,
Committee on Small Business
and Entrepreneurship,
Washington, DC.
The Committee met, pursuant to notice, at 2:34 p.m., in
Room 428A, Russell Senate Office Building, Hon. Marco Rubio,
Chairman of the Committee, presiding.
Present: Senators Rubio, Risch, Ernst, Young, Romney,
Cardin, Cantwell, Shaheen, Markey, Coons, and Rosen.
OPENING STATEMENT OF HON. MARCO RUBIO, CHAIRMAN, A U.S. SENATOR
FROM FLORIDA
Chairman Rubio. The Committee will come to order. Today's
hearing of the Senate Committee on Small Business and
Entrepreneurship will be to consider the nomination of Ms.
Jovita Carranza to serve as the Administrator of the Small
Business Administration, and we welcome you to the Committee.
The SBA provides entrepreneurs with vital access to
capital, technical assistance, and entrepreneurial resources,
ensuring that American small businesses can start, can scale,
and can succeed. However, the needs of entrepreneurs and small
business owners have changed in the more than six decades since
the SBA was created back in 1953, under President Eisenhower.
Today there are over 30 million small businesses in the United
States, employing nearly 60 million Americans. These firms
operate in a new economic climate in which small business
dynamism is vital and innovation drives growth.
In order to continue to serve small businesses effectively,
the SBA must also become dynamic and innovative. Agency
modernization is, in my opinion, imperative to make sure that
programs not only meet the needs of American entrepreneurs but
also help them compete in what is now a fully global
environment.
With China's continued economic aggression and
manipulations, small businesses must be better positioned to
support U.S. competition on an international scale. It is my
view that the SBA ought to provide tailored and accessible
resources to support American competitiveness. This means the
agency must expand beyond the traditional offerings and
incorporate creative programing to spur investments, support
advanced manufacturing, promote innovation, and expand export
opportunities.
This Committee is actively working towards these outcomes
through a comprehensive reauthorization and modernization of
the Small Business Act and Small Business Investment Act, and
together I hope we can create the SBA of tomorrow and not
simply languish in the agency of decades past, because
ultimately the status quo is simply no longer good enough.
American national competitiveness requires successful small
businesses and so do our communities. Roughly 1.8 million, or
more than 60 percent of all new jobs are created by small
businesses. In my State of Florida, in my home state, small
businesses employ over 3.4 million individuals. Successful
small businesses mean increased access to dignified work,
improved local GDP, a healthier economy, and ultimately
stronger communities.
Today's hearing, as I said at the outset, is focused on the
role of the Administrator, who will be our partner in
addressing these issues and working with us to ensure the
success of small businesses that propel American
competitiveness and also stronger communities.
And with that I want to recognize the Ranking Member.
OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, RANKING MEMBER, A
U.S. SENATOR FROM MARYLAND
Senator Cardin. Ms. Carranza, first of all, welcome. It is
wonderful to have you here. I thank you very much for your
public service and your willingness to take on this very
important responsibility, so, first, thank you for your
commitment.
When I was elected to the United States Senate in 2006, I
requested a seat on this Committee. I say that because it is
not on everyone's priority list to get on the Small Business
and Entrepreneurship Committee. I wanted to be on the
Committee. I recognized how important it was in my state for
job growth, for innovation. And I know that Maryland has a long
history of using entrepreneurship as a tool for economic
empowerment for underserved communities.
It was the late Baltimore Congressman Parren J. Mitchell
who created the first set-aside program for minority
contractors. He did that in 1977. Today, Maryland is home to
the largest concentration of women-owned businesses in the
country, as well as the largest concentration of minority-owned
businesses.
So if you are confirmed you will be leading the SBA at a
time when the face of business ownership in America is becoming
more diverse. Minorities, women, veterans, and entrepreneurs
from underserved communities face specific historical barriers
to business ownership, and they need an SBA that has
leadership, vision, and tools required to meet those needs.
When former Administrator Linda McMahon resigned, I said my
hope is that President Trump will nominate a successor who is
as committed to advocating for America's small business as
Administrator McMahon was. Your career in business and
government, including your prior service as Deputy
Administrator of SBA under President Bush, makes me hopeful
that you will pick up where Administrator McMahon left off.
While I am confident in your ability to lead the agency, I
am sure you would agree with me that the best leaders have
strong teams. If confirmed, you will enter an agency that has
not had a Deputy Administrator for more than 19 months. I hope,
if you are confirmed, you will work with the Administration to
recruit and nominate someone who is committed to serving
America's small businesses to help lead that agency.
I would also like to share two of my priorities that I hope
will be your priorities if confirmed as our Administrator.
First, SBA must do a better job of reaching underserved
communities. As I mentioned on the outset, my home state has
one of the most diverse small business communities in the
country.
When I meet with underserved small business owners across
Maryland, their top concern is always access to capital.
Capital is the lifeblood of small businesses, and for
underserved entrepreneurs who have less wealth from which to
fund a venture and who have lower rates of business loan
approval, the affordable capital provided by SBA is invaluable.
Unfortunately, SBA's highest-volume loan program, the 7a
program, has mirrored the disparities in the credit market
instead of filling the gaps in the credit market. The agency
should invest in tools like the Community Advantage Pilot
Program, which has demonstrated its ability to get capital in
the hands of underserved entrepreneurs at a much higher rate
than the 7a program.
That is why I introduced the Closing the Credit Gap Act to
make SBA's Community Advantage permanent, expand the geographic
and demographic reach of the program, and increase the maximum
loan size from $250,000 to $350,000. I hope you will make
Community Advantage and other SBA loan programs that serve
underserved entrepreneurs like the Microloan program a
priority.
Second, SBA must do all it can to increase opportunities
for small business contractors. In 2018, Federal contracting
accounted for 8 percent of Maryland's GDP, approximately $33
billion, including $11 billion spent with small businesses. The
jobs created by these companies have helped thousands of
families in Maryland enter the middle class.
So I was very troubled by the Bloomberg Government report
that found that the number of Federal contractors working on
unclassified prime contracts is at a 10-year low, despite a
steady rise in government contract spending over that same
period of time. This means that while contracts are getting
bigger and bigger, we are creating an insular club where fewer
and fewer businesses successfully compete for government
contracts, creating a less-competitive marketplace and reducing
opportunities in the process. Small businesses are bearing the
brunt of this decline.
The report also found that the Federal Government did
business with 32 percent fewer small vendors in fiscal year
2018 than it did in fiscal year 2009. For comparison, the
number of large vendors fell by only 4 percent.
So I was pleased to learn that you once chaired the SBA
Office of Small and Disadvantage Business Utilization Council,
so I know you understand how vital it is for SBA to advocate
for small contractors, especially those in underserved
communities. SBA does a lot of good for America's small
businesses, but again, it should do more for the underserved
communities.
I look forward to hearing your views on all these issues
and how you will lead, if confirmed, the SBA.
Chairman Rubio. Thank you to the Ranking Member.
Unfortunately, our cameras in the hearing room are not working
so we had to set up that temporary one. So if you want to do
your statement again, or----
Senator Cardin. I will turn and do it this way.
Chairman Rubio. I am kidding. I am joking.
[Laughter.]
Well, maybe he does want to do it. No, I think we have got
it recorded somewhere.
Well, first of all I want to thank you for that.
So let me introduce our nominee. On the 1st of August,
2019, President Trump formally nominated Jovita Carranza to
serve as the Administrator of the SBA. She enjoys a long and
successful career in both the private sector and in government
service. In 1976, she was hired by UPS as a part-time hub
operations and human resources supervisor. Twenty-nine years
later, after hard work and dedication, she retired from UPS as
the Vice President of AR Operations.
In December of 2006, she was nominated to serve as the
Small Business Administrator's Deputy Administrator during
President George W. Bush's administration. Her nomination was
successfully reported to the Senate floor by this Committee,
where she was confirmed by voice vote.
After serving in that role for two years, she began working
as a logistics consultant. She was again called on by
government to serve in government on June of 2017, where she
was named Treasurer of the United States, a position she still
holds today.
She has a strong history of community engagement, serving
as a member of several organizations and on a number of boards
throughout the years, including that of the American Cancer
Society and the Hispanic Health Coalition. She has a Master of
Business Administration degree from the University of Miami and
spent time studying at California State University Los Angeles
and Michigan State University, among others.
She is married to Joel Roque and has one adult daughter.
I am encouraged by her experience with the SBA and the goal
we both share of ensuring the agency is best positioned to
serve America's small businesses.
So again, welcome to the Committee, and before you give
your opening statement, as I informed you, if you would stand
for the required oath of all who appear before us for
nomination.
Do you solemnly swear to tell the truth, the whole truth,
and nothing but the truth, so help you God?
Ms. Carranza. I do.
Chairman Rubio. Should you become confirmed as
Administrator, are you will to appear and testify before any
duly constituted committee of Congress when requested to do so?
Ms. Carranza. I do.
Chairman Rubio. Are you willing to provide such information
as is requested by any such committee?
Ms. Carranza. I do.
Chairman Rubio. All right. Thank you, and you are
recognized for your opening statement.
I always wanted to swear in a witness, my whole life. I
finally got it done. I saw it in the movies all these years. It
is awesome.
TESTIMONY OF JOVITA CARRANZA, OF ILLINOIS, NOMINATED TO BE
ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION
Ms. Carranza. It is a real honor to be the first one. Thank
you.
Thank you, Mr. Chairman, Ranking Member Cardin, and
distinguished members of the Committee. I have had the
opportunity to meet with a number of you recently. I enjoyed
learning about the small businesses in your state, and I want
to thank you for sharing your insights into how we can advance
policies that will help support entrepreneurs.
I want to thank the President for nominating me, my family
and friends for their support, as well as colleagues who have
supported me through this process.
Our 30 million small businesses play a vital role to our
Nation's prosperity, helping Americans climb the economic
ladder and improving the communities in which they operate.
When they succeed, we all win. Throughout my life, as a young
girl in a working-class neighborhood, as an executive leader at
a global company, and as a government official, I have seen the
transformative power entrepreneurship can have on individuals,
communities, and the global economy.
Like you, I believe entrepreneurship and small business
ownership, in many ways, represents the American Dream. I am
passionate about empowering entrepreneurs of all backgrounds
and ethnicities with the guidance and the support needed to
achieve success.
I want to share some of the specific priorities I would
bring to the SBA, but first, I would like to briefly tell you
how it is that I arrived here today, so that you can understand
how my life experiences informed the leadership vision I hope
to bring to the agency.
My parents were first-generation Mexican Americans born in
Chicago. They worked hard to provide for their four daughters.
They ingrained in me the importance of hard work, education,
and the perils of complacency and settling for ``good enough.''
I was also taught that perseverance has a way of opening
doors. My career with UPS began as a part-time, hourly employee
on the warehouse docks. I was responsible for loading shipments
onto trucks, and in over three decades with the company, my
exposure to regional markets expanded to global markets. I led
operations in Latin America and the Caribbean, managing
thousands of employees.
After I retired, I was nominated to serve as Deputy
Administrator at SBA, where I would oversee 80 national field
offices and a portfolio of loans worth roughly $80 billion.
After SBA, I returned home to the city of Chicago, and for
the next several years I leveraged my private sector and
government experience to help strengthen and expand nonprofits,
focused on supporting entrepreneurship among underserved
communities.
Almost three years ago, I returned to the public service,
after the President nominated me to serve as U.S. Treasurer.
Mr. Chairman, my journey here today has not been an easy
one. I have experienced some of the same challenges many
Americans face. I remember what it was like to work two jobs,
while not only attending college but also raising a child as a
single mother. If you would have told me then that my signature
would one day be printed on every earned dollar, I never would
have believed it. But I sit here before you today the
embodiment of that American dream.
I retired from UPS as the highest-ranking Latina in the
history of the company, and in the years since, I have been
fortunate to earn the confidence of two Presidents who
appointed me to serve in their respective administrations.
Members of this Committee, whatever success I achieved in
life has been a function of not only hard work, but also
opportunity, guidance, and advocacy I received from others.
If I am confirmed to lead the SBA, I will leverage the
power of this agency to continue to provide the same kind of
support that I received to entrepreneurs who need it most. I
intend to put particular emphasis on opening more doors for
women and for entrepreneurs in underserved communities,
including military families and veterans, and I intend to
prioritize disaster preparedness. I will be a tireless advocate
in the Cabinet for small businesses, as I strive to maintain an
open and collaborative relationship with members of the
Committee and your staff.
Thank you again for your consideration. I am happy to
answer any questions you may have.
[The prepared statement of Ms. Carranza follows:]
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Chairman Rubio. Thank you very much. We will start with the
Ranking Member.
Senator Cardin. Once again, thank you for being here and
your willingness to serve.
You mentioned helping underserved communities. I mentioned
it in my opening statement. So I want to get to the issue of
availability of credit. When you look at minority-owned small
businesses, they are much more likely to be denied credit. They
are much more likely to get smaller loans. They are much more
likely not even to apply for loans because of the expectation
that they will not be able to get the loans, the interest rates
are going to be higher, and the list goes on and on and on. The
same thing is true with women. The same thing is true with the
veteran-owned businesses. The same thing is true in rural
businesses.
So my first question to you is, when you look at the 7a
program today, the biggest program we have under the SBA for
credit, less than 5 percent of the loans go to black business
owners. Only 18 percent go to women. Less than 5 percent go to
veterans. Only 16 percent went to owners in rural areas. I say
that because that is well, well below the demographics of each
of those underserved groups in our country.
What will you do to try to reach out and to deal with this
gap we have in credit in America?
Ms. Carranza. Senator Cardin, I appreciate you raising that
important issue. It is a very apparent condition in our market.
But let me share with you what I have been involved in as U.S.
Treasurer these past couple of years.
I have been tasked to oversee the Office of Consumer
Policy, and that office is totally dedicated on consumer
protection, consumer financial inclusion, as well as financial
literacy and education. And I have worked extensively with the
community, in particular the underserved, the underbanked, and
unbanked community. That was a focus that we identified as
bringing the Main Street to Wall Street, because we recognized
the disparities as it relates to credit worthiness or credit
accessibility or just qualifying for access to capital, whether
it is gender, ethnicity, or particular community limitations.
So you can rest assured that I am very sensitized to the
particular area that you have identified, and if confirmed as
Administrator of SBA, I would look at ways of, as I indicated
in my opening statement, optimize the performance of all of the
programs at SBA.
Senator Cardin. So let me give you one area where you could
make an immediate help, by helping us. When you compare the 7a
program with the Community Advantage program, it is a
remarkable difference. Black owners, as I said, about 7.5
percent of the 7a programs, 12 percent under the Community
Advantage. The women-owned businesses are doing much better
under Community Advantage also, and when we take a look at
Hispanic businesses, it goes from 8.5 percent under the 7a
program to 17 percent under the Community Advantage program.
So I filed legislation to make the Community Advantage
program permanent. We also want to allow new participants to
participate in lifting the moratorium. Can I have your
assurances that you will take a very hard look at this and I
hope to become an advocate for these changes so that we can
build on what is working better in the SBA?
Ms. Carranza. Senator Cardin, as we discussed in your
office, because you posed that same question to me and I
mentioned to you that I would work very closely with you as
well as assess the current impact that Community Advantage. And
so to your question I answer yes, I will be closely engaged and
supportive and a very involved advocate.
Senator Cardin. Thank you. I do not--we do not have a
reporter in our private discussion so I thought I would put
that on the record.
Ms. Carranza. Oh, that is fine. I have it recorded.
Senator Cardin. Thank you very much.
Ms. Carranza. You are welcome.
Senator Cardin. Where you also find tremendous
underrepresentation in underserved communities is in innovation
and funds for innovation. Less than 1 percent of all venture
capital goes to rural businesses, about 3 percent go to women-
owned businesses, and only 3 percent go to black- and Hispanic-
owned businesses. One of the effective ways we have found in
dealing with this gap is for the SBA to partner with HBCUs and
minority institutions, because they have the avenues already
into the community, the credibility in the community.
Will you work with me to try to engage more of these
minority institutions and helping develop more opportunities
for innovation in underserved communities?
Ms. Carranza. Senator Cardin, that is a very easy question
to answer. I look forward to working with you and learning more
about what SBA and the collaboration that they have expanded
with other agencies. And as an advocate for small business on
this Cabinet I look forward to also advising and influencing
other Cabinet members to support this.
Senator Cardin. Thank you. And one last question, if I
might. I filed what is known as the New Start Act. I did that
as a follow-up to legislation that we passed dealing with the
First Step, recognizing our criminal justice system needs to be
adjusted and fixed. The Trump administration supported the
First Step legislation. It was signed into law. We have a lot
of returning citizens that have a lot of challenges, and they
are certainly a very much underserved community. If we can get
them into the entrepreneurship programs they are going to be
much more productive for our society, for themselves, and for
our community.
Will you work with me to find ways in which the SBA can
help us deal with returning citizens so that they can
participate in American entrepreneurship?
Ms. Carranza. Senator Cardin, if confirmed, I look for
opportunities to address what the resource partners are
providing, and when I say resource partners, SBDCs and SCORE
and the Women's Business Centers, in addition to the
headquarters office and the oversight of the programs. So, yes,
I look forward to working with your office and expanding their
footprint in that community.
Senator Cardin. Thank you. Thank you, Mr. Chairman.
Chairman Rubio. Senator Romney.
Senator Romney. Thank you, Mr. Chairman. I am going to
focus my questions on the inspector general's report on the
management issues that was put out--of the SBA--that was put
out in 2020, in October.
One of the areas that the inspector general focused on was
the dollar threshold for support, and it was at $750,000 for
economic disadvantaged, and their view was that that number was
not economically justified. Their report contends that the SBA
should develop objective and reasonable criteria based on
quantitative research and to finalize and implement that
criteria. That challenge, by the way, was first reported by the
inspector general in 2003, and yet they noted that very limited
progress has been made.
If confirmed, will you take a close look at the
disadvantaged threshold and fix an issue that has been
lingering around since 2003?
Ms. Carranza. Senator Romney, once again I want to thank
you for having--taking the opportunity to interact with you in
your office and learning about the areas of concern that you
have, and to answer your question, I look forward, if
confirmed, to review the IG report and get back to you on some
strategies we could develop.
As I indicated in my opening statement, one of my
objectives is to really look at performance of the programs and
optimizing their particular impact.
Senator Romney. Thank you. One of the recommendations that
came from the inspector general was improved compliance of the
requirement that lenders only make SBA 7a loans to credit-
worthy small businesses, or borrowers, who--and this is in
their words--who cannot obtain credit through a conventional
lender at reasonable terms. And, you know, I am a believer in
private markets and in private financial institutions, but I
know there are many gaps in underserved areas. But I want to
make sure that the Federal Government does not end up
subsidizing businesses who do not need to receive that kind of
subsidy.
Can you also review very carefully the GAO recommendations
and act as soon as possible to meet this requirement as well?
Ms. Carranza. Senator Romney, thank you for raising that
important issue. Credit worthiness is really critical, not only
for the banks' risk factor but also for the borrower, because
we also do not want to put that client prematurely in a
situation where their credit situation becomes even worse, and
could not apply even for microloans. So I will look forward to
working closely with this particular program and ensuring that
all risk factors are being addressed appropriately.
Senator Romney. Excellent. I would note that in my state,
as in many states, I believe, across the country, that the
technology growth and development in our economy is accounting
for much of the job growth across America. It certainly is in
my state. And as you seek to find places to provide support to
people who are looking for help in starting a business or
expanding a business, I know that it is important that you
consider the demographic qualities and characteristics of the
various borrowers. But I would hope, as well, that emphasis is
placed on the geographic characteristics of a place where a
business might be located, as well as on the growth potential
and the survivability of that business as well.
I have particular interest in what is happening in the
rural parts of our country. I am thinking about the rural parts
of my own state, but I am sure that is true throughout the
country. Our urban areas are doing particularly well--high job
growth, increasing wages, and household earnings--but rural
America is having a difficult time, particularly those areas
that do not have a very sizeable agricultural community. Even
ag these days is suffering.
But do you believe that there has been sufficient focus on
the rural communities, and is there a way to increase the
capacity of support for entrepreneurs and innovators in rural
America?
Ms. Carranza. Thank you for that question, Senator Romney,
and as I discussed with several of the Senators that I visited,
rural community, underserved community, underbanked, food
deserts, bank deserts, we have addressed a particular need to
have a focus. I do not believe SBA is the only agency targeting
an area that like rural, whether it is through issues like
providing broadband services or banking services to the rural
area, or just levels of investments with banks.
So I look forward to working with you and learn, in
particular, the deficiencies or gaps that you are addressing in
your particular state, and employ the programs at SBA.
Senator Romney. Thank you, Ms. Carranza. I would note how
pleased I am that someone with your extensive experience, not
just in the world of public service but in the UPS world, the
private sector world, I certainly hope and believe that that
experience can serve you well in this new responsibility.
Thank you, Mr. Chairman.
Ms. Carranza. Thank you, Senator.
Chairman Rubio. Thank you. Senator Cantwell. Oh, Coons is
here first?
Senator Cantwell [continuing]. So graciously was before me,
but opened the door to let me walk in. I told him I thought he
really was here first.
[Laughter.]
So I defer to my colleague.
Senator Coons. And to my colleague, if my wife were not
arriving in five minutes I would defer to you again, but thank
you. I am going to rocket ahead with brief questions.
Chairman Rubio. And the good news is the cameras are all
working again, so we got this all on tape.
[Laughter.]
Senator Cantwell. Thank you.
Senator Coons. Thank you, Mr. Chairman, Ranking Member. Ms.
Carranza, welcome. I enjoyed working with your predecessor and
look forward to working with you as well. This Committee has a
strong tradition of passing meaningful and bipartisan
legislation that opens the doors to opportunity and to help
Americans start and grow businesses.
One of the highest-impact SBA programs, which was founded
in little Wilmington, Delaware, was SCORE, which I know you are
familiar with as a former SCORE board member. In your opinion,
what value does SCORE contribute to our Nation's entrepreneurs?
Ms. Carranza. I appreciate that question, Senator Coons,
and I also regret the lack of opportunity to meet with you one-
on-one to elaborate on this particular subject. But for the
immediate, SCORE--and I am really impressed with the entire
infrastructure and the services that they provide. The
infrastructure consists of more than 10,000 volunteers, retired
executives that provide hours of coaching and mentoring. I have
participated in award events with SCORE, where they have
recognized, for instance, a small business that started out
with $100,000, and the award event that I attended was this
particular small business reaching their first million dollars,
and they attributed it to the coaching and counseling, the
services and products that the SCORE organization provides.
It is an essential component in the community, along with
SBDCs and Women's Business Centers. Collectively, they have
touchpoints that a lot of other not-for-profits would have. So
I value the contribution and the impact that SCORE provides.
Senator Coons. As you know, there were some challenges
highlighted by the SBA's inspector general. The House has now
passed bipartisan legislation to reauthorize SCORE and to
address those challenges, and I am hoping the Senate will do as
well, and I look forward to working with you on that.
As I am sure you are aware, SBA told Congress this year the
7a loan program, the flagship lending program, will require a
subsidy for the first time since 2013. That projection has
injected some uncertainty into the program. It was surprising,
I think, given the strong state of the portfolio and the
overall economy.
I am concerned SBA's model is overestimating the cost of
the program. Two quick questions. Will you work with the
Committee to open up the model's dated assumptions so we can
make sure we are doing everything possible to keep the 7a
program available to small business borrowers? And what is your
view on an increase in programming fees and how that would
affect borrowers?
Ms. Carranza. Thank you for that question, Senator Coons,
and the opportunity to share that I had mentioned in my opening
statement that I have three particular areas of focus, and one
of them is program optimization or maximization in the
community and the impact that they provide to the small
businesses that are in need of their services. And 7a is one,
among other access to capital programs that we have. And so I
look forward to learning more about the details concerning that
and get back to you, and work with you personally on that.
I believe that access to capital is always going to be a
deficiency and a need, and so we should be able to provide the
best financing opportunities for small businesses, especially
with the current growth trajectory that we are realizing in our
minorities.
Senator Coons. Thank you. One other area I hope we work
together on is community development financing institutions,
which are critical to providing resources to under-resourced
communities. You, if I understand correctly, serve on CDFI's
Community Development Advisory Board.
Unfortunately, Senator Kennedy and I--he is the Chair and I
am the Ranking on the Appropriations Subcommittee that funds
all of SBA's work--there are a lot of contentious issues in
that subcommittee. CDFIs is not one of them. President Trump
has attempted to eliminate that program now several years in a
row in his budget, but it enjoys bipartisan support, both
houses of Congress. I hope that we can work together to
strengthen CDFIs as a program going forward.
Ms. Carranza. Senator Coons, I believe that the CDFI has a
lot of untapped potential, especially under the Opportunity
Zone incentives, and the Microloan product is a very strong one
and the Tribal Nations also access CDFIs very strongly. So it
has a lot of value that I look forward to working with you and
identifying where can we maximize further those contributions.
Senator Coons. Thank you, Ms. Carranza. I am proud of the
work this Committee has done to put together a reauthorization
package. There are two bills that I have contributed, and I
just want to thank Mark Santos of my team for helping lead
that, the Ramp for Innovators Act, to help SBIR awardees with
commercialization, and the SIGMA Act to improve small
manufacturers' access to capital. I hope we will have an
opportunity in this Congress to move forward on authorizing
legislation, and that would require, I think, some cooperation
between all of us.
Last, I would like to invite you to Delaware. Your
predecessor, Administrator McMahon, made several visits. It is
a very nearby state. We are very welcoming, and I hope you will
take the opportunity to make a visit early in your term.
Ms. Carranza. Thank you, Senator. I look forward to the
visit.
Senator Coons. Thank you.
Chairman Rubio. It is quite accessible by train,
apparently. Is that right?
[Laughter.]
Senator Coons. Train, plane, automobile, bus. You can even
jog there if you want.
Ms. Carranza. Thank you.
Chairman Rubio. So our chairman emeritus, Senator Risch.
Senator Risch. Thank you. Well, Ms. Carranza, thank you so
much for agreeing to take this job. Your background in both
government and especially in the private sector is impressive.
Ms. Carranza. Thank you.
Senator Risch. And it does well. Did you meet with the
President before you--have you met with the President since you
took this job?
Ms. Carranza. Yes, as a matter of fact I did.
Senator Risch. When you met with him, did he ask you to
autograph his personal copy of ``Why American Small Businesses
Need Mitt Romney,'' that you wrote in October of----
[Laughter.]
Ms. Carranza. That was an interesting question, but Senator
Risch----
[Laughter.]
I will tell you that I had a delightful exchange when he--
when we discussed this particular very responsible role and his
commitment to small business. And when he expressed an interest
to continue the progress that our former Administrator had
made, I mentioned to him that I was there and I would accept
this role and that my commitment was to exceed his
expectations.
Senator Risch. Well, I appreciate that. Thank you for
taking the time to meet with me. As I explained to you when we
met, and I want to get here on the record, is I was shocked
when I heard OMB say that 7a was going to need a subsidy. I am
a big fan of the 7a program, since I started on this Committee,
which was when I first got here 11 years ago. I have always
been an advocate that the programs should run subsidy-free, and
there is no reason they cannot, if the underwriting is correct,
if the regulators are in place.
And so OMB, as we all know, uses Ouija boards, I think, as
opposed to calculators, to reach the conclusions that they do.
I would hope that you would get, when you get settled in, take
a look at that and try to show the OMB why they are wrong on
those calculations. Those fees are a bad deal when you are
talking about making these kind of loans, and the increase in
those fees just would not sell well in the private sector. And,
indeed, it would not be good for what small business is trying
to do as far as making the 7a loans. So I hope you will take a
look at that when you get settled in and be able to show OMB
why they are wrong.
Ms. Carranza. Senator Risch, I look forward to sharing with
you, visiting with you and sharing with you more extensively,
but I have had the opportunity to visit with small businesses
as I traveled throughout the Nation doing town hall meetings
and whatnot. And, inevitably, when you challenge small
businesses on what SBA can change or address much more
aggressively for them, it is always the fees being charged. And
so that is something I will look into and get back to you on
that.
Senator Risch. Well, thank you. I appreciate that.
The other thing that is close to my heart is small business
investment company licenses that are taking way too long. And,
indeed, in the reauthorization bill that we are eventually
hopefully going to try to move forward, we have in their
provisions to try to rectify some of those. I hope you will
take a look at that. I know you will get on board when we
eventually get that passed. I think that there really needs to
be some reform in that. I am a real advocate for that and I
would like to welcome you to that party if you are so inclined,
after you get settled in, and have a look at that.
Ms. Carranza. Yes, Senator Risch, and thank you for that--
for raising that area of concern. It has been expressed by all
of the Senators that I had the opportunity to meet, and so one
of the priorities that I have is to look into the SBIC. I have
had the opportunity to become, I am going to say generally
aware, through some of the hearings that I have observed
online, and understand that there are some areas of concern,
and I look forward, if confirmed, to really assess the
complexities of the program and its current impact.
Senator Risch. Thank you very much. Thank you, Mr.
Chairman.
Chairman Rubio. Thank you.
Senator Cantwell.
Senator Cantwell. Thank you, Mr. Chairman, and thank you
for holding this hearing, and to you and the Ranking Member
Cardin.
Ms. Carranza, thank you so much for your willingness to
serve. I wanted to mention export programs because Washington
is an export state. The SBA State Trade Expansion Program is
one of the key tools for small businesses to continue their
export opportunities, so I want to know if you will support
robust funding for the STEP program and whether you support
reauthorization of the U.S. Export-Import Bank.
Ms. Carranza. Senator Cantwell, coming from the
international arena I understand the value and the importance
of exports, and not being familiar exactly with what the
program is providing now I look forward to, if confirmed, to
assess, become much more familiar, and get back to you, and
work with you on that. But exports are one of the priorities
that SBA has in providing growth for small businesses, and I
look forward to enabling that.
Senator Cantwell. Okay. So you are not familiar with the
SBA's program?
Ms. Carranza. Not in great detail at this point.
Senator Cantwell. Okay. Well maybe for the record you could
answer both, the STEP program and the Export-Import Bank.
Ms. Carranza. Yes, and I look forward to it.
Senator Cantwell. On cybersecurity, we had a chance to talk
a little bit about this, but according to the U.S. National
Cybersecurity Alliance, more than 60 percent of small
businesses go out of business within six months of a cyber
attack. So I am pleased to see the passage of the Main Street
Cyber Act last Congress provided guidance to help small
businesses reduce cybersecurity risks, but obviously there is
more that we need to do. The Small Business Development Centers
across the country are now providing technical assistance to
small businesses, and I believe that this is an important
aspect because of the challenges of getting access to capital
to constantly update technology.
So would you be willing to consider pilot programs or other
things helping small businesses access capital to help build
critical cyber infrastructure?
Ms. Carranza. Senator Cantwell, as we discussed, small
businesses, what they face on cybersecurity is not only gaining
information and being informed of how to prevent, how to
address it, but also, as you indicated in your question, is the
access to capital to support the infrastructure, to support
cybersecurity software and procedures and processes. So I look
forward to working with you on that.
Senator Cantwell. So you think it is a good idea to
continue to focus on how to get small businesses support for
cybersecurity?
Ms. Carranza. I look forward to working with your office to
support more access to capital for cybersecurity infrastructure
for small businesses, because that is where they lag.
Senator Cantwell. Okay. I think, Mr. Chairman, instead of
asking one more question that I do not get a defined answer to
I think I am just going to wait. Thank you.
Ms. Carranza. Okay. Thank you.
Chairman Rubio. Senator Young.
Senator Young. Treasurer Carranza, good to see you again.
Ms. Carranza. Yeah, thank you.
Senator Young. I enjoyed our visit in the office and was
really encouraged that you are going to be focusing on Small
Business Investment Company program improvement as one of your
top priorities, as you step into this role, so thank you very
much for that. It is really important to Hoosier small
businesses, and one government program that I think is broadly
recognized as effective, but can be made more effective.
I would like to turn to the Office of Advocacy. It is
tasked with identifying challenges and advocating for small
business interests when it comes to regulatory reforms. Do you
believe, Treasurer Carranza, there are more opportunities for
this Office of Advocacy to be more focused on its core mission
of removing cumbersome regulations, and if so, maybe you could
speak to that issue a bit.
Ms. Carranza. Thank you for that question, and it is a very
important issue. Heavy regulation is a major burden. It is very
costly for small businesses. I believe everyone here recognizes
that. And this Administration has been very focused on
addressing a reduction in very costly regulations, not only for
big business but small businesses especially.
I have had the experience of working with small businesses
for close to about 25 years in my private sector, and there are
three major costs for any small business and regulation taxes
are the top two, and health care for employees. So if there is
anything that the SBA can focus in on, especially the Office of
Advocacy, and once I get close, if confirmed, close to that
office to learn how effective they are, what programs they have
in place, the communication tools and infrastructure that they
have moving forward, I will get back to you and tell you what I
have learned and what we can do more. I know that it is----
Senator Young. Thank you. My sense is there is an
opportunity, just for that entity within SBA, to be a little
more outward focused, perhaps more aggressive as it relates to
advocating on behalf of small businesses. But hopefully we can
work constructively together to that end.
Ms. Carranza. Yes. If confirmed, absolutely, I look forward
to working with you on that.
Senator Young. Thank you. The nature of our economy has
long been changing, moving less from traditional assets and
more towards the increased valuation of intangible assets,
whether that is customer relationships or intellectual
property. And one would think that would pose some challenges
when calculating valuations of different companies.
So as the economy continues to evolve, how is the SBA going
to modernize its lending practices to take into account the
growth of the intangible assets within businesses?
Ms. Carranza. If confirmed, I will take it as an
observation or something that I need to really look at, how we
are progressing through our strategic planning process, if that
has been identified as an opportunity for growth, and I always
call it transformation, and be much more relevant in the
market. Intellectual property is key, and I know that some of
the small businesses that are involved with trade have their
intellectual property challenged, and at this point I would not
know the department of SBA and how they are addressing this new
market or new trend.
Senator Young. So would you be willing to work with me,
have your staff work with my staff, on this discrete issue?
Because I do think there is going to be an opportunity, moving
forward, for the SBA to modernize how it deals with small
businesses whose main assets are indeed intellectual property.
Ms. Carranza. Yes, Senator. I look forward to working with
you, absolutely.
Senator Young. And then lastly, but not least importantly,
as the father of three daughters, I think it is essential that
we continue to do what you have indicated you want to do, in
your opening testimony, opening more doors for women-owned
businesses. Currently the SBA and the Office of Women's
Business Ownership work with many organizations. I know it is a
collaborative effort, but by any accounts it is a successful
effort.
What can SBA do to, you know, in this early stage before
you have even been formally confirmed, what do you think they
might be able to do to help women better access capital and
perhaps even incentivize women who have met with financial
success to mentor those who are just coming along?
Ms. Carranza. Thank you for that question, and Senator, let
me share what I have done in the current role I have as the
U.S. Treasurer. I have been collaborating with the Department
of Labor and SBA for the past couple of years developing a
digital platform that is providing some very relevant, some
cutting-edge training tools so that--and it is designed
particularly for women entrepreneurs, startups, and emerging
small businesses, because there is a unique approach to
training. And they have about seven portals. We provided, at
Treasury, the portal that was focused on business financial
literacy.
So I have been working in that particular sector and I know
that SBA could do more in collaborating with other agencies,
and as a voice on the Cabinet I will--you can be confident that
I will be a strong advocate to continue that work. I have been
also asked to serve on the Women's Suffrage Centennial, and so
there are ample opportunities there also to work with the
business sector and the community. So advocacy for women
endeavors has been a lifelong experience, and I look forward to
working with you.
Senator Young. Just know that this Senator and so many
others stand ready to ensure you are successful in furthering
the interests and dreams of women as they go out there and try
and meet with success in the free enterprise system. So thank
you.
Ms. Carranza. Thank you, Senator, and I think you would be
pleased to know that a lot of our resource partners have a
particular interest in that community as well, so I look
forward to expanding that.
Senator Young. Thank you, Treasurer.
Chairman Rubio. Thank you, Ms. Carranza. One of the
arguments, the core arguments that many of us have been making
for a while is the sort of broad-based consensus that once
China got richer they would become more like us, was a
catastrophic error. And we have seen it play out in some of the
economic imbalances that I think are now--you see multiple
efforts to correct it both in the Administration and here in
Congress.
The first one I point to is that according to research that
is out there from the 10-year period from 2001 to 2011, our
country lost 2.4 million jobs in small- and medium-sized firms,
that were in manufacturing, due to Chinese import competition.
These are tens of thousands of small businesses in fields like
furniture, electronics, auto parts, fabricated metals industry,
located mainly in the Midwest and Upper South, but that
included northwest Florida. And these are businesses that went
under during this time.
What do you view the SBA's role as being, particularly in
helping foster domestic investment in the manufacturing, and
particularly in the advanced manufacturing sectors, so we can
create the kind of strong, dignified jobs that are critical to
having strong communities and strong families and so forth?
Ms. Carranza. Thank you, Senator--Chairman Rubio. The
manufacturing I agree has always been the life blood of a
community, and manufacturing provides not only ample employment
for certain communities but they also have a mission of
producing the best quality products and services in the world
here in the United States. And so what I believe that SBA, if
confirmed as Administrator, is to ensure that we are
continuously providing access to capital for budding
entrepreneurs that have a particular product, are looking
forward to establishing a manufacturing here in the United
States and exporting. That would be one of the program
optimizations that I would be assessing, to ensure that we are
not only providing access to capital but value-added technical
assistance.
Chairman Rubio. Thank you for mentioning capital, because
obviously manufacturing is very capital-intensive.
Ms. Carranza. Yes.
Chairman Rubio. You know, the Chinese government also
outlined a plan. It was Made in China 2025. It is an industrial
plan. And on it they outline, basically, a roadmap on the key
industries that they intend to establish global superiority in
these particular industries, all of strategic importance. And
the ambition, if you look at that, goes well beyond controlling
manufacturing at the lower end of the value chain, and it
includes innovation, design, production at the higher end of
the value chain.
With regards to those industries, particularly those that
we know, because of that plan, China is targeting for
domination, and that includes unfair trade practices,
subsidization, reverse engineering, forcing our domestic
companies to joint venture with Chinese companies with an end
to putting them out of business.
So in light of all that, and knowing the strategic
importance of these industries, what can the SBA do to help
small businesses compete with these Chinese government-backed
firms in those strategic sectors?
Ms. Carranza. Thank you for that question, Chairman, and it
is a very important one. I have taken the opportunity to review
some of the components of the USMCA, and Chapter 25, where it
is dedicated, and very specific about small businesses and what
we can do to facilitate trade and protect intellectual property
and spur innovation, and look at cost-effective trades and
taxes and duties and whatnot.
So SBA could continue serving as the advocate for small
businesses in those particular markets, and whether it is the
International Affairs Program Office at SBA, the resource
partners, much more sensitized to the Chinese market. But I
believe that technical assistance is going to be really
critical to work with small businesses to proactively prepare
them for international trade, especially a market as trying as
China.
Chairman Rubio. I guess my point is that one thing is to
try to sell into the Chinese market, which obviously will also
be a challenge. I think the item I was pointing to is you are a
firm, you are in a sector, industrial sector, in which the
Chinese are making a concerned government-backed effort to
globally dominate that sector.
They do it by not only guaranteeing their domestic
companies unfettered access to their own market without
competition, but then also by subsidizing their efforts to
compete against our companies, here and around the world. And
since they are subsidized, they can offer much lower price at
sometimes comparable quality. No company can compete against
that, because these are not government-backed companies. And
the result is either they do not happen or they get put out of
business. Then the Chinese dominate the sector and they can
charge whatever they want.
And so I encourage you to look more closely on how we can
align SBA programs, particularly for companies trying to enter
those strategic industries, because there is no way that a
small business, or even a large one, to some extent, can
compete against a nation state with the size and the power and
the scope of China, under the governance of the Chinese
Communist Party.
Ms. Carranza. Chairman, I share your concerns, and you can
have the confidence that if confirmed I will work closely with
your office to address those particular areas.
Chairman Rubio. Thank you.
Ms. Carranza. You are welcome.
Chairman Rubio. Senator Shaheen.
Senator Shaheen. Thank you, Mr. Chairman, and Ms. Carranza,
thank you for your interest in considering to be nominated for
this very important post as SBA Administrator.
I understand that before I got here that you were asked
about your commitment to ensuring that SBA works with all
agencies within government to ensure that they meet their small
business contracting goals, particularly for women- and
veteran- and minority-owned small businesses. Did I understand
that correctly?
Ms. Carranza. Senator, thank you for the question, and yes,
it is a matter of--also a topic that I discussed with several
of the Senators that I met with, yes.
Senator Shaheen. Thank you. Yes, I appreciated our
conversation about as well.
I think you may have been asked about the State Trade and
Export Promotion program, which we have seen, in New Hampshire,
has been very important in ensuring that our small businesses
have some assistance in getting into international markets. One
of my favorite statistics is that while over 90 percent of
markets are outside of the United States, only about 1 percent
of small and medium-sized businesses actually have access to
those international markets.
So having a program through the SBA like the STEP program
has been very important in what I have seen according to the
most recent performance report, is that STEP has returned $31
for every dollar invested, when we look at the return on
investment by small business.
One of the concerns that I have heard from New Hampshire
businesses, however, is with the high cost of administering
that program, and I wonder, if confirmed, will you commit to a
review of the program requirements for STEP to see how we can
reduce the administrative burden for small businesses who
participate?
Ms. Carranza. Thank you for that question, Senator Ernst,
and as we discussed when we met, I look for opportunities to
ensure that the programs that are viable for either trade or
job growth, access to capital, et cetera, are performing and
providing the impact that they are designed to--were designed
and intended for. And so I look forward to working with you on
ensuring that that STEP program is optimized. It is a vital----
Senator Shaheen. And reduce the administrative burden.
Ms. Carranza. I look at ways of that for efficiency and
facilitation, and so yes, I would look--I look forward to
working on the administrative burdensome of that program.
Senator Shaheen. Good. Thank you.
I was very pleased to be part of the effort, back in 2015,
to try and provide relief for veterans from certain SBA loan
fees during the reauthorization of the 7a program, and I have
been disappointed to see that the SBA now is planning to put
aside those fee waivers for veterans so that they will be
paying those fees again. And I wonder if you can talk about why
you think that is necessary and whether you are willing to
commit to work with our office and the Committee to try and see
if we cannot waive those fees again for veteran-owned
businesses looking for loans.
Ms. Carranza. If confirmed, Senator, I look forward to
working with you on that. I do not know the particulars of that
particular issue of the fee structure, but I will take it as a
priority to look into it, as we have indicated that we can
never do enough for veterans, and if there is an opportunity
there then I will work with the Committee as well to address
that issue.
Senator Shaheen. Good. Thank you. And finally, on the SBIR
program, the Small Business Innovation Research program, has
been a significant way that we have encouraged innovation among
our small businesses. It has benefited so many of our agencies
within government. I am on the Armed Services Committee so I
see very directly how the SBIR program has provided innovation
for many of the military equipment and operations needs that we
have.
Can you talk about what your views are of the SBIR program,
and will you advocate to increase those allocations and make
these small business programs permanent, both SBIR and STTR?
Ms. Carranza. Senator Ernst, with regard to----
Senator Shaheen. Excuse me. I am Senator Shaheen.
Ms. Carranza. I am sorry.
Senator Shaheen. I know a lot of people are thinking about
Iowa and New Hampshire together as we----
[Laughter.]
Presidential nominating process.
Ms. Carranza. Thank you very much for clarifying that. I am
sorry.
Senator Shaheen. That is okay.
Ms. Carranza. But I wanted to address the SBIR, which is a
very worthy program, and as you indicated, the agencies benefit
from the innovative research and development. And so the 11
agencies that are providing the partnership with SBA to ensure
that value, I look forward to working with you on that.
I have become familiar of the current impact and the
current trend, level of contribution, and I will take the
position of saying we probably can do more, and I look forward
to working with you on that.
Senator Shaheen. Thank you. Thank you, Mr. Chairman.
Chairman Rubio. Senator Rosen.
Senator Rosen. Thank you, Mr. Chairman, and Treasurer
Carranza, congratulations again on your nomination. I
appreciate you and your staff visiting me last week to discuss
Nevada matters----
Ms. Carranza. Yes.
Senator Rosen [continuing]. Matters important to everybody.
And I know that people have already asked you a lot of
questions, so I just want to put a couple of Nevada stats out
there and we are going to move on to cybersecurity. But, you
know, the importance of providing, women-, minority-owned
businesses more resources and opportunities to grow is so
important, because Nevada has the fifth-largest Latino
population per capita in the United States. We have one of the
fastest-growing AAPI communities in the Nation, and Nevada has
also led the Nation in the growth of women-owned businesses in
the past decade.
Currently there are more than 80,000 women-owned small
businesses and 70,000 minority-owned small businesses, and
although sometimes you think of Nevada as the Las Vegas trip
with our big, wonderful hotels, small businesses in Nevada
actually make up more than 99 percent of all of our businesses.
And so very important to us, and we just really want to be sure
that we can expand our small business base and work with SBA to
provide those additional resources, and plug those holes where
we have to.
So I am going to move on to cybersecurity. We talked about
this a little bit, cybersecurity for small business, because
small business owners, they do not often think that they are
going to be victims of a cyber attack. They think maybe of a
big bank or a big retail company. So they think, ``Oh, I am
small. Who wants my information?''
But last year the majority of all targeted cyber attacks
were directed at small business, and unfortunately 60 percent
of small businesses that are attacked go out of business within
six months, because of the hit that they take.
So what is your assessment of how SBA can help raise
awareness to provide and strengthen that training for
cybersecurity? Tell me about your plans to promote cyber
hygiene. And we talked about, what I want to say, a cyber
disaster recovery in the case of ransomware, or how do they
recover that? You know, it is good to be proactive. How do you
not go into phishing things? How do you do some of those? But
how do you recover if you are attacked?
Ms. Carranza. Well, thank you, Senator Rosen, and I am
definitely going to get your name correct.
[Laughter.]
I am so sorry.
Senator Rosen. That is okay. I am closer so it is easier to
read.
Ms. Carranza. But cybersecurity is of great importance for
all businesses, both large and small, and as we spoke in your
chambers--and I learned the word hygiene, cybersecurity
hygiene; it is a new terminology and a new identity--but that
is basically what it takes. You were not here earlier but I
mentioned to the Senators that cybersecurity is not only about
additional information and we know how to counter an attack or
how to prepare or what type of software there is, but there is
also a need, and it was expressed to me, a need to identify
capital for them, so that they can build infrastructure----
Senator Rosen. That is right.
Ms. Carranza [continuing]. And support the systems that
they have to install and also the services that they have to.
There are firewalls and whatnot, install, very costly.
Senator Rosen. Yes. It is very complicated, yeah.
Ms. Carranza. As it relates to SBA, I believe we consumer
address not only from the Advocacy Office but also partnerships
with other agencies, to learn what their best practices are.
Can we share knowledge so that we can be proactive with small
businesses? But SBA, and if confirmed, I would be a strong
advocate on doing more for small businesses and cybersecurity.
Large organizations are having difficulties, so someone has
to take the position on behalf of supporting small business,
especially the 30 million.
Senator Rosen. Well, and I think you bring up a good point,
because we see this in telemedicine and telehealth, that we can
often give money for the actual program but we are not giving
money for people for the hardware or maybe to bring out the
broadband, if it is a rural area, that they need. It is kind of
saying, well, I am going to give you free gas for life but you
do not own a car yet, if you do not have the other kinds of
infrastructure that you need.
And so I think being able to either help provide these or
help when you make the loans, understand that we have to expand
the resources they often need to use the tools is very
important. So I appreciate you looking into that.
Ms. Carranza. Senator Rosen, I am also a strong believer of
not only the public sector doing it all but also the private
and public partnerships that we can develop to address that.
Senator Rosen. Yeah. Well, thank you. I appreciate it.
Ms. Carranza. You are welcome. Thank you.
Chairman Rubio. Senator Markey.
Senator Markey. Thank you, Mr. Chairman, very much.
Massachusetts has been a big beneficiary of the SBIR/STTR
program. I will just give you some numbers. They are massive.
We so far have received 22,500 grants from those programs since
its inception, and last year alone, Massachusetts received 593
awards, worth $350 million, just last year, from the SBIR
program.
So this has been central to the growth of the Massachusetts
economy, and Route 128, along our technology highway, has been
a big beneficiary, making breakthroughs in new programs that
actually ultimately help our national security, as well as the
economic well-being of the State of Massachusetts. And we care
very much about the integrity of this program.
Back about eight years ago, there was an effort to kind of
de-authorize SBIR, and the program limped along through 14
temporary authorizations. And I just do not think it makes any
sense for us to ever allow that to happen again. With the
leadership of Chairman Rubio and Ranking Member Cardin and
champions like Senator Shaheen and Senator Rosen, we are
working very hard to show a commitment to ensuring the
permanency of these programs.
Do you support making these programs permanent?
Ms. Carranza. I value the--thank you for the question,
Senator. I value the contribution that the SBIR and STTR are
making currently, and you have cited the value that we have
experienced. And so I would, if confirmed, and become a little
bit more familiar with the agencies that are participating with
this particular program, I look forward to working with your
office to ensure that it maintains as a viable program, and
let's assess what would it look like five years from now.
Senator Markey. Okay. Well, I thank you for that and we
would obviously welcome your advocacy for that goal to be
achieved.
During your time at the SBA, most venture capital-backed
small businesses were not eligible for SBIR funding, and since
that time Congress worked out an agreement to allow a number of
participating agencies to award a limited percentage of their
SBIR allocation to small businesses owned in the majority by
venture capital. But we made sure, at the time, that if VC
firms got a piece of the pie, would increase the size of the
whole pie through larger allocation amounts, so true small
businesses did not lose their important funding, because for
many small businesses, venture capital is not going away, not
in the early formation stages of those businesses.
What do you think, Ms. Carranza, is the appropriate role
for VC firms, hedge funds, private equity-backed small
businesses in the SBIR program?
Ms. Carranza. Senator, I would be deficient to respond to
that question currently, not understanding the role and the
impact that it would make. So I would, if confirmed, I would
assess it, evaluate, speaking with the particular, again,
agencies, as well as the program directors that have oversight
at SBA with that program, and then get back to you on that----
Senator Markey. Okay. Well, thank you.
Ms. Carranza [continuing]. On that question, but I will
take it under review.
Senator Markey. Thank you. And then on the question of SBA
program oversight, we asked the SBA to oversee but not
administer the SBIR/STTR programs, and that means that there
has to be oversight over these programs. And it is the Office
of Innovation and Investment that oversees the programs, but
that office is tasked with overseeing multiple SBA programs and
does so on a limited budget with limited staff. And currently
the SBA lacks any sort of enforcement tools for ensuring that
other agencies comply with SBIR statutes and directives, and
they are behind in submitting annual reports to Congress.
So I would like to hear from you what your strategy would
be for tackling the administrative deficiencies in the SBIR
program, to make sure the oversight is there and that the
American taxpayer receives the best return on their investment.
Ms. Carranza. Thank you for bringing that to my attention.
It is a serious issue. And so if confirmed I look forward to
working closely, again, to identify those deficiencies, assess
why they are occurring, and once I have had the opportunity to
do that I look forward to reporting back to you, sir.
Senator Markey. Okay.
Ms. Carranza. Senator, the fact that I have not been in
close proximity to any of the programs, it would be short of me
to address that, but I will take it upon, if confirmed.
Senator Markey. I would look forward to that report coming
back to the Committee, and I thank you, Mr. Chairman.
Chairman Rubio. We are going to enter a second round of
questions.
Ranking Member.
Senator Cardin. Thank you, Mr. Chairman. First I would ask
consent that the letter from the American Legion supporting the
fee waiver on veteran loans continue, how important that is, be
made part of our record.
Chairman Rubio. Without objection.
[The letter follows:]
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Senator Cardin. And also just point out to the members of
the Committee that the SBA did finally issue their rules on
small business size under the Runaway Extension Act. That is
good news. That was actually done in a relatively timely way,
so I thought I would at least bring that to the attention of
our members.
I want to--several of our members have talked about needing
an advocate, as the Administration of the Small Business
Administration, that is going to be a strong advocate for
programs. Several members talked to you about permanency of
programs.
Now why do we talk about permanency of programs? Only
because we are 20 days away from missing deadlines again, where
programs are going to expire. We are a year away from missing
many programs that did expire, that we are still looking at
extenders. We are two years away from programs that have
expired because we have not taken up that issue. And when you
are dealing with economic tools that are available,
predictability becomes critically important.
So I understand your desire to be in a confirmed position
before taking positions on permanency of programs. I get that.
But I want to see that passion that when we have tools that
work, that the Administrator is going to be in there fighting
to make these tools permanent so you do not have to deal with
an unpredictable Congress missing deadlines.
And I think that is some of the frustration you are hearing
from some of the members today on programs that are no-brainers
for how important they are. The SBIR program, that is a no-
brainer. Everybody understands how important it is. We need to
make it permanent. And I would argue the same thing is true
with the Community Advantage program. Make it permanent. It is
working. Why do we want to have the uncertainty as to whether
that tool is going to be available later? So that is some of
frustration you are hearing from the members. And again, I
understand your position of wanting to be able to have reviewed
these programs and understand how they interact with other
opportunities.
You have heard several of us talk about we want to have an
advocate to fight OMB. They are always unreasonable to every
agency. We understand that. And after decisions are made, you
have to live by what they do and you have got to support what
they do. But want you in there fighting to make sure that we
continue the fee waiver programs for our veterans, and that we
get an honest presentation on the revenue neutrality of the 7a
program and not the terrible presentation OMB made this year
that Congress rejected, both Democrats and Republicans.
So we want to make sure we have an advocate there to
maintain these fee issues as it relates to 7a programs, because
the fees will make it prohibitive for small businesses to take
advantage of the 7a programs if they get too large.
And I would add to that, we are working to strengthen
entrepreneurship programs here, so on the women-owned small
businesses, let me just give you my own assessment. Maryland is
a wonderful state. We have one Women's Business Center in
Maryland, located in the Washington area. There are no
entrepreneur services for Baltimore for women, under the
Women's Business Center. That is outrageous. And Baltimore is
not alone. There are a lot of places throughout the country
that could benefit from it.
So we need someone who is going to advocate for a larger
pie so that we can get more Women's Business Centers opened,
and larger dollar amounts so that they could do more to help
women develop entrepreneurships. So we need an advocate there
that is going to be there fighting for these programs.
We also know that we had the single source for
disadvantaged women's businesses, but the problem is that
unlike the 8a for minorities you have a rule-of-two program
that, for many cases, eliminates the sole source for working
for women-owned businesses. So we want to make sure that, if
you are confirmed as Administrator, you are going to be in
there fighting for this. You are not going to win every battle
with this Administration. We know that. Or certainly not with
OMB, because nobody ever wins every battle with OMB. But we
want to make sure you are there fighting for this, and that you
work with us so that the tools for small business, that the
ones that are working are made permanent, and we do not have to
worry about missing deadlines in Congress to make sure those
tools are available to help the small business community in our
country. That is what we are looking for.
Ms. Carranza. Well, Senator Cardin, there is a particular
hearing structure. Otherwise I would be leaping off this desk.
But I am a passionate advocate for small business. My track
record reflects that. I am not only a mentor but I am also a
coach for small businesses. I have family members who have
started small businesses. I have a niece who graduated from law
school and then said, ``I want to start a small business.'' So
I understand the value and the need. They are the greatest job
creators and wage growth. They are vibrant for the community.
And let me tell you a little story about OMB and my role as
the U.S. Treasurer. I have worked very closely with OMB. Some
people keep them at an arm's distance, like the IG, but I do
not. I engage them. I actually invite them in, because I want
to know what their perspectives are and what their limitations
are, so that I can work around them and at least achieve my
ultimate goal.
I reformed the Financial Literacy in Education Commission
body of work. That is 23 agencies that I worked with to
convince them that we were not making sufficient impact. I
asked a very plain question--where was the Financial Literacy
in Education Commission when Detroit went belly-up? That is
when a commission should have been very engaged to recover, to
provide technical assistance and tools and products, coaching,
and whatnot.
So that is a prime example of how I can flex the muscle in
working with other agencies to make things happen. It is just
that I am composed here.
Senator Cardin. I get you.
Ms. Carranza. Okay. The other point, Senator Cardin, it is
a matter of--if it is a budget, are the resources being applied
in an area where there is the greatest impact? What I have
observed in reviewing all of the latest legislation that the
Committee members have submitted, it is either to expand or
enhance or a particular--or a current program, which tells me
that the core competency of that particular program is
effective, but we need more.
And so I look at how do we work on either sustainability of
a program, I know terms like ``cap'' come into the discussion,
expanding, enhancing, and what I would look at is the current
available resource available in each program, are we serving it
or are we just performing status quo? Are we responding to the
needs of the small businesses, and as an advocate, that is how
I would assess. Is it the people, is it the process, or is it
the budget? And I look forward to getting back to you, Senator,
with my results.
Senator Cardin. I hear you. I just want you to know you
have friends on both sides of the aisle here that are going to
be strong advocates for small business tools under the SBA.
Ms. Carranza. Thank you very much.
Chairman Rubio. Senator Rosen.
Senator Rosen. Thank you. I am going to ask a question
about access to capital for our cannabis small businesses. You
know, in Nevada, along with 10 other states and District of
Columbia, we have legalized the recreational use of marijuana,
and in our state it is thousands of new, good-paying jobs. And
I will tell you that the first full year of sales in Nevada,
our cannabis business has sold nearly $425 million of
recreational marijuana products, that resulted in $70 million
of tax revenue for our state.
And so, however, legal cannabis businesses currently lack
access to essential SBA resources, such as loans, counseling,
mentoring, training, that you provide to other small
businesses. And this new industry is not just growing our local
business and economy. It is doing it for other states as well,
and it is one of my top priorities, to ensure that these new
businesses succeed.
So what would be your plans to ensure that legally
operating cannabis small businesses in states like Nevada have
access to the same SBA programs as other small businesses--
loans, counseling, training--and would you be willing to work
with me on legislation to help provide them some technical
assistance?
Ms. Carranza. Senator Rosen, as I discussed when we met,
there are some restrictions. SBA's Small Business Act is
responsive to Federal and appropriate eligible small
businesses. And at this point it is not--the services are not
positioned----
Senator Rosen. Would you be willing to help me work on some
legislation for those of us who have states----
Ms. Carranza. I look forward to working with you on the
potential of that, Senator Rosen. It would be premature to say
these are the expectations, but I definitely would look forward
to learning with you.
Senator Rosen. No, I understand that there are limitations,
but for those states that have legalized, and I am sure there
is more that will be coming forward, that if there is that
possibility I would look forward to partnering with you on
that, because it really is, as you see----
Ms. Carranza. Absolutely.
Senator Rosen [continuing]. Four-hundred twenty-five
million dollars in the first year. That is a lot.
Ms. Carranza. No, I look forward to learning more from you,
and then, Senator, it is an emerging market, as they would
say----
Senator Rosen. Yes, it certainly is.
Ms. Carranza [continuing]. And I look forward to working
with you on that.
Senator Rosen. And so I have one last question, an easier
question, I think, and it is about the Small Business Child
Care Investment Act. Senator Ernst and I recently introduced
the Small Business Child Care Investment Act. It is bipartisan
legislation that would provide nonprofit small business child
care providers access to the same SBA loans that are currently
available for the for-profit child care providers. Currently
those nonprofit child care providers, they may have access to
microloans but they are barred from applying for other SBA
loans.
And so, of course, millions of families in America lack
access to affordable child care. They have difficulty finding
it. Sometimes the average cost, I think, is about $10,000 a
year, more than that in high-density areas. And so a lot of
people live in what we call child care deserts, with few
options for licensed child care.
And so is this an issue that, again, we can work with, and
your office, to try to expand, especially in those child care
deserts, underserved communities, the access for nonprofits to
be able to have good, secure, licensed child care for their
communities?
Ms. Carranza. Senator Rosen, as we discussed when I met
with you, there are a lot of not-for-profits, especially in the
faith-based community, that provide child care, and I look
forward to working with you. As a mother and as a single mother
I fully can appreciate the importance of having reliable and
cost-effective child care, because it does impact attendance,
workforce reliability, upward mobility.
So again, if confirmed, I look forward to working with you
in that particular area. I know currently the portfolio does
not support not-for-profit access to capital, but I also know
that there are microloan contributors or facilitators
throughout the community that we could talk further about that.
Senator Rosen. I think this is an area that we could really
help parents get to work and support their families if we can
give them good quality, affordable child care where they are.
It is very important to our economy.
Ms. Carranza. Yes. I agree with you, Senator Rosen. It is a
very hot issue, especially when our workforce, women workforce
is expanding----
Senator Rosen. Yeah.
Ms. Carranza [continuing]. As well as these unemployment
numbers are just phenomenal.
Senator Rosen. Right.
Ms. Carranza. So we need to be responsive, so I look
forward to working with you.
Senator Rosen. Well, I want to thank you again for your
willingness to serve. I really look forward to working with you
on that, expanding your advocacy and all of our opportunities
for small business, not just in Nevada but across the country.
Ms. Carranza. Thank you, Senator Rosen.
Senator Rosen. Thank you.
Chairman Rubio. I just want to echo on the child care
thing. I do not know what the statistics are now but in 33 out
of 50 states, it was the case a few years ago, child care is
more expensive than going to college. And, you know, if the
cost of child care is 110 percent of your salary for the week,
I mean, you are basically--it is costing you money, or if it is
even comparable.
So it is a huge issue, and I would also, I mean, in a lot
of places you see where employees and even small business
owners, child care is the very nice lady that takes care of
everybody else's kids on the block, and they are wonderful
people. But we would love to see more opportunities for not-
for-profits to be able to see children in early childhood
education settings, not just care.
We are going off topic a little bit but it is a big deal
for a lot of parents and it is an impediment to entering and
remaining in the workforce, because, you know, you do a lot of
your learning, believe or not--well, a lot of people do not
know--from zero to five. Those first five years are so
critical, and it is truly a real challenge, beyond the setting
of this hearing.
So I have a few more questions. They are all sort of
written in a way to just get a quick answer so we could have it
for our records, so here we go. This is the lightning round.
All right. If you are confirmed, will you commit to
addressing the management challenges of the Office of
Investment and Innovation to ensure the programmatic integrity
of the SBAIC program?
Ms. Carranza. Yes.
Chairman Rubio. If you are confirmed, will you commit to
appearing before this Committee within 90 days for an oversight
hearing to report on your progress in addressing these
problems?
Ms. Carranza. I look forward to meeting with you, yes.
Chairman Rubio. If you are confirmed, will you commit to
going back to the drawing board on the proposed lending rule,
doing a small business impact analysis, and engaging with
stakeholders in a productive way to ensure appropriate changes
are made that will not negatively impact small business access
to capital?
Ms. Carranza. As I indicated, Chairman, I look forward to
working with you after I am confirmed, if confirmed, is to
assess the particular programs to get back to you on that, yes.
Chairman Rubio. Okay. So that--okay. If you are confirmed,
will you commit to communication and transparency to Congress
on the subsidy models and calculations for all the Federal
credit programs at SBA?
Ms. Carranza. Yes.
Chairman Rubio. If confirmed, will you commit to ensuring
the backlog of staff needed by the SBIR/STTR team are filled
within 120 days of your confirmation?
Ms. Carranza. You have a commitment in my first 100 days I
will be assessing the shortfalls of any program.
Chairman Rubio. Okay. I said 120. You said 100, so I am
going to write 100 here.
Ms. Carranza. Okay. I always like coming under.
Chairman Rubio. I hear you. No, that is great. All right.
If confirmed, do you commit to ensuring that moving forward
Federal grant money is not used to repay previously misspent
funds identified by the SBA OIG?
Ms. Carranza. Yes.
Chairman Rubio. If confirmed, can you commit to working on
modernizing the Disaster Loan Program and placing significant
internal controls to avoid fraud, waste, and abuse in disaster
lending in line with the recommendations made by the OIG?
Ms. Carranza. Yes, I am risk averse, absolutely.
Chairman Rubio. If confirmed, will you commit to having a
woman-owned small business certification program in place
within 120 days of your confirmation? 180 days, I am sorry.
Ms. Carranza. Senator Rubio, and understanding the
complexity of it, I would just tell you that I would
expeditiously work on that, if confirmed.
Chairman Rubio. Okay. All right. So we gained 20 days on
the other one and this one----
[Laughter.]
About 180 days.
Ms. Carranza. Not bad.
Chairman Rubio. All right. Very soon.
The Committee has sent several letters requesting the SBA
consider several proposals to aid small businesses against
cyber threats. You have heard a lot about that here today as
well. To date, we have not received a response to these letters
from the SBA. If confirmed, will you commit to providing the
Committee a response within 30 days of becoming Administrator?
Ms. Carranza. I was made aware of that before the hearing,
Senator, and you have my commitment that I will expeditiously
work on that, if confirmed.
Chairman Rubio. All right. Anything else?
Senator Cardin. Was that 30 days? Is that--both sides are
really concerned about not getting a response on that cyber
letter.
Ms. Carranza. Yes. I will, again, expeditiously, as quickly
as I can, much like I came in under loud, I hope to do it even
sooner.
Chairman Rubio. Okay.
Ms. Carranza. Thank you, Senator Cardin.
Chairman Rubio. Well, we have reached the end of this
hearing. I want to thank you for the time you have given us.
The hearing record is going to stay open until tomorrow
evening, and any statements or questions for the record should
be submitted by Friday, December 13th, at 12 p.m. And with
that, this hearing is adjourned.
Ms. Carranza. Thank you very much. I appreciate it.
[Whereupon, at 4:02 p.m., the Committee was adjourned.]
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