[Senate Hearing 117-328]
[From the U.S. Government Publishing Office]


                                                       S. Hrg. 117-328

                     OVERSIGHT OF SBA'S OFFICE OF DISASTER 
                                  ASSISTANCE

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          AND ENTREPRENEURSHIP

                                 OF THE

                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 13, 2022

                               __________

      Printed for the use of the Committee on Small Business and 
                            Entrepreneurship
                            
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        Available via the World Wide Web: http://www.govinfo.gov
        
                              __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
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            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
                    ONE HUNDRED SEVENTEENTH CONGRESS

                              ----------                              

                 BENJAMIN L. CARDIN, Maryland, Chairman
                  RAND PAUL, Kentucky, Ranking Member
MARIA CANTWELL, Washington           MARCO RUBIO, Florida
JEANNE SHAHEEN, New Hampshire        JAMES E. RISCH, Idaho
EDWARD J. MARKEY, Massachusetts      TIM SCOTT, South Carolina
CORY A. BOOKER, New Jersey           JONI ERNST, Iowa
CHRISTOPHER A. COONS, Delaware       JAMES M. INHOFE, Oklahoma
MAZIE HIRONO, Hawaii                 TODD YOUNG, Indiana
TAMMY DUCKWORTH, Illinois            JOHN KENNEDY, Louisiana
JACKY ROSEN, Nevada                  JOSH HAWLEY, Missouri
JOHN HICKENLOOPER, Colorado          ROGER MARSHALL, Kansas
                 Sean Moore, Democratic Staff Director
              William Henderson, Republican Staff Director
                            
                            
                            C O N T E N T S

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                                                                   Page

                           OPENING STATEMENTS

Cardin, Hon. Benjamin L., Chairman, a U.S. Senator from Maryland.     1
Paul, Hon. Rand, Ranking Member, a U.S. Senator from Kentucky....     3

                                WITNESS

Sanchez Jr., Mr. Francisco, Associate Administrator, Office of 
  Disaster Assistance, U.S. Small Business Administration, 
  Washington, DC.................................................     4

          ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Cardin, Hon. Benjamin L.
    Opening statement............................................     1
Paul, Hon. Rand
    Opening statement............................................     3
Sanchez Jr., Mr. Francisco
    Testimony....................................................     4
    Prepared statement...........................................     6
    Responses to questions submitted by Senator Cantwell and 
      Senator Hirono.............................................    24

 
            OVERSIGHT OF SBA'S OFFICE OF DISASTER ASSISTANCE

                              ----------                             


                        WEDNESDAY, JULY 13, 2022

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:30 p.m., in 
Room 428A, Russell Senate Office Building, Hon. Ben Cardin, 
Chairman of the Committee, presiding.
    Present: Senators Cardin, Shaheen, Booker, Rosen, 
Hickenlooper, Paul, Risch, Scott, Ernst, Inhofe, Hawley, and 
Marshall.

              OPENING STATEMENT OF CHAIRMAN CARDIN

    Chairman Cardin. Good afternoon. The Committee on Small 
Business and Entrepreneurship will come to order. Today the 
Committee will conduct oversight of the SBA's Office of 
Disaster Assistance, which administers the SBA's disaster 
programs.
    The office also implements the COVID EIDL program that 
Congress created to support small businesses through the 
pandemic. Over the last two years, the SBA's attention has 
largely been focused on supporting small businesses through the 
pandemic. EIDL has provided loans to nearly four million 
businesses and served as a lifeline when credit was not 
available from other sources. It was critically important 
during this pandemic and it worked.
    While the program has had its share of problems, including 
widespread fraud in the early month of the pandemic and poor 
communications with applicants, particularly during the 
program's final months, its importance for small businesses 
cannot be overstated.
    This hearing is an opportunity to discuss the Office of 
Disaster Assistance's traditional role, which is to help 
communities rebuild in the wake of natural disasters. Due to 
the effects of climate change, natural disasters are becoming 
more dangerous, deadly, and frequent in every part of this 
nation. In the Southern states, what used to be once-in-a-
century hurricanes and tornadoes are devastating communities 
and causing billions of dollars' worth of damage every few 
years. In Western states, there have been life-threatening heat 
waves, crop-killing droughts, and historic wildfire seasons in 
just the last three years. And in my home state of Maryland, in 
a single town, historic Ellicott City suffered two devastating 
flash floods in two years.
    So as we discuss the Office of Disaster Assistance's 
procedures this afternoon we must keep in mind that the SBA's 
disaster loans to families and businesses will continue to be 
among the most important Federal resources available in the 
wake of a disaster. The faster communities can access capital 
after natural disasters, the more quickly they can return to 
their homes and reopen their businesses. For homeowners, faster 
loan processing times reduces the destabilizing effects of 
natural disasters that may prevent parents from going to work 
and keep kids out of school. For small businesses, how quickly 
they receive a disaster loan could be the difference between a 
swift reopening or closing their doors for good.
    Small businesses, we know, are the growth engine of our 
economy. We know that is where we create jobs. But they do not 
have the same resiliency and the same deep pockets that larger 
companies have. So when a natural disaster occurs, they are 
much more vulnerable of not being able to make it through that 
disaster. Moreover, acting quickly to get families back into 
their homes and to reopened shutters businesses help 
reestablish a state of normalcy for communities and can prevent 
them from splintering.
    The SBA, and the Office of Disaster Assistance more 
specifically, must do all it can to improve the disaster 
response to provide as much support as possible to communities 
in light of the increased dangers created by climate change.
    I was a member of this Committee when the SBA made several 
improvements to a system to shorten loan processing times 
following Hurricane Sandy almost a decade ago. Now, as the 
COVID EIDL program continues to wind down, the SBA must 
similarly take the lessons learned from the pandemic to make 
even more improvements. And that is the role of this Committee, 
to oversight how the SBA is responding to the experiences 
learned during the pandemic.
    So to Assistant Administrator Sanchez, I am looking forward 
to hearing more about the consolidation of disaster lending 
functions in the Office of Capital Access that was finalized 
last week. I hope this change will address the widespread 
customer service problems that we saw in the COVID EIDL program 
over the last two years. I am also looking forward to hearing 
more about how the SBA intends to further empower resource 
partners and local community organizations to play a central 
role in the aftermath of natural disasters.
    The Maryland SBDC was an invaluable asset to small 
businesses in historical Ellicott City following the floods in 
2016 and 2018. I was there, and I saw their work, and I saw how 
they literally saved small businesses.
    In addition to working with resource partners to help small 
businesses recover after a disaster, the SBA should leverage 
these organizations' regional knowledge and relationships to 
better prepare small business owners before a natural disaster. 
For example, the SBA should use the SBDC's SCORE chapters and 
Women's Business Centers to help small business owners create 
business continuity plans that will make it easier to reopen 
following a disaster.
    Mr. Sanchez, I want to thank you once again for joining us 
today. Oversight is one of the most critical functions of this 
Committee so I am looking forward to a frank discussion about 
how the SBA and the Office of Disaster Assistance intends to 
support our communities in the years ahead.
    And with that let me yield to the distinguished Ranking 
Member, Senator Paul.

               OPENING STATEMENT OF SENATOR PAUL

    Senator Paul. This past December, violent storms swept 
across my state. The tornadoes took the lives of 88 and injured 
hundreds more across several other states. The damage was 
immense. In the days following the storms I met with local 
officials across western Kentucky to help them secure the 
resources they needed to clear debris and rebuild.
    It is understandable that government has a role in natural 
disaster recovery. However, I think Congress made a mistake by 
expanding the scope of the Office of Disaster Assistance. That 
office, already tasked with helping rebuild after natural 
disasters, had plenty of responsibilities without also having 
to clean up manmade economic disasters like the ineffective and 
authoritarian COVID lockdowns.
    Last week, the Small Business Administrator's inspector 
general released a report detailing gross mismanagement of the 
Shuttered Venue Operator's Grant Program. For example, the IG 
found that the SBA knowingly chose a riskier method of 
distributing funds. Rather than doling out money at intervals, 
designed to ensure appropriate use of taxpayer dollars, the SBA 
shelled the money out in one large sum. As a result, SBA was 
unable to check if grantees spent the awards on permissible 
expenditures.
    The IG report also detailed how the allocated funds were 
without government authorization and documentation. In the ten 
awards reviewed by the inspector general, none had the proper 
authorization. This stunning absence of safeguards resulted in 
over $33 million in unauthorized commitments, that we know of. 
The IG report found that as much as $9.7 billion could have 
been disbursed without proper government authorization.
    Perhaps most shockingly, in some instances the Offices of 
Disaster Assistance gave applicants more money than they 
requested. Of the ten awards received, the IG found that three 
recipients were awarded more than they asked for, to the 
cumulative tune of $2.6 million. It seems Milton Friedman's 
prophetic statement that ``Nobody spends somebody else's money 
as carefully as his own'' is applicable.
    To adequately address these concerns, my staff requested 
that the Committee invite Inspector General Mike Ware to 
testify today, but unfortunately that request was declined. 
Nevertheless, we should not be deterred from addressing the 
major problems that the IG identified. I hope the Chairman will 
commit to ensure that the SBA is a responsible steward of 
taxpayer dollars.
    Chairman Cardin. Let me thank Senator Paul. As our staffs 
have talked about, I do think it is important to have the IG 
here, and we intend to invite the IG to the Committee for a 
hearing to deal with the broader issues coming out of the 
different programs administered by the SBA. But today's hearing 
is going to focus primarily on the reorganization and how SBA 
is handling the Office of Disaster Assistance.
    And we are pleased to have with us today the Associate 
Administrator of the Office of Disaster Assistance for Small 
Business Administration, Francisco Sanchez. He took this 
position in January of 2022, but he comes to us from 
experiences in local government. He was the Deputy Homeland 
Security and Emergency Management Coordinator for Harris County 
Office of Homeland Security and Emergency Management, leading 
strategic development planning, public affairs, and community 
preparedness initiatives for Texas's largest county.
    Mr. Sanchez, it is a pleasure to have you before the 
Committee. You may proceed. Your full statement will be made 
part of our record.

STATEMENT OF FRANCISCO SANCHEZ, ASSOCIATE ADMINISTRATOR, OFFICE 
   OF DISASTER ASSISTANCE, U.S. SMALL BUSINESS ADMINISTRATION

    Mr. Sanchez. Good afternoon, Chairman Cardin, Ranking 
Member Paul, and distinguished members of the Committee. Thank 
you for the invitation to be here.
    This week marks six months leading the Office of Disaster 
Assistance, Office of Disaster Assistance, at the U.S. Small 
Business Administration. Disaster recovery is one of the most 
important functions of our work. We provide financial 
assistance so communities can rebuild, recover, and now to be 
more resilient.
    SBA knows that we must do more to better leverage its 
programs and resources to help small businesses in the face of 
increasingly frequent and catastrophic disasters. I am proud to 
be one of the architects that is optimizing the disaster 
program. By shifting the direct disaster lending to the Office 
of Capital Access, it improves customer service and elevates 
our investments in preparedness, resilience, and recovery.
    My experience has been formed by nearly two decades in 
disaster response and putting communities back together. Prior 
to joining SBA, as you mentioned, Chairman, I served as the 
Deputy Homeland Security Emergency Management Coordinator. 
Harris County is 1,777 square miles, serving five million 
residents, including the city of Houston. I had the honor to 
serve on command staff for four of our nation's ten most 
devastating natural disasters. My experience in times of crisis 
informs how we are now leading recovery from the ground up and 
across the SBA and the Federal family.
    A priority of the Biden-Harris administration and 
Administrator Guzman is to improve the effectiveness of helping 
businesses, homeowners, renters, and private nonprofits for all 
hazards. In my short time at the SBA I have learned that we 
have a great asset, an incredible team that is up for that 
task.
    From helping open the Astrodome during Hurricane Katrina 
and welcoming more than 200,000 evacuees to being at the helm 
during Hurricane Harvey, which now ties Katrina as the 
costliest tropical storm on record, I have looked in the faces 
of people going through their worst, and on their worst days we 
must be at our best.
    This is not just a professional obligation. To me, 
response, recovery, and resilience has a deep personal 
connection. In 1983, at the age of 11, Hurricane Alicia struck 
the Texas coast. It spared my family but that name was retired. 
During Tropical Storm Allison in 1989, my mom stood watch as 
the water swelled out of the bayou, swept up our street, and 
letting out a sigh of relief as it retreated from the front 
door. Hours later, we felt under our feet the dark water seep 
up from the floorboards, and Allison too was a name that was 
retired.
    During Hurricane Ike in 2008, I was working in our 
Emergency Operations Center, feeling helpless as my childhood 
home flooded again, this time a total loss. With the help of 
Federal programs we helped my mom rebuild, including elevating 
her home. The storm hit on September of 2008, and my mom would 
not be able to move back in until September of 2012, a rough 
road of four long years. That storm name, too, was retired.
    During Hurricane Harvey in 2018, I worked around the clock 
in our Emergency Operations Center responding to 50 inches of 
rain. That is 9 trillion gallons of water. My mom was 
responding too. Her resilient home was an island of refuge as 
dozens of neighbors and friends escaped the several feet of 
water that drowned the neighborhood. But my mom and her home 
were safe.
    Recovery tied to resilience works. Each of those storm 
names have been retired, but the remnants and the havoc they 
wreaked remain. Disaster are a continuum, and we are reshaping 
our work to respond accordingly.
    The year 2021 marks the sixth consecutive year in which ten 
or more billion-dollar disasters have struck the United States. 
Today we are on the ground across 11 states and 25 primary 
counties, responding to three presidentially declared 
disasters, four agency declarations, and five governor 
certifications. We are only at the start of the 2022 hurricane 
season but already have three named storms.
    We are responding to the challenges we face today in 
reshaping to be nimble, scalable, and flexible for the 
disasters on the horizon. In short, we are ready.
    My thanks to this Committee for your support of our mission 
and for your dedication to help disaster survivors. I look 
forward to our continued work together to build resilient small 
businesses so our local economies can thrive and people can 
prosper.
    And again, thank you for the invitation, Mr. Chairman.
    [The prepared statement of Mr. Sanchez follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Cardin. Well thank you, Mr. Sanchez. I appreciate 
your testimony and your service.
    I want to drill down a little bit more on your comments 
indicating that the reorganization under the Office of Access 
to Capital is going to, you say, make the services more 
friendly to those who are relying upon disaster relief help. I 
would like you to explain how you see the improved services to 
the people in need and what lessons we learned from the 
pandemic that we can use to improve the services during a 
disaster, whether it be a natural disaster or whether it be a 
pandemic.
    Mr. Sanchez. Thank you, Mr. Chairman, for that question. It 
right person, right job, and it is, in part, implementing some 
of the lessons that we learned from COVID--technology, building 
capacity, surge, putting those protocols in place to be able to 
detect and deter fraud and respond to that.
    The Office of Capital Access is the home to the lending 
programs of SBA, so the expertise is already there. We will see 
efficiencies, improved technologies for improved customer 
service. What that allows the Office of Disaster Assistance to 
do is to focus on the very critical piece of connecting 
disaster survivors with that streamlined and improved disaster 
lending process.
    Chairman Cardin. Because, yeah, particularly during the 
pandemic there were concerns on how the programs were being 
administered. I understand the Office of Capital Access has 
direct lending services to your customers. So I do think you 
need to assure that the service levels meet the needs. During a 
disaster it is critically important to be on the ground 
immediately, have your personnel on the ground immediately at 
the site. The businesses cannot seek you out. They are trying 
to board up their properties and figuring out what they have to 
do in order to stay afloat. You need to be where they are.
    Is that the intent that you will be able to provide that 
type of on-ground services during a natural disaster? Actually, 
before it even starts you need to be on the ground.
    Mr. Sanchez. Senator, that is exactly the intent, to meet 
the customer where they are. Part of that improvement is we can 
be on the ground quicker. We can meet with those, as you 
mentioned, those local resource partners, SCORE, and those 
programs, to ensure that we are tailoring our response in a way 
that is reflective of that community's needs, and we can stay 
longer, focused on that mission of being on the ground to 
ensure that long-term recovery, that we are part of that and in 
sync with those local priorities.
    Chairman Cardin. So how do you coordinate the work that you 
do with your resource partners with the SBDCs and the Women's 
Business Centers, or with the other community organizations, 
such as the CDFIs, or, quite frankly, with the other Federal 
agencies that are involved during a natural disaster such as 
FEMA and HUD? How do you coordinate the different players that 
are there to help someone, a business or homeowner, during a 
disaster?
    Mr. Sanchez. By its very definition, a disaster means that 
local resources are overwhelmed. Not even a Federal agency can 
tackle that altogether. So that is why those relationships are 
critically important.
    In every opportunity that I have had to be on the ground I 
had visited with our local partners, our Business Development 
Centers, our Women Entrepreneur Centers, local Chambers of 
Commerce, to see how we can leverage those relationships. We 
work across the board with FEMA, HUD, and other agencies to 
make sure we are lockstep moving forward and being nimble and 
scalable to tailor our response from the ground up to meet 
those needs.
    Chairman Cardin. Well, I want to follow up, not necessarily 
right now, as to how we make sure that we have that type of 
coordination and how this reorganization with the SBA will 
assist. You are the lead in some areas, in some you are not, 
but you all have to be working in a coordinated way during 
these stressful times.
    I want to get to one other subject, and that is the pre-
disaster planning, to have plans in place to use resources to 
help particularly small businesses develop a pre-disaster 
strategy and plan. We have allowed the use of resources for 
this purpose. Tell me how you intend to carry out that role of 
your responsibilities.
    Mr. Sanchez. Yes, Senator. That is exactly the part of the 
new mission is to making sure that we lean in ahead of the 
disaster as we have folks on the ground working with our field 
office, working with our local resource partners, that we take 
those plans, at the high level, but then tailor them to meet 
the unique needs of that community, not just now, well in 
advance of a disaster, but as we are landing on the ground, 
making sure we tweak those to be responsive in the moment, and 
we are going to move forward as we do that, make that part of 
the planning process, make that the institutional way to 
respond, and build out that culture.
    Chairman Cardin. Thank you. Senator Marshall.
    Senator Marshall. Thank you, Chairman. Administrator 
Sanchez, welcome, and thank you for coming here this afternoon. 
Kind of a follow-up question that the Chairman was getting at 
as well.
    Kansas does not have a huge hurricane with billions of 
dollars of damage. Typically we have lots of small disasters. 
That is a tornado impacting a town, you know, two or three 
different times a year, and then we have had our share of 
wildfires as well. While the disaster office has been there for 
each of our events, they are at an incredibly slow pace. For 
example, fires in Hutchinson, Kansas, on March 9th, the SBA 
Resource Center was not set up until April 28th, seven weeks 
later. Constituents struggle to wait seven weeks for that 
assistance.
    Why would there be substantial delays? What would you feel 
is success? How do you measure success? What would be your goal 
in your response team getting to a disaster?
    Mr. Sanchez. Sure. Thank you, Senator. I will address, in 
part, what the SBA challenge is and how we tie it to the larger 
picture. Typically, for loan processing, it is about five days, 
and then disbursement of first funds is--I am sorry. Loan 
processing is about eight days for homeowners, five days for 
the actual disbursement.
    We come in on the ground after there has been a disaster 
declaration at the state. We are working with our state 
partners to educate about how we meet the threshold to try to 
expedite that process so that we can be on the ground quicker 
as well.
    Senator Marshall. What about the time to be on the ground, 
from the time the disaster occurs? How do you measure that and 
what would you think? Like seven weeks just seems too long to 
me.
    Mr. Sanchez. Yeah, Senator. That was seven weeks from the 
time of the disaster. What we have to wait for to actually open 
the lending process is for the disaster declaration to be 
cleared, requested by the state, and then we can be on the 
ground. We are working with our partners to educate how we can 
expedite that for our states. But once we get that trigger we 
can be on the ground within 48 to 72 hours.
    Senator Marshall. So your goal would be once the state 
declares a disaster is to have presence there in two to three 
working days.
    Mr. Sanchez. Yes, sir. Once that comes to us we sign it and 
we are on the ground.
    Senator Marshall. Okay. Again, kind of along the same line 
of questioning, for those wildfires it appears that our staff 
had to do most of, I am going to call it marketing, letting 
them know what the SBA could and could not do, how they could 
help. What can you do to better improve your communication to 
those small businesses that you are there to help them? What 
are the opportunities for improvement there?
    Mr. Sanchez. I think as the Chairman mentioned, reaching in 
to SCORE and those local district offices to see how we can 
tailor that for that specific community, and I have a 
commitment to work with our officials from those states and 
local officials to see--you are where the expertise is on the 
ground. How do we leverage our knowledge to those local 
communities? What community should we be in? What does that 
message need to look like? We want to increase access of those 
programs. It is an under-told story so we want to partner with 
that when we are on the ground with local officials and local 
expertise to make the most impact.
    Senator Marshall. Okay. Thank you so much. I yield back.
    Chairman Cardin. Senator Shaheen.
    Senator Shaheen. Thank you, Mr. Chairman, and Mr. Sanchez, 
thank you for being here and for your ongoing efforts.
    I want to begin with a statement that I know is not 
directly under what this hearing is about and what we are 
working on today, in terms of disaster assistance, but I would 
be remiss if I did not ask you to take back to SBA the 
frustration that we still hear in New Hampshire from small 
businesses who were in the queue for EIDL loans and the program 
was so precipitously discontinued. Business owners are still 
very frustrated by that, and it left a very bad taste for 
people who were counting on the SBA to help them through the 
pandemic.
    So again, I appreciate this is not under your purview but I 
do think it is a message that the SBA needs to hear, and 
hopefully that as we look at lessons learned we will be looking 
at what we can do better in those kinds of situations.
    One of the things that has been really important in New 
Hampshire has been our district office in sharing with small 
businesses what help is available through the SBA. They have 
really done great outreach, and I know that, or at least as I 
understand under this reorganization you are looking at ODA to 
be that office that does outreach and education.
    So can you talk about how you see that continuing to work 
with the district offices and what resources you think district 
offices are going to continue to need in order to do their 
piece of outreach and information to small business?
    Mr. Sanchez. Sure. First, Senator, I will gladly take back 
that message, and I will assure you, from the Office of 
Disaster Assistance for those lessons that were had during 
COVID, while they may have not been in the Office of Disaster 
Assistance we are going to take those lessons and make sure 
that we can apply them across the board to our mission, to 
improve the customer experience.
    In terms of our district offices, they are so incredibly 
connected in those communities. They know how that community 
works. They know where their Economic Development Agencies are 
and those Chambers.
    We are in communication constantly about how we can partner 
up with that local expertise. From us, bring the resources that 
we can bring to bear for that lending capacity and connecting 
people with programs. But they are also critical for us to 
deliver after a disaster not just lending but connecting them 
to the resources that are already provided by the SBA across 
the board, to bring those to disaster survivors. So not only 
have we provided lending but those resources so they can 
continue to thrive and be more resilient, and tackle that from 
the whole SBA angle.
    Senator Shaheen. Well, I am really glad to hear that. I 
know there is a proposal through SBA to reduce pretty 
significantly the operating budgets of district offices. So I 
hope, again, that you will take back just how important it is 
in New Hampshire--and I am sure it is true of the other states 
that members represent here--the work that gets done.
    My next question is really a more overarching one for the 
long term, and that is how are we going to continue to address 
disaster assistance given the increasing costs each year from 
climate change and other aspects of disasters that we are 
seeing? Because I do not think that we are going to be able to 
continue to do it in the same way that we have, and so we have 
got to take a different approach. I appreciate that this 
reorganization may be one effort to take a look at that, but I 
think we are going to have to be much more visionary about how 
we think about this in the future.
    Mr. Sanchez. Senator, it is something I am passionate about 
from a local perspective. I come from a region where we now 
average a presidentially declared disaster every nine months, 
and that does not even include Harris County, Houston, Texas. 
And so along the Gulf Coast, and it does not even include the 
SBA declarations yet or the other smaller disasters.
    And let me sort of paint, if I can, the landscape.
    Senator Shaheen. Great.
    Mr. Sanchez. SBA is often the first and only on the ground, 
as we do not meet those other thresholds, and we are there more 
often. Since 2000, for example, there have only been four years 
in which there were more presidentially declared disasters than 
there were SBA disasters. So not only are we often the first 
and only, the only Federal agency to the scale that we do to do 
homeowners and renters, private nonprofits, and businesses. So 
we have to scale up, so we have got teams that can get ready to 
surge and meet those disasters this hurricane season and 
wildfire season.
    We need to be flexible, and we need to be nimble. And we 
need to work within the authorities that we have to be able to 
adapt to need. But the pace is incredible, and we have got some 
work ahead.
    Senator Shaheen. If I can ask one more question, Mr. 
Chairman, one of the things that we looked at when we were 
working on bipartisan infrastructure package last year was how 
to put in funding for resilience. And you talked about your 
mother's home and building it back more resilient than it was 
originally.
    But how do we incorporate that in ways that are within 
existing law, for example? One of the things I found 
particularly frustrating when I first got to the Senate was the 
fact that under our FEMA requirements you had to build back 
exactly the way it was before, and it took a long time for us 
to get that changed.
    But resilience has got to be part of what we are doing now. 
We have got to be looking at prevention as much as we are 
looking at restoration after a disaster has occurred. So how do 
you think about that in terms of SBA?
    Mr. Sanchez. Sure. From my perspective, from every cycle of 
emergency management, preparedness, response, recovery, and 
mitigation, two elements. One is on the mitigation piece. Once 
you get a disaster loan, you get 20 percent on top of that to 
mitigate in a way that you build more resilient to the disaster 
you were impacted, we need to explore making mitigation 
available at the front end as well instead of having to wait 
for businesses or homeowners to be impacted.
    The other piece is a cultural shift in recognizing that 
that problem is real, that it is here, and we need to adapt, 
and we have got some catching up to do. And what I have heard 
from small businesses across the country is they want to tackle 
it but they are busy trying to keep the lights on and keeping 
the open sign there.
    So what we can do, and will be doing, is providing, at the 
front end, accessible information on how they can be resilient, 
from simple steps to the more robust steps, how climate change 
may affect those regions. And so they have that bandwidth and 
knowledge and make it easily accessible so we can digest that 
for them and make it something they can take action on, and do 
that homework for them and be a good resource.
    Senator Shaheen. Thank you. Thank you, Mr. Chairman.
    Chairman Cardin. Senator Inhofe.
    Senator Inhofe. Thank you, Mr. Chairman. I do have a 
couple--one is not a question but it is a request for 
assistance in a problem that we are having, that you probably 
are not aware of but maybe you are. I do not know. When 
disasters happen, states can request a FEMA disaster 
declaration or SBA disaster declaration to help with the 
rebuilding process. Unfortunately, the Oklahoma Office of 
Emergency Management in my state has been told by your SBA 
regional counterparts, for a number of years now, that if a 
state is denied a FEMA declaration they forfeit the ability to 
subsequently apply for SBA declaration in order to receive 
assistance.
    Now I know that some people have denied this, and 
headquarters says that this is not the case, and that states 
can apply for an SBA declaration.
    Now this is a discrepancy that is repeated several times, 
and the request I would like to have from you, Mr. Sanchez, we 
need your commitment to resolve this issue. We have had this 
for a long period of time. We get some inconsistencies with 
this. And to do this it would be necessary, I think, to follow 
up with both my office and your Office of Emergency Management 
to correct this.
    Can I depend on you to help us in this effort?
    Mr. Sanchez. Yes, Senator.
    Senator Inhofe. To personally become involved in?
    Mr. Sanchez. Yes, sir. Not only that, Senator, I am working 
on it already. You know, Oklahoma is a neighbor of where I come 
from in Texas.
    Senator Inhofe. Sure. Sure.
    Mr. Sanchez. I called this morning to Mark Gower, who is 
the Director for the state Office of Emergency Management in 
Oklahoma. You can apply for an SBA disaster declaration if you 
are denied by FEMA. I think there is confusion as to whether 
you can launch SBA prior to FEMA, and so we are going to work 
through that. And I am glad to keep your office informed and 
work directly with Oklahoma to make sure we can be as flexible 
and nimble as we can be to get those programs on the ground.
    Senator Inhofe. Well, I know you can do it. And by the way, 
I am very familiar. In the real world I was a builder and 
developer, mostly in South Texas, and I know how things worked. 
And I have worked with your department over a period of time.
    So if we could do that, if you could do that and give that 
commitment to us, that would make our lives a lot easier.
    We have a lot of natural disasters, as you know--tornadoes, 
wildfires, and other problems. The SBA is currently working 
with FEMA to respond to recent flooding in Seminole, Oklahoma. 
These disasters have a unique impact on rural communities, and 
we are a rural state, so when we have rural problems we feel it 
a little bit more than a lot of others do. They have a unique 
impact on the communities where they can easily wipe out the 
livelihoods of Oklahomans involved in farming and ranching.
    So is there something that you could share with us today 
that I could take back that you are doing to ensure the 
individuals in rural communities are able to access SBA 
disaster resources?
    Mr. Sanchez. Senator, thank you for asking that because 
that hits close to home for me. I was both in deep South Texas, 
rural Texas.
    Senator Inhofe. Where?
    Mr. Sanchez. Brownsville. Two miles more south and it would 
have been Matamoros. Mercy Hospital.
    Senator Inhofe. I am totally familiar with that, South 
Padre Island and then all the way up to--well, halfway up the 
state.
    Mr. Sanchez. It is. My grandfather actually owned about a 
20-acre ranch, Los Palmitos. So he was a rancher as well and 
did some crops there. So I get rural. It is actually a focus of 
mine.
    I have reached out--and that is part of making sure we meet 
the customer where they are at. We have had some rural 
communities hit, and my instruction to the team is get on the 
ground, talk to local officials, let us get out there, in less 
time than necessary. I have spoken to county executives 
directly myself that have 7,000 or less population, 17,000 or 
less population. It is a focus of mine. And if there are 
lessons to be learned or ways that we could improve, not only 
am I open to it, it is something that I am highly focused on 
personally.
    Senator Inhofe. Good. That is all I could ask, and I look 
forward to great results. Thank you.
    Mr. Sanchez. Thank you, Senator.
    Chairman Cardin. Senator Hickenlooper.
    Senator Hickenlooper. Thank you, Chair Cardin, and thank 
you for your service and for appearing here.
    First, thank you for taking into consideration the 
suggestion that my colleague, Senator Bennet, Representative 
Neguse, and myself all made in terms of the Marshall Fire, the 
letter we sent in March. I think modernizing how the SBA 
calculates building costs is an important first step, as 
Coloradans figure out how they are going to rebuild after that 
horrendous fire. But I think we also need to update the 
borrowing limits to reflect the median value of a house, that 
has more than doubled in the 28 years since the last time we 
had a reset.
    So how do you think the SBA should, and how well the SBA 
update their disaster loan assistance home and personal 
property loan maximums to account for this roughly 30 years of 
consistent inflation?
    Mr. Sanchez. Senator, that is an excellent point in terms 
of the lending limits. The last time we looked at it, it was 
1990. I was graduating high school. It is time for us to look 
at those numbers, and we are looking at that. And my hope is 
that in the next few weeks we will have some news to you from 
the Office of Capital Access and our joint work together about 
how they are going to tackle that, because we have got an 
approach that is being put together and we are going to be 
responsive to that.
    And I was very pleased to be able to visit with Mayor 
Stolzmann and local officials there in the Marshall Fire to see 
how we could use existing rules to be adaptive, and we will 
continue to do that.
    Senator Hickenlooper. Great. I appreciate that.
    The chaos and damage that follows disasters often 
exacerbate the existing obstacles for traditionally underserved 
communities in their efforts to try and access capital. What is 
the SBA doing, and what could it be doing more to ensure that 
individuals who may otherwise struggle to secure affordable 
credit have the opportunity to use these disaster relief loan 
programs?
    Mr. Sanchez. Senator, we recently launched an equity action 
plan to tackle issues like that, and fortunately the great team 
in place before I came on board was wrapping that up. But one 
is access to capital, making sure that we meet the customer 
where they are. So whether it is a language issue or economic 
issue, that we are meeting them where they are and explaining 
those programs. It is, in the end, a lending program, so people 
have to go through a complex financial process, so we are 
trying to streamline that and improve that.
    In the meantime, and even more so, my approach is if you 
come to the SBA and ask for assistance, and if we cannot quite 
get to a yes yet, what other programs within SBA can we bring 
to the table and leverage, and navigate our local resources to 
connect them with everything else in the community and Federal 
programs? So that really unified approach is something that we 
are looking at to bring that to the ground.
    Senator Hickenlooper. Interesting. And this is a little bit 
more out on getting out on the edge. We, obviously, in 
Colorado, we feel that we are on the front lines of climate 
change and the climate crisis. We are seeing--I do not think 
you could call it a drought anymore. It is aridification or 
desertification. It is the consistently drying of our 
precipitation patterns, which has led to more and more, worse 
and worse wildfires.
    What is the SBA doing to ensure that the 7(a), the 504, 
other lending programs are being used by small businesses, 
taking into account resilience, you know, the resilience for 
disasters but also preparedness to help mitigate what we know 
is coming in the form of climate change?
    Mr. Sanchez. Senator, in the past two years I believe we 
have had 400-plus drought declarations in this country, and 
Colorado is ground zero for some of those, and parts of the 
Western United States. Working with my colleagues across SBA 
that oversee those programs, to see how we can leverage that. 
And again, it is really bringing the whole of SBA. We cannot 
look at disasters in that narrow scope anymore. What can we do 
to build resilience? How do we incentivize that across other 
programs so that, quite frankly, those businesses and homes can 
withstand the next disaster and recover quicker? So that is a 
priority.
    Senator Hickenlooper. Yeah, and I think obviously that is 
something you are still figuring out and we are all still 
figuring out, is how to look at this new reality.
    Anyway, thank you for all your work and taking on such a 
challenging but very important job.
    Mr. Sanchez. Thank you.
    Senator Hickenlooper. I yield back to the Chair.
    Chairman Cardin. Thank you. Mr. Sanchez, my experience 
during the disaster and the flooding in Ellicott City, 
Maryland, was a positive experience with the SBA, the Federal 
agencies, the local agencies. It was, I would compare it to a 
one-stop shop. They were there. And yes, we went through a 
declaration, but we had resources out before the declaration as 
far as advising the business owners, property owners what they 
were likely to need to be able to do.
    So my question is, as you are now reorganizing, are there 
discussions taking place to make sure that we have a seamless 
system of applying for Federal help? The process might be 
different at FEMA and HUD than it is at SBA. But are you 
coordinating that to make it easier for the customer to be able 
to not be bounced from one line to another but that can take 
care of all of their inquiries and applications in one 
location?
    Mr. Sanchez. Senator, I am glad you bring up sort of the 
difference between the lending program and also how it rolls 
out on the ground. I am the first non-banker to be in this 
position, so I come from the perspective of a local official 
that has been repeatedly hit with disasters. How do we improve 
that customer experience? And I know collaboration is the key 
to that.
    We are working with FEMA, HUD, and our Federal partners to 
work on what does the sequence look like, how can we collapse 
it or be adaptable to make those resources, all of those 
resources, available in a one-stop shop as much as possible.
    Already we are removing barriers. We had a pilot program on 
the threshold, so there would be less bouncing around between 
FEMA and SBA. We have now implemented that for hurricane 
season. So that is just one step and that is already in effect, 
and we are going to continue to explore how we do that better.
    Chairman Cardin. The SBA already allows the borrower to use 
a certain amount of their loan for future mitigation. Are they 
doing that? Is that program well understood by the customer, 
that they are permitted to do mitigation with a certain amount 
of their loans?
    Mr. Sanchez. We are actually increasing right now. We have 
had, in my short time here, going on two or more educational 
opportunities for our lenders on the ground so they can explain 
that program better. It is, I think, an underutilized program, 
so we are going to continue to champion that, and even go back 
to existing disasters. You have two years to apply for that 
after you get the loan, so we are even going to go back and 
reach out to the folks that are already accessing the program, 
to remind them about that opportunity.
    Chairman Cardin. I appreciate you keeping us informed as to 
whether there are additional authorities that you need or 
whether you have adequate authorization. Mitigation is so 
critically important, so we do want that information to get out 
there.
    Senator Rosen.
    Senator Rosen. Oh, thank you. Thank you. I just came from 
presiding. Thank you. I appreciate it. Thank you for holding 
the hearing and for waiting for me to come from the floor. It 
is so important, the disaster assistance that you do for small 
businesses, and I really want to thank you for being with us 
today.
    You know, you know, Senator Cardin is, of course, from 
Maryland, but I am from Nevada, out west, and what do we have 
there but a major, major drought, extreme drought, and extreme 
heat. And so extreme heat and drought really do have effects on 
our small businesses.
    We have experienced historic high heat, high temperatures. 
Reno and Las Vegas are the two fastest-warming cities in the 
country--or two of them, excuse me--and extreme heat events 
have caused hundreds of deaths. They have devastated our small 
businesses and rural communities, who really rely on outdoor 
recreation and that part of the tourism economy.
    Unfortunately, the Federal Stafford Act does not list 
extreme heat as a potential disaster, and therefore FEMA has 
never declared an extreme heat disaster. But given that small 
businesses can only receive SBA disaster assistance if they are 
located in federally declared disaster areas, businesses facing 
the impacts of extreme heat, they are really just left without 
support. Last year, Senator Cornyn and I sent a letter to FEMA 
asking the agency to address extreme heat as a major disaster.
    So, Mr. Sanchez, as FEMA works through its own internal 
process how can SBA work with FEMA? How can you provide more 
resources to our small businesses that are dealing with these 
impacts of extreme heat? And I would also add that, you want to 
include drought in that too because really, it is pretty much 
the same issue.
    Mr. Sanchez. Senator, thank you for that question. You 
know, I come from Houston where we experienced the hottest June 
on record, and there are records like that all over the 
country. I will certainly work with FEMA to see how we are in 
that process and fold that under disaster declaration.
    I had the opportunity actually a few months ago, before I 
even came on board here, to visit with a colleague in Cook 
County--I am sorry. Not Cook County.
    Senator Rosen. Cook County is in Illinois, and Chicago, 
right. Clark County. That is my Clark County.
    Mr. Sanchez. Thank you, Senator. And what they are seeing 
there is heat having a cascading impact, as a community that is 
used to heat but even more that disaster is becoming more 
problematic and more consequential. So it is a local concern 
there, and I do look forward to addressing that. And if that is 
something that is a declared disaster we certainly can bring 
resources to bear to help recover.
    Senator Rosen. Yeah, and like I said, we are trying to work 
with FEMA to get these disasters declared. On top of this, 
because of the extreme heat and extreme drought we have 
wildfires. They are impacting our small businesses, hundreds of 
wildfires each year in Nevada. They threaten lives and 
livelihoods. Of course, they are happening all across the West 
and across the country. But they drive away our tourists with 
wildfire smoke, our poor air quality, and in the case of the 
2018 Martin and Sugarloaf Fires, they burned nearly 1 million 
acres of land.
    And so 80 percent of Nevada, over 80 percent, is federally 
owned or managed in some form, so we all have to coordinate, 
and SBA has a major role to play in terms of stakeholder 
collaboration, because we have Department of Defense, we have 
Department of Energy, we have BLM, et cetera, et cetera.
    So as we enter wildfire season can you discuss your 
outreach to our small businesses that may be in the wildfire 
impact zones, if you will?
    Mr. Sanchez. Sure, Senator. As a former firefighter I get 
the threat that the wildfires face, and particularly in areas 
like the West and in Nevada. Not only are we ready to respond 
to that in bringing resources on the ground, we are trying to 
be innovative. We have got a strategic partner in the Institute 
for Business and Home Safety.
    We recently launched an event in California where we saw 
the Paradise Fire, as an example of launching information of 
how businesses and homeowners can become more resilient and 
prepare for wildfires. So not only responding when it happens 
so we can provide those resources for recovery on the ground, 
working with partners to ensure that they have the preventive 
preparedness information in advance as well.
    Senator Rosen. And then, again, I think this probably would 
take coordination with FEMA or other agencies. But we have 
businesses that are impacted. Maybe they are okay but the road 
is out because of a fire or a flood or a mudslide. A bridge is 
out. Our internet is out because of the wildfires. So these 
businesses have business interruption even though they may not 
be burning down themselves.
    And so can you commit to trying to work with FEMA on how 
you can help the small businesses again that are in this impact 
zone? They are impacted as a result of this fire, drought, or 
heat, but they are not burning down at the moment.
    Mr. Sanchez. Excellent point, Senator, and I am committed 
to that collaboration. I will tell you, we are already doing 
that. I visit with my counterpart at FEMA on a regular basis to 
see what does that local situation look like? We did exactly 
just what you asked in Montana, for the fire in Yellowstone. We 
had businesses that were not impacted but roads and bridges 
were down so tourism was down. So we worked with the state and 
said, hey, were you aware that you can still apply for disaster 
loan for disasters, so they would be able to utilize that.
    And so we are working on those options and we will continue 
to do that, and are doing that now, just through our normal 
course of work.
    Senator Rosen. Thank you. I appreciate it, and really 
getting the word out to our small businesses across the country 
really makes a difference. Thank you.
    Chairman Cardin. Senator Booker.
    Senator Booker. Administrator, so good to have you here----
    Mr. Sanchez. Thank you, Senator.
    Senator Booker [continuing]. And thank you very much for 
your really hard work under difficult [inaudible-off 
microphone] small businesses and the work you are doing is 
important.
    I know from my time as a mayor, when I had a real job, that 
we were really dealing with the impact of disasters. And being 
the mayor during Hurricane Sandy was quite the challenge for my 
community, and I was really proud of how my city, even though 
we had loss of life and tremendous loss of property, I was 
really proud about how we rose to meet that challenge.
    But I learned a lot, because we were still doing recovery 
in New Jersey from Hurricane Sandy a year or two later, when I 
became Senator for the state of New Jersey, and traveling up 
and down with Bob Menendez and seeing a lot of things that just 
do not make sense to me. And that is why I am excited about 
pre-disaster resources, because when people are hit time and 
time again, when I have people telling me stories about, you 
know, back in 1980 we had this happen, or even more recently, 
it is clear that we, as a country, could save taxpayer dollars 
through a lot of our investments.
    So again, the additional loan funds for mitigation, 
property improvements, I really believe are critical and 
something that I really support, investments in natural 
infrastructure. These issues, whether it is fires or flooding, 
are going to get worse and worse and worse, and we have got to 
start acting.
    Each weather event, as you know, typically costs tens of 
billions of dollars in Federal recovery funding. Federal 
spending on disaster recover totals approximately half a 
trillion dollars since 2005. And unfortunately, up to 13 
million people can be displaced.
    So I just would love to hear and better understand how the 
SBA has made these significant pre-disaster mitigation 
investments to help on resiliency, and I was wondering if you 
could describe some of the work in that area and maybe give me 
some more hope that I can talk to a lot of the other mayors 
that are still doing the real work, that we are going to be 
making more investments in helping for resiliency.
    Mr. Sanchez. Excellent question, Senator, because 
mitigation is critical to making sure those businesses and 
homeowners can withstand a disaster but get back on their feet 
quicker, especially in these economic times where it is already 
challenging enough.
    We are adding a new focus and emphasis on that mitigation 
program, so once you have a disaster loan you can add 20 
percent on top of that. But there are opportunities to explore 
the ability to make those lending pre-disaster. So that is 
critically important.
    You talked about Sandy. The number I have off the top of my 
head is about a quarter billion for Ida. In New Jersey I 
believe that is $6 million that folks have utilized for that 
mitigation program, but they have the option to do that up to 
two years later. So if local officials are looking at how do we 
address mitigation, let us work with those individuals to see 
if they want to access that program to build back stronger. And 
for businesses, making sure they know the resources that they 
have available and education, what they can do on their own, in 
addition to what we do, to build that resilience piece, moving 
forward.
    Senator Booker. And so this is one of those times where I 
think the SBA is ahead of other government agencies in having 
this kind of forethought. Are there lessons you are learning 
that other agencies might be able to benefit from?
    Mr. Sanchez. One, from a local perspective, is that is what 
we are bringing to the table in terms of the importance of 
resilience. There is a vast effort in the Biden-Harris 
administration to look at resilience and climate change and 
tackle that. So there are a lot of moving parts.
    I think for us we need to own what is our primary mission 
and deliver everything that we can, and so that is what we are 
doing at the Office of Disaster Assistance. And as we move 
forward with that robust approach for resilience, is really 
doing that in lockstep and in sync with our partners to see how 
we can maximize those impacts.
    Senator Booker. That is very humble of you. It sounds like 
you are saying, ``Cory, I am just going to do my job and keep 
focused on my goals and missions.''
    How about this, a little bit of advice for us? Do you think 
Congress should be making larger investments, given your sort 
of cost benefit analysis, investment return analysis? Do you 
think we should be doing bigger investments in Congress in pre-
disaster mitigation or other things that you think are great 
investments in terms of return, like that pre-disaster money 
might be?
    Mr. Sanchez. Senator, in sheer numbers, for every $1 we 
invest in mitigation there is $6 in return. But I do not think 
we can look at that in a dollar-per-dollar ratio anymore. What 
does that mean for getting kids back in school, people back in 
their jobs, rebuilding those neighborhoods and making sure 
people do not flee those disaster areas? That is absolutely 
critical and not part of the economic equation.
    So for me, as someone that has responded to that many 
disasters, mitigation and resilience is absolutely key to 
making sure people do not even have to recover.
    Senator Booker. Fantastic. Thank you very much, Mr. 
Chairman.
    Chairman Cardin. Thank you.
    Mr. Sanchez, let me thank you very much. The record will 
stay open for two weeks for those who may have questions for 
the record. We ask that you respond as quickly as possible to 
that.
    And thank you for what you are doing. We are very 
interested in being kept informed, as you see hurdles that you 
think we can help you with. As Senator Booker was saying, we 
are very much interested in trying to do pre-disaster 
mitigation. We also are very supportive of using part of the 
disaster loans to mitigate future challenges. So this is all 
part of our priorities, and we look forward to your best advice 
to us how we can work together to achieve those objectives.
    Thank you very much, and with that the hearing will stand 
adjourned.
    Mr. Sanchez. Thank you, Senator.
    [Whereupon, at 3:24 p.m., the Committee was adjourned.]

      

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