[House Report 106-184]
[From the U.S. Government Publishing Office]
106th Congress Rept. 106-184
HOUSE OF REPRESENTATIVES
1st Session Part 1
======================================================================
PROGRAM FOR INVESTMENT IN MICROENTREPRENEURS (PRIME)
_______
June 14, 1999.--Ordered to be printed
_______
Mr. Leach, from the Committee on Banking and Financial Services,
submitted the following
R E P O R T
together with
DISSENTING AND SUPPLEMENTAL VIEWS
[To accompany H.R. 413]
[Including cost estimate of the Congressional Budget Office]
The Committee on Banking and Financial Services, to whom was
referred the bill (H.R. 413) to authorize qualified
organizations to provide technical assistance and capacity
building services to microenterprise development organizations
and programs and to disadvantaged entrepreneurs using funds
from the Community Development Financial Institutions Fund, and
for other purposes, having considered the same, report
favorably thereon without amendment and recommend that the bill
do pass.
Purpose and Summary
The purpose of H.R. 413, the ``Program for Investment in
Microentrepreneurs Act of 1999'' (the ``Act''), as reported out
of the Committee on Banking and Financial Services, is to
encourage entrepreneurship and community development by
providing assistance to microenterprise development
organizations, thereby enabling these organizations to more
effectively meet the growing training and technical assistance
needs of low income entrepreneurs. The Act authorizes the
Community Development Financial Institutions (``CDFI'') Fund to
establish a microenterprise technical assistance and capacity
building grant program that would award grants on a competitive
basis to eligible microenterprise development organizations and
programs. Eligible organizations include Indian Tribes.
The Act is not a loan program. The PRIME Act provides
funding to support the training and technical assistance needs
of microenterprise development organizations that target low
income and very low income individuals.
The general philosophy of the microenterprise industry is
to bring new sources of income to segments of the population
where job opportunities are low by combining small amounts of
credit with business management skills. A microenterprise is
generally a sole proprietorship with fewer than five employees,
has not had access to credit from commercial banks, and can
initially use a loan in an amount under $15,000.
In the past ten years, encouraging entrepreneurship as a
strategy for poverty alleviation and community development has
evolved. The ``1999 Director of U.S. Microenterprise Programs''
lists 342 microenterprise programs in forty-six states and the
District of Columbia, a significant increase over the 195
programs listed in the 1994 directory. Such programs provide a
range of services to help low income entrepreneurs, including
business training, financial management, counseling, and
assistance in accessing capital.
In testimony provided in the Committee, the Aspen
Institute, a nonprofit education and research organization,
presented the findings of its Self-Employment Learning Project
(``SELP''). Over a five year period, SELP's study tracked 405
entrepreneurs who were each served by one of seven
microenterprise programs. The purpose of the study was to
evaluate the costs and performance of the programs, as well as
the outcomes experienced by the microentrepreneurs. SELP
reported the following results:
The average change in household income was $8,485--
rising from $13,889 to $22,374 over five years;
Fifty-three percent of the entrepreneurs increased
their incomes enough to cross the poverty line (using
150% of the poverty line as the reference point);
Entrepreneurs reduced their reliance on government
assistance by 61% with the largest reduction in the
amount of AFDC benefits;
The business survival rate was 49% over five years;
which is comparable to Census Bureau and Internal
Revenue Service survival rates for businesses with
similar characteristics as the sampled
microenterprises.
The SELP study reinforces the arguments that
microenterprise organizations are of critical importance to low
income entrepreneurs. As stated, existing funding for
microenterprise programs is largely in the form of credit.
However, the study indicates that credit without training is of
limited success. Thus, the intent of the Act is to fill this
void. PRIME Act funds cannot be used to capitalize loans to
microentrepreneurs, rather the funds may be used for technical
assistance purposes only. The Act's funding targets low-income
individuals and at least 50% of the funding must be used to
target very low income individuals (those at or below 150% of
the poverty line).
The Act authorizes the CDFI Fund to establish a
microenterprise technical assistance and capacity building
grant program that would award grants on a competitive basis to
eligible microenterprise development organizations and
programs. The Act is authorized for four years at levels of $15
million for FY00, $25 million for FY01, $30 million for FY02,
and $35 million for FY03. Under the Act, funds could be used by
qualifying nonprofit organizations to:
Provide training and technical assistance to low
income and disadvantaged individuals interested in
starting or expanding their own business;
Engage in capacity building activities targeted to
microenterprise development organizations that serve
low income and disadvantaged individuals; and
Support research and development activities designed
to identify and promote entrepreneurial training and
technical assistance programs that can effectively
serve low income and disadvantaged individuals.
To be considered qualified for funds under the Act, an
organization must be a nonprofit microenterprise development
organization or program with a demonstrated record of serving
economically disadvantaged individuals. Financial assistance
under the Act must be matched with funds from sources other
than the Federal government on a basis of not less than 50% of
each dollar. The intent of the Act is to ensure that technical
assistance and capacity building funds are made available to a
range of microenterprise organizations, including small and
emerging organizations as well as larger and more established
organizations.
Hearings
The Committee held a hearing on H.R. 413, the ``Program for
Investment in Microentrepreneurs Act of 1999,'' on May 26,
1999. Testifying at the hearing were: the Honorable Edward M.
Kennedy; the Honorable Bobby L. Rush; Gary Gensler,
Undersecretary for Domestic Finance, Department of the
Treasury; Ellen W. Lazar, Director, Community Development
Financial Institutions Fund; Jason J. Friedman, Vice President,
Institute for Social and Economic Development; Marguerite
Sisson, Owner, River City Cleaning; Joan Dallis, Vice
President, Rural Opportunities Enterprise, Inc.; Karla Melvin,
Director, Employment Services, Women Venture; Peggy Clark,
Executive Director, Economic Opportunities Program, The Aspen
Institute; Ellen Golden, Chair, Association for Enterprise
Opportunities; and Mark Pinsky, Chairman, Coalition of
Community Development Financial Institutions.
Committee Consideration and Votes
On May 26, 1999, the full committee met in open session to
mark up H.R. 413, the ``Program for Investment in
Microentrepreneurs Act in 1999.'' The Committee called up H.R.
413 as original text for purposes of amendment. No amendments
were offered. On the question of final passage, the Committee,
by voice vote, favorably reported H.R. 413 to the full House of
Representatives for consideration. Also, the Committee passed
by voice vote a motion to authorize the Chairman to offer such
motions as may be necessary in the House of Representatives to
go to conference with the Senate on a similar bill.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Committee on Government Reform
No findings and recommendations of the Committee on
Government Reform were received as referred to in clause
3(c)(4) of rule XIII of the Rules of the House of
Representatives.
Constitutional Authority
In compliance with clause 3(d)(1) of rule XIII of the Rules
of the House of Representatives, the constitutional authority
for Congress to enact this legislation is derived from both the
power to regulate interstate commerce (Clause 3, Section 8,
Article I) and ``to coin money'' and ``regulate the value
thereof'' (Clause 5, Section 8, Article I). The latter
Constitutional power has been broadly construed to allow for
the Federal regulation of the provision of credit and other
forms of economic assistance via the financial services
industry and to regulate every phase of the subject of
currency. In addition, Congress is granted the authority to
make laws (Clause 18, Section 8, Article I) that are necessary
and proper to carry out the foregoing powers as well as other
powers vested by the Constitution.
New Budget Authority and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, please see the attached
Congressional Budget Office cost estimate.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Congressional Accountability Act
The reporting requirement under section 102(b)(3) of the
Congressional Accountability Act (P.L. 104-1) is inapplicable
because this legislation does not relate to terms and
conditions of employment or access to public services or
accommodations.
Congressional Budget Office Cost Estimate and Unfunded Mandates
Analysis
The cost estimate pursuant to clause 3(c)(3) of rule XIII
of the Rules of the House of Representatives and section 402 of
the Congressional Budget Act of 1974 is attached herewith:
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 10, 1999.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 413, the Program
for Investment in Microentrepreneurs Act of 1999 (PRIME Act).
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Deborah Reis.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
H.R. 413--Program for Investment in Microentrepreneurs Act of 1999
(PRIME Act)
Summary: H.R. 413 would establish within the Community
Development Financial Institutions (CDFI) Fund a new program to
provide assistance to nonprofit organizations and other
entities that serve low-income entrepreneurs of very small
businesses. The bill would authorize the fund to provide grants
to qualified organizations to help them assist such businesses
through training and other aid. Up to 15 percent of such grants
also could be used to expand the capacity of these
organizations. For the purposes of carrying out the new
program, the bill would authorize appropriations of $15 million
in 2000, $25 million in 2001, $30 million in 2002, and $35
million in 2003. CBO estimates that appropriations of the
authorized amounts would result in discretionary spending of
$70 million over the 2000-2004 period.
Enacting H.R. 413 would not affect direct spending or
receipts; therefore, pay-as-you-go procedures would not apply.
The bill contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandate Reform Act (UMRA)
and would impose no costs on state or local governments. Any
costs incurred by tribal governments would be voluntary.
Estimated cost to the Federal Government: Assuming
appropriation of the authorized amounts, CBO estimates that the
CDFI fund would spend about $70 million through fiscal year
2004 to implement the assistance program established by H.R.
413. (The balance of $35 million authorized for this purpose
would be spent after 2004.) The estimated budgetary impact of
H.R. 413 is shown in the following table. The costs of this
legislation fall within budget function 450 (community and
regional development).
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-------------------------------------------------
2000 2001 2002 2003 2004
----------------------------------------------------------------------------------------------------------------
SPENDING SUBJECT TO APPROPRIATION
Authorization Level........................................... 15 25 30 35 0
Estimated Outlays............................................. 3 8 14 22 23
----------------------------------------------------------------------------------------------------------------
Basis of estimate: For purposes of this estimate, CBO
assumes that the full amounts authorized for the
microentrepreneur investment program will be appropriated for
each fiscal year and that outlays will occur at spending rates
similar to those experienced with existing CDFI programs. The
activities authorized by H.R. 413 would constitute a new
program within the CDFI fund; at present, there is no spending
for such activities.
Pay-as-you-go considerations: None.
Intergovernmental and private-sector impact: The bill
contains no intergovernmental or private-sector mandates as
defined in UMRA and would impose no costs on state or local
governments. Any costs incurred by tribal governments would be
voluntary.
Estimate prepared by: Deborah Reis.
Estimate approved by: Paul N. Van de Water, Assistant
Director for Budget Analysis.
Section-by-Section Analysis--Program for Investment in
Microentrepreneurs Act of 1999
Section 1. Provision of Technical Assistance to Microenterprises
Section 1 amends Title I of the ``Riegle Community
Development and Regulatory Improvement Act of 1994'' by adding
the following new sections:
Section 171. Short title
This section designates new Subtitle C as the ``Program for
Investment in Microentrepreneurs Act of 1999'' (PRIME Act).
Section 172. Definitions
This section defines terms as they apply to the PRIME Act.
Section 173. Establishment of program
This section requires the Treasury Secretary to establish a
microenterprise technical assistance and capacity building
grant program which shall provide assistance from the CDFI Fund
in the form of grants to qualified organizations.
Section 174. Uses of assistance
This section provides that grants can be used for the
following purposes: (1) to provide training and technical
assistance to disadvantaged entrepreneurs; (2) to engage in
capacity building activities targeted to microenterprise
development organizations that serve low income entrepreneurs;
and (3) to aid in researching and developing the best practices
in the field of microenterprise and technical assistance
programs of disadvantaged entrepreneurs.
Section 175. Qualified organizations
This section defines a qualified organization as a
nonprofit microenterprise development organization that has a
demonstrated record of assisting disadvantaged entrepreneurs,
an intermediary private nonprofit entity that serves
microenterprise development organizations, or an Indian tribe
if it can certify that a nonprofit microenterprise development
does not exist in the area.
Section 176. Allocation of assistance; subgrants
This section provides that not less than seventy-five
percent of PRIME's funding shall be used for training and
technical assistance to microenterprise development
organization and not less than fifteen percent for capacity
building activities.
The legislation targets very low income entrepreneurs.
Specifically, this section requires that not less than fifty
percent of PRIME's grants be made to very low income persons.
Very low income person is defined as having an income, adjusted
for family size, of not more than 150 percent of the poverty
line.
This section requires diversity in the extension of grants
to ensure that grant recipients include both large and small
microenterprise organizations, serving urban, rural, and Indian
tribal communities and racially and ethnically diverse
populations.
Section 177. Matching requirements
This section provides matching requirements from sources
other than the Federal government equal to fifty percent of
each dollar provided by the CDFI Fund. Sources of matching
funds may include fees, grants, gifts, funds from loan sources,
or in the form of in-kind resources, grants, or loans to the
organization.
In the case of an applicant with severe economic
constraints on sources available for matching funds, the
Administrator may reduce or eliminate the matching requirement.
Not more than 10% of the total funds made available under the
Act may be excepted from the matching requirements.
Section 178. Applications for assistance
This section requires the CDFI Fund to establish procedures
for submission of applications for assistance.
Section 179. Recordkeeping
This section establishes recordkeeping requirements for
organizations that receive PRIME Act grants, including an
annual report in which the organization discloses its
activities, financial condition and its success in satisfying
the terms and conditions of its assistance agreement.
Section 180. Authorization
This section authorizes appropriations of $15 million for
fiscal year 2000, $25 million for fiscal year 2001, $30 million
for fiscal year 2002, and $35 million for fiscal year 2003.
Section 181. Implementation
This section gives the Treasury Secretary the authority to
carry out the PRIME Act.
Section 2. Administrative Expenses
Section 2 increases the CDFI Fund's authorized
administrative expenses from $5,550,000 to $6,100,000 to
accommodate administration of the PRIME Act.
Section 3. Conforming Amendments
This section makes technical and conforming amendments.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
THE RIEGLE COMMUNITY DEVELOPMENT AND REGULATORY IMPROVEMENT ACT OF 1994
* * * * * * *
TITLE I--COMMUNITY DEVELOPMENT AND CONSUMER PROTECTION
SUBTITLE A--COMMUNITY DEVELOPMENT BANKING AND FINANCIAL INSTITUTIONS
ACT
* * * * * * *
SEC. 104. ESTABLISHMENT OF NATIONAL FUND FOR COMMUNITY DEVELOPMENT
BANKING.
(a) * * *
* * * * * * *
(d) Advisory Board.--
(1) * * *
(2) Membership.--The Board shall consist of [15] 17
members, including--
(A) * * *
* * * * * * *
(G) [9] 11 private citizens, appointed by the
President, who shall be selected, to the
maximum extent practicable, to provide for
national geographic representation and racial,
ethnic, and gender diversity, including--
(i) 2 individuals who are officers of
existing community development
financial institutions;
(ii) 2 individuals who are officers
of insured depository institutions;
(iii) 2 individuals who are officers
of national consumer or public interest
organizations;
(iv) 2 individuals who have expertise
in microenterprises and microenterprise
development;
[(iv)] (v) 2 individuals who have
expertise in community development; and
[(v)] (vi) 1 individual who has
personal experience and specialized
expertise in the unique lending and
community development issues confronted
by Indian tribes on Indian
reservations.
* * * * * * *
(4) Board function.--It shall be the function of the
Board to advise the Administrator on the policies of
the Fund regarding activities under this subtitle and
subtitle C. The Board shall not advise the
Administrator on the granting or denial of any
particular application.
* * * * * * *
SEC. 121. AUTHORIZATION OF APPROPRIATIONS.
(a) Fund Authorization.--
(1) * * *
* * * * * * *
(2) Administrative expenses.--
(A) In general.--Of amounts authorized to be
appropriated to the Fund pursuant to this
section, not more than [$5,550,000] $6,100,000
may be used by the Fund in each fiscal year to
pay the administrative costs and expenses of
the Fund, including costs and expenses
associated with carrying out subtitle C. Costs
associated with the training program
established under section 109 and the technical
assistance program established under section
108 shall not be considered to be
administrative expenses for purposes of this
paragraph.
* * * * * * *
Subtitle C--Microenterprise Technical Assistance and Capacity Building
Program
SEC. 171. SHORT TITLE.
This subtitle may be cited as the ``Program for Investment in
Microentrepreneurs Act of 1999'', also referred to as the
``PRIME Act''.
SEC. 172. DEFINITIONS.
For purposes of this subtitle--
(1) the term ``Administrator'' has the same meaning
as in section 103;
(2) the term ``capacity building services'' means
services provided to an organization that is, or is in
the process of becoming a microenterprise development
organization or program, for the purpose of enhancing
its ability to provide training and services to
disadvantaged entrepreneurs;
(3) the term ``collaborative'' means 2 or more
nonprofit entities that agree to act jointly as a
qualified organization under this subtitle;
(4) the term ``disadvantaged entrepreneur'' means a
microentrepreneur that is--
(A) a low-income person;
(B) a very low-income person; or
(C) an entrepreneur that lacks adequate
access to capital or other resources essential
for business success, or is economically
disadvantaged, as determined by the
Administrator;
(5) the term ``Fund'' has the same meaning as in
section 103;
(6) the term ``Indian tribe'' has the same meaning as
in section 103;
(7) the term ``intermediary'' means a private,
nonprofit entity that seeks to serve microenterprise
development organizations and programs as authorized
under section 175;
(8) the term ``low-income person'' has the same
meaning as in section 103;
(9) the term ``microentrepreneur'' means the owner or
developer of a microenterprise;
(10) the term ``microenterprise'' means a sole
proprietorship, partnership, or corporation that--
(A) has fewer than 5 employees; and
(B) generally lacks access to conventional
loans, equity, or other banking services;
(11) the term ``microenterprise development
organization or program'' means a nonprofit entity, or
a program administered by such an entity, including
community development corporations or other nonprofit
development organizations and social service
organizations, that provides services to disadvantaged
entrepreneurs or prospective entrepreneurs;
(12) the term ``training and technical assistance''
means services and support provided to disadvantaged
entrepreneurs or prospective entrepreneurs, such as
assistance for the purpose of enhancing business
planning, marketing, management, financial management
skills, and assistance for the purpose of accessing
financial services; and
(13) the term ``very low-income person'' means having
an income, adjusted for family size, of not more than
150 percent of the poverty line (as defined in section
673(2) of the Community Services Block Grant Act (42
U.S.C. 9902(2), including any revision required by that
section).
SEC. 173. ESTABLISHMENT OF PROGRAM.
The Administrator shall establish a microenterprise technical
assistance and capacity building grant program to provide
assistance from the Fund in the form of grants to qualified
organizations in accordance with this subtitle.
SEC. 174. USES OF ASSISTANCE.
A qualified organization shall use grants made under this
subtitle--
(1) to provide training and technical assistance to
disadvantaged entrepreneurs;
(2) to provide training and capacity building
services to microenterprise development organizations
and programs and groups of such organizations to assist
such organizations and programs in developing
microenterprise training and services;
(3) to aid in researching and developing the best
practices in the field of microenterprise and technical
assistance programs for disadvantaged entrepreneurs;
and
(4) for such other activities as the Administrator
determines are consistent with the purposes of this
subtitle.
SEC. 175. QUALIFIED ORGANIZATIONS.
For purposes of eligibility for assistance under this
subtitle, a qualified organization shall be--
(1) a nonprofit microenterprise development
organization or program (or a group or collaborative
thereof) that has a demonstrated record of delivering
microenterprise services to disadvantaged
entrepreneurs;
(2) an intermediary;
(3) a microenterprise development organization or
program that is accountable to a local community,
working in conjunction with a State or local government
or Indian tribe; or
(4) an Indian tribe acting on its own, if the Indian
tribe can certify that no private organization or
program referred to in this paragraph exists within its
jurisdiction.
SEC. 176. ALLOCATION OF ASSISTANCE; SUBGRANTS.
(a) Allocation of Assistance.--
(1) In general.--The Administrator shall allocate
assistance from the Fund under this subtitle to ensure
that--
(A) activities described in section 174(1)
are funded using not less than 75 percent of
amounts made available for such assistance; and
(B) activities described in section 174(2)
are funded using not less than 15 percent of
amounts made available for such assistance.
(2) Limit on individual assistance.--No single
organization or entity may receive more than 10 percent
of the total funds appropriated under this subtitle in
a single fiscal year.
(b) Targeted Assistance.--The Administrator shall ensure that
not less than 50 percent of the grants made under this subtitle
are used to benefit very low-income persons, including those
residing on Indian reservations.
(c) Subgrants Authorized.--
(1) In general.--A qualified organization receiving
assistance under this subtitle may provide grants using
that assistance to qualified small and emerging
microenterprise organizations and programs, subject to
such rules and regulations as the Administrator
determines to be appropriate.
(2) Limit on administrative expenses.--Not more than
7.5 percent of assistance received by a qualified
organization under this subtitle may be used for
administrative expenses in connection with the making
of subgrants under paragraph (1).
(d) Diversity.--In making grants under this subtitle, the
Administrator shall ensure that grant recipients include both
large and small microenterprise organizations, serving urban,
rural, and Indian tribal communities and racially and
ethnically diverse populations.
SEC. 177. MATCHING REQUIREMENTS.
(a) In General.--Financial assistance under this subtitle
shall be matched with funds from sources other than the Federal
Government on the basis of not less than 50 percent of each
dollar provided by the Fund.
(b) Sources of Matching Funds.--Fees, grants, gifts, funds
from loan sources, and in-kind resources of a grant recipient
from public or private sources may be used to comply with the
matching requirement in subsection (a).
(c) Exception.--
(1) In general.--In the case of an applicant for
assistance under this subtitle with severe constraints
on available sources of matching funds, the
Administrator may reduce or eliminate the matching
requirements of subsection (a).
(2) Limitation.--Not more than 10 percent of the
total funds made available from the Fund in any fiscal
year to carry out this subtitle may be excepted from
the matching requirements of subsection (a), as
authorized by paragraph (1) of this subsection.
SEC. 178. APPLICATIONS FOR ASSISTANCE.
An application for assistance under this subtitle shall be
submitted in such form and in accordance with such procedures
as the Fund shall establish.
SEC. 179. RECORDKEEPING.
The requirements of section 115 shall apply to a qualified
organization receiving assistance from the Fund under this
subtitle as if it were a community development financial
institution receiving assistance from the Fund under subtitle
A.
SEC. 180. AUTHORIZATION.
In addition to funds otherwise authorized to be appropriated
to the Fund to carry out this title, there are authorized to be
appropriated to the Fund to carry out this subtitle--
(1) $15,000,000 for fiscal year 2000;
(2) $25,000,000 for fiscal year 2001;
(3) $30,000,000 for fiscal year 2002; and
(4) $35,000,000 for fiscal year 2003.
SEC. 181. IMPLEMENTATION.
The Administrator shall, by regulation, establish such
requirements as may be necessary to carry out this subtitle.
DISSENTING VIEWS
A new federal subsidized lending program to copy another
problem-ridden one should be rejected for a variety of reasons.
While the proponents of the bill may be well meaning, one
should make a distinction between intentions and results. The
initial government intervention in the private market (with
high taxes, overburdening regulation and easy credit) is the
cause of much of the problem, and it is what must be addressed.
Congress should, of course, recognize Constitutional restraints
and not interfere in local lending initiatives.
When I was sworn in as a U.S. Congressman, I pledged to
uphold the Constitution. This document detailed an agenda of
limited government: Article One, Section 8 (the enumerated
powers clause) and the ninth and tenth amendments (reserving to
the states and people those powers not specifically granted to
the federal government). A careful reading of the Constitution,
Bill of Rights, and Declaration of Independence make the
unconstitutional status of this vast expansion of federal
powers easy to discern.
H.R. 413, the PRIME Act, continues not only the expansion
of federal powers beyond the bounds set by the Constitution but
increases its unconstitutional expenditure by $15 million of
other people's money to create yet another new, wasteful
government program. And the amount is set to double in just two
years!
Whatever the merits or demerits of the idea of
microlending, the question before this body is whether we will
respect constitutional constraints and always remember that we
are allocating other people's money. The answer to the problem
of community development will not be found in Federal
government programs. Indeed, previous expenditures to fund an
increasing number of expanding programs has not solved the
problem. Yet the problem remains--to listen to the supporters
of this bill who call for ever-increasing funding for programs
that have not worked, the problem is actually worsening. It is
time to reject this approach and focus on sound fiscal and
monetary fundamentals as the best path to true community
development.
Ron Paul.
SUPPLEMENTAL VIEWS
We strongly support the goals of the Program for
Investments and Micro Entrepreneurs (``PRIME'') Act. It is
vital that we provide technical assistance and capacity
building to low-income and very low-income micro-entrepreneurs.
Technical assistance programs for micro-entrepreneurs, as
well as funding for these programs, are desperately needed.
Although the PRIME program was drafted to provide much-needed
assistance to low-income micro-entrepreneurs, it does not
address the largest issue confronting micro-enterprise
programs--the need for adequate funding. Funding for the SBA
Microloan program has historically been inadequate. Although
the authorization for the Microloan technical assistance
program has remained at $40 million since FY 1998, the
Administration requested only $16.5 million for the program in
FY 1998, and the Congress appropriated just over $12.9 million.
In FY 1999, the Administration again requested $16.5 million
and the Congress appropriated that same amount. In Fiscal Years
1998 and 1999, the SBA Microloan technical assistance program
has received only $17.4 million in total funding. This clearly
insufficient amount represents less than one-fourth of the
program's total authorized funding level during that period.
We are concerned that the PRIME program will be forced to
share already scarce funding with the SBA Microloan program,
creating two well-intention, but underfunded programs.
As members of the Banking Committee who also serve on the
Small Business Committee, we have spent a great deal of time
working to assist low- and moderate-income entrepreneurs which
programs like PRIME are targeted to assist. We are especially
concerned that this program complement--and not simply
duplicate--the services already provided by the Small Business
Administration, especially the 7(m) Microloan program.
The similarities between the proposed PRIME Act and the SBA
Microloan program are demonstrated by each program's statement
of purpose. As approved by the Committee, the PRIME program's
purpose is:
To authorize qualified organizations to provide
technical assistance and capacity building services to
micro enterprise and development organizations and
programs to disadvantaged entrepreneurs * * *
According to the statement of purpose for the SBA's
Microloan technical assistance and capacity building program,
as originally authorized in 15 U.S.C. Sec. 636 7(m), the
program's purpose is:
To make grants available to eligible nonprofit
entities that, together with non-Federal matching
funds, will enable such entities to provide intensive
marketing, management, and technical assistance to
assist low-income entrepreneurs and other low-income
individuals * * *
Because of the potential for duplication, we have several
concerns about how the PRIME program will work with existing
federal micro-enterprise technical assistance and capacity
building grant programs, especially those that already exist at
the Small Business Administration. We are hopeful that further
work will be done to ensure that PRIME works in conjunction
with existing programs, especially in the following areas:
coordination to allow prime to complement sba microloan program
We believe that, for PRIME to be successful, it is critical
that it build on the lessons learned by more experienced
federal program, such as SBA's Microloan program. By working in
concert with SBA to develop the regulations to implement the
PRIME program, CDFI will prevent any conflict or duplication.
As a result, this step will enable PRIME to operate more
efficiently and effectively. It would be unfortunate in this
time of budget restraints for Congress to create a new
government program, one that closely resembles an existing
program, while ignoring the lessons learned and the expertise
developed in the operation of a similar program.
Since the inception of the Microloan program, SBA has
learned what regulations are necessary to ensure the efficient
and effective operation of a technical assistance and capacity
building grant program. Since the PRIME program is
substantively similar to the existing SBA Microloan program, we
believe that CDFI and, in the end, the micro-enterprise
community could benefit from the expertise SBA has to offer in
developing the initial regulations for the program.
sba microloan technical assistance and capacity building programs
The PRIME Act holds the potential to complement and
supplement what the SBA Microloan program is currently doing. A
main component of the PRIME Act, as is the case with SBA's
Microloan program, is its focus on capacity building. It should
be noted that, in addition to the technical assistance SBA
provides with its 7(m) Microloan program, it has the ability to
provide technical assistance without the loan component.
Through its Non-lending Technical Assistance Provider
(``NTAP'') program, SBA can provide up to $125,000 in capacity
building loans--like the PRIME Act--for the specific purpose of
capacity building.
Because SBA has spent a considerable amount of time on the
areas targeted by the PRIME Act, namely technical assistance
and capacity building, it has cultivated a network of
experienced entrepreneurial intermediaries that have developed
critical expertise in serving the micro-entrepreneurial
community. To move forward with an entirely new program without
including or providing an incentive for the already existing
network of micro-intermediaries to participate would be a
detriment the micro-entrepreneurial community. If the PRIME Act
is to be successful, it must take into account the experience
of these intermediaries and provide a catalyst for them to
participate in this new program.
conclusion
Our greatest concern with the PRIME Act is that it has the
potential to duplicate existing federal programs. Therefore, we
urge that steps be taken to ensure this new program work in
concert with existing programs, especially those administered
by the SBA. If these steps are not taken, then it is likely
that a duplicative program will be created. As a result, two
underfunded programs will be operating, neither of which will
be serving the target community. This is especially of concern
since the Microloan program has been traditionally underfunded.
Specifically, we believe for PRIME to be successful that
CDFI should work with SBA to draft any regulations regarding
the PRIME Act. The Administration has developed a great deal of
expertise over the years with technical assistance and capacity
building, and their knowledge of the special needs of this type
of program is invaluable. At the same time, existing
intermediaries with experience in providing technical
assistance and capacity building to micro-enterprises must be
included in any new program. We believe that the ultimate goal
of any program of this nature must be to get technical
assistance to the nation's micro-entrepreneurs. The most
effective way to do this is to ensure that the Prime Act works
in conjunction with existing programs to provide our
entrepreneurs with the technical assistance and capacity
building they need to succeed.
Nydia M Velazquez.
Sue Kelly.
Rick Hill.
John E. Sweeney.
Donald A. Manzullo.
Dennis Moore.
Stephanie Tubbs Jones.
Charles A. Gonzalez.