[Congressional Record (Bound Edition), Volume 145 (1999), Part 5]
[Senate]
[Pages 6780-6785]
[From the U.S. 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

[[Page 6781]]

     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.
     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

[[Page 6782]]

     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 
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.

[[Page 6783]]

  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) 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

[[Page 6784]]

     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

[[Page 6785]]

     SBA fail to meet a statutory deadline in the future, I expect 
     the Agency to advise this 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.

                          ____________________