[Congressional Record Volume 145, Number 53 (Monday, April 19, 1999)]
[Senate]
[Pages S3825-S3829]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
RED TAPE REDUCTION ACT
Mr. BOND. Mr. President, during the past recess, the third
anniversary of the Small Business Regulatory Enforcement Fairness Act,
better known as the Red Tape Reduction Act, passed on March 29 with
little notice or fanfare.
Let me suggest that while the Red Tape Reduction Act is hardly a
household word, it is well worth commemorating, and it is extremely
important to the small businesses in America who are oppressed by
excessive Government regulation and unthinking regulation imposing
unnecessary burdens on them.
I ask unanimous consent to print in the Record letters of support
that speak to the importance of this law to our Nation's small
businesses.
There being no objection, the letters were ordered to be printed in
the Record, as follows:
National Federation of
Independent Business,
Washington, DC, April 19, 1999.
Hon. Kit Bond,
Chairman, Committee on Small Business, U.S. Senate,
Washington, DC.
Dear Chairman Bond: On behalf of the 600,000 small business
owners of the National Federation of Independent Business
(NFIB), I am writing to join you in commemorating the third
anniversary of the Small Business Regulatory Enforcement
Fairness Act.
For close to 30 years, NFIB has worked with Congress to
secure meaningful regulatory reform for small business. In
1980, the groundwork was laid by the Regulatory Flexibility
Act that requires agencies to measure the impact of their
regulations on small businesses.
Together, with you and other leaders in Congress, we worked
hard to address recommendations from the 1995 White House
Conference on Small Business. In 1996, many of those
recommendations were enacted as part of the Small Business
Regulatory Enforcement Fairness Act. This ``Red Tape
Reduction Act'' gave teeth to the Regulatory Flexibility Act
by making agency decisions under the Act judicially
reviewable and adding even more small business safeguards to
the rulemaking and enforcement functions of government
agencies.
Since passage of the Red Tape Reduction Act, NFIB has been
committed to ensuring successful implementation of the law.
Our small business members have testified on regulatory
enforcement before Regulatory Fairness Boards across the
country. NFIB members also have participated in panels
convened by the U.S. Environmental Protection Agency (EPA)
and the Occupational Safety and Health Administration (OSHA)
to assist in the development of regulatory proposals.
Additionally, we have worked closely with small business
trade groups and the U.S. Small Business Administration's
Office of Advocacy to ensure that agencies consider the
impact on small business prior to regulatory action.
Small business has benefitted from passage of the Red Tape
Reduction Act. For 3 years, small business has been
guaranteed a ``seat at the table'' when government agencies
make regulatory decisions. However, more needs to be done.
Small businesses with 20 to 49 employees continue to spend,
on average, 19 cents out of every dollar on regulatory costs.
The very smallest businesses, with 1 to 4 employees, spend
almost twice as much per employee on regulatory costs than
larger businesses.
Your observance of the Red Tape Reduction Act's anniversary
is timely. Congressional oversight on agency compliance with
the Act is needed now more than ever. Small business, the
employer of over one-half of the private workforce, is in
danger if we rest on our laurels. There continues to be
obstacles in the way of American small business' economic
potential: high taxes, excessive regulations, rising health-
care costs, and frivolous lawsuits.
We commend your leadership in ushering the Red Tape
Reduction Act through Congress and to the President for
signature 3 years ago. Your continued focus on the needs of
small business is honorable, and we remain committed to
helping you address the challenges faced by small and
independent businesses, in America.
Sincerely,
Dan Danner,
Vice President.
____
Small Business Legislative Council,
Washington, DC, March 24, 1999.
Hon. Kit Bond,
Chairman, Committee on Small Business, U.S. Senate,
Washington, DC.
Dear Mr. Chairman: On behalf of the Small Business
Legislative Council (SBLC) I would like to congratulate you
on the third anniversary of your ``red tape reduction'' law,
the Small Business Regulatory Enforcement Fairness Act
(SBREFA). Personally, I believe it is one of the most
important small business laws of all time. We cannot say
thank you enough.
Only now is everybody, including the agencies, beginning to
fully appreciate the value of SBREFA. We must continue the
momentum created by SBREFA. At your recent roundtable, we
offered several suggestions on how we can make a good thing
better, such as including the IRS under the Review Panel
provisions.
The SBLC is a permanent, independent coalition of eighty
trade and professional associations that share a common
commitment to the future of small business. Our members
represent the interests of small businesses in such diverse
economic sectors as manufacturing, retailing, distribution,
professional and technical services, construction,
transportation, tourism and agriculture. For your
information, a list of our members is enclosed.
You have built a small business record to be proud of.
SBREFA is an important cornerstone. As you know, we are avid
supporters of your efforts. As always, we look forward to
working with you on behalf of small business.
Congratulations!
Sincerely,
John C. Satagaj,
President and General Counsel.
members of small business legislative council
ACIL
Air Conditioning Contractors of America
Alliance for Affordable Services
Alliance for American Innovation
Alliance of Independent Store Owners and Professionals
American Animal Hospital Association
American Association of Equine Practitioners
American Bus Association
American Consulting Engineers Council
American Machine Tool Distributors Association
American Nursery and Landscape Association
American Road & Transportation Builders Association
American Society of Interior Designers
American Society of Travel Agents, Inc.
American Subcontractors Association
American Textile Machinery Association
American Trucking Associations, Inc.
Architectural Precast Association
Associated Equipment Distributors
Associated Landscape Contractors of America
Association of Small Business Development Centers
Association of Sales and Marketing Companies
Automotive Recyclers Association
Automotive Service Association
Bowling Proprietors Association of America
Building Service Contractors Association International
Business Advertising Council
CBA
Council of Fleet Specialists
Council of Growing Companies
Direct Selling Association
Electronics Representatives Association
Florists' Transworld Delivery Association
Health Industry Representatives Association
Helicopter Association International
Independent Bankers Association of America
Independent Medical Distributors Association
International Association of Refrigerated Warehouses
International Formalwear Association
International Franchise Association
Machinery Dealers National Association
Mail Advertising Service Association
Manufacturers Agents for the Food Service Industry
Manufacturers Agents National Association
Manufacturers Representatives of America, Inc.
National Association for the Self-Employed
National Association of Home Builders
National Association of Plumbing-Heating-Cooling Contractors
National Association of Realtors
National Association of RV Parks and Campgrounds
National Association of Small Business Investment Companies
National Association of the Remodeling Industry
National Chimney Sweep Guild
National Community Pharmacists Association
National Electrical Contractors Association
National Electrical Manufacturers Representatives Association
National Funeral Directors Association, Inc.
National Lumber & Building Material Dealers Association
National Moving and Storage Association
National Ornamental & Miscellaneous Metals Association
National Paperbox Association
National Society of Accountants
National Tooling and Machining Association
National Tour Association
National Wood Flooring Association
Organization for the Promotion and Advancement of Small
Telephone Companies
Petroleum Marketers Association of America
Printing Industries of America, Inc.
Professional Lawn Care Association of America
Promotional Products Association International
The Retailer's Bakery Association
Saturation Mailers Coalition
Small Business Council of America, Inc.
[[Page S3826]]
Small Business Exporters Association
Small Business Technology Coalition
SMC Business Councils
Society of American Florists
Turfgrass Producers International
Tire Association of North America
United Motorcoach Association
____
Med America Dental and
Hearing Center,
Mt. Vernon, MI, USA.
Dear Senator Bond: Three years ago, the SBREFA bill you
authored became law. This was a good bill that became good
law. The goal was to cause a sea change in how federal
regulatory agencies did business. A change from:
They being the good guys and small business being the bad
guys
They being the cops and us the crooks
Enforcing compliance by coercion to working together for
the safety of our employees.
We have made some progress towards that goal. Some agencies
are getting the message. And, some are not. Some divisions,
districts, and inspectors are trying to move forward. And,
others have been doing it the old way so long that one
wonders if they are capable of change. Still others appear to
possess a bias towards any free market business trying to
provide goods and services, jobs for Americans, and a decent
profit.
The Regulatory Fairness boards, established by SBREFA, have
worked very hard to get the word out about small businesses
rights to regulatory fairness. We have talked with all the
federal regulatory agencies regarding their statutory
requirements under this law. Some are seeking to comply.
Others are performing heroic contortions of logic beyond all
reason to avoid compliance with this law. Even today, some
inspectors and small business advocates appear unaware of the
rights of small businesses for regulatory fairness.
Some agency departments, such as OSHA in the Kansas oil
fields and in the Colorado construction trades, are working
with small businesses to develop good safety practices where
there are clear measurable issues of workers being harmed.
Yet, the same agency, OSHA ,seeks to slam dunk repetitive
motion regulations, when most such injuries are related to
computer games and sports outside of the work place. Thus,
creating an expensive and time consuming conflict between
employers and employees.
The regulatory fairness boards, comprised of small business
owners who are quite busy running their own businesses, have
worked very hard to communicate with small business owners
about their rights to regulatory fairness. We have taken some
compelling testimony regarding excessive and over-zealous
enforcement of federal regulations. Last year, the most
compelling was HHS and HCFA campaign against the Home Health
Care Industry. Your good efforts to halt this campaign are
greatly appreciated.
Other compelling examples have been forwarded to Congress.
The regulatory fairness boards, rightly so, have no authority
over the federal regulatory agencies. That is left to
Congress and the Administration. We have gathered the
comments and high-lighted areas of abuse. Our future success
greatly depends upon the actions taken by Congress in
response to these abuses. I pray for your courage and
success.
Three years ago, thanks to SBREFA, we began a long marathon
to roll back the tide of regulatory burdens on America's
small businesses. We are making progress. It's a marathon.
Not, a sprint. I ask that you do not lose heart. I pray that
we will not.
Thank you for your strong support of America's small
businesses.
Scott George.
____
National Tooling &
Machining Association,
Ft. Washington, MD, April 2, 1999.
Hon. Kit Bond,
Chairman, Committee on Small Business, U.S. Senate,
Washington, DC.
Dear Chairman Bond: With the anniversary of the Small
Business Regulatory Enforcement Fairness Act (SBREFA) upon
us, now is the appropriate time to say ``Thank You'' once
again for all your work on that important law. SBREFA has put
the needed teeth into the Regulatory Flexibility Act of 1980,
allowing judicial review of agency rules and the new panel
process involving small businesses and the agencies that
regulate them.
NTMA's future Chairman of the Board, Roger Sustar, recently
completed his work on a SBREFA panel with OSHA regarding the
draft ergonomics program standard. This was NTMA's first
experience in the panel process--and it was amazing! Seeing
OSHA sit down and listen to the real small business people
this standard would affect was something we would not have
dreamed of just a couple of short years ago. While there is
still a month before the final panel report is printed, it
was a terrific experience to have input before a final
ergonomics rule was proposed. I am looking forward to the
panel report's recommended changes to the proposed standard,
based on the input of small business entity representatives.
It is also appropriate to say that the SBA's Office of
Advocacy played a key role in the panel process, and that
their help was invaluable. Jere Glover and his staff,
particularly Claudia Rayford and David Schnare, ensured that
small business' voice was heard during the process. NTMA is
very supportive of the Office of Advocacy and all they do. We
actively support, and have asked for, increased funding in
the Budget for this vital part of our government.
I know there is a possibility that SBREFA will be expanded
to cover the Internal Revenue Service. NTMA fully supports
that proposal. If there is anything I can do in that
endeavor, just call on me.
As the chief sponsor of SBREFA, I congratulate you on the
anniversary of this law and applaud your efforts to help
small businesses across this country get a fair hearing with
the federal government. You have always been a true friend to
small business.
Sincerely,
John A. Cox, Jr.,
Manager, Government Affairs.
Mr. BOND. Mr. President, we have heard a lot about the need for
oversight to find out what Government agencies are doing with the laws
we pass. Today, I am here to report on the oversight of the Small
Business Committee, because we want to make sure that the small
businesses get the fair treatment they are entitled to under the law.
Unfortunately, while we have made some progress and offered hope to
many small businesses, we have found a number of agencies have failed
to make the grade. So in a few moments, I am going to announce a new
series of awards for small-business-oppressing Government agencies who
deserve to have some help in unclogging the regulatory pipelines in
their office.
For several decades, small business owners have watched with dismay
as Federal regulations have proliferated. These regulations are taking
increasingly large amounts of time and money to interpret, and
compliance costs have soared. Until recently, we were shocked by the
general assumption that small business owners spend 5 percent of their
revenues to prepare their taxes.
Last Monday, in a hearing we had in the Small Business Committee, we
found it worse than we imagined. The committee heard testimony from
Brian Gloe, the co-CEO of Rosse Lithographing Company in Kansas City,
that his business, for example, pays more than 16 percent of its net
income just to figure out how much it owes the IRS. That is even before
they write the check to pay the taxes.
As my colleagues well know, the IRS is just one Federal agency. Other
agencies imposing huge burdens on small businesses include the
Environmental Protection Agency, the Department of Labor, and the
Occupational Safety and Health Administration. Add to that list the
countless other agencies a small business must deal with, depending on
what products it sells or services it provides. Each of these agencies
has thousands of requirements which must be followed under penalty of
fines or even prison time.
In short, the Red Tape Reduction Act was long overdue. I was very
pleased that this body passed the measure unanimously. It passed the
House on a consent calendar. It was signed into law on March 29, 1996.
It was designed to provide tools to small business owners to assure
regulatory fairness and reduce unnecessary regulatory burdens.
The new law contains important innovative provisions. One, it gives
small entities the ability to take an agency to court for failing to
consider ways to reduce the economic impact of their new regulations.
Two, it requires agencies to prepare ``plain English'' compliance
guides so that small business owners will not have to hire a team of
lawyers just to interpret the regulations.
Three, it makes it easier for small businesses to recover attorney's
fees when agencies make demands for outrageous fines and penalties that
are not sustainable in court.
And finally, it allows Congress to review and disapprove certain new
agency regulations that are extreme or are not what Congress intended.
Despite the straightforward nature of this law, it seems some
agencies are ignoring Congress' commonsense mandate to make things
simpler for the little guy and other agencies are actively fighting
against it. On March 10, Senator Kerry, the ranking Democrat on the
Small Business Committee, joined me in hosting a roundtable with
representatives of small business on of the Red Tape Reduction Act. We
learned that many agencies have failed to fulfill their obligations
under the new law and under the Regulatory Flexibility Act which
preceded it.
These important laws apply to all regulations, unless the head of any
[[Page S3827]]
agency can demonstrate that a new rule will not have a significant
impact on a substantial number of small entities. That makes sense to
me. When new regulations will affect small businesses, the agency
should comply with the law so the burdens on small businesses will be
identified and reduced.
You would think that agencies would embrace gladly the opportunity to
help, rather than impose unnecessary burdens on the smallest of
businesses. Regrettably, that just is not the case. A closer look shows
that these agencies are using every trick in the book, exploiting every
known loophole, and creating new ones not to comply with the law.
Rather than help, they work to exempt the regulations from the law.
Here are a couple of examples: No. 1, false and ridiculous claims.
EPA is infamous for its legalistic dodge, asserting that the national
ambient air quality standards for ozone and particulate matter would
not affect small entities. This flies in the face of our experience,
when they jack the standards up so hard it requires punitive measures
that harshly burden small businesses. I have heard from many government
officials in towns throughout Missouri who are concerned that their
constituents will lose jobs as a result of those standards.
Two, raising the bar. Agencies avoid compliance with the law by
erroneously asserting a rule would not have a significant impact on
small businesses. But data from the affected small businesses clearly
show otherwise. They are being affected in large numbers.
Three, the artful dodge. Agencies like the EPA and OSHA avoid the law
by issuing guidance and permits rather than rules subject to notice and
comment. I guess they have not heard the old saying: If it walks like a
duck and it quacks like a duck, it must be a duck--even if they want to
call it a permit or guidance.
Fourth, the plain old loophole. The Health Care Financing
Administration, HCFA, in particular has abused a narrow ``good cause''
exception to avoid following these laws.
These are just a few examples of ways to get around the law. Instead
of implementing simple, needed reforms, the agencies thumb their noses
at Congress and the millions of small business owners. Their sleight of
hand has not gone unnoticed. I am not going to stand idly by. Too often
in Washington, when we pass a law in Congress, we move on to something
else and forget about it. The agencies write the regulations, implement
the laws however they want to, and your unsuspecting constituents find
out the law they think was passed is something else entirely once the
regulators write the regulations. That is why we need to change the
views of some of the Washington bureaucrats.
I am not going to look the other way. I am going to make sure the
agencies do what the new law requires them to do and what is required
under the Regulatory Flexibility Act. Several months ago, I asked the
General Accounting Office to assess agency compliance with the
provisions of the Reg Flex Act. Today, I am releasing GAO's report and
findings.
While the Reg Flex Act has been the law for 18 years, GAO found that
the agencies' knowledge of the actual requirements is lacking and that
noncompliance is widespread. Agencies are failing right and left to
meet the basic requirements of the law passed by Congress and enacted
on a bipartisan, unanimous basis by the Congress in 1996.
Congress told them to look over the agency's regulations to see if
there is any way we can change or eliminate regulations to make life
easier for small business. That is all--just a review, just a
recommendation. But they are not even doing that.
The GAO identified seven agencies that have consistently issued
regulations affecting small business but have failed to conduct the
periodic reviews required. What is the holdup? The agencies have
thousands of employees. It seems the administrators might be able to
use one or two of them to look at the regulations and see if any can be
changed, particularly in this administration which touts its so-called
``reinventing Government'' plan.
Perhaps this award we are announcing today will remind them. Today I
am awarding the ``Plumber's Best Friend Award,'' a plunger, to each
agency which has failed to get the process moving, those agencies which
need to unclog their pipelines and review existing rules. I am sending
the head of each agency a letter explaining the requirements for
periodic review and asking them to outline the steps they will take to
get the agency in compliance.
And now for that moment you all have been waiting for. The winners of
the first ``Plumber's Best Friend Award'' are: Department of Commerce,
Department of Health and Human Services, Department of the Interior,
Department of the Treasury, Federal Communications Commission, and the
Securities and Exchange Commission.
But the grand prize winner in my book is the Small Business
Administration. Believe it or not, the agency whose mission it is to
safeguard the interests of and to assist small business owners has
failed to follow this small-business-friendly law. Think about it; SBA
should be the advocate for small business at the Cabinet table,
ensuring Government-wide compliance, not showing indifference to the
law. I was stunned that the SBA cannot get a passing grade.
But it gets even worse. Nine other agencies completely failed to
report to Congress by March 29 on their efforts to help small business
as required in the act. All agencies that regulate small entities were
to provide informal compliance assistance and penalty reductions for
those small businesses seeking to comply in good faith. As we have
learned, if we do not require progress reports, no progress is made. So
we gave everyone 2 years to figure out how to do the right thing. But
nine Federal agencies could not even get a report out on time. Ask
yourself what happens to a small business woman running a business out
of her home if she does not get an IRS, OSHA, or EPA form filed on
time. They do not just overlook it; they come down on and crack hard on
the small business.
The agencies failing to even report were the Departments of Defense,
Justice, Veterans Affairs, the General Services Administration, the
National Archive and Records Administration, the National Space and
Aeronautics Administration, the Office of Management and Budget, and
the Architectural and Transportation Barriers Control Board.
But, again, most outrageous among the nine agencies that missed the
deadline: the Small Business Administration. In fact, when I brought
this to the SBA Administrator's attention, the SBA's general counsel
had the audacity to claim the SBA was not covered by certain provisions
of the law because SBA was not a regulatory agency. So today I am
sending another letter to SBA, explaining why they are covered by the
Red Tape Reduction Act and calling on the Administrator to take
immediate steps to comply with the law.
I ask unanimous consent these three letters be printed in the Record.
There being no objection, the letters were ordered to be printed in
the Record, as follows:
U.S. Senate,
Committee on Small Business,
Washington, DC. April 19, 1999.
Hon. Aida Alvarez,
Administrator, U.S. Small Business Administration,
Washington, DC.
Dear Administrator Alvarez: On March 16, I requested an
explanation as to why the Small Business Administration (SBA/
Agency) failed to report to Congress as required under
sections 213 and 223 of the Small Business Regulatory
Enforcement Fairness Act of 1996 (Act of SBREFA) (Title II of
P.L. 104-121). My letter also asked SBA to report to Congress
on its implementation of sections 213 and 223 of SBREFA,
which require agencies to provide informal compliance
assistance and penalty reductions/waivers to small entities.
On March 31, 1999, I received a reply from SBA's General
Counsel Michael D. Schattman. Unfortunately, SBA's response
was inadequate and raises additional concerns regarding SBA's
understanding of and compliance with the Act. In preparing
this letter, I consulted with the Congressional Research
Service and the Senate Legislative Counsel, and they
concurred with my analysis and conclusion that SBA's
explanation for its noncompliance is inconistent with the
statue on its face, a legal analysis of the statute, and the
intent of Congress as documented in the legislative history.
In SBA's letter, Mr. Schattman asserts that SBA did not
need to report to Congress because SBA is not a regulatory
agency or, at least, not the type of regulatory agency SBA
believes was covered by sections 213 and 223. The rationale
behind this strained, interpretation appears to be that SBA
is not covered by sections 213 and 223 because: (1)
[[Page S3828]]
SBA's programs ``aid, counsel and protect small business;''
(2) SBA does not ``impose penalties for regulatory
violations''; and (3) SBA allegedly does not ``force small
businesses to comply with laws and regulations that require
them to conduct their businesses in a certain way.'' I
strongly differ with the basis for SBA's rationale.
First of all, sections 213 and 223 invoke the definition of
``agency'' found in section 551 of title 5, U.S. Code. SBA is
not expressly or implicitly excluded from this definition.
SBA's attempt to excuse its noncompliance by claiming not be
a ``regulatory agency'' also fails because the term
``regulatory agency'' is again based on the definition of
``agency'' found in section 551 of title 5, U.S. Code, which
pertains to administrative procedures and rulemaking.
In general, an agency is a regulatory agency if it has
statutory authority to issue rules and enforce compliance
with them. SBA is, therefore, a regulatory agency. SBA issues
regulations that govern the participation of small business,
small governments, and small not-for-profits in the programs
it administers. For instance, SBA issues regulations that
determine which small businesses qualify as a small
disadvantaged business (SDB), a HUBZONE small business
concern, or a 7(a) lender. SBA audits compliance with and
enforces the requirements of these and other regulations. If
a small business is not in compliance with the regulations,
SBA has the authority to remove a small business from the
list of approved SDBs or HUBZONE small business concerns. SBA
can disqualify a financial institution from eligibility as a
7(a) lender or a certified development company under section
504 of the Small Business Investment Act. Consequently, SBA's
strained interpretation is not supported in law or fact.
The statement that ``SBA does not believe the SBREFA
reports were required'' only makes sense if two points are
assumed correct: (1) that sections 213 and 223 apply only to
agencies that impose monetary penalties or fines; and (2) SBA
does not impose monetary penalties or fine. While I might
concede that section 223 speaks to penalties and fines,
section 213 is not limited to compliance assistance related
to regulations that carry penalties or fines. SBA's argument
is further flawed because not only does SBA's enforcement
authority have financial implications for small businesses,
but SBA has the authority to impose monetary penalties and
Mr. Schattman's letter lists four such instances. SBA appears
to have gotten scarred away with its post hoc analysis of why
it did not comply with these sections and their respective
reporting requirements. As the Chairman of the Committee that
authorizes SBA's programs, I cannot agree with the statement
that ``[i]n no circumstances can SBA regulate, control or
penalize a small business in the conduct of its enterprise.''
This statement does not square with SBA's statutory
authority. For instance, section 687 of title 15, U.S. Code,
authorizes SBA ``to prescribe regulations governing the
operation of small business investment companies, and to
carry out the provisions of this Act. . . .'' SBA's claim is
also contradicted by its inclusion in the November 9, 1998-
edition of Unified Agenda of Regulatory and Deregulatory
Actions and the publication of SBA's regulatory plan,
outlining the Agency's regulatory priorities, and SBA's
semiannual regulatory agenda. It is clear that SBA must be
enforcing the regulations it promulgates.
In addition, Mr. Schattman's letter lists four instances
where SBA can impose monetary penalties on Small Business
Investment Centers (SBICs) or individuals obtaining disaster
loans. This fact alone appears to discredit the assertion
that SBA is not covered by section 213 and 223. SBA's
argument is further undermined by the fact that many SBICs
meet SBA's definition of a small business and a small
business concern can be a borrower under the disaster loan
program. Consequently, we need look no further than SBA's own
letter to identify situations that trigger SBA's obligation
to comply with sections 213 and 223. Ironically, SBA's
authority to enforce its regulations and impose penalties is
by no means limited to these four situations.
While I believe SBA's narrow definition of what constitutes
a regulatory agency is without merit, even conceding this
constrained definition for argument's sake, SBA's letter
contradicts itself further. In the letter, the Agency
confirms it is covered by section 222, which created the
Small Business and Agriculture Regulatory Enforcement
Ombudsman and Small Business Regulatory Fairness Boards.
(emphasis added.) The Ombudsman listed SBA as a covered
agency in its reports covering 1997 and 1998, and Mr.
Schattman's letter notes that SBA gladly accepts credit given
it by the SBA-appointed Ombudsman. This appears to conflict
with SBA's assertion that it does not regulate small
businesses. In fact, in the Ombudsman's 1997 report, SBA is
the subject of two complaints from small businesses that
``involved enforcement or compliance activity undertaken by a
federal regulatory agency with regard to a small business.''
When the SBA-appointed Ombudsman provided SBA with a copy of
the draft report for review, SBA wrote back stating it had no
comment on the report. In its letter regarding the next
year's draft report, SBA alleged that it was not a regulatory
agency; however, in that same letter, SBA says that it will
give small businesses notice of their right to comment to the
Ombudsman when ``we engage in enforcement procedures.'' The
letter also references SBA's ``enforcement and compliance
activities.'' Again, I fail to see how SBA can argue that it
is covered under section 222 and not sections 213 and 223.
Mr. Schattman's letter failed to mention that numerous
small businesses complained to the Ombudsman about SBA's
enforcement actions. In fact, the Ombudsman's recent report
states that SBA was mentioned in 18 written comments and by
16 people that testified before the Enforcement Ombudsman and
Fairness Boards. While some of these complaints may not fall
within the Ombudsman's authority, they would seem to imply
that SBA's rules and regulations do indeed affect the
operations of small businesses. As an example, one small
business complained about SBA's denial of a guaranteed loan.
In response, SBA informed the company why the ``good cause''
waiver of the 7(a) loan program's ``prior loss rule'' did not
apply. SBA's own corrective action, informing the District
Offices of the procedures to follow, further suggests that
the requirements of section 213 and 223 are applicable to
SBA.
In addition, Mr. Schattman wrote that ``SBREFA only
addresses enforcement proceedings. . . .'' Quite to the
contrary, the Act amended chapter 6 of title 5, U.S. Code
(commonly known as the Regulatory Flexibility Act) to address
explicitly rulemaking activities affecting small entities. In
fact, SBA's Office of Advocacy, which is referenced in the
letter, is actively involved in the Small Business Advocacy
Review Panels created under the Act and is exercising its
authority to file amicus briefs in cases initiated by small
entities aggrieved by agency noncompliance with the
requirements of the Regulatory Flexibility Act. While
improving fairness toward small entities during agency
enforcement actions is an important part of the Act, the law
also addresses agency rulemaking and informal compliance
assistance with statutes and agency regulations.
In conclusion, there is nothing in Mr. Schattman's letter
that relieves SBA of its obligation to comply with sections
213 and 223. Moreover, there is nothing in the law that
allows SBA to forego the requirement to report to Congress on
its implementation of these sections. While SBA may not be a
regulatory agency of the magnitude of the Environmental
Protection Agency or the Occupational Safety and Health
Administration, the scope of SBA's activities, its programs
and rulemaking activities are consistent with the definition
of a regulatory agency. The simple fact that SBA has the
authority to issue regulations that affect small entities--
positively or negatively--triggers the need to comply with
the Act. Furthermore, the Act provides agencies with broad
discretion to implement the general requirements of these
sections in accordance with the agency's underlying statutes
and programs.
It would be an oversight if I did not express my
disappointment with SBA. Indeed, I would have expected SBA to
lead the charge to comply with this law, which was enacted in
great part to implement recommendations from the 1995 White
House Conference on Small Business. However, it appears that
rather than engaging its attorneys in an effort to comply
with the law, SBA instead asked them to devise a rationale to
justify noncompliance. This is unacceptable. Consequently, I
request that SBA immediately implement programs to provide
compliance assistance to small entities and to offer penalty
reductions, or waivers, where appropriate, and keep this
Committee apprised of your efforts. I look forward to
receiving a response by 3:00, April 29, 1999, detailing the
steps you will take to bring SBA into compliance with SBREFA.
Should you need additional information, please contact me
or Suey Howe, the Committee's Regulatory Counsel, at 224-
5175.
Sincerely,
Christopher S. Bond,
Chairman.
____
U.S. Senate,
Committee on Small Business,
Washington, DC, March 16, 1999.
Hon. Aida Alvarez,
Administrator, U.S. Small Business Administration,
Washington, DC.
Dear Administrator Alvarez: The Small Business Regulatory
Enforcement Fairness Act of 1996 (Act) required federal
agencies that regulate the activities of small business to
implement programs to provide informal compliance assistance
and penalty reductions/waivers to small entities, including
small businesses, small governments and small not-for-profit
organizations. All such federal agencies, including the Small
Business Administration (SBA or Agency), were to report to
Congress on implementation of these programs no later than
March 29, 1998--nearly one year ago. To date, SBA has not
submitted to this Committee the reports to Congress required
under Sections 213 and 223 of the Act.
As Chairman of the Senate Committee on Small Business and
as the principal author of the Small Business Regulatory
Enforcement Fairness Act, I request a detailed explanation
why SBA failed to fulfill its statutory obligation to report
to Congress on SBA's implementation of the requirements under
Sections 213 and 223. Furthermore, I request that SBA provide
these reports to this Committee, as well as the other
committees named in the statute to receive the reports, by
March 31, 1999. Moreover, should SBA fail to meet a statutory
deadline in the future, I expect the Agency to advise this
[[Page S3829]]
Committee of its failure in writing, describing why the
deadline was missed and when the required activities will be
completed. In closing, and perhaps most importantly, SBA's
failure to comply with these reporting requirements raises
questions regarding the Agency's commitment to fulfilling its
responsibilities under the Act, which was enacted by Congress
to ensure that federal agencies treat small businesses fairly
in rulemaking and enforcement activities.
Should you need additional information, please contact me
or Suey Howe, the Committee's Regulatory Counsel, at 224-
5175.
Sincerely,
Christopher S. Bond,
Chairman.
____
U.S. Small Business Administration, Office of General
Counsel,
Washington, DC, March 31, 1999.
Hon. Christopher S. Bond,
Chairman, Committee on Small Business, U.S. Senate,
Washington, DC.
Dear Mr. Chairman: I have been asked by Administrator
Alvarez to respond to your letter of March 16, 1999, to
provide you with my legal interpretation of the Small
Business Regulatory Enforcement Act (SBREFA). The Small
Business Administration (SBA) strongly supports SBREFA. As an
Agency we are very sensitive to the problems that small
businesses face in dealing with regulatory agencies that
impose penalties for regulatory violations and force small
businesses to comply with laws and regulations that require
them to conduct their businesses in a certain way.
However, SBA is in a different category. All of our
programs and activities are specifically designed to aid,
counsel and protect small businesses. Unlike regulatory
agencies that set policies with which small businesses must
comply, SBA provides assistance and counseling. As you know,
SBA reports annually, and in many cases more often, on its
program activities and the assistance it provides. Therefore,
SBA does not believe the SBREFA reports were required.
Rather than regulate small businesses, we provide small
businesses access to capital indirectly by guaranteeing loans
made by our lending resource partners. Through our Small
Business Development Centers, we counsel and train small
businesses to start or grow their businesses, often by
providing them with information on SBA's programs. Also, SBA
assists small businesses in obtaining government contracts
through our procurement programs and through working with
other Federal agencies to encourage them to contract with
small businesses.
SBA is committed to ensuring that we meet both the spirit
and dictates of SBREFA. We provide support to the National
Ombudsman and the Regulatory Fairness Boards. As you know,
the Office of the National Ombudsman is fully staffed and can
draw on the resources of the Agency whenever necessary. After
consulting with the National Ombudsman, we established a
process to respond speedily and thoroughly to small business
issues raised with the National Ombudsman.
In fact, we received special mention in the Ombudsman's
Report filed with you on March 1, 1999, for our commitment to
using high-level, independent staff to process SBREFA
comments. Additionally, we are constantly developing new ways
to reach as many small businesses as we can to tell them how
to take advantage of our programs.
SBA is not a ``regulatory'' agency. It does not, except in
very rare instances, impose penalties or conduct enforcement
activities. In fact, there are only four instances in which
SBA can impose a monetary penalty. (The four instances are:
SBA may impose a penalty on an SBIC for failure to cooperate
in an examination or for providing books and records in poor
condition; SBA may impose a penalty on an individual who
wrongfully applies disaster loan proceeds; SBA may impose a
penalty on an SBIC for every day that an SBIC fails to report
pursuant to the Small Business Investment Act; SBA may impose
penalties on a lender or a fiscal transfer agent in certain
circumstances.) None of these four penalties are imposed
against small businesses--two may be imposed on Small
Business Investment Companies, one may be imposed on
individuals receiving disaster loans, and one may be imposed
on lenders or fiscal transfer agents. In no circumstance can
SBA regulate, control or penalize a small business in the
conduct of its enterprise.
However, SBA is covered by other sections of SBREFA and has
been very responsive to the Regulatory Fairness Program
(RegFair) developed by the National Ombudsman and Regional
Fairness Boards. For example, we eagerly participate, as an
Agency, not just through the Ombudsman's Office, in regional
RegFair meetings.
While SBREFA only addresses enforcement proceedings, I
would be remiss in not mentioning SBA's Office of Advocacy.
The Office of Advocacy works with Federal agencies in
developing regulations that address small business concerns.
The Office of Advocacy helps ensure that agency policies are
structured in such a way that agencies, using fair
enforcement policies, can achieve their missions with the
least possible burdens on small entities.
SBA strongly supports your efforts on behalf of small
business and believes that, working together, we can provide
a more positive atmosphere in which small businesses can
flourish. I would be glad to meet with you or your staff to
discuss this further.
Sincerely,
Michael D. Schattman,
General Counsel.
Mr. BOND. For the Reg Flex and Red Tape Reduction Act to deliver the
benefits intended by Congress, the agencies must comply with the law.
It is that simple. Too many agencies, too many officials,
unfortunately, in this administration seem to have the attitude that
they are Olympians on the hill who know what is best for the peasants
in the valley, when it really is the other way around. We should be
listening to what the people who create the jobs and the economic well-
being in our country, the small business sector, are saying.
Perhaps these plungers will help unclog things. But if sunshine and
friendly persuasion will not work and if a plumber's friend cannot get
it unclogged, it may be time to put civil penalties and fines in place
so the agencies know we are serious. The job we are telling them to do
is simple: Help small business, don't hurt it. If they will not do it,
if the plumber's best friend won't help them, then we will change the
law again and impose some penalties.
Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. THOMAS. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. THOMAS. First of all, I have a couple of unanimous consent
proposals.
____________________