House Report 107-433 - SMALL BUSINESS ADVOCACY IMPROVEMENT ACT OF 2002

[House Report 107-433]
[From the U.S. Government Publishing Office]

107th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 107-433

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

SMALL BUSINESS ADVOCACY IMPROVEMENT ACT OF 2002

_______

May 2, 2002.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed

_______

Mr. Manzullo, from the Committee on Small Business, submitted the
following

R E P O R T

together with

ADDITIONAL VIEWS

[To accompany H.R. 4231]

[Including cost estimate of the Congressional Budget Office]

The Committee on Small Business, to whom was referred the
bill (H.R. 4231) to improve small business advocacy, and for
other purposes, having considered the same, report favorably
thereon without amendment and recommend that the bill do pass.

Purpose of Legislation

The purpose of this legislation is to amend the Small
Business Act to strengthen and improve the Office of Advocacy
within the Small Business Administration and to ensure that
there exists an entity in the executive branch that has the
statutory independence and adequate financial resources to
effectively advocate for and on behalf of small businesses.

Background and Need for Legislation

There is abundant evidence, which has been the recurring
focus of hearings of this Committee, that the Nation's small
businesses continue to be burdened by excessive regulations and
that this burden falls disproportionately upon small
businesses. In his speech to the Women's Entrepreneurship
Summit, held in Washington, D.C., March 19, 2002, the President
underscored the complication encountered by small businesses in
doing business and the excessive costs that needless
regulations can place on small business concerns. In this
respect the President stated:
``There are a lot of federal regulations that complicate
the lives of small business people all across the country. The
SBA [Small Business Administration] has calculated that the
hidden costs of regulations to businesses with fewer than 20
workers * * * comes down to $7000 per worker. That's a lot of
money, particularly if you are trying to figure out ways to
expand the employment base. And this is a drag on our economy.
Hidden costs are a drag upon our economy.''
The President has pledged to clean up the regulatory burden
on small businesses. In line with this objective, an
independent office of small business advocacy will help to
ensure that federal agencies properly assess the impact of
proposed regulations on the small business community and comply
with the statutory obligations with respect to small business.
It is essential to Congress in performing its
constitutional duties and to the President in carrying out his
small business objectives that there is an office that acts as
an independent advocate for small businesses and can provide
unbiased views of present and proposed regulations, without
being restricted by the views or policies of the Small Business
Administration or any other federal executive branch agency.
To be effective, an office that acts as an advocate for
small businesses requires sufficient resources to conduct
creditable economic studies and research essential to an
accurate evaluation of the impact of regulations on small
businesses, the role of small business in the Nation's economy,
and the barriers to the growth of small businesses. In the
past, the Office of Advocacy has not had the necessary
resources. This legislation helps to ensure that resources are
available to support the independence of the office and to
assure that the research, information, and expertise provided
by an independent office of advocacy is a valid source of
information and advice for Congress and the federal agencies
with which the office will advocate for small businesses.

Summary of Legislation

The legislation makes certain amendments, briefly reviewed
in this summary, to Public Law 94-305 (15 U.S.C. 634a-634g) in
order to strengthen and improve the Office of Advocacy. The
Chief Counsel is to be appointed by the President, with the
advice and consent of the Senate, without regard to political
affiliation and solely on the grounds of fitness to perform the
duties of the office. During the history of the Office of
Advocacy, there have been extended periods where the position
of Chief Counsel has been vacant. To provide some degree of
continuity in office, a serving Chief Counsel may remain in
office, at the pleasure of the incumbent President, for one
year after a presidential term has expired.
Small business concerns owned and controlled women, by
veterans, and service-disabled veterans are added, as
applicable, to those small business concerns named as requiring
assistance as apart of the primary functions of the Office of
Advocacy. Minority owned small businesses are included in the
present provisions of the Act. In addition as a primary
function, the Chief Counsel is empowered to make
recommendations to the President and Congress with respect to
issues and regulations affecting small businesses.
As functions in addition to those presently mandated by
statute, the Office of Advocacy will be required to maintain
economic databases and share the information with Congress and
the Small Business Administration, and to enter into a
memorandum of understanding with the Small Business and
Agriculture Regulatory Enforcement Ombudsman to provide for
greater cooperation between the two offices.
Independence of the Office of Advocacy is contingent upon
needed resources which in the past have been diminished in the
executive branch budgetary review process administered by the
Office of Management and Budget. To ensure that such resources
are provided, the Chief Counsel is required to transmit to the
President annually estimated expenditures and proposed
appropriations for the Office of Advocacy, which the President
must include in the Budget without revision. This provision is
not without precedent. Other independent agencies within the
Executive Branch already have this authority, including the
International Trade Commission, to insure that their decisions
are truly independent and not influenced by any budgetary
manipulations.
The legislation would permit the appointment of two Deputy
Chief Counsels, one responsible for regulations and the other
for economic research and studies. The bill also defines the
duties of regional advocates, one in each of the ten Federal
regions. The Small Business Administration is required to
provide adequate office space, equipment, and personnel to the
Office of Advocacy.
The Chief Counsel is specifically required to report to the
President and Congress, at least annually, concerning federal
agency compliance with the Regulatory Flexibility Act. The
legislation reauthorizes the Office of Advocacy for a 3-year
period, i.e., $10,000,000 for fiscal year 2003, $12,000,000 for
fiscal year 2004, and $14,000,000 for fiscal year 2005.

Committee Action

The Committee held two hearings, one on March 12, 2001, and
another on March 20, 2002. Both hearings were directed at
receiving testimony and reviewing draft legislation as to how
to strengthen and make the Office of Advocacy more independent.
Following these hearings, H.R. 4231 was introduced by
Congressman Donald A. Manzullo (R-IL) for himself and
Congresswoman Nydia Velazquez (D-NY) on April 16, 2002, and was
referred to the Committee on Small Business. On April 17, 2002,
the Committee on Small Business met to consider the bill. There
were no amendments. The bill was ordered favorably reported by
voice vote.

Committee Votes

Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the recorded
votes on the motion to report legislation. There was no
recorded vote taken in connection with ordering H.R. 4231
reported.

Committee Oversight Findings

With respect to the requirements of clause 3(c)(1) of rule
XIII of the Rules of the House of Representatives, the
Committee's oversight findings are reflected in this report.

New Budget Authority, Entitlement Authority, and Tax Expenditures

With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives, and section
308(a) of the Congressional Budget Act of 1974, the Committee
references the report of the Congressional Budget Office
included below.

Statement of General Performance Goals and Objectives

With respect to the requirements of clause 3(c)(4) of rule
XIII of the Rules of the House of Representatives, the
performance goals and objectives of this legislation are to:
(a) reduce the unnecessary and excessive regulatory burden
disproportionately placed on small businesses by certain
federal agencies; (b) ensure that there exists an entity that
has the statutory independence and adequate financial resources
to effectively advocate for and on behalf of small businesses;
(c) improve the effectiveness of the Small Business and
Agriculture Regulatory Enforcement Ombudsman to resolve small
business issues by working in cooperation with the Office of
Advocacy; and, (d) collect and make available creditable
economic studies, research, and expertise for the accurate
assessment of the impact of regulations on small businesses,
the role of small businesses in the Nation's economy, and the
barriers of growth to small businesses.

Statement of Congressional Budget Office Estimate

With respect to the requirements of 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, the Committee has
received the cost estimate for H.R. 4231 from the Director of
the Congressional Budget office as follows:

U.S. Congress,
Congressional Budget Office,
Washington, DC, April 29, 2002.
Hon. Donald Manzullo,
Chairman, Committee on Small Business,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4231, the Small
Business Advocacy Improvement Act of 2002.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Ken Johnson.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.

H.R. 4231--Small Business Advocacy Improvement Act of 2002

H.R. 4231 would increase the amount authorized to be
appropriated under current law for the Office of Advocacy
within the Small Business Administration (SBA). The Office of
Advocacy researches and assesses the effect of federal programs
on small businesses and issues recommendations based on these
findings.
CBO estimates that implementing H.R. 4231 would cost $6
million in 2003 and $32 million during the 2003-2007 period,
assuming the appropriation of the authorized amounts. H.R. 4231
would not affect direct spending or receipts; therefore, pay-
as-you-go procedures would not apply.
H.R. 4231 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would not affect the budgets of state, local, or tribal
governments.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 4231 is shown in the following table.
The costs of this legislation fall within budget function 370
(commerce and housing credit). Based on information from the
SBA, CBO estimates that the Office of Advocacy will spend about
$7 million in 2002. However, under current law, only $1 million
a year is authorized to be appropriated for the office for
future years. H.R. 4231 would increase the authorization of
appropriations for the office to $10 million in 2003, $12
million in 2004, and $14 million in 2005. Estimated outlays are
based on historical spending patterns.

----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-----------------------------------------------------
2002 2003 2004 2005 2006 2007
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SPENDING SUBJECT TO APPROPRIATION

Spending for SBA's Office of Advocacy Under Current Law:
Authorization Level \1\............................... 7 1 1 1 1 1
Estimated Outlays \1\................................. 7 1 1 1 1 1
Proposed Changes:
Authorization Level................................... 0 9 11 13 0 0
Estimated Outlays..................................... 0 6 10 12 3 1
Spending for SBA's Office of Advocacy Under H.R. 4231:
Authorization Level \1\............................... 7 10 12 14 1 1
Authorization Level \1\............................... 7 7 11 13 4 2
----------------------------------------------------------------------------------------------------------------
\1\ The 2002 level is the estimated spending of the Office of Advocacy in that year.

Pay-as-you-go considerations: None.
Intergovernmental and private-sector impact: H.R. 4231
contains no intergovernmental or private-sector mandates as
defined in UMRA and would not affect the budgets of state,
local, or tribal governments.
Previous CBO estimate: On March 7, 2001, CBO transmitted a
cost estimate for S. 395, the Independent Office of Advocacy
Act of 2001, as ordered reported by the Senate Committee on
Small Business on March 1, 2001. S. 395 would authorize such
sums as are necessary for the Office of Advocacy, while H.R.
4231 would authorize specific amounts for 2003 through 2005.
Estimate prepared by: Federal Costs: Ken Johnson; Impact on
State, Local, and Tribal Governments: Susan Sieg Tompkins; and
Impact on the Private Sector: Cecil McPherson.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.

Federal Mandates Statement

The Committee adopts as its own the estimate of federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.

Preemption Clarification

Section 423 of the Congressional Budget Act of 1994
requires the report of any committee on a bill or joint
resolution to include a statement of the extent to which the
bill, or joint resolution is intended to preempt state, local,
or tribal law. Except to the extent the Office of Advocacy is a
federal entity, the Committee states that H.R. 4231 does not
preempt any state, local, or tribal law.

Advisory Committee Statement

No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.

Constitutional Authority Statement

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional authority for this legislation is provided in
Article I, section 8 of the Constitution of the United States,
which grants to Congress the power to enact this bill.

Applicability to Legislative Branch

The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.

Section-by-Section Analysis of the Legislation

Section 1. Short title

The short title is the ``Small Business Advocacy
Improvement Act of 2002.''

Section 2. Findings and purpose

The findings of Congress include the fact that excessive
regulations promulgated and proposed by federal agencies
continue to impose a disproportionate burden on small business;
that an entity within the executive branch to effectively
advocate for small business must be independent and not
restricted by views of the Small Business Administration or any
other federal executive branch agency; and, that to be
effective such an independent office needs adequate resources
to conduct creditable economic studies and research to be a
valuable source of information and advice for Congress and the
federal agencies with which the office will advocate on behalf
of small businesses.
The purpose of this Act are to: ensure that an entity
exists that has statutory independence and adequate resources
to effectively advocate for small businesses; require that the
independent office keep Congress informed about issues and
regulations affecting small business concerns and the necessity
for corrective action by a regulatory agency or Congress;
provide a separate authorization for appropriation for such an
entity; and, create greater cooperation between the Small
Business and Agriculture Regulatory Enforcement Ombudsman and
the independent office is assisting small businesses in
resolving issues plaguing one or more small businesses.

Section 3. Appointment of Chief Counsel for Advocacy

The Chief Counsel for Advocacy is to be appointed by the
President, with the advice and consent of the Senate, without
regard to political affiliation and solely on the grounds of
fitness to perform the duties of the office. An individual may
not be appointed who was employed by the Small Business
Administration during the 5-year period preceding the date of
such individual's appointment.
The position of Chief Counsel is raised from level IV to
level III of the Executive Schedule. A Chief Counsel may remain
in office, at the pleasure of the President, until a successor
is nominated, but in no instance longer than one year from the
end of a President's term. The present Chief Counsel is to
continue to serve, but the pay increase will be applicable to a
successor Chief Counsel.

Section 4. Primary functions of Office of Advocacy

This section adds assistance to small business concerns
owned and controlled by women and small business concerns owned
and controlled by veterans as primary functions of the Office
of Advocacy. Assistance to small business concerns owned and
controlled by socially and economically disadvantaged
individuals, or minority enterprises, is already a primary
function of the Office of Advocacy.
As a new primary function, the office of Advocacy is
required too make recommendations to Congress with respect to
issues and regulations affecting small businesses and the
necessity for corrective action by any federal agency or by
Congress.

Section 5. Additional functions

This section adds three additional functions to be
performed by the Office of Advocacy which are: (1) maintain
economic databases and make the information available to the
Administrator of the Small Business Administration and to
Congress; (2) carry out the responsibilities of the Chief
Counsel under the Regulatory Flexibility Act; and, (3) enter
into a memorandum of understanding with the Small Business and
Agriculture Regulatory Enforcement Ombudsman concerning
cooperation between the Ombudsman and the Office of Advocacy in
assisting small businesses resolve issues involving federal
agencies.
The Chief Counsel is given the authority to transmit to the
President the estimated expenditures and proposed
appropriations for the Office of Advocacy, which shall be
included by the President in the Budget without revision.

Section 6. Deputy Chief Counsels and regional advocates

The Chief Counsel may appoint 2 persons to serve as Deputy
Chief Counsels, one whose focus shall be in reducing the
regulatory burden on small businesses and the other responsible
for providing valid economic studies and reports. The Chief
Counsel may also appoint 10 regional advocates, one in each of
the Standard Federal Regions, as appropriate. The duties of the
regional advocates shall include: (1) furthering the research
efforts concerning small businesses; (2) interfacing with
Federal agencies that regulate or do business with small
businesses; (3) in coordination with the Small Business and
Agriculture Regulatory Enforcement Ombudsman, assisting the
functioning of regional small business fairness boards,
including, where requested, helping small businesses to resolve
matters that are subject of complaints made to such boards with
respect to adverse Federal agency action; (4) assisting in
disseminating information about programs and services that help
small business concerns; and, (5) performing such other duties
as the Chief Counsel shall assign.

Section 7. Overhead and administrative support

The Administrator of the Small Business Administration is
required to provide the Office of Advocacy with all necessary
office space, together with such equipment, office supplies,
communications facilities, and personnel and maintenance
services, as may be needed.

Section 8. Reports

The Chief of Counsel is required, not less than annually,
to advise Congress and the Administrator of the Small Business
Administration on whether Federal agencies are complying with
the Regulatory Flexibility Act. The Chief Counsel may prepare
and publish other reports as deemed necessary.

Section 9. Authorization for appropriations

The amounts authorized to be appropriated are $10,000,000
for fiscal year 2003, $12,000,000 for fiscal year 2004, and
$14,000,000 for fiscal year 2005.

Section 10. Conforming amendments

This section makes conforming amendments as required by
changes in this Act to strengthen and improve the Office of
Advocacy.

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):

ACT OF JUNE 4, 1976

(Public Law 94-305)

AN ACT To amend the Small Business Act and Small Business Investment
Act of 1958 to provide additional assistance under such Acts, to create
a pollution control financing program for small business, and for other
purposes.

* * * * * * *

TITLE II--STUDY OF SMALL BUSINESS

establishment

Sec. 201. (a) There is established within the Small Business
Administration an Office of Advocacy. [The management of the
Office shall be vested in a Chief Counsel for Advocacy who
shall be appointed from civilian life by the President, by and
with the advice and consent of the Senate.]
(b) The management of the Office shall be vested in a Chief
Counsel for Advocacy who shall be appointed from civilian life
by the President, by and with the advice and consent of the
Senate, without regard to political affiliation and solely on
the ground of fitness to perform the duties of the office.
(c) No individual may be appointed under subsection (b) if
such individual has served as an officer or employee of the
Small Business Administration during the 5-year period
preceding the date of such individual's appointment.
(d) Any Chief Counsel appointed after the date of the
enactment of this subsection shall be paid at a rate not to
exceed the rate of basic pay for level III of the Executive
Schedule.
(e) After the expiration of the term of a President, the
Chief Counsel may continue to serve at the pleasure of the
President for a period of not to exceed one year until such
date as a successor to the Chief Counsel is nominated.

study

Sec. 202. The primary functions of the Office of Advocacy
shall be to--
(1) * * *

* * * * * * *

(6) determine financial resource availability and to
recommend methods for delivery of financial assistance
[to minority enterprises] to small business concerns
owned and controlled by socially and economically
disadvantaged individuals, to small business concerns
owned and controlled by women, and to small business
concerns owned and controlled by veterans, including
methods for securing equity capital, for generating
markets for goods and services, for providing effective
business education, more effective management and
technical assistance, and training, and for assistance
in complying with Federal, State, and local law;
(7) evaluate the efforts of Federal agencies,
business and industry to assist [minority enterprises]
small business concerns owned and controlled by
socially and economically disadvantaged individuals,
small business concerns owned and controlled by women,
and small business concerns owned and controlled by
veterans;
(8) make such other recommendations as may be
appropriate to assist the development and strengthening
of [minority and other small business enterprises]
small business concerns owned and controlled by
socially and economically disadvantaged individuals,
small business concerns owned and controlled by women,
small business concerns owned and controlled by
veterans, and other small businesses;
(9) recommend specific measures for creating an
environment in which all businesses will have the
opportunity to [complete] compete effectively and
expand to their full potential, and to ascertain the
common reasons, if any, for small business successes
and failures;

* * * * * * *

[(11) advise, cooperate with, and consult with, the
Chairman of the Administrative Conference of the United
States with respect to section 504(e) of title 5 of the
United States Code; and]
[(12)] (11) evaluate the efforts of each department
and agency of the United States, and of private
industry, to assist small business concerns owned and
controlled by veterans, as defined in section 3(q) of
the Small Business Act (15 U.S.C. 632(q)), and small
business concerns owned and controlled by [serviced-
disabled] service-disabled veterans, as defined in such
section 3(q), and to provide statistical information on
the utilization of such programs by such small business
concerns, and to make appropriate recommendations to
the Administrator of the Small Business Administration
and to the Congress in order to promote the
establishment and growth of those small business
concerns[.]; and
(12) make recommendations and submit reports to the
President, to the Chairmen and Ranking Members of the
Committee on Small Business of the House of
Representatives and the Committee on Small Business and
Entrepreneurship of the Senate, and to the
Administrator of the Small Business Administration,
with respect to issues and regulations affecting small
businesses and the necessity for corrective action by
any Federal agency or by Congress.

duties

Sec. 203. (a) The Office of Advocacy shall also
perform the following duties on a continuing basis:
(1) * * *

* * * * * * *

(4) represent the views and interests of small
businesses before other Federal agencies whose policies
and activities may affect small business; [and]
(5) enlist the cooperation and assistance of public
and private agencies, businesses, and other
organizations in disseminating information about the
programs and services provided by the Federal
Government which are of benefit to small businesses,
and information on how small businesses can participate
in or make use of such programs and services[.];
(6) maintain economic databases and make the
information contained therein available to the
Administrator of the Small Business Administration and
to Congress;
(7) carry out the responsibilities of the Chief
Counsel under chapter 6 of title 5, United States Code;
and
(8) enter into a memorandum of understanding with the
Small Business and Agriculture Regulatory Enforcement
Ombudsman regarding methods and procedures for
cooperation between the Ombudsman and the Office of
Advocacy and transmit a copy of such memorandum to the
Committee on Small Business of the House of
Representatives and the Committee on Small Business and
Entrepreneurship of the Senate.
(b) On or before October 15 of the year preceding the
beginning of each fiscal year, the Chief Counsel shall transmit
to the President the estimated expenditures and proposed
appropriations for the Office of Advocacy, which shall be
included by the President in the Budget without revision.

staff and powers

Sec. 204. (a) In carrying out the provisions of this title,
the Chief Counsel for Advocacy may--
(1) * * *

* * * * * * *

(b)(1) The Chief Counsel may appoint 2 individuals to serve
as Deputy Chief Counsels.
(2) Notwithstanding any other provision of this section, the
pay rate for each Deputy Chief Counsel may not exceed the rate
of basic pay for level III of the Senior Executive Service.
(3) Individuals appointed to positions under this subsection
shall not be counted toward the limitation contained in
subsection (a)(1) regarding the number of individuals who may
be compensated at a rate in excess of the lowest rate for GS-15
of the General Schedule.
(c) The Chief Counsel may appoint regional advocates within
each Standard Federal Region as appropriate. Such regional
advocates shall--
(1) assist in examining the role of small business in
the economy of the United States by identifying
academic and other research institutions that focus on
small business concerns and linking these research
resources to research activities conducted by the
Office of Advocacy;
(2) assist in representing the views and interests of
small business concerns before Federal agencies whose
policies and activities may affect small business;
(3) in coordination with the Small Business and
Agriculture Regulatory Enforcement Ombudsman, assist
the functioning of regional small business fairness
boards;
(4) assist in enlisting the cooperation and
assistance of public and private agencies, businesses,
and other organizations in disseminating information
about the programs and services provided by the Federal
Government that are of benefit to small business
concerns and the means by which small business concerns
can participate in or make use of such programs and
services; and
(5) carry out such duties pursuant to the mission of
the Office of Advocacy as the Chief Counsel may assign.

assistance of government agencies

Sec. 205. (a) The Administrator of the Small Business
Administration shall provide the Office of Advocacy with
appropriate and adequate office space at central and field
office locations of the Administration, together with such
equipment, office supplies, communications facilities, and
personnel and maintenance services as may be necessary for the
operation of such offices.
(b) Each department, agency, and instrumentality of the
Federal Government is authorized and directed to furnish to the
Chief Counsel for Advocacy such reports and other information
as he deems necessary to carry out his functions under this
title.

reports

Sec. 206. [The Chief Counsel may from time to time prepare
and publish such reports as he deems appropriate. Not later
than one year after the date of enactment of this title, he
shall transmit to the Congress, the President and the
Administration, a full report containing his findings and
specific recommendations with respect to each of the functions
referred to in section 202, including specific legislative
proposals and recommendations for administration or other
action. Not later than 6 months after the date of enactment of
this title, he shall prepare and transmit a preliminary report
on his activities.]
(a) Not less than annually, the Chief Counsel shall submit to
the President, the Committee on Small Business of the House of
Representatives, the Committee on Small Business and
Entrepreneurship of the Senate, the Committee on Government
Affairs of the Senate, the Committee on Government Reform of
the House of Representatives, and the Committees on the
Judiciary of the Senate and the House of Representatives, and
the Administrator of the Small Business Administration a report
on agency compliance with chapter 6 of title 5, United States
Code.
(b) In addition to the reports required by this title, the
Chief Counsel may prepare and publish such other reports as the
Chief Counsel determines appropriate.
(c) The reports shall not be submitted to the Office of
Management and Budget or to any other Federal agency or
executivedepartment for any purpose prior to transmittal to the
Congress and the President.

authorization

Sec. 207. There are authorized to be appropriated [not to
exceed $1,000,000] $10,000,000 for fiscal year 2003,
$12,000,000 for fiscal year 2004, and $14,000,000 for fiscal
year 2005 to carry out the provisions of this title. Any sums
so appropriated shall remain available until expended.

* * * * * * *

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TITLE 5, UNITED STATES CODE

* * * * * * *

PART III--EMPLOYEES

* * * * * * *

Subpart D--Pay and Allowances

* * * * * * *

CHAPTER 53--PAY RATES AND SYSTEMS

* * * * * * *

SUBCHAPTER II--EXECUTIVE SCHEDULE PAY RATES

* * * * * * *

Sec. 5314. Positions at level III

Level III of the Executive Schedule applies to the following
positions, for which the annual rate of basic pay shall be the
rate determined with respect to such level under chapter 11 of
title 2, as adjusted by section 5318 of this title:
Solicitor General of the United States.

* * * * * * *

Chief Counsel for Advocacy, Small Business
Administration.

Sec. 5315. Positions at level IV

Level IV of the Executive Schedule applies to the following
positions, for which the annual rate of basic pay shall be the
rate determined with respect to such level under chapter 11 of
title 2, as adjusted by section 5318 of this title:
Deputy Administrator of General Services.

* * * * * * *

[Chief Counsel for Advocacy, Small Business
Administration.]

* * * * * * *

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SECTION 311 OF THE SMALL BUSINESS ADMINISTRATION REAUTHORIZATION AND
AMENDMENTS ACT OF 1990

SEC. 311. RURAL TOURISM TRAINING PROGRAM.

The [Chief Counsel for Advocacy] Administrator of the
Small Business Administration shall conduct training
sessions on the types of Federal assistance available
for the development of rural small businesses engaged
in tourism and tourism-related activities. Such
training sessions shall be conducted in conjunction
with the Office of Rural Affairs (established pursuant
to section 26 of the Small Business Act) and
appropriate personnel designated by each district
office of the Administration.

* * * * * * *

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SECTION 30 OF THE SMALL BUSINESS ACT

SEC. 30. OVERSIGHT OF REGULATORY ENFORCEMENT.

(a) * * *
(b) SBA Enforcement Ombudsman.--
(1) * * *
(2) The Ombudsman shall--
(A) * * *

* * * * * * *

(D) coordinate and report annually on the
activities, findings and recommendations of the
Boards to the Administrator and to the heads of
affected agencies; [and]
(E) provide the affected agency with an
opportunity to comment on draft reports
prepared under subparagraph (C), and include a
section of the final report in which the
affected agency may make such comments as are
not addressed by the Ombudsman in revisions to
the draft[.]; and
(F) enter into a memorandum of understanding
with the Office of Advocacy regarding methods
and procedures for cooperation between the
Ombudsman and the Office of Advocacy.

* * * * * * *

ADDITIONAL VIEWS

Democrats strongly support the goal of providing the Office
of Advocacy with a stronger voice in the formation of public
policy across the federal government. At the same time, it is
important to ensure the Office of Advocacy stays true to its
core mission of providing support to small businesses and
entrepreneurs. Other legislation that has been considered
significantly expanded the authority and duties of the Office
of Advocacy. The provisions in this legislation do not force
Advocacy into a much greater role--which could lead to a
decline in its effectiveness as an office.
Congress established the Office of Advocacy to be an
independent voice for small business in the formation of public
policy across the federal government. Advocacy focuses on
researching small business trends, characteristics, and
contributions to the economy. It also monitors Executive Branch
compliance with the Regulatory Flexibility Act.
The Office of Advocacy's responsibilities regarding agency
compliance with the Regulatory Flexibility Act are crucial to
fulfilling the intent of the statute. Small Business Committee
Democrats believe that the heart of the Regulatory Flexibility
Act lies in its own inherent flexibility. The flexibility of
the law is due to the fact that the Regulatory Flexibility Act
statutory terms are necessarily vague. This allows agencies to
tailor their regulatory alternatives and relief to their own
rules or policies. Agency interpretations vary widely--some
select a few regulations with obvious small business impacts
for Regulatory Flexibility Act analyses, while others analyze
the majority of their regulations but the analysis is usually
very limited. The Office of Advocacy exists to patrol these
interpretations and educate agencies about the implications
their actions have on small business.
Agency interpretations of the Regulatory Flexibility Act
should be developed and enforced with serious consideration.
The Regulatory Flexibility Act (RFA) as amended by the Small
Business Regulatory Enforcement Fairness Act (SBREFA) is
intended to give small businesses, small governments and small
non-profit enterprises a special opportunity to participate in
the development of regulations that significantly affect them.
Agencies need to focus their efforts and resources on the
select number of regulations that will have a truly significant
impact on a substantial number of small businesses. If too many
regulations are subject to the RFA's requirements, agencies
will be less likely (and less able) to devote substantial
resources to this task. Any RFA statutory clarifications should
be clear and targeted. Democrats believe that granting an
agency authority to define RFA/SBREFA terms or regulate certain
provisions of the act will likely work against the interests of
small businesses.
The Chief Counsel has a dual responsibility. First, he/she
must act as an independent watchdog for small business. Second,
he/she is also part of the President's Administration. These
two roles can be difficult to perform together without the risk
of undue influence from the Small Business Administration
(SBA), the Office of Management and Budget (OMB), or other
federal agencies. The influences from these offices may
compromise Advocacy's independence and freedom to take
positions that support small business, but may be contrary to
the Administration's policies or regulatory actions.
Given the nature of Advocacy's job, it could be called upon
to criticize federal government actions that are not in the
best interest of small businesses. This could create a natural
tension between the Office of Advocacy and OMB as well as other
federal agencies. For this reason, we believe that the Office
of Advocacy Improvement should have fiscal independence from
the Administration. The Office of Advocacy Improvement Act of
2002 stipulates that the budget request of the Chief Counsel
will be included in the President's budget without change.
Creation of a line item budget for the Office of Advocacy would
have still required Advocacy to negotiate with OMB for
resources through the budget pass-back process. This
legislation allows the Administration (i.e., OMB) and the
Office of Advocacy to be relieved from discussions regarding
budget allocations.
Earlier draft legislation granted the Office of Advocacy
the authority to issue regulations governing federal agency
compliance with the Regulatory Flexibility Act and promulgate
federal regulations to carry out the functions and duties of
the office. This would have been a significant expansion of the
current reach of Advocacy's authority. Democrats do not support
this effort because we believe it would dilute the mission of
the Office of Advocacy.
Previous legislative proposals have attempted to combine
the functions of the National Ombudsman and the Office of
Advocacy into a single, independent office. The Regulatory
Flexibility Act and the Small Business Regulatory Enforcement
Fairness Act have provisions relating to SBA's participation in
the rulemaking activities of the federal government at two
distinct phases: (1) during rule development and (2) after
final rule promulgation (final passage).
Congress directed the Office of Advocacy to participate in
the development of regulations that are likely to significantly
affect small businesses. This is accomplished through the Small
Business Advocacy Review Panel process (prior to rule proposal)
and through comments on proposed regulations during the public
notice and comment period.
To compliment the Office of Advocacy's efforts in the pre-
proposal phase of rulemaking, Congress created the Regulatory
Ombudsman to report on the enforcement activities of federal
agencies as they relate to small businesses after a regulation
is finalized. The Regulatory Flexibility Act, as amended by the
Small Business Regulatory Enforcement Fairness Act, directs the
Ombudsman to work with each agency to ensure that small
businesses are provided with a means to comment on the
enforcement activity of that agency, keep the identity of the
small business confidential, and rate agency responsiveness to
small business concerns.
Democrats recognize that working with federal agencies a
different stages of rulemaking necessitates a different type of
relationship with the agency and different types of skills and
resources. These functions need to be specialized in order to
be effective and they are best kept to different parts of the
Small Business Administration so they each can be guaranteed
adequate attention. In addition, the combination of pre- and
post-rule functions could create a conflict of interest within
a single office--if enforcement problems arise regarding a
particular regulation, it could be said that the pre-rule
advocates should have corrected this problem at the pre-rule
stage.
The funding levels provided in this legislation will enable
the Office of Advocacy to move forward in its effort to improve
and strengthen Advocacy's position and voice among the federal
agencies. Committee Democrats believe these funds are necessary
to support the Office of Advocacy's research functions to
report small business trends, characteristics, and
contributions to the economy.
In summary, Democrats support these targeted provisions to
make the SBA Office of Advocacy more independent from the
Administration and OMB. Having an independent Office of
Advocacy is more important than ever with an Administration
that places such emphasis on big businesses.

Nydia M. Velazquez.