[House Report 107-806]
[From the U.S. Government Publishing Office]
Union Calendar No. 507
107th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 107-806
======================================================================
SUMMARY OF ACTIVITIES
__________
A REPORT
of the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
January 2, 2003.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
COMMITTEE ON SMALL BUSINESS
DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas NYDIA VELAZQUEZ, New York
JOEL HEFLEY, Colorado JUANITA MILLENDER-McDONALD,
ROSCOE BARTLETT, Maryland, Vice California
Chair DANNY DAVIS, Illinois
FRANK LoBIONDO, New Jersey WILLIAM PASCRELL, New Jersey
SUE KELLY, New York DONNA CHRISTIAN-CHRISTENSEN,
STEVE CHABOT, Ohio Virgin Islands
PAT TOOMEY, Pennsylvania ROBERT BRADY, Pennsylvania
JIM DeMINT, South Carolina TOM UDALL, New Mexico
JOHN THUNE, South Dakota STEPHANIE TUBBS JONES, Ohio
MIKE PENCE, Indiana CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey DAVID PHELPS, Illinois
DARRELL ISSA, California GRACE NAPOLITANO, California
SAM GRAVES, Missouri BRIAN BAIRD, Washington
EDWARD L. SCHROCK, Virginia JAMES P. LANGEVIN, Rhode Island
FELIX J. GRUCCI, New York MIKE ROSS, Arkansas
TODD W. AKIN, Missouri BRAD CARSON, Oklahoma
SHELLEY MOORE CAPITO, West Virginia ANIBAL ACEVEDO-VILA, Puerto Rico
BUD SHUSTER, Pennsylvania
J. Douglas Thomas, Staff Director
Michael Day, Minority Staff Director
Nancy M. Piper, Chief Clerk
------
STANDING SUBCOMMITTEES
Subcommittee on Tax, Finance, and Exports
PAT TOOMEY, Pennsylvania, Chairman
STEVE CHABOT, Ohio BILL PASCRELL, Jr., New Jersey,
DARRELL ISSA, California Ranking
EDWARD SCHROCK, Virginia JAMES LANGEVIN, Rhode Island
TODD AKIN, Missouri GRACE NAPOLITANO, California
FRANK LoBIONDO, New Jersey ANIBAL ACEVEDO-VILA, Puerto Rico
JIM DeMINT, South Carolina DANNY K. DAVIS, Illinois
JOHN THUNE, South Dakota ROBERT A. BRADY, Pennsylvania
MIKE ROSS, Arkansas
------
Subcommittee on Workforce, Empowerment, and Government Programs
JIM DeMINT, South Carolina, Chairman
FRANK LoBIONDO, New Jersey JUANITA MILLENDER-McDONALD,
MIKE FERGUSON, New Jersey (California), Ranking
FELIX GRUCCI, New York DANNY K. DAVIS, Illinois
DARRELL ISSA, California STEPHANIE TUBBS JONES, Ohio
EDWARD SCHROCK, Virginia CHARLES A. GONZALEZ, Texas
SHELLY MOORE CAPITO, West Virginia MIKE ROSS, Arkansas
DONNA CHRISTIAN-CHRISTENSEN,
Virgin Islands
------
Subcommittee on Rural Enterprises, Agriculture, and Technology
JOHN THUNE, South Dakota, Chairman
ROSCOE BARTLETT, Maryland TOM UDALL, New Mexico, Ranking
FELIX GRUCCI, New York DONNA CHRISTIAN-CHRISTENSEN,
MIKE PENCE, Indiana Virgin Islands
BILL SHUSTER, Pennsylvania DAVID D. PHELPS, Illinois
BRAD CARSON, Oklahoma
------
Subcommittee on Regulatory Reform
MIKE PENCE, Indiana, Chairman
LARRY COMBEST, Texas ROBERT BRADY, Pennsylvania,
SUE KELLY, New York Ranking
SAM GRAVES, Missouri BILL PASCRELL, Jr., New Jersey
ROSCOE BARTLETT, Maryland CHARLES GONZALEZ, Texas
TODD AKIN, Missouri DAVID D. PHELPS, Illinois
PAT TOOMEY, Pennsylvania JAMES P. LANGEVIN, Rhode Island
ANIBAL ACEVEDO-VILA, Puerto Rico
LETTER OF TRANSMITTAL
----------
House of Representatives,
Committee on Small Business,
Washington, DC, January 2, 2003.
Hon. Jeff Trandahl,
Clerk, House of Representatives,
Washington, DC.
Dear Mr. Trandahl: On behalf of the Committee on Small
Business of the U.S. House of Representatives, I am pleased to
transmit the attached Summary of Activities of the Committee on
Small Business for the 107th Congress.
This report is submitted in compliance with the
requirements of Rule XI, clause 1(d), of the Rules of the House
of Representatives with respect to the activities of the
Committee, and in carrying out its duties as stated in the
Rules of the House of Representatives.
The purpose of this report is to provide a reference
document for Members of the Committee, the Congress and the
public which can serve as a research tool and historic
reference outlining the Committee's legislative and oversight
activities conducted pursuant to Rule X, clause 1(o), 2(b)(1)
and 3(g), of the Rules of the House of Representatives. This
document is intended to serve as a general reference tool, and
not as a substitute for the hearing records, reports and other
Committee files.
Sincerely,
Donald A. Manzullo,
Chairman.
C O N T E N T S
----------
Page
Chapter I--Introduction.......................................... 1
1.1 Historical Background.................................... 1
1.2 Extracts From the Rules of the House of Representatives.. 2
1.3 Number and Jurisdiction of Subcommittees................. 3
1.4 Disposition of Legislation Referred to the Committee..... 4
Chapter II--The Small Business Administration.................... 7
2.1 SBA Programs in General.................................. 7
2.2 SBA Business Loans....................................... 8
2.3 Disaster Assistance Loans................................ 9
2.4 Small Business Investment Companies...................... 9
2.5 Procurement Assistance................................... 10
2.6 Entrepreneurial Development.............................. 11
2.7 Surety Bond Guarantees................................... 12
2.8 Technology and Innovation................................ 13
2.9 Export Assistance........................................ 15
2.10 Office of Advocacy...................................... 15
Chapter III--Hearings and Meetings Held by the Committee on Small
Business and Its Subcommittees, 107th Congress................. 17
3.1 Full Committee........................................... 17
3.2 Subcommittee on Workforce, Empowerment, and Government
Programs................................................... 18
3.3 Subcommittee on Regulatory Reform and Oversight.......... 19
3.4 Subcommittee on Tax, Finance, and Exports................ 19
3.5 Subcommittee on Rural Enterprises, Agriculture and
Technology................................................. 20
Chapter IV--Publications of the Committee on Small Business and
Its Subcommittees, 107th Congress.............................. 21
4.1 Reports.................................................. 21
4.2 Hearings Records......................................... 21
Chapter V--Summary of Legislative Activities of the Committee on
Small Business, 107th Congress................................. 25
5.1 H.R. 1860, Small Business Technology Transfer Program
Reauthorization Act of 2001................................ 25
5.2 S. 1196, Small Business Investment Company Amendments Act
of 2001, Public Law 107-100................................ 28
5.3 H.R. 203, National Small Business Regulatory Assistance
Act of 2001................................................ 31
5.4 H.R. 2666, Vocational and Technical Entrepreneurship
Development of 2001........................................ 39
5.5 H.R. 2538, Native American Small Business Development Act 41
5.6 H.R. 4231, Small Business Advocacy Improvement Act of
2002....................................................... 44
5.7 H.R. 3230, Small Business Emergency Relief and Recovery
Act........................................................ 47
5.8 H.R. 2867, Small Business Opportunity Enhancement Act of
2002....................................................... 52
5.9 S. 174, Microloan Improvement Act of 2001................ 54
Chapter VI--Summary of Other Legislative Activities of the
Committee on Small Business.................................... 57
6.1 Committee Meetings....................................... 57
6.1.1 Organizational Meetings............................ 57
6.1.2 Oversight Plan for the 107th Congress.............. 57
6.2 Budget Views and Estimates............................... 61
6.2.1 Fiscal Year 2001 Budget............................ 61
6.2.2 Fiscal Year 2002 Budget............................ 69
Chapter VII--Summary of Oversight, Investigations, and Other
Activities of the Committee on Small Business.................. 79
7.1 Summary of Committee Oversight Plan and Implementation... 79
7.2 Summaries of the Hearings Held by the Full Committee on
Small Business.............................................
7.2.1 Improving and Strengthening the Office of Advocacy. 79
7.2.2 Pension Reform for Small Business.................. 80
7.2.3 A Tax Agenda for Small Business.................... 81
7.2.4 Black Beret Procurement: Business as Usual at the
Pentagon............................................... 83
7.2.5 Health Care Financing Administration Paperwork
Burdens: The Paperwork Reduction Act as a Prescription
for Better Medicine.................................... 85
7.2.6 FY 2002 Budget for the U.S. Small Business
Administration......................................... 86
7.2.7 Access to Capital.................................. 87
7.2.8 SBA Programs for Veterans and the National Veterans
Business Development Corporation....................... 89
7.2.9 Federal Prison Industries Procurement and Its
Effects on Small Business.............................. 90
7.2.10 What has Ex-Im Bank Done For Small Business
Lately?................................................ 91
7.2.11 Procurement Policies of the Pentagon with Respect
to Small Businesses and the New Administration......... 92
7.2.12 Field Hearing on Small Business Access to Health
Care................................................... 93
7.2.13 The Regulatory Morass at the Centers Medicare and
Medicaid Service: A Prescription for Bad Medicine...... 95
7.2.14 Federal Government Competition with Small
Businesses............................................. 97
7.2.15 Reducing Regulatory and Paperwork Burdens on Small
Healthcare Providers: Proposals From the Executive
Branch................................................. 99
7.2.16 Field Hearing, Small Business Views on Federal
Government Procurement and Other Programs.............. 100
7.2.17 Field Hearing, Challenges the Small,
Disadvantaged, and Minority Business Owners Face in the
Federal Procurement Arena.............................. 101
7.2.18 Field Hearing, Critical Small Business Issues
Affecting Long Island--Key Problems Facing the Island's
Small Businesses, and Potential Assistance or Solutions
Involving the Federal Government....................... 102
7.2.19 Field Hearing, Procurement Policies of the
Department of Defense With Regard to Small Businesses--
Finding Solutions to Problems That Exist............... 104
7.2.20 The Role Small Businesses Can Play in Jump-
Starting the Economy................................... 105
7.2.21 Impact of Financial and Professional Service
Exports on Small Business.............................. 106
7.2.22 Medicare Endorsed Prescription Drug Discount Cards
and Their Impact on Small Business..................... 108
7.2.23 National Sales Tax Holiday: How Will This Proposal
Impact America's Small Businesses?..................... 110
7.2.24 Main Street America to Learn How Small Businesses
are Surviving in the Present Economic Downturn and to
Examine the Impact of Federal Programs Designed to
Assist Small Businesses................................ 111
7.2.25 90 Days After September 11: How Are Small
Businesses Being Helped?............................... 112
7.2.26 Protecting Small Business and National Parks: The
Goals Are Not Mutually Exclusive....................... 114
7.2.27 Small Business Access to Health Care.............. 116
7.2.28 The President's Proposed Budget for the Small
Business Administration, FY 2003....................... 117
7.2.29 Disaster Loan Size Standards...................... 119
7.2.30 SBREFA Compliance: Is it the Same Old Story?...... 120
7.2.31 Subsidy Rate Calculation: An Unfair Tax on Small
Business?.............................................. 122
7.2.32 Making the Office of Advocacy Independent......... 123
7.2.33 Navigating the Small Business Environment:
Challenges and Opportunities........................... 124
7.2.34 Can Improved Compliance with the Regulatory
Flexibility Act Resuscitate Small Healthcare Providers? 125
7.2.35 Why Add an Interest Rate Hike on Our Struggling
Small Manufacturers?................................... 127
7.2.36 National Small Business Week: Small Business
Accomplishments........................................ 128
7.2.37 Pentagon Procurement Policies and Programs with
Respect to Small Business.............................. 130
7.2.38 CMS: New Name, Same Old Game?..................... 132
7.2.39 Impact of High Dollar Value on Small Exporters.... 134
7.2.40 How Limiting International Visitor Visa Hurts
Small Tourism Business................................. 134
7.2.41 Maximizing Organization and Leadership in a
Federal Agency to Fulfill its Statutory Mission:
Restructuring of the Small Business Administration..... 137
7.2.42 Unintended Consequences of Increased Tariffs on
American Manufacturers................................. 139
7.2.43 Small Business Access to Health Care.............. 140
7.2.44 Federal Procurement and International Trade:
Assessing the Federal Government's Efforts to Meet the
Needs of Local Small Businesses........................ 142
7.2.45 Lost Jobs, More Imports: Unintended Consequences
of Higher Steel Tariffs................................ 144
7.2.46 CMS Regulation of Healthcare Services............. 145
7.2.47 Federal Prison Industries' Unfair Competition with
Small Business: Potential Interim Administrative
Solutions.............................................. 147
7.3 Summaries of the Hearings Held by the Subcommittee on
Workforce, Empowerment, and Government Programs............ 148
7.3.1 Reauthorization of the Small Business Technology
Transfer Program (STTR)................................ 148
7.3.2 To Investigate the Legislation that Would Increase
the Extent And Scope of the Services Provided by Small
Business Development Centers........................... 149
7.3.3 Suggestions for Improvement in SBA Programs:
Veterans and Disaster Loans............................ 151
7.4 Summaries of the Hearings Held by the Subcommittee on
Regulatory Reform and Oversight............................ 152
7.4.1 Promoting Internet Entrepreneurship: Should the
Government Take Any Action?............................ 152
7.4.2 Broadband Access in Rural Areas.................... 154
7.4.3 Removing Red Tape from the Department of Labor's
Apprenticeship Approval Process........................ 157
7.4.4 September 11, 2001 Plus 30: Are America's Small
Businesses Still Grounded?............................. 158
7.4.5 Small Business Access to Competitive
Telecommunication Services............................. 161
7.4.6 EPA Rulemaking: Do Bad Analyses Lead to Irrational
Rules?................................................. 162
7.4.7 Issues in the Travel Agency Business............... 164
7.4.8 The Costs of Regulation to Small Business.......... 167
7.4.9 The TRI Lead Rule: Costs, Compliance, and Science.. 168
7.4.10 The Small Business Health Care Market: Bad
Reforms, Higher Prices, and Fewer Choices.............. 170
7.4.11 Federal Farm Programs: Unintended Consequences of
FAV Rules.............................................. 171
7.5 Summaries of the Hearings Held by the Subcommittee on
Rural Enterprises, Agriculture, and Technology Problems.... 173
7.5.1 Regrowing Rural America Through Value-added
Agriculture............................................ 173
7.5.2 Renewable Fuels.................................... 174
7.5.3 Small Business Access.............................. 175
7.5.4. Access to Health Care in Rural America............ 177
7.6 Summaries of the Hearings by the Subcommittee on Tax
Finance, and Exports....................................... 178
7.6.1 Access to Capital: Proposed Solutions for the
Capital Funding Needs of Start-up and Emerging Growth
Businesses............................................. 178
7.6.2 Trade Promotion Authority and Trade Adjustment
Assistance: How Will Small Business Exporters and
Farmers Benefit?....................................... 179
7.6.3 Farm and Ranch Risk Management Accounts (FARRM):
How Will Lehigh Valley Farmers Benefit?................ 180
7.6.4 Tax Relief: The Real Economic Stimulus for
America's Economy...................................... 181
7.6.5 How Can Technical Assistance Stimulate New Jersey's
Manufacturing Base?.................................... 182
7.6.6 Payroll Industry at Risk Due to ACH System Used for
Direct Deposit......................................... 183
Union Calendar No. 507
107th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 107-806
======================================================================
SUMMARY OF ACTIVITIES
_______
January 2, 2003.--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
SUMMARY OF ACTIVITIES
CHAPTER ONE
INTRODUCTION
This is the fourteenth summary report of the standing
Committee on Small Business. The action by the House of
Representatives in adopting the House Resolution 988 on October
8, 1974, provided that the committee be established as a
standing committee, and upgraded the Permanent Select Committee
on Small Business by giving the Committee legislative
jurisdiction over small business matters in addition to the
oversight jurisdiction it had historically exercised.
The adoption of the House rules in the 94th through 107th
Congress confirmed this action and continued the process begun
on August 12, 1941, when, by virtue of House Resolution 294
(77th Congress, 1st session), the Select Committee on Small
Business was created. In January 1971, the House designated the
Select Committee as a permanent Select Committee; and, on
October 8, 1974, the 93rd Congress, recognizing the importance
of the work performed on behalf of this nation's small
businesses, provided that the Committee should thereafter be
established as a standing committee.
1.1 Historical Background
The history of the Select Committee on Small Business from
its inception in 1941 during the 77th Congress through 1972,
the end of the 92nd Congress, may be found in House Document
93-197 (93rd Congress, 2nd session), entitled ``A History and
Accomplishments of the Permanent Select Committee on Small
Business.''
The Committee is bipartisan in recognition that the
nation's small business people represent a major segment of our
business population and our nation's economic strength. This
committee, continuing its vital oversight responsibilities,
serves as the advocate and voice for small business as well as
the focal point for small business legislation.
In recognition of the importance of the Committee, the
House of Representatives has established the Committee's
membership at 36 Members. The following Members were named to
constitute the Committee in the 107th Congress:
Republicans included:
Donald A. Manzullo (IL), Chairman; Larry Combest (TX);
Joel Hefley (CO); Roscoe Bartlett (MD), Vice Chairman;
Frank LoBiondo (NJ); Sue Kelly (NY); Steve Chabot (OH);
Patrick J. Toomey (PA); Jim DeMint (SC); John Thune
(SD); Mike Pence (IN); Mike Ferguson (NJ); Darrell E.
Issa (CA); Sam Graves (MO); Edward L. Schrock (VA);
Felix J. Grucci, Jr. (NY); Todd W. Akin (MO); Shelley
Moore Capito (WV); Bill Shuster (PA).
Democrats included:
Nydia M. Velazquez (NY), Ranking Minority Member;
Juanita Millender-McDonald (CA); Danny K. Davis (IL);
Bill Pascrell, Jr. (NJ); Donna Christian-Christensen
(VI); Robert Brady (PA); Tom Udall (NM); Stephanie
Tubbs Jones (OH); Charles Gonzalez (TX); David Phelps
(IL); Grace F. Napolitano (CA); Brian Baird (WA); Mark
Udall (CO); James P. Langevin (RI); Mike Ross (AR);
Brad Carson (OK); Anibal Acevedo-Vila (PR).
1.2 Extracts From the Rules of the House of Representatives
------
RULE X
ORGANIZATION OF COMMITTEES
Committees and Their Legislative Jurisdictions
1. There shall be in the House the following standing committees,
each of which shall have the jurisdiction and related functions
assigned by this clause and clauses 2, 3, and 4. All bills,
resolutions, and other matters relating to subjects within the
jurisdiction of the standing committees listed in this clause shall be
referred to those committees, in accordance with clause 2 of rule XII,
as follows:
* * * * * * *
(o) Committee on Small Business.
(1) Assistance to and protection of small business, including
financial aid, regulatory flexibility, and paperwork reduction.
(2) Participation of small-business enterprises in Federal
procurement and Government contracts.
GENERAL OVERSIGHT RESPONSIBILITIES
2. (b)(1) In order to determine whether laws and programs
addressing subjects within the jurisdiction of a committee are being
implemented and carried out in accordance with the intent of Congress
and whether they should be continued, curtailed, or eliminated, each
standing committee (other than the Committee on Appropriations) shall
review and study on a continuing basis--
(A) The application, administration, execution, and
effectiveness of laws and programs addressing subjects within
its jurisdiction;
(B) The organization and operation of Federal agencies and
entities having responsibilities for the administration and
execution of laws and programs addressing subjects within its
jurisdiction;
(C) any conditions or circumstances that may indicate the
necessity or desirability of enacting new or additional
legislation addressing subjects within its jurisdiction
(whether or not a bill or resolution has been introduced with
respect thereto); and
(D) future research and forecasting on subjects within its
jurisdiction.
(2) Each committee to which subparagraph (1) applies having more
than 20 members shall establish an oversight subcommittee, or require
its subcommittees to conduct oversight in their respective
jurisdictions, to assist in carrying out its responsibilities under
this clause. The establishment of an oversight subcommittee does not
limit the responsibility of a subcommittee with legislative
jurisdiction in carrying out its oversight responsibilities.
(c) Each standing committee shall review and study on a continuing
basis the impact or probable impact of tax policies affecting subjects
within its jurisdiction as described in clauses 1 and 3.
SPECIAL OVERSIGHT FUNCTIONS
* * * * * * *
3. (k) The Committee on Small Business shall study and investigate
on a continuing basis the problems of all types of small business.
1.3 Number and Jurisdiction of Subcommittees
There will be four subcommittees as follows:
--Workforce, Empowerment and Government Programs (seven
Republicans and six Democrats)
--Regulatory Reform and Oversight (seven Republicans and six
Democrats)
--Rural Enterprises, Agriculture and Technology (five
Republicans and four Democrats)
--Tax, Finance and Exports (eight Republicans and seven
Democrats)
During the 107th Congress, the Chairman and ranking minority member
shall be ex officio members of all subcommittees, without vote, and the
full committee shall have the authority to conduct oversight of all
areas of the committee's jurisdiction.
In addition to conducting oversight in the area of their respective
jurisdiction, each subcommittee shall have the following jurisdiction:
WORKFORCE, EMPOWERMENT AND GOVERNMENT PROGRAMS
Oversight and investigative authority over problems faced by small
businesses in attracting and retaining a high quality workforce,
including but not limited to wages and benefits such as health care.
Promotion of business growth and opportunities in economically
depressed areas.
Oversight and investigative authority over regulations and other
government policies that impact small businesses located in high risk
communities.
Opportunities for minority, women, veteran and disabled-owned small
businesses, including the SBA's 8(a) program.
General oversight of programs targeted toward urban relief.
Small Business Act, Small Business Investment Act, and related
legislation.
Federal Government programs that are designed to assist small
business generally.
Participation of small business in Federal procurement and
Government contracts.
REGULATORY REFORM AND OVERSIGHT
Oversight and investigative authority over the regulatory and
paperwork policies of all Federal departments and agencies.
Regulatory Flexibility Act.
Paperwork Reduction Act.
Competition policy generally.
Oversight and investigative authority generally, including novel
issues of special concern to small business.
RURAL ENTERPRISES, AGRICULTURE AND TECHNOLOGY
Promotion of business growth and opportunities in rural areas.
Oversight and investigative authority over agricultural issues that
impact small businesses.
General oversight of programs targeted toward farm relief.
Oversight and investigative authority for small business technology
issues.
TAX, FINANCE AND EXPORTS
Tax policy and its impact on small business.
Access to capital and finance issues generally.
Export opportunities and oversight over Federal trade policy and
promotion programs.
The adoption of the House Rules in the 94th through the
107th Congresses confirmed this action and continued the
process begun on August 12, 1941, when, by virtue of House
Resolution 294 (77th Congress, 1st session), the Select
Committee on Small Business was created. In January 1971, the
House designated the Select Committee as a Permanent Select
Committee; and, on October 8, 1974, the 93rd Congress,
recognizing the importance of the work performed on behalf of
this nation's small businesses, provided that the Committee
should thereafter be established as a standing committee.
1.4 Disposition of Legislation Referred to the Committee
A total of 57 House bills and 5 Senate bills were referred
to the Committee on Small Business during the 107th Congress.
The Committee acted on 10 bills, of which 6 reports were filed.
Four bills on which the Committee acted upon were signed into
law either individually or as part of broader legislation. For
a more detailed summary of the Committee's legislative
activities, please refer to Chapter Five of this report.
Because the Committee passed a three-year reauthorization
for the Small Business Administration (SBA) during the 106th
Congress in 2000, there was not a great need to pass new
legislation. Only one program needed to be reauthorized in the
107th Congress--the Small Business Technology Transfer (STTR)
program--which the Committee did in 2001 (P.L. 107-50).
In response to the terrorist attacks of September 11, 2001,
the Committee passed H.R. 3230 on November 14, 2001. The
essential emergency elements of H.R. 3230 were incorporated
into the Department of Defense Appropriations and Emergency
Supplemental Act of 2002 (P.L. 107-117).
The Committee also ensured that the Small Business
Investment Company Amendments Act of 2001 (S. 1196)
expeditiously became law (P.L. 107-100), bypassing formal
committee action and taking the bill up directly from the
Senate and onto the House floor.
The Committee waived jurisdiction over the Small Business
Paperwork Relief Act (H.R. 327) in order to move the process
along to ensure that this bill would become law (P.L. 107-198).
Four bills on which reports were filed and passed the House
did not see timely action by the Senate (H.R. 203, H.R. 2538,
H.R. 2666, and H.R. 4231).
One bill, for which a Committee report was filed, did not
see action on the House floor (H.R. 2867). One Senate bill that
the Committee acted upon did not see action on the House floor
(S. 174) in deference to a request from the Minority-side of
the Committee.
Finally, while not counted in the overall total, it is
important to note that the Committee waived the formal process
of a mark-up and did not have any objection to placing either
H.R. 5645 or S. 3172, which dealt with the same subject, on the
unanimous consent calendar prior to adjournment but was unable
to because of an objection from one other Member.
For a summary of the Committee's legislative activities,
please refer to Chapter Five of this report.
CHAPTER TWO
THE SMALL BUSINESS ADMINISTRATION
The Committee has both legislative and oversight
jurisdiction over the Small Business Administration (SBA),
which was created in 1953, inter alia, to provide opportunities
for entrepreneurship, inventiveness, and the creation and
growth of small businesses; to provide procurement assistance
to small businesses seeking to contract with the federal
government; to help assure the availability of capital to small
businesses; and, to provide assistance to victims of disasters.
During the 107th Congress, the Committee held a number of
hearings that focused on the mission and performance of the
SBA. With the tragic events of September 11, 2001 and the
unprecedented terrorist attacks upon the United States, the
Committee was especially concerned with the SBA's response in
providing assistance to those small businesses directly and
indirectly affected by terrorism. A review of the legislative
activities of the Committee appears in Chapter Five and a
synopsis of the hearings held by the Committee may be found in
Chapter Seven of this report.
The major programs of the SBA are briefly described below.
2.1 SBA Programs in General
SBA has approximately 2,100 employees in the field, 700 at
the headquarters in Washington, D.C., and 1,300 full and part-
time employees in the disaster assistance program. There are 10
regional offices, 84 district and branch offices, more than
1,100 service outlets, 6 area offices, and 3 loan processing
centers. It provides loan guarantees, direct loans for physical
damage and economic injury to disaster victims, assistance to
small businesses who are seeking to compete in the federal
procurement arena and to obtain contracts, as well as
management, marketing and technical assistance provided by
Small Business Development Centers (SBDCs), and the Senior
Corps of Retired Executives (SCORE). It also administers a
surety bond program for small businesses that are not able to
obtain bonding elsewhere.
An independent entity within SBA, the Office of Advocacy,
headed by the Chief Counsel for Advocacy appointed by the
President with the advice and consent of the Senate, serves as
an advocate for small businesses both in the legislative and
executive branches of government. The SBA also oversees the
implementation of the Small Business Innovation Research and
Small Business Technology Transfer programs that provide
research and development opportunities for small businesses.
2.2 SBA Business Loans
One of the major purposes for SBA is to help assure that
capital is available to small businesses that demonstrate the
ability to repay but are otherwise unable to obtain credit.
Subject to appropriations, loans are made for a wide variety of
purposes, such as plant acquisition, construction, conversion
or expansion, including acquisition of land, material,
supplies, equipment, and working capital. SBA administers three
major loan programs known as the 7(a), 504, and microloan
programs.
SBA's largest business loan guarantee program is the 7(a)
loan program. In FY2001, 42,957 7(a) loans were made in the
amount of approximately $9.9 billion and in FY2002 there were
52,666 such loans made in the amount of $12.2 billion. Banks
and other lending institutions make loans and the SBA
guarantees up to $1,000,000 ($1,250,000 in the case of lending
for certain export purposes) of a private sector loan of up to
$2,000,000. Generally, the SBA guarantees up to 85 percent of
loans of $150,000 or less, and 75 percent of loans greater than
$150,000.
In response to the tragic events of September 11, Public
Law 107-117 appropriated $75,000,000 to reduce fees for small
businesses adversely affected by the terrorist attacks. There
were 4,897 loans made to small businesses under the provisions
of this law (known as the ``STAR'' program loans) in the amount
of $1.9 billion.
Cuts were made in the annual on-going fees charged to such
lenders from 0.50 percent (50 basis points) to 0.25 percent (25
basis points). In addition, Public Law 107-100 made changes
with respect to loans approved during the 2-year period
beginning on October 1, 2002, i.e., the upfront guarantee fees
charged to borrowers were reduced for loans in the total amount
of not more than $700,000 and the annual guarantee fee paid by
lenders was reduced by 50 percent.
The 504-loan program was established to encourage economic
development, create and preserve job opportunities, and foster
growth and modernization of small businesses. A small business
may apply to a Certified Development Company (CDC), licensed by
SBA, to finance part of a proposed 504 project. The SBA
guarantees debentures of up to $1,000,000 ($1,300,000 where
certain economic redevelopment objectives are met). The
guarantees are for 100 percent of the debenture that represents
40 percent of the total project costs. The balance of the costs
is provided by a 10 percent or more contribution by the
borrower, and a private sector loan to finance the remaining 50
percent. In FY2001, CDCs made 5,213 504 loans totaling $2.3
billion and in FY2002, CDCs made 5,480 504 loans totaling $2.5
billion.
The Microloan program is designed to provide capital to
small enterprises. The program has two types of loans, i.e.,
direct and guaranteed. SBA directly provides loans to 165
intermediaries who in turn make loans of up to $35,000 to small
businesses. Also SBA guarantees 100 percent of loans to the
intermediaries by banks. SBA funds grants to intermediaries and
other qualified organizations to provide marketing, management,
and technical assistance to borrowers. In FY2001, intermediary
lenders made 2,295 loans in the amount of $31,800,000. In
FY2002, intermediary lenders made 2,532 loans in the amount of
$35,794,500.
2.3 Disaster Assistance Loans
Under the Disaster Assistance program, SBA makes direct
loans rather than loan guarantees. There are three kinds of
disaster loans: (1) home disaster loans, (2) physical disaster
business loans, and (3) economic injury business loans. The
owner of a home may apply for a home disaster loan to cover
physical damage to his or her primary residence and personal
property, and those not owning their primary residence may
apply for a loan with respect to physical loss of their
personal property. Almost any business, non-profit entity, or
charity (big or small) whose real or personal property was
damaged in a declared disaster may apply for a physical
disaster business loan.
A small business located in a declared disaster area may
apply for an economic injury disaster loan, if the small
business has suffered a substantial economic loss as a direct
result of the disaster that prevents it from meeting its
obligations as they mature or to pay its ordinary and necessary
operating expenses. A small business whose owner or an
essential employee is a Military Reservist or a member of the
National Guard may apply for an economic injury disaster loan,
if the small business has suffered or is likely to suffer
substantial economic injury as a result of the individual's
absence while on active duty during a period of a military
conflict existing on or after March 24, 1999.
SBA received an additional $75,000,000 to fund $583,000,000
in disaster assistance loans resulting from the tragic events
of September 11. With respect to such loans, Congress enacted
into law changes in the program to: allow non-profit and non-
depository institutions to apply for physical injury disaster
loans; give discretion to the Administrator to raise the small
business size standards to permit more businesses to qualify as
small businesses and to be eligible for economic injury
disaster loans, especially those in the New York City
metropolitan area; defer payment of principal and interest for
two rather than the usual 1-year period; and, raise the maximum
amount that can be borrowed from $1,500,000 to $10,000,000.
Since September 11, 2002 and up to the end of FY2002, SBA has
approved over 10,000 disaster loans and has disbursed over
$800,000,000 in loan funds.
2.4 Small Business Investment Companies
SBA licenses and regulates venture capital companies that
specialize in financing, through debt or equity, in small
businesses. These Small Business Investment Companies (SBICs)
provide equity capital or long-term financing and may provide
technical and managerial assistance. Public Law 107-100, signed
into law by the President on December 21, 2001, allows the SBIC
program to operate without appropriated funds for FY2002 and
still provide access to capital for small businesses.
Capital for investment has been raised traditionally by
investors in an SBIC and by debentures guaranteed as to both
principal and interest by SBA (which usually are equal to 2 or
3 times the SBIC's private capital). SBICs relying upon
debenture leverage primarily invest in debt securities of small
businesses that have cash flows sufficient to service the
outstanding debentures. SBA guaranteed $486,714,000 in
debentures in FY2001, and $328,625,000 in FY2002.
In 1992, legislation was enacted instituting a new SBIC
program involving participating securities. SBA guarantees the
principal and pays the purchasers of participating securities
the interest as it comes due on behalf of a SBIC. When the SBIC
becomes profitable, the SBIC repays SBA the interest advanced
and a share of the profits. The participating securities
program permits investment in new enterprises that do not have
established records of profitability. In FY2001, $4.46 billion
was made in equity investments to 2,254 small businesses. In
FY2002, $2.66 billion in equity investments were made to 1,982
small businesses.
The New Markets Venture Capital (NMVC) program, enacted
into law in 2000, provides capital to small enterprises located
in low-income areas. SBA can enter into participation
agreements with newly formed venture capital companies and
guarantees securities to allow them to make equity investments
in small businesses located in low-income areas. In addition,
SBA can make grants to NMVC SBICs so that they can provide
managerial assistance to small businesses in which they have
invested. SBA guaranteed no NMVC program debentures in FY2001
since no NMVC SBICs had completed the licensing process in that
fiscal year. In FY2002, one NMVC license was issued and the
licensee invested $500,000 in one business. One debenture was
guaranteed in the amount of $1,150,000.
2.5 Procurement Assistance
SBA is tasked with the responsibility of helping small
businesses get their fair share of the total prime contract and
subcontracting dollars spent by federal agencies for goods,
services, property, and construction. By statute small business
are expected to receive at least 23 percent of the total value
of all prime contracts awarded for each fiscal year. Other
Government-wide minimum goals are established by statute for
small business concerns owned and controlled by service-
disabled veterans, 3 percent; qualified HUBZone small business
concerns, 3 percent (FY2003 and thereafter); small business
concerns owned and controlled by socially and economically
disadvantaged (SDB) individuals, 5 percent; and, small business
concerns owned and controlled by women, 5 percent.
SBA Procurement Center Representatives (PRCs), generally
located at federal agencies that have major procurement
activities, are tasked with the responsibilities of identifying
contracting opportunities for small businesses, attempting to
break up large bundled contracts so that small businesses can
participate as prime contractors, and assisting small
businesses in competing for government contracts. SBA
Commercial Market Representatives (CMRs) assist small
businesses in obtaining subcontracts with prime contractors who
have submitted subcontracting plans with federal agencies. SBA
certifies small businesses as eligible for the 8(a), SDB, and
HUBZone programs. Also, SBA is authorized to certify to a
contracting officer that a small business is competent to
perform a particular government procurement (or sale) contract.
The electronic Procurement Marketing and Access Network
(PRONET) permits small businesses to list their capabilities on
the Internet and is the official database of firms certified
under the 8(a), SDB, and HUBZone programs. However, PRONET does
not provide contracting opportunities directly to small
businesses listed. SBA sets size standards that define whether
a business entity is small and eligible under federal programs
and preferences reserved for small businesses. Size standards
are established for types of business activities, generally,
under theNorth American Industry Classification System (NAICS).
Business development assistance is provided under 7(j) of the Small
Business Act to small businesses owned and controlled by economically
and socially disadvantaged individuals.
2.6 Entrepreneurial Development
The SBA's economic assistance programs support those
seeking to start a business, and those desiring to grow and
expand an existing small business, by providing individual
counseling, management training, procurement and marketing
assistance, and with guidance materials and workshops.
Assistance is provided at service locations throughout the
United States, Puerto Rico, and the U.S. Virgin Islands, and
electronically by means of various Internet sites. The
facilities that deliver entrepreneurial development assistance
include: approximately 1,100 SBDCs, 11,500 SCORE volunteers, 78
Business Information Centers (BICs), 16 Tribal Business
Information Centers (TBICs), 4 Veterans Business Outreach
Centers, and 83 Women's Business Centers (WBCs).
SBDCs are funded by both federal and state appropriations.
The SBA administers the program through grants generally to
state governments and agencies. Most SBDCs are affiliated with
state college and university systems. They assist small
businesses and aspiring entrepreneurs with business problems
concerning, e.g., personnel administration, marketing, sales,
merchandising, finance, accounting, business management, and
participation in international markets. SBDCs may not charge a
fee for counseling services. Modest fees are charged for
workshops and business related training and courses.
SCORE has 389 chapter locations where volunteer counselors
provide practical business advice and training services to over
375,000 clients annually. All counseling is provided free of
charge to clients. Annual congressional appropriations are used
to reimburse counselors for mileage and incidental expenses. E-
mail counseling is provided over the Internet. The network of
BICs is established through partnerships between the SBA and
for-profit entities, other agencies, and non-profit
organizations. BICs provide up-to-date computer technology,
hardware and software, and a large library of business related
publication and videos. On-site counseling in many BICs are
provided by SCORE volunteers and SBDC counselors
WBCs provide assistance and one-on-one counseling to women
entrepreneurs with respect to technology, financial and
management planning and problem solving, access to capital,
marketing, business administration, and selling to the federal
government. The Online Women's Business Center provides around-
the-clock Internet access to business information to help start
a business, resolve business problems, or grow an existing
enterprise through federal contracting or exporting
opportunities.
The National Women's Business Council is a source of
independent advice to the President, federal agencies, and
Congress with regard to entrepreneurship and the impact of
federal polices and programs upon women who want to start and
grow business enterprises. The council has focused on issues
involving the award of federal prime contracts and subcontracts
to women-owned small businesses and barriers to women
entrepreneurs obtaining access to credit and investment
capital.
Veterans Business Outreach Centers provide veterans and
service-disabled veterans with assistance in gaining access to
capital, resolving business and management problems, and
starting and growing small businesses. In addition, SBA has
entered into agreements with the Association of Small Business
Development Centers, the Department of Labor, and the
Department of Veterans Affairs to provide outreach and needed
business administration and entrepreneurial services to
veterans and service-disabled veterans.
SBA is planning to replace the present TBIC program with
the Native American Economic Development program that is
designed to address the special needs of the 2,500,000 Native
Americans and Alaskan Natives. The average unemployment rate on
reservations in 1999 was 43 percent and on some reservations
can be as high as 70 percent. Development of business skills
can be a major factor in resolving the present high
unemployment rate. However, technical assistance was provided
in only six states.
2.7 Surety Bond Guarantees
Small business contractors and subcontractors who seek
public and private construction contracts are often required to
furnish surety bonds guaranteeing the completion of the
contracted work. The SBA provides assistance to such
contractors by extending guarantees of up to 90 percent to
surety insurance companies. These guarantees enable small
contractors to obtain bonding more easily. The SBA's bonding
assistance is accomplished through the Prior Approval Program
or the Preferred Surety Bond Program. Bid bonds as well as
performance and/or payment bonds may be guaranteed on contracts
up to $2,000,000.
The SBA will pay a surety participating in the Prior
Approval Program 90 percent of a loss incurred if: (1) the
total amount of the contract is $100,000 or less; and (2) the
bond was issued on behalf of a small business owned and
controlled by socially and economically disadvantaged
individuals or is a qualified HUBZone small business concern.
Otherwise, SBA will pay a surety in an amount not to exceed an
administrative ceiling of 80 percent of a loss on bonds issued
to other than disadvantaged and HUBZone concerns in excess of
$100,000. Under the Preferred Surety Bond program, the SBA's
guarantee is limited to 70 percent of the bond for all small
businesses on contracts that do not exceed a face value of
$1,250,000. In FY2001, SBA provided 6,320 bid and final bond
guarantees on contracts valued at $1.4 billion. In FY2002, SBA
provided 7,372 bid and final bond guarantees on contracts
valued at $1.76 billion.
2.8 Technology and Innovation
It is the free enterprise system, and not government
programs, that make the United States the world leader in
innovation and technology. Small businesses are at the
forefront of research and development and have been more
prolific in creating new jobs through innovation and
technology. However, there are two government programs, the
Small Business Innovation Research (SBIR) and the Small
Business Technology Transfer (STTR) programs, which have
successfully provided innovative research and developed
products for government and commercial use.
SBA's Office of Technology provides oversight, monitoring,
evaluation, and reporting for these programs. In FY2001, SBA
awarded approximately 30 cooperative agreements in the amount
of $3,500,000 pursuant to the Federal and State Technology
Partnership (FAST) program. The grants are to provide technical
assistance to high-tech small businesses to enhance their
market competitiveness. In addition in FY2001, SBA awarded 25
cooperative agreements in the amount of $1,500,000 to provide
statewide outreach to small businesses in rural states that
have received few SBIR and STTR awards.
The SBIR program has been in existence since 1982. Unlike
the STTR program, the SBIR program does not require, but
permits, a cooperative venture between a for-profit small
business and a researcher from a university, federal laboratory
or a nonprofit research institution for the purpose of
developing commercially viable products. However, the project's
principal investigator must be employed by the small business.
A small business to be eligible must be: (1) independently
owned and operated and other than the dominant firm in the
field which it is proposing to carry out SBIR projects, (2)
organized and operated for profit, with 500 employees or less,
(3) the primary source of employment for the project's
principal investigator at the time of award and during the
period when the research is conducted, and (4) at least 51-
percent owned by U.S. citizens or lawfully admitted permanent
resident aliens.
Agencies that spend more than $100 million for external
research, and research and development must set aside 2.5
percent of their R&D budget for awards under SBIR. There are no
additional moneys appropriated to support this program. At
present, there are ten agencies that qualify for the program.
The agencies are: Department of Defense, Department of Energy,
National Aeronautics and Space Administration, National Science
Foundation, Department of Agriculture, Department of Commerce,
Department of Education, Environmental Protection Agency,
Department of Health and Human Services, and Department of
Transportation.
The participating agencies listed above designate research
and development topics for which small businesses may submit
proposals for project funding. The proposals are evaluated by
the agency based on (1) the qualifications of the small
business, (2) the value of the project to the agency and the
degree of innovation, and (3) the market potential of the
product to be developed. Once funded, a project goes through
three phases. Each phase is funded separately.
Phase I is the start-up portion of the project and may be
funded up to $100,000. This phase lasts approximately six
months and is for the purpose of exploring the scientific, and
technical aspects of the project. Phase II may last up to two
years and may be funded in an amount up to $750,000. During
this period, research and development continues and the
commercial potential explored. Only projects that successfully
complete Phase I can be considered for funding in Phase II.
Phase III is the point in the project that the idea moves from
the laboratory to the production facility to the market place.
No SBIR funds may be used to pay for Phase III. The funding
must come from the private sector or non-SBIR federal funding.
In FY2001, 3,215 Phase I funding agreements were awarded
totaling $317,000,000 and 1,533 Phase II funding agreements
were awarded totaling $977,000,000
The STTR program is independent of the SBIR program with
which it is frequently confused. The STTR program requires a
cooperative venture between a for-profit small business and a
researcher from a university, federal laboratory, or a non-
profit research institution for the purpose of developing
commercially viable products from ideas spawned in a laboratory
environment. For a federal agency to participate in the
program, it must have an extramural budget for research or
research and development that exceeds $1 billion for any fiscal
year. Presently, there are five federal agencies that meet the
funding requirement. They are: Department of Defense,
Department of Energy, Department of Health and Human Services,
National Aeronautics and Space Administration, and National
Science Foundation.
To be eligible for an STTR award a small business must have
no more than 500 employees, and be independently owned and
operated with its principal place of business in the United
States. In addition, the small business may not be the dominant
entity in the field in which the project is contained and must
be primarily owned by U.S. citizens. To be eligible to
participate in the program, a research entity must be a non-
profit institution as defined by the Stevenson-Wyler Act of
1980 or a federally funded research and development center as
determined by the National Science Foundation under the
provisions of section 35(c)(1) of the Office of Federal
Procurement Policy Act.
The program requires that the research and development
project be conducted jointly by a small business and a research
institution in which not less than 40 percent of the work is
performed by the small business, and that not less than 30
percent of the work is performed by the research institution.
Though the venture is cooperative in nature, the small business
is responsible for the overall management and control of each
project.
The statute mandates that each award go through three
phases. Phase I is the start-up part of a particular project
and entails, as may be possible, a determination of the
scientific, technical, and commercial merits of the concepts
underlying a particular award. Phase II provides an opportunity
to further develop the concepts to meet the objectives of the
particular award. Only projects that successfully complete
Phase I can be considered for funding under Phase II. Phase III
is the point at which the project moves from the laboratory to
commercial application or further cooperative research and
development. No STTR funds may be used to pay for Phase III.
The funding must come from the private sector or non-STTR
federal funding. In FY2001, 224 Phase I funding agreements were
awarded in the amount of $24,000,000 and 113 Phase II funding
agreements were awarded totaling $53,000,000.
2.9 Export Assistance
SBA is authorized to promote increased participation of
small businesses in international trade. To assist small
businesses that wish to export, SBA works with the Department
of Commerce and other federal agencies to identify business
opportunities and to assist in financing the sale of U.S. made
products to foreign buyers. SBA works with the Department of
Commerce, the Export-Import Bank, Department of Agriculture, as
well as SBDCs and SCORE, in maintaining a network of 19 U.S.
Export Assistance Centers (USEACs) that provide information and
counseling with respect to export marketing and financing.
USEACs are SBA's primary outlet for delivering export services
to small businesses. Small businesses may obtain free
consultation through the Export Legal Assistance Network (ELAN)
program, which enables those interested in starting export
operations to consult with international trade attorneys from
the Federal Bar Association, and to access publications on
international trade and export marketing.
The SBA has several loan programs, available to exporters
depending upon the purpose for which the funds are to be used.
Exporters can obtain funds for fixed asset acquisitions during
startup or expansion and for general working capital needs
through the 7(a) loan program. Export Trading Companies can
qualify for SBA's business loan guarantee program, provided
that they are for profit entities and have no bank equity
participation. The Export Working Capital program authorizes
SBA to guarantee 90 percent of a private sector loan of up to
$750,000 for working capital. Loans made under this program
generally have a 12-month maturity but two one-year extensions
may be obtained.
The loans can be for single or multiple export sales and
can be expended for pre-shipment working capital and post-
shipment exposure coverage, but the proceeds cannot be used to
obtain fixed assets. Through the 7(a) loan program, the SBA can
provide export assistance by guaranteeing international trade
loans that provide long-term financing to small businesses
engaged in international trade, as well as those businesses
adversely affected by import competition. In FY2001, SBA
guaranteed 425 export loans worth an estimated $167,000,000. In
FY2002, SBA guaranteed 468 export loans in the total amount of
$200,300,000.
2.10 Office of Advocacy
The Office of Advocacy was created in 1976, pursuant to
Title II of Public Law 94-305. The law provides for the
President to appoint a Chief Counsel of Advocacy, subject to
the advice and consent of the Senate. The mandated mission of
the Office of Advocacy is to represent and advance small
business interests before the Congress and federal agencies for
the purpose of enhancing small business competitiveness.
The primary focus of the Office of Advocacy is monitoring
federal agency compliance with the Regulatory Flexibility Act
that requires federal agencies to assess the impact of their
proposed and final rules on small entities including small
businesses, small organizations, and small governmental
jurisdictions. In addition, the Office of Advocacy serves as a
focal point for receiving complaints and suggestions regarding
federal agency policies and activities that affect small
businesses. The Office of Advocacy also suggests changes in
federal legislation and regulatory policy to enhance the
competitive stance of small businesses. Finally, the Office of
Advocacy has been delegated by the Administrator to maintain an
economic database on small businesses, which is used in the
preparation of an annual report on small business.
CHAPTER THREE
HEARINGS AND MEETINGS HELD BY THE COMMITTEE ON SMALL BUSINESS AND ITS
SUBCOMMITTEES, 107TH CONGRESS
3.1 Full Committee
------------------------------------------------------------------------
Date Subject and location
------------------------------------------------------------------------
February 28, 2001....................... Meeting to consider and adopt
Committee Rules and Oversight
Plan for the 107th Congress;
Washington, D.C.
March 14, 2001.......................... Full Committee meeting to
adopt the Committee's Views
and Estimates on the
President's FY 2002 Budget
Proposal; Washington, D.C.
March 22, 2001.......................... Improving and Strengthening
the Office of Advocacy;
Washington, D.C.
March 28, 2001.......................... Pension Reform for Small
Business; Washington, D.C.
April 4, 2001........................... Full Committee Roundtable, A
Tax Agenda for Small
Business. This was a joint
Roundtable with the Senate
Committee on Small Business
and Entrepreneurship;
Washington, D.C.
May 2, 2001............................. Black Beret Procurement:
Business As Usual At the
Pentagon? Washington, D.C.
May 9, 2001............................. Health Care Financing
Administration Paperwork
Burdens: the Paperwork
Reduction Act as a
Prescription for Better
Medicine; Washington, D.C.
May 16, 2001............................ FY 2002 Budget for the U.S.
Small Business
Administration; Washington,
D.C.
May 17, 2001............................ Small Business Access to
Capital; Washington, D.C.
May 23, 2001............................ Hearing With Respect for
Veterans and the National
Veterans Business Development
Corporation; Washington, D.C.
June 6, 2001............................ Federal Prison Industries
Procurement and Its effects
on Small Business;
Washington, D.C.
June 13, 2001........................... What Has The Ex-Im Bank Done
For Small Business Lately?
Washington, D.C.
June 20, 2001........................... Procurement Policies of the
Pentagon with Respect to
Small Businesses and the New
Administration; Washington,
D.C.
June 26, 2001........................... U.S. Trade Representative,
Ambassador Bob Zoellick,
Briefing with Members of the
Committee on Small Business;
Washington, D.C.
July 9, 2001............................ Field Hearing on Small
Business to Health Care;
July 11, 2001........................... The Regulatory Morass at the
Centers for Medicare and
Medicaid Services, A
Prescription for Bad
Medicine; Washington, D.C.
July 18, 2001........................... Federal Government Competition
with Small Businesses;
Washington, D.C.
July 25, 2001........................... Reducing Regulatory and
Paperwork Burdens on the
Small Healthcare Providers
Proposals from the Executive
Branch. Washington, D.C.
August 1, 2001.......................... Mark-up of H.R. 1860; H.R.
203; H.R. 2538; H.R. 2666;
Washington, D.C.
August 27, 2001......................... Field hearing, Small Business
Views on Federal Government
Procurement and Other
Programs; Santa Fe, New
Mexico.
August 27, 2001......................... Field hearing, Challenges that
Small, Disadvantaged, and
Minority Business Owners Face
in the Federal Procurement
Arena; Alburquerque, New
Mexico.
August 30, 2001......................... Field hearing, Critical Small
Business Issues Affecting
Long Island; Riverhead, New
York.
September 6, 2001....................... Procurement Policies of the
Department of Defense with
Regard to Small Businesses--
Finding Solutions to Problems
that Exist; Washington, D.C.
October 10, 2001........................ The Role Small Businesses Can
Play in Jump-Starting the
Economy; Washington, D.C.
October 24, 2001........................ Impact of Financial and
Professional Service Exports
on Small Business;
Washington, D.C.
October 25, 2001........................ Medicare-Endorsed Prescription
Drug Discount Cards and their
Impact on Small Business;
Washington, D.C.
November 14, 2001....................... Markup of H.R. 3230, the
American Small Business
Emergency Relief and Recovery
Act of 2001. Washington, D.C.
November 15, 2001....................... National Sales Tax Holiday:
How will this Proposal Impact
America's Small Businesses?
Washington, D.C.
November 19, 2001....................... Field Hearing with Respect to
Main Street America. To Learn
How Small Businesses Are
Surviving in the Present
Economic Downturn and to
Examine the Impact of Federal
Programs Designed to Assist
Small Businesses;
Spartanburg, South Carolina.
December 6, 2001........................ 90 Days after September 11:
How are Small Businesses
Being Helped? Washington,
D.C.
January 26, 2002........................ Protecting Small Business and
National Parks: The Goals are
not Mutually Exclusive; West
Yellowstone, Montana.
February 6, 2002........................ Small Business Access to
Health Care; Washington, D.C.
February 13, 2002....................... The President's Proposed
Budget for the Small Business
Administration FY 2003;
Washington, D.C.
February 27, 2002....................... Hearing on the SBA Size
Standards for Small Business.
Washington, D.C.
February 27, 2002....................... Full Committee meeting to
adopt the Committee's views
and estimates on the
President's FY 2003 budget
proposal, Washington, D.C.
March 1, 2002........................... Tax Roundtable: Access to
Capital. Washington, D.C.
March 6, 2002........................... SBREFA Compliance: Is it the
Same Old Story? Washington,
D.C.
March 13, 2002.......................... Subsidy Rate Calculation: An
Unfair Tax on Small Business?
Washington, D.C.
March 20, 2002.......................... Making the Office of Advocacy
Independent. Washington, D.C.
April 2, 2002........................... Field Hearing, Navigating the
Small Business Environment:
Challenges and Opportunities;
Carson, California.
April 4, 2002........................... Field Hearing, on Small
Business Access to Health
Care; Rockford, Illinois.
April 10, 2002.......................... Can Improved Compliance with
the Regulatory Flexibility
Act Resuscitate Small
Business Health Care
Providers? Washington, D.C.
April 24, 2002.......................... Why Add an Interest Rate Hike
on Our Struggling Small
Manufacturers? Washington,
D.C.
April 17, 2002.......................... Full Committee mark-up of H.R.
2867, Small Business
Opportunity Enhancement Act
of 2001, ordered to be
reported. Washington, D.C.
April 17, 2002.......................... Full Committee mark-up S. 174,
Microloan Program Improvement
Act of 2001, ordered to be
reported. Washington, D.C.
April 17, 2002.......................... Full Committee mark-up H.R.
4231, Small Business Advocacy
Improvement Act, ordered to
be reported as amended.
Washington, D.C.
May 8, 2002............................. National Small Business Week:
Small Business Success
Stories; Washington, D.C.
May 15, 2002............................ Pentagon's Procurement Polices
and Programs with Respect to
Small Business; Washington,
D.C.
May 16, 2002............................ CMS: New Name, Same Old Game?
Washington, D.C.
June 12, 2002........................... Impact of High Value of Dollar
on U.S. Exports; Washington,
D.C.
June 19, 2002........................... How Limiting International
Visa Hurts Small Tourism
Businesses; Washington, D.C.
July 23, 2002........................... Unintended Consequences of
Increased Steel Tariffs on
American Manufacturers.
Washington, D.C.
August 14, 2002......................... Field hearing, Small Business
Access to Health Care,
Crystal Lake, Illinois.
August 14, 2002......................... Small Business Roundtable,
Medical Malpractice and its
Effects on Small Business,
Libertyville, Illinois.
September 3, 2002....................... Field Hearing, on Federal
Procurement and International
Trade: Assessing the Federal
Government's Efforts to meet
the Needs of Local Small
Businesses; Norwalk,
California
September 24, 2002...................... The Role the Federal
Government and Small
Businesses are Playing in
Assisting Individuals with
Disabilities; Washington,
D.C.
September 25, 2002...................... Lost jobs, More Imports:
Unintended Consequences of
Higher Steel Tariffs. (Part
II); Washington, D.C.
October 3, 2002......................... CMS Regulation of Healthcare
Services; Washington, D.C.
November 21, 2002....................... Hearing on the Federal Prison
Industries' Unfair
Competition with Small
Business: Potential Interim
Administrative Solutions
Washington, D.C.
------------------------------------------------------------------------
3.2 Subcommittee on Workforce, Empowerment, and Government Programs
------------------------------------------------------------------------
Date Subject and location
------------------------------------------------------------------------
June 20, 2001........................... Joint Subcommittee hearing,
Subcommittee on Workforce,
Empowerment, and Government
Programs and Subcommittee on
Rural Enterprises,
Agriculture, and Technology,
Reauthorization of the Small
Business Technology Transfer
Program (STTR); Washington,
D.C.
June 26, 2001........................... Joint Subcommittee hearing
Subcommittee on Tax, Finance
and Exports, and the
Subcommittee on Workforce,
Empowerment, and Government
Programs Proposed Solutions
for the Capital Funding Needs
of Start-up and Emerging
Growth Businesses;
Washington, D.C.
July 19, 2001........................... National Small Business
Regulatory Assistance Act of
2001; Washington, D.C.
May 21, 2002............................ Suggestions for Improvements
in SBA Programs: Veterans and
Disaster Loans Sales;
Washington, D.C.
June 6, 2002............................ Joint Subcommittee hearing
between Regulatory Reform and
Oversight and The
Subcommittee on Workforce,
Empowerment, and Government
Programs, The Cost of
Regulation to Small Business;
Washington, D.C.
July 16, 2002........................... Maximizing Organization and
Leadership in a Federal
Agency to Fulfill its
Statutory Mission
Restructuring of the Small
Business Administration,
Washington, D.C.
------------------------------------------------------------------------
3.3 Subcommittee on Regulatory Reform and Oversight
------------------------------------------------------------------------
Date Subject and location
------------------------------------------------------------------------
April 3, 2001........................... Promoting Internet
Entrepreneurship: Should
Government Take any Action?
Washington, D.C.
May 17, 2001............................ Joint Subcommittee hearing
with the Subcommittee on
Regulatory Reform and
Oversight and the
Subcommittee on Rural
Enterprises, Agriculture and
Technology, Economic
Development in Rural America--
Small Business Access to
Broadband; Washington, D.C.
May 24, 2001............................ Joint Subcommittee hearing
with the Subcommittee on
Regulatory Reform and
Oversight and the
Subcommittee on Rural
Enterprises, Agriculture and
Technology, Eliminating the
Digital Divide: Who Will Wire
Rural America; Washington,
D.C.
June 21, 2001........................... Regulatory Summit; Washington,
D.C.
September 25, 2001...................... Removing Red Tape from the
Department of Labor's
Apprenticeship Approval
Process; Washington, D.C.
October 11, 2001........................ September 11, 2001 Plus 30:
Are America's Small
Businesses Still Grounded?
Washington, D.C.
November 1, 2001........................ Small Business Access to
Competitive
Telecommunications Services;
Washington, D.C.
November 8, 2001........................ EPA Rulemaking: Do Bad
Analyses Lead to Irrational
Rules? Washington, D.C.
May 1, 2002............................. Issues in the Travel Agency
Business; Washington, D.C.
June 6, 2002............................ Joint Subcommittee hearing
between Regulatory Reform and
Oversight and The
Subcommittee on Workforce,
Empowerment, and Government
Programs. The Cost of
Regulation to Small Business;
Washington, D.C.
June 13, 2002........................... The Lead TRI Rule: Costs,
Compliance, and Science;
Washington, D.C.
July 11, 2002........................... The Small Business Health
Market: Bad Reforms, High
Prices, and Fewer Choices;
Washington, D.C.
September 19, 2002...................... Federal Farm Program Rules
Effects on Small Growers;
Washington, D.C.
------------------------------------------------------------------------
3.4 Subcommittee on Tax, Finance, and Exports
------------------------------------------------------------------------
Date Subject and location
------------------------------------------------------------------------
June 26, 2001........................... Joint Subcommittee hearing
Subcommittee on Tax, Finance
and Exports, and the
Subcommittee on Workforce,
Empowerment, and Government
Programs Proposed Solutions
for the Capital Funding Needs
of Start-up and Emerging
Growth Businesses;
Washington, D.C.
August 9, 2001.......................... Field hearing, Farm and Ranch
Risk Management Accounts
(FARRM): How will Lehigh
Valley Farmers Benefit? Pen
Argyl, Pennsylvania.
July 24, 2001........................... Trade Promotion Authority and
Trade; Washington, D.C.
December 6, 2001........................ Tax Relief: The Real Economic
Stimulus for America's
Economy; Washington, D.C.
February 20, 2002....................... Field Hearing How Can
Technical Assistance
Stimulate New Jersey's
Manufacturing Base; Passaic,
New Jersey.
April 9, 2002........................... Hearing on the Payroll
Industry at Risk due to ACH
System Used for Direct
Deposit; Washington, D.C.
------------------------------------------------------------------------
3.5 Subcommittee on Rural Enterprises, Agriculture, and Technology
------------------------------------------------------------------------
Date Subject and location
------------------------------------------------------------------------
May 17, 2001............................ Joint Subcommittee hearing
with the Subcommittee on
Regulatory Reform and
Oversight and the
Subcommittee on Rural
Enterprises, Agriculture and
Technology Economic
Development in Rural America--
Small Business Access to
Broadband.; Washington, D.C.
May 24, 2001............................ Joint Subcommittee hearing
with the Subcommittee on
Regulatory Reform and
Oversight and the
Subcommittee on Rural
Enterprises, Agriculture and
Technology, Eliminating the
Digital Divide: Who Will Wire
Rural America? Washington,
D.C.
June 20, 2001........................... Joint Subcommittee hearing
Subcommittee on Workforce,
Empowerment, and Government
Programs and Subcommittee on
Rural Enterprises,
Agriculture, and Technology
Reauthorization of the Small
Business Technology Transfer
Program (STTR); Washington,
D.C.
July 17, 2001........................... The Regrowing Rural America
through Added Value-added
Agriculture; Washington, D.C.
July 24, 2001........................... Renewable Fuels; Washington,
D.C.
February 7, 2002........................ Small Business Access to
Technology; Washington, D.C.
March 19, 2002.......................... Access to Health Care in Rural
America; Washington, D.C.
------------------------------------------------------------------------
CHAPTER FOUR
PUBLICATIONS OF THE COMMITTEE ON SMALL BUSINESS AND ITS SUBCOMMITTEES,
107TH CONGRESS
4.1 Reports
------------------------------------------------------------------------
House Report Number Title and date
------------------------------------------------------------------------
107-210................................. Report to accompany H.R. 203,
the National Small Business
Regulatory Assistance Act of
2001; September 21, 2001.
107-211................................. Report to accompany H.R. 2358,
the Native American Small
Business Development Act;
September 21, 2001.
A....................................... Report to accompany H.R. 2666,
the Vocational and Technical
Entrepreneurship Development
Act of 2001; September 21,
2001.
107-213, Part I......................... Report to accompany H.R. 1860,
Small Business Technology
Transfer Program
Authorization Act of 2001;
September 21, 2001.
107-432................................. Report to accompany H.R. 2867,
Small Business Opportunity
Enhancement Act of 2002, May
2, 2002.
107-433................................. Report to accompany H.R. 4231,
Small Business Advocacy
Improvement Act of 2002, May
2, 2002.
------------------------------------------------------------------------
------------------------------------------------------------------------
Senate Report Number Title and date
------------------------------------------------------------------------
107-18.................................. Report to accompany S. 174,
the Microloan Program
Improvement Act of 2001.
107-55.................................. Report to accompany S. 1196,
Small Business Investment
Company Amendments Act of
2001, Public Law 107-100;
August 28, 2001.
------------------------------------------------------------------------
4.2 Hearing Records
------------------------------------------------------------------------
Date, title, and
Serial No. Held by location
------------------------------------------------------------------------
107-1................ Full.......................... March 22, 2001,
Improving and
Strengthening
the Office of
Advocacy;
Washington, D.C.
107-2................ Full.......................... March 28, 2001,
Pension Reform
for Small
Business;
Washington, D.C.
107-3................ Regulatory.................... April 3, 2001,
Promoting
Internet
Entrepreneurship
: Should
Government Take
any Action?
Washington, D.C.
107-4................ Full.......................... April 4, 2001, A
Tax Agenda for
Small Business;
Washington, D.C.
107-5................ Full.......................... May 2, 2001,
Black Beret
Procurement:
Business As
Usual at the
Pentagon?
Washington, D.C.
107-6................ Full.......................... May 9, 2001,
Health Care
Financing
Administration
Paperwork
Burdens: The
Paperwork
Reduction Act as
a Prescription
For Better
Medicine;
Washington, D.C.
107-7................ Full.......................... May 16, 2001, FY
2002 Budget for
the SBA;
Washington, D.C.
107-8................ Full.......................... May 17, 2001,
Access to
Capital;
Washington, D.C.
107-9................ Regulatory.................... May 17 and 24,
2001, Joint
Subcommittee
hearings with
the Subcommittee
on Regulatory
Reform and
Oversight and
the Subcommittee
on Rural
Enterprises,
Agriculture and
Technology;
Economic
Development in
Rural America--
Small Business
Access to
Broadband;
Eliminating the
Digital Divide:
Who Will Wire
Rural America?
Washington, D.C.
107-10............... Full.......................... May 23, 2001, SBA
Programs for
Veterans and the
National
Veterans
Business
Development
Corporation;
Washington, D.C.
107-11............... Full.......................... June 6, 2001,
Federal Prison
Industries
Procurement and
Its Effect on
Small Business;
Washington, D.C.
107-12............... Full.......................... June 13, 2001,
What has Ex-Im
Bank Done for
Small Business
Lately?
Washington, D.C.
107-13............... Full.......................... June 20, 2001,
Procurement
Policies of the
Pentagon with
Respect to Small
Businesses and
the New
Administration;
Washington, D.C.
107-14............... Workforce..................... June 20, 2001
Joint
Subcommittee
hearing
Subcommittee on
Workforce,
Empowerment, and
Government
Programs and
Subcommittee on
Rural
Enterprises,
Agriculture, and
Technology,
Reauthorization
of the Small
Business
Technology
Transfer Program
(STTR);
Washington, D.C.
107-15............... Tax........................... June 26, 2001
Joint
Subcommittee
hearing
Subcommittee on
Tax, Finance and
Exports, and the
Subcommittee on
Workforce,
Empowerment, and
Government
Programs,
Proposed
Solutions for
the Capital
Funding Needs of
Start-up and
Emerging Growth
Businesses;
Washington, D.C.
107-16............... Full.......................... July 9, 2001,
Field hearing,
Small Business
Access to Health
Care, in
Arlington
Heights,
Illinois.
107-17............... Full.......................... July 11, 2001 The
Regulatory
Morass at the
Centers for
Medicare and
Medicaid
Services: A
Prescription for
Bad Medicine;
Washington, D.C.
107-18............... Rural......................... July 17, 2001,
Growing Rural
America through
Value Added
Agriculture;
Washington, D.C.
107-19............... Full.......................... July 18, 2001,
Federal
Government
Competition with
Private Sector
Small
Businesses;
Washington, D.C.
107-20............... Workforce..................... July 19, 2001,
National Small
Business
Regulatory
Assistance Act
of 2001;
Washington, D.C.
107-21............... Rural......................... July 24, 2002,
Renewable Fuels;
Washington, D.C.
107-22............... Tax........................... July 24, 2001,
Trade Promotion
Authority and
Trade Adjustment
Assistance: How
Will Small
Business
Exporters and
Farmers Benefit?
Washington, D.C.
107-23............... Full.......................... July 25, 2001,
Reducing
Regulatory and
Paperwork
Burdens on the
Small Healthcare
Providers
Proposals from
the Executive
Branch.
Washington, D.C.
107-24............... Tax........................... August 9, 2001,
Farm and Ranch
Risk Management
Accounts. Field
Hearing held in
Pen Argyl,
Pennsylvania.
107-25............... Full.......................... August 27, 2001,
Field hearing,
Procurement
Practices of the
New Mexico
Department of
Energy
Facilities Santa
Fe, New Mexico.
107-26............... Full.......................... August 27, 2001,
Field hearing,
Encouraging the
Growth of
Minority-Owned
Small Businesses
and Minority
Entrepreneurship
; Albuquerque,
New Mexico.
107-27............... Full.......................... August 30, 2001,
Field hearing,
Critical Small
Business Issues
Affecting Long
Island;
Riverhead, New
York.
107-28............... Full.......................... September 6,
2001,
Procurement
Policies of the
Department of
Defense with
Regard to Small
Businesses--Find
ing Solutions to
Problems that
Exist;
Washington, D.C.
107-29............... Regulatory.................... September 25,
2001, Removing
Red Tape From
the Department
of Labor's
Apprenticeship
Approval
Process.
Washington, D.C.
107-30............... Full.......................... October 10, 2001,
Hearing on the
Role Small
Businesses Can
Play in Jump-
Starting the
Economy;
Washington, D.C.
107-31............... Regulatory.................... October 24, 2001,
September 11,
2001 Plus 30:
Are America's
Small Businesses
Still Grounded?
Washington, D.C.
107-32............... Full.......................... October 24, 2001,
Impact of
Financial and
Professional
Service Exports
on Small
Business;
Washington, D.C.
107-33............... Full.......................... October 25, 2001,
Medicare-
Endorsed
Prescription
Drug Discount
Cards and their
Impact on Small
Business;
Washington, D.C.
107-34............... Regulatory.................... November 1, 2001,
Small Business
Access to
Competitive
Telecommunicatio
ns Services.
Washington, D.C.
107-35............... Regulatory.................... November 8, 2001,
EPA Rulemaking:
Do Bad Analyses
Lead to
Irrational
Rules?
Washington, D.C.
107-36............... Full.......................... November 15,
2001, National
Sales Tax
Holiday: How
will this
Proposal Impact
America's Small
Businesses?
Washington, D.C.
107-37............... Full.......................... November 19,
2001, Field
Hearing with
Respect to Main
Street America
to Learn How
Small Businesses
Are Surviving in
the Present
Economic
Downturn and to
Examine the
Impact of
Federal Programs
Designed to
Assist Small
Businesses.
Spartanburg,
South Carolina.
107-38............... Tax........................... December 6, 2001,
Tax Relief: The
Real Economic
Stimulus for
America's
Economy.
Washington, D.C.
107-39............... Full.......................... December 6, 2001,
90 Days after
September 11:
How are Small
Businesses Being
Helped?
Washington, D.C.
107-40............... Full.......................... January 26, 2002,
Field Hearing on
Protecting Small
Business and
National Parks;
The Goals are
not Mutually
Exclusive; West
Yellowstone,
Montana.
107-41............... Full.......................... February 6, 2002,
Hearing on Small
Business Access
to Health Care.
Washington, D.C.
107-42............... Rural......................... February 7, 2002,
Small Business
Access to
Technology.
Washington, D.C.
107-43............... Full.......................... February 13,
2002, Hearing on
the SBA Budget
request for FY
2003.
Washington, D.C.
107-44............... Tax........................... February 20,
2002, How Can
Technical
Assistance
Stimulate New
Jersey's
Manufacturing
Base? Field
Hearing in
Passaic, New
Jersey.
107-45............... Full.......................... February 27,
2002, Disaster
Loan Size
Standards;
Washington, D.C.
107-46............... Full.......................... March 6, 2002,
SBREFA
Compliance: Is
it the Same Old
Story?
Washington, D.C.
107-47............... Full.......................... March 13, 2002,
Subsidy Rate
Calculation: An
Unfair Tax on
Small Business?
Washington, D.C.
107-48............... Rural......................... March 19, 2002,
Access to Health
Care in Rural
America.
Washington, D.C.
107-49............... Full.......................... March 20, 2002,
Making the
Office of
Advocacy
Independent.
Washington, D.C.
107-50............... Full.......................... April 2, 2002,
Field Hearing,
Navigating the
Small Business
Environment:
Challenges and
Opportunities.
Carson,
California.
107-51............... Full.......................... April 4, 2002,
Field Hearing,
Small Business
Access to Health
Care; Rockford,
Illinois.
107-52............... Tax........................... April 9, 2002, Is
the Payroll
Industry at Risk
Due to the ACH
System Used for
Direct Deposit?
Washington, D.C.
107-53............... Full.......................... April 10, 2002,
Can Improved
Compliance with
the Regulatory
Flexibility Act
Resuscitate
Small Business
Health Care
Providers?
Washington, D.C.
107-54............... Full.......................... April 24, 2002,
Why Add an
Interest Rate
Hike on Our
Struggling Small
Manufacturers?
Washington, D.C.
107-55............... Regulatory.................... May 2, 2002,
Issues in the
Travel Agency
Business;
Washington, D.C.
107-56............... Full.......................... May 8, 2002,
National Small
Business Week:
Small Business
Success Stories.
Washington, D.C.
107-57............... Full.......................... May 15, 2002,
Pentagon's
Procurement
Polices and
Programs with
Respect to Small
Business;
Washington, D.C.
107-58............... Full.......................... May 16, 2002,
CMS: New Name,
Same Old Game?
Washington, D.C.
107-59............... Workforce..................... May 21, 2002,
Suggestions for
Improvements in
SBA Programs:
Veterans and
Disaster Loans
Sales;
Washington, D.C.
107-60............... Regulatory and Workforce...... June 6, 2002,
Joint
Subcommittee
hearing on the
Cost of
Regulation to
Small Business.
Washington, D.C.
107-61............... Full.......................... June 12, 2002,
Impact of High
Value of Dollar
on U.S. Exports.
Washington, D.C.
107-62............... Regulatory.................... June 13, 2002,
The Lead TRI
Rule: Costs,
Compliance, and
Science.
Washington, D.C.
107-63............... Full.......................... June 19, 2002,
How Limiting
International
Visa Hurts Small
Tourism
Businesses.
Washington, D.C.
107-64............... Regulatory.................... July 11, 2002,
The Small
Business Health
Market; Bad
Reforms, Higher
Prices, and
Fewer Choices.
Washington, D.C.
107-65............... Workforce..................... July 16, 2002,
Maximizing
Organization and
Leadership in a
Federal Agency
to Fulfill its
Statutory
Mission of the
Small Business
Administration.
Washington, D.C.
107-66............... Full.......................... July 23, 2002,
Unintended
Consequences of
Increased Steel
Tariffs on
American
Manufacturers.
Washington, D.C.
107-67............... Full.......................... August 14, 2002,
Field hearing,
Small Business
Access to Health
Care, Crystal
Lake, Illinois.
107-68............... Full.......................... September 3,
2002, Field
Hearing, Federal
Procurement and
International
Trade: Assessing
the Federal
Government's
Efforts to Meet
the Needs of
Local Small
Businesses.
Norwalk,
California.
107-69............... Regulatory.................... September 19,
2002, Hearing on
The Federal Farm
Program Rules
Effect on Small
Growers;
Washington, D.C.
107-70............... Full.......................... September 24,
2002, The Role
the Federal
Government and
Small Businesses
are Playing in
Assisting
Individuals with
Disabilities;
Washington, D.C.
107-71............... Full.......................... September 25,
2002, Hearing,
Lost jobs, More
Imports:
Unintended
Consequences of
Higher Steel
Tariffs. (Part
II). Washington,
D.C.
107-72............... Full.......................... October 3, 2002,
Hearing on CMS
Regulation of
Healthcare
Services.
Washington, D.C.
107-73............... Full.......................... November 21,
2002, Federal
Prison
Industries'
Unfair
Competition with
Small Business:
Potential
Interim
Administrative
Solutions;
Washington, D.C.
------------------------------------------------------------------------
CHAPTER FIVE
LEGISLATION ACTED ON BY THE COMMITTEE ON SMALL BUSINESS IN THE 107TH
CONGRESS
5.1 H.R. 1860--Small Business Technology Transfer Program
Reauthorization Act of 2001, Public Law 107-50
Legislative History
------------------------------------------------------------------------
Date Action
------------------------------------------------------------------------
H.R. 1860
5/16/2001............................... Referred to the Committee on
Small Business, and in
addition to the Committee on
Science, for a period to be
subsequently determined by
the Speaker, in each case for
consideration of such
provisions as fall within the
jurisdiction of the committee
concerned.
5/16/2001............................... Referred to House Small
Business.
5/16/2001............................... Referred to House Science.
5/18/2001............................... Referred to the Subcommittee
on Environment, Technology,
and Standards.
8/1/2001................................ Committee consideration and
mark-up session held.
9/21/2001 5:56pm....................... Reported (Amended) by the
Committee on Small Business.
H. Rept. 107-213, Part I.
9/21/2001 5:56pm....................... House Committee on Science
Granted an extension for
further consideration ending
not later than Sept. 21,
2001.
9/21/2001 5:56pm....................... Committee on Science
discharged.
9/21/2001 5:56pm....................... Placed on the Union Calendar,
Calendar No. 128.
9/24/2001 2:17pm....................... Mr. Manzullo moved to suspend
the rules and pass the bill,
as amended.
9/24/2001 2:18pm....................... Considered under suspension of
the rules. (Consideration: CR
H5936-5941).
9/24/2001 2:41pm....................... On motion to suspend the rules
and pass the bill, as amended
Agreed to by voice vote.
(Text: CR H5936-5937).
9/24/2001 2:41pm....................... Motion to reconsider laid on
the table Agreed to without
objection.
9/25/2001............................... Received in the Senate, read
twice.
9/26/2001............................... Passed Senate without
amendment by Unanimous
Consent. (Consideration: CR
S9856)
9/26/2001............................... Message on Senate action sent
to the House.
9/26/2001............................... Cleared for White House.
10/3/2001............................... Presented to President.
10/15/2001.............................. Signed by President.
10/15/2001.............................. Became Public Law No. 107-50.
------------------------------------------------------------------------
Need for Legislation
H.R. 1860 amends the Small Business Act to extend the Small
Business Technology Transfer (STTR) Program through the end of
September 2009. Under present law, the STTR Program would
terminate on September 30, 2001. The STTR Program was created
by Congress under the Small Business Research and Development
Enhancement Act of 1992 and was initially authorized for three
years beginning in FY1994. The Small Business Reauthorization
Act of 1997 reauthorized the program for one additional year in
1996 and subsequently extended for an additional four years,
through the end of FY2001. Besides extending the life of the
program for eight additional years, H.R. 1860 makes
improvements to the program similar to those made previously to
the Small Business Innovative Research (SBIR) Program.
Beginning in FY2004 the percentage of the extramural budget
required to be expended by agencies participating in the
program increases from 0.15 percent to 0.3 percent. The
permanent nature of the program is acknowledged by striking the
word ``pilot'' as previously used to describe the program.
Again, beginning in FY2004, the amount that a small business
can receive for a Phase II award is increased from $500,000 to
$750,000, in line with Phase II awards made under the SBIR
Program.
Participating agencies are directed to implement an
outreach program to research institutions and small business
concerns for the purpose of enhancing the STTR Program, in
conjunction with any such outreach done for purposes of the
SBIR Program. The Administrator of the Small Business
Administration is directed to modify the STTR Program policy
directive to clarify that the rights to data provisions apply
to all three phases of the STTR Program. The Administrator is
also required to collect and maintain data in a common format
necessary to fairly evaluate the successes or shortcomings of
the program and to work with the participating agencies to
simplify and standardize the reporting requirements for the
collection of data from STTR applicants and awardees.
The provisions of the Federal and State Technology
Partnership (FAST) Program are amended to require that the
Administrator promulgate regulations establishing standards for
the consideration of proposals for funding under the FAST
Program and adds as one of the evaluation criteria whether the
proposal addresses the needs of small business concerns located
in one or more qualified census tracts. Reports to Congress
regarding awards under the SBIR and STTR Programs are required
to include information concerning the number of proposals
received from, and the total of awards to, HUBZone small
business concerns. The Administrator is directed to promulgate
an STTR Program-wide model agreement for intellectual property
rights.
Section-by-Section Analysis
Section 1. Short title
This section establishes the short title as the ``Small
Business Technology Transfer Program Reauthorization Act.''
Section 2. Extension of program and expenditure amounts
Subsection (a) extends the STTR program, authorized by
section 9(n) of the Small Business Act, through September 30,
2009. The percentage of extramural budget required to be
expended by a participating agency annually on the program is
established at 0.15 percent for each fiscal year through 2003
and is increased to 0.3 percent for fiscal year 2004 and each
fiscal year thereafter. Subsection (b) strikes the word
``pilot,'' as it appears in section 9 of the Small Business
Act, to describe the previous, trial basis of the program, and,
thereby, establishes the permanent nature of the program.
Section 3. Increase in authorized Phase II awards
Subsection (a) increases from $500,000 to $750,000 the
amount that a participating agency may generally pay for a
Phase II award. Further, the subsection permits the
participating agency to shorten or lengthen the periods of
Phase I and Phase II awards where appropriate for particular
projects. Presently, a Phase I is a one-year award and a Phase
II is a two-year award.
Subsection (b) makes the amendments contained in subsection
(a), above, i.e., increasing the amount of a Phase II award and
making the length of Phase I and II awards more flexible,
effective beginning October 1, 2003.
Section 4. Agency outreach
This section requires that a participating agency implement
an outreach program to research institutions and small
businesses to increase participation and to enhance its STTR
Program. Such STTR outreach program is to be undertaken in
conjunction with a agency's outreach with respect to the SBIR
Program.
Section 5. Policy directive modification
This section amends section 9(p) of the Small Business Act
to require the Administrator of the SBA to clarify the policy
directive applicable to the STTR Program to insure that it is
clear that the retention by a small business of rights to data
generated by a small business in the performance of an STTR
project does not terminate for a period of not less than four
years after the small business completes participation in a
phase of the award.
Section 6. STTR Program data collection
Subsection (a) requires that SBA maintain sufficient data
to effectively evaluate the STTR Program.
Subsection (b) provides for the maintenance of an
electronic database of information about the STTR Program
similar to the database maintained for the SBIR Program. In
addition, in collecting information concerning the STTR
Program, the Administrator shall provide data concerning (1)
whether a small business or a research institution initiated
the collaboration with respect to a particular project, (2)
whether the small business or the research institution
originated the technology that is the subject of a project, (3)
the length of time it took to negotiate a licensing agreement
between the small business and the research institution, and
(4) how the proceeds from the commercialization, marketing, or
sale of technology resulting from each assisted STTR project
were allocated (by percentage) between the small business and
the research institution.
Subsection (c) requires that the Administrator work in
cooperation with the participating agencies to establish
standardized reporting requirements for the collection of data
from STTR applicants and awardees, taking into consideration
the unique needs of each agency, and where possible permitting
electronic updating to the maximum extent possible. Data
collection shall be designed to minimize the burden on small
businesses.
Subsection (d) requires that the Administrator in reporting
to Congress annually include in such reports the number of
proposals received from, and the number and total amounts of
awards to, HUBZone small businesses under the SBIR and STTR
Programs.
Section 7. STTR Program-wide model agreement for intellectual property
rights
Subsection (a) requires the Administrator to issue
regulations, after an opportunity for comment by affected
agencies, small businesses, research institutions, and other
interested parties, that establish one model agreement for use
by all participating agencies which allocates between small
businesses and research institutions intellectual property
rights and rights, if any, to carry out follow-on research,
development, or commercialization.
Subsection (b) requires participating agencies to adopt the
model agreement that the Administrator promulgates by
regulation.
Section 8. FAST Program assistance to low-income areas
Subsection (a) amends the Federal and State Technology
(FAST) Partnership Program by adding further criteria for
reviewing proposals for funding under the program. The
reviewers areto also consider whether the proposal addresses
the needs of small businesses located in one or more HUBZones.
Subsection (b) requires the Administrator to promulgate
regulations establishing the standards for consideration of
FAST Program proposals, including addressing the need of small
businesses located in one or more HUBZones.
5.2 S. 1196--Small Business Investment Company Amendments Act of 2001,
Public Law 107-100
Legislative History
------------------------------------------------------------------------
Date Action
------------------------------------------------------------------------
S. 1196
7/18/2001............................... Read twice and referred to the
Committee on Small Business
and Entrepreneurship.
7/19/2001............................... Senate Committee on Small
Business and
Entrepreneurship. Ordered to
be reported without amendment
favorably.
8/28/2001............................... Senate Committee on Small
Business and
Entrepreneurship. Reported by
Senator Kerry under authority
of the order of the Senate of
07/30/2001 without amendment.
With written report No. 107-
55.
8/28/2001............................... Placed on Senate Legislative
Calendar under General
Orders. Calendar No. 143.
11/15/2001.............................. Measure laid before Senate by
unanimous consent.
(Consideration: CR S11923-
11926)
11/15/2001.............................. Passed Senate with an
amendment by Unanimous
Consent. (Text: CR S11925-
11926)
11/16/2001 9:16am...................... Received in the House.
11/16/2001.............................. Message on Senate action sent
to the House.
11/16/2001 2:28pm...................... Held at the desk.
11/16/2001 2:35pm...................... Mr. Manzullo asked unanimous
consent to take from the
Speaker's table and consider.
11/16/2001 2:38pm...................... Considered by unanimous
consent. (Consideration: CR
H8316-8320)
11/16/2001 2:39pm...................... On passage Passed without
objection.
11/16/2001 2:39pm...................... Motion to reconsider laid on
the table Agreed to without
objection.
11/27/2001.............................. Message on House action
received in Senate and at
desk: House amendment to
Senate bill.
12/8/2001............................... Senate concurred in House
amendment with an amendment.
Unanimous Consent.
(Consideration: CR 12/7/2001
S12740-12745)
12/10/2001.............................. Message on Senate action sent
to the House.
12/11/2001 10:17pm..................... Mr. Manzullo moved that the
House suspend the rules and
agree to the Senate amendment
to the House amendment.
12/11/2001 10:23pm..................... On motion that the House
suspend the rules and agree
to the Senate amendment to
the House amendment Agreed to
by voice vote.
(Consideration: CR H9193-
9195; text as House agreed to
Senate amendment: CR H9193-
9194)
12/11/2001 10:23pm..................... Motion to reconsider laid on
the table Agreed to without
objection.
12/11/2001.............................. Cleared for White House.
12/14/2001.............................. Presented to President.
12/21/2001.............................. Signed by President.
12/21/2001.............................. Became Public Law No. 107-100.
------------------------------------------------------------------------
Need for Legislation
In 1958, Congress created the SBIC program to assist small
business owners obtain investment capital. Forty-three years
later, small businesses continue to experience difficulty in
obtaining investment capital from banks and traditional
investment sources. Although investment capital is readily
available to large businesses from traditional investment
firms, small business seeking investments in the range of
$250,000 to $5 million have to look elsewhere. SBICs frequently
are the only sources of investment capital for growing small
businesses.
The SBIC program has helped some of our Nation's best-known
companies. It has provided a financial boost at critical points
in the early growth period for many companies that are familiar
to all of us. For example, the FedEx Corporation received a
needed infusion of capital from two SBA-licensed SBICs at a
critical juncture in its development stage. The SBIC program
also helped other well-known companies when they were not so
well known, such as Intel, Outback Steakhouse, America Online,
and Callaway Golf.
In 1992 and 1996, the Committee on Small Business worked
closely with the Small Business Administration to correct
earlier deficiencies in the Small Business Investment Act of
1958 in order to ensure the future of the program. In 1992, and
again in 1996, Congress enacted major changes to strengthen and
reform the SBIC program. Today, the SBIC program isexpanding
rapidly in an effort to meet the growing demands of small business
owners for debt and equity investment capital. More qualified
investment teams are seeking license approval from SBA than ever
before. Since October 1998, the number of new SBIC licensees has
increased by more than 35 percent, as SBA approved 53 new licenses in
FY 1999 and 60 new licenses in FY 2000, bringing the total number of
active SBIC licenses to 415.
At the same time the SBIC program is experiencing
significant growth, the investment groups that are receiving
guaranteed funds for investing in small businesses are
performing at an exceptionally high level. Each year the SBA
and the Office of Management and Budget (OMB) develop a credit
subsidy rate estimate, which is the cost of running the program
based largely on its projected future losses. Under the
Debenture and Participating Securities programs, the credit
subsidy rates have dropped dramatically. For example, the
credit subsidy rate for the Debenture program dropped again in
FY 2001 and is projected to drop still further in FY 2002.
For FY 2002, the Bush Administration has recommended a
program level of $2.5 billion for the Participating Securities
program and increasing the annual interest fee paid by the
Participating Securities SBICs by thirty-seven base points
(0.37 percent, taking the fee from 1 percent to 1.37 percent)
in order to cause the credit subsidy rate to drop to 0.0
percent and eliminate all appropriations for the program.''
(See Senate Report 107-55 at pp. 1-2 (August 28, 2001)).
Congress agreed with the President's zero funding of the
SBIC participating shares program. To maintain access to
valuable venture capital for small businesses, the Senate
finally passed S. 1196 with an increase in participating
securities fees from 1.0 percent to 1.38 percent.
As a trade-off for higher fees in the SBIC program, S. 1196
was amended in the House to provide some modest fee relief for
two years starting on October 1, 2002 to small business
borrowers and lenders in the other two major loan guarantee
programs of the SBA--the 7(a) business loan program and the 504
Certified Development Company loan program. S. 1196, as
amended, lowers both upfront borrower and the annual on-going
lender fees in the 7(a) program for loans up to $700,000.
----------------------------------------------------------------------------------------------------------------
Loans up to $150,000 to Loans over
7(a) Fees $150,000 $700,000 $700,000 Annual on-going fee
(percent) (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Current law............................... 2 3 3.5 0.50 on balance.
S. 1196 change............................ 1 2.5 3.5 0.25 on balance.
----------------------------------------------------------------------------------------------------------------
S. 1196 also eliminates the 504 upfront borrower fee for
two years and the 504 on-going fee would be cut in half over
the lifetime of the loan, subject to any needed appropriations.
Section-by-Section Analysis
Section 1. Short title
This Act will be called the ``Small Business Investment
Company Amendments Act of 2001.''
Section 2. Subsidy fees
This section amends the Small Business Investment Act of
1958 to permit the SBA to collect an annual interest fee from
SBICs in an amount not to exceed 1.28 percent of the
outstanding Participating Security and Debenture balance. In no
case will SBA be permitted to charge an interest fee that would
reduce the credit subsidy rate to less than 0 percent, when
combined with other fees and congressional appropriations. This
section would take effect on October 1, 2001.
Section 3. Conflicts of interest
Section 3 would remove the requirement that SBA run local
advertisements when it seeks to determine if a conflict of
interest is present. SBA would continue to publish these
notices in the Federal Register. This section would not
prohibit the SBA from requiring a local advertisement should it
believe it is necessary; it is supported by the SBA.
Section 4. Penalties for false statements
This section would amend Title 12 and Title 18 of the
United States Code to ensure that false statements made to SBA
under the SBIC program would have the same penalty as making
false statements to an SBIC. The section would make it clear
that a false statement to SBA or to an SBIC for the purpose of
influencing their respective actions taken under the Small
Business Investment Act of 1958 would be a criminal violation.
The courts could then access civil and criminal penalties for
such violations.
Section 5. Removal or suspension of management officials
This section would amend section 313 of the Small Business
Investment Act of 1958 to expand the list of persons who could
be removed or suspended by the SBA from the management of an
SBIC to include officers, directors, employees, agents, or
other participants of an SBIC. The persons subject to this
section are called ``Management Officials,'' a new term added
by this amendment. The amendment does not change thelegal or
practical effect of the provisions of Section 313; however, it has been
drafted to make its provisions easier to follow.
Sections 3, 4 and 5 would take effect on enactment of this
bill.'' (See Senate Report 107-55 at pp. 8-9 (August 28,
2001)).
Section 6. Reduction of fees
Subsection (a) reduces certain 7(a) fees for loans approved
during the 2-year period beginning on October 1, 2002. The up
front guarantee fee for loans that do not exceed $150,000 is
reduced from 2 percent to 1 percent. The up front guarantee fee
for loans that exceed $150,000 but are not more than $700,000
is reduced from 3.5 percent to 2.5 percent. The annual on-going
fee on the outstanding balance of the deferred share of the
participating loan was reduced to 0.25 percent from 0.50
percent.
Subsection (b) reduced fees for loans made under the 504
loan program during the 2-year period beginning October 1,
2002. The on-going fee was reduced by 50 percent for the life
of the loan and the no up front guarantee fee can be assessed
or collected with respect to 504 loans made during the 2-year
period.
5.3 H.R. 203--National Small Business Regulatory Assistance Act of
2001
Legislative History
------------------------------------------------------------------------
Date Action
------------------------------------------------------------------------
H.R. 203
1/3/2001................................ Referred to the House
Committee on Small Business.
8/1/2001................................ Mark-up session held.
9/21/2001 5:41 pm...................... Reported (Amended) by the
Committee on Small Business.
H. Rept. 107-210.
9/21/2001 5:41 pm...................... Placed on the Union Calendar,
Calendar No. 125.
10/2/2001 3:46 pm...................... Mr. Manzullo moved to suspend
the rules and pass the bill,
as amended.
10/2/2001 3:46 pm...................... Considered under suspension of
the rules. (Consideration: CR
H6086-6090)
10/2/2001 4:10 pm...................... On motion to suspend the rules
and pass the bills, as
amended Agreed to by voice
vote. (Text: CR H6086-6087)
10/2/2001 4:10 pm...................... Motion to reconsider laid on
the table Agreed to without
objection.
10/3/2001............................... Received in the Senate and
Read twice and referred to
the Committee on Small
Business and
Entrepreneurship.
------------------------------------------------------------------------
Need for Legislation
During the past 20 years, the Federal Register--the
compendium of federal regulatory initiatives and changes--
almost doubled in size from 42,000 pages to a record 83,289
pages in 2000. This crush of federal dictates is particularly
troubling to small businesses that find it increasingly
difficult to meet these burgeoning regulatory requirements
while at the same time trying to successfully operate their
businesses in an expanding competitive global environment.
Often, small business owners do not learn about their failure
to comply with a regulation or that a new regulatory
requirement has been imposed until an inspector or auditor
walks through the door.
The result is neither beneficial to the small business
owner nor the federal government. Federal regulations exist to
achieve some statutory objective; noncompliance hinders the
reaching of these statutory goals. Small business owners
certainly would be more interested in complying with federal
regulations than paying penalties and fines. However, the
amount of information, including regulations and concomitant
guidance, simply overwhelms small firms.
In 1996, Congress took action in an effort to alleviate
this problem. The Small Business Regulatory Enforcement
Fairness Act provided that federal agencies are required to
produce plain-English compliance guides for any regulation that
would have a significant economic impact on a substantial
number of small businesses. Of course, if small business owners
do not know about the regulatory changes, the existence of such
compliance guides does little to assist them. Some mechanism
must exist to make small businesses more aware of their
regulatory obligations.
Even more important than making small businesses aware of
the regulations is providing them with assistance needed to
understand and comply with the regulations. A regulation may
only take up 10 or 11 pages of text, but the explanation for
what those 10 or 11 pages mean may encompass as much as 300
hundred pages of dense, triple-columned, single-spaced pages in
the Federal Register. Most small business owners do not have
the time to go through this dense prolixity. And even if they
did, they would not understand it unless they were
knowledgeable in the field. The Committee believes that greater
assistance must be provided to small business owners in helping
them comply with complex regulatory issuances. Otherwise, a
divide could develop between those businesses, usually large,
with the resources to comply and those, usually small, without
such resources. The small businesses will be at risk for
penalties, fines, and audits while large businesses will not. A
regulatory compliance assistance program operated through the
small business development centers could provide substantial
assistance in ensuring such a divide does not occur.
The Small Business Administration oversees a number of
mechanisms for delivering advice to small business owners. One
of the most effective is the Small Business Development Center
(SBDC) program. Operated in conjunction with colleges and
universities, the SBDCs assist smallbusinesses in solving
problems concerning the operations, manufacturing, engineering,
technology, exchange and development, personnel administration,
marketing, sales, merchandising, finance, accounting, and business
strategy development. The SBDCs utilize the resources and the expertise
of colleges and universities. In addition, the SBDCs, like the
Agricultural Extension Service, also provide a focal point for
information retrieval, coordination of federal and state government
services, and referral to experts. Historically, SBDCs have focused on
financial, management, and marketing activities of small businesses
despite the requirement that they also provide regulatory compliance
assistance. See Sec. 21(c)(3)(H) of the Small Business Act (codified at
15 U.S.C. Sec. 648(c)(3)(H)).
SBDCs can provide an effective mechanism for dispensing
regulatory compliance information and advice. However,
regulatory compliance, unlike many of the other activities
undertaken by the small business development centers, has
significant legal consequences. Therefore, a pilot program to
examine how the regulatory compliance assistance will operate
in selected SBDCs is a preferred strategy to simply providing
an authorization of additional funding so that SBDCs can
provide regulatory compliance assistance.
Section-by-Section Analysis
Section 1. Short title
Designates the bill as the ``National Small Business
Regulatory Assistance Act of 2001.''
Section 2. Purpose
This section expresses the purpose of the legislation--to
establish a pilot project within certain SBDCs to provide and
coordinate regulatory compliance assistance to small
businesses.
Section 3. Definitions
The definitions of the Small Business Act shall apply to
this pilot program unless a different definition is utilized in
the new Sec. 36 created by this Act. In those cases in which
the definition is different, the definitions in new Sec. 36
shall apply to the pilot program created by this Act.
Section 4. Small Business Regulatory Assistance Pilot Program
This section establishes the pilot program by creating a
new Section 36 of the Small Business Act.
Section 36(a)(1) defines the term ``Administrator'' as the
Administrator of the Small Business Administration.
Section 36(a)(2) defines the term ``Association'' to be the
association established pursuant to Section 21 of the Small
Business Act, which represents the majority of SBDCs. That
organization is the Association of Small Business Development
Centers.
Section 36(a)(3) defines the term ``Participating Small
Business Development Center'' as a SBDC selected to participate
in the pilot program established under this section.
Section 36(a)(4) defines the term ``Pilot Program'' as the
three-year program established under this section.
Section 36(a)(5) defines the term ``Regulatory Compliance
Assistance'' as assistance provided by a participating SBDC to
a small business concerning compliance with federal
regulations.
Section 36(a)(6) defines the term ``Small Business
Development Center'' means a small business development center
described in section 21 of the Small Business Act.
Section 36(a)(7) defines the term ``State'' to include all
fifty states and the District of Columbia, the Virgin Islands,
and Guam.
Section 36(b) authorizes the Administrator of the Small
Business Administration to establish a pilot program for
selected small business development centers to provide small
businesses with regulatory compliance assistance.
Section 36(c)(1) authorizes the Administrator to enter into
arrangements with SBDCs selected under this section for the
provision of regulatory compliance assistance.
The participating SBDCs are required to provide access to
information and resources on regulatory compliance, including
contact information for federal and state compliance and
technical assistance similar to those established under section
507 of the Clean Air Act Amendments of 1990. Numerous other
federal and state agencies have non-punitive compliance
assistance programs (such as the federal Occupational Safety
and Health Administration) and the Committee expects that the
participating SBDCs will maintain all necessary contact
information with those federal and state agencies. Furthermore,
the Committee expects that the quality of coordination of these
assistance resources will be a significant factor in selecting
the SBDCs for the pilot project.
Section 36(c)(1) also requires that the selected SBDCs
establish various training and educational activities. The
Committee expects that selected centers will utilize their
contacts with federal and state agencies to obtain compliance
pamphlets, videos, books, and any compliance guides issued
pursuant to the Small Business Regulatory Enforcement Fairness
Act. In addition, the Committee expects that participating
centers will hold lectures and seminars on regulatory
compliance including updates on compliance based on regulatory
changes. The Committee expects that the Administrator will
consider the quality of proposed educational programs in
determining which centers are selected to participate in the
pilot program.
Section 36(c)(1)(C) also mandates that the selected SBDCs
provide confidential counseling on a one-on-one basis at no
charge to small businesses seeking regulatory compliance
assistance. The Committee recognizes that compliance with
regulations inculcates legal rights and responsibilities of
small business owners. Therefore, section 36(c) prohibits any
regulatory compliance counseling that would be considered the
practice of law in the jurisdiction in which the SBDC is
located or in which such counseling is conducted. Furthermore,
the Committee supports efforts in which the participating
development centers establish contacts with lawyers in the
community willing to provide seminars and other consultative
service on regulatory compliance matters.
Section 36(c)(1) also requires the provision of technical
assistance. Such counseling may include the arrangement of
meetings with technical experts known to the participating
small business development centers as long as such counseling
again is done on a one-on-one basis at no charge to the small
business.
Section 36(c)(1)(E) makes explicit the Committee's concern
that small businesses are directed to those individuals who
have appropriate credentials and certifications to provide
regulatory compliance assistance. While the Committee fully
understands that many very successful businesses, including
Microsoft, Apple, and Dell Computer, started in garages and
those businessmen are quite capable of providing advice on
starting, financing, and marketing a business, they are not
necessarily qualified to provide guidance on compliance with
OSHA, EPA, or IRS regulations. In fact, due to the potential
legal consequences resulting from a small business owner
following incorrect guidance, the Committee determined that it
is necessary to make explicit the requirement that the
participating centers only refer businesses to individuals with
appropriate expertise in the regulatory compliance matter for
which advice is sought.
Section 36(c)(2) requires each participating center to file
a quarterly report with the Administrator. The report shall
provide a summary of the compliance assistance provided under
the pilot program. The report also must contain any data and
information obtained by the participating SBDC from a federal
agency concerning compliance that the federal agency intends to
be disseminated to small business concerns. The Committee
believes that this latter requirement will enable the
Administrator or the Chief Counsel for Advocacy to raise issues
of agency inconsistencies, to the extent that they exist, to
the appropriate decisionmakers.
Section 36(c)(2) requires that reports be filed with the
Administrator in an electronic format. The Committee expects
the Administrator to promulgate regulations that will provide
for a consistent format of the report. The Committee believes
that such consistency is necessary for the accurate compilation
of data and proper assessment of the effectiveness of the pilot
program.
Section 36(c)(2) also permits, but does not require,
participating SBDCs to make interim reports if such reports are
necessary or useful. For example, a participating SBDC may
receive inconsistent compliance information from a federal
agency. By alerting the Administrator prior to the issuance of
the quarterly report, the federal agency may be able to issue a
clarification that may eliminate confusion, save compliance
costs, and improve small business compliance.
One of the critical concerns to small businesses is that
discussions of compliance assistance could be revealed to
federal agencies, which would lead to fines and penalties.
Furthermore, the Committee is concerned that SBDCs have been
revealing the names of businesses, which seek their advice to
the Administrator for functions unrelated to the financial
auditing of SBDCs. The Committee believes that such behavior is
simply intolerable. Without any assurances of privacy, small
businesses will be less likely to use small business
development centers. And this would be especially true for
regulatory compliance assistance efforts. The Committee
recognizes the concern about revealing the names of businesses
that utilize the resources of SBDCs. Therefore, section
36(c)(1)(D) prohibits the disclosure of the names or addresses
of any concern receiving compliance assistance under this pilot
program unless the Administrator is ordered to make such
disclosure pursuant to a court order or civil or criminal
enforcement action commenced by a federal or state agency. The
Committee expects that participating SBDCs will only respond to
formal agency requests such as civil investigative demands,
subpoenas, requests from Administrator's Associate
Administrator for Small Business Development Centers when
performing a financial audit of the SBDC, or requests from the
Inspector General of the Small Business Administration. The
Committee expects the SBDCs will not provide information
concerning the identity of businesses simply upon the verbal
request of a federal or state agency.
Section 36(d) requires the Administrator to act as
repository of data and information submitted by the
participating SBDCs. Given the oversight role and importance of
the Associate Administrator for Small Business Development
Centers, section 36(d) requires that the functions of
maintaining the database be housed with the Associate
Administrator. The Committee believes that a central repository
is necessary in order to determine whether federal agencies are
providing consistent compliance information on a national
basis. However, the Committee expects that the information
received under this subsection be made available to other
offices within the Small Business Administration, particularly
the Chief Counsel for Advocacy and the Small Business and
Agriculture Regulatory Ombudsman so those offices can more
effectively carry out their mission of representing the
interests of small businesses before federal agencies.
Section 36(d) also requires that the Administrator to issue
an annual report to the President and the Committees on Small
Business of the Senate and the House Representatives. The
report will contain: (a) data on the types of information
provided by the participating SBDCs; (b) the number of small
businesses that contacted the participating SBDCs; (c) the
number of small businesses assisted by participating SBDCs; (d)
information on the outreach activities of the participating
SBDCs; (e) information regarding each case known to the
Administrator in which participating SBDCs provided conflicting
advice regarding compliance with federal regulation to one or
more small businesses; (f) and any recommendations for
improving the regulatory environment of small businesses. The
Committee believes that this information is necessary to
properly evaluate the utility of the pilot program. More
importantly, the report will reveal whether similarly situated
small businesses are receiving consistent regulatory compliance
assistance. In preparing the report, the Committee recognizes
that the Administrator may wish to consult with the Chief
Counsel for Advocacy and the Small Business and Agriculture
Regulatory Ombudsman. The Committee supports such consultative
efforts but notes that the Administratormay not delegate the
responsibility of preparing the report required by this subsection to
any office within the Small Business Administration except the
Associate Administrator for Small Business Development Centers.
Section 36(e) limits participation in the pilot program
only to those SBDCs certified under Sec. 21(k)(2) of the Small
Business Act. The Committee is limiting participation in the
pilot program to those SBDCs selected which are of the highest
quality. Some SBDCs have not completed their certification
programs. Nevertheless, some of these centers may be developing
or already have exceptional regulatory compliance assistance
programs. The Committee does not believe that such centers
should be prohibited from participating in the pilot program.
Therefore, Sec. 36(e)(2) authorizes the Administrator to waive
the requirement for certification if the center is making a
good faith effort to obtain such certification.
Section 36(f) requires the Administrator to select two
participating state programs from each of the Small Business
Administration's ten federal regions as those regions exist on
the date of enactment of this Act. The Administrator shall
consult with the Association and give the Association's
recommendations substantial weight. The Administrator is
required to complete the selection of the participating centers
within 60 days after the regulations to implement the pilot
program have been promulgated.
Section 36(g) ensures that no matching funds currently
allocated to the operation of the SBDCs will be utilized to
fund the pilot program. In order to ensure proper funding, the
Committee is authorizing a separate funding authorization for
the program.
Section 36(h) establishes the procedures for distributing
grants among the selected state programs. The formula is based
on the principle that a state that has a smaller population
also will have, in absolute terms, fewer small businesses than
a larger state. The formula therefore allocates funds according
to the relative size of each state. The Committee believes that
the minimum funds needed to initiate a state program will be
$200,000. Because the Committee has authorized $5,000,000, it
is making extra resources available to the larger states that
will require more resources to initiate the pilot project.
Section 36(i) requires the Comptroller General of the
United States to provide a report three years after the
establishment of the pilot program evaluating the effectiveness
of the program. The report also should contain any suggested
modifications to the pilot program. Finally, the Comptroller
General should provide its opinion concerning whether the
program should be continued and expanded to include more SBDCs.
The report shall be transmitted to the Committees on Small
Business of the Senate and House of Representatives. The
Committee expects that the pilot program will be sufficiently
successful to expand the program to other SBDCs.
Section 36(j) limits the operation of the pilot program
only to the funds appropriated in advance for the program.
Section 36(j) provides an authorization of appropriations of
$5,000,000 for fiscal year 2002 and each year thereafter.
Section 36(j) also prohibits the Administrator from using other
funds, including other funds made available for the operation
of SBDCs, to operate this pilot project. The Committee
authorized the additional appropriations because it determined
that funding of the regulatory compliance program should not
detract from the available funding for the delivery of other
SBDC programs.
Section 5. Promulgation of regulations
Section 5 authorizes the Administrator to promulgate
regulations to implement this pilot program no later than 180
days after the enactment of the Act. Such regulations only
shall be promulgated after the public has been given an
opportunity for notice and comment. The Committee believes that
the Administrator can and should accomplish the issuance of
regulations within the deadline set by statute. The Committee
considers this Act to be some other law for purposes of section
603 of Title 5 of the United States Code.
The regulations shall include the priorities for the type
of assistance to be provided, standards relating to the
educational, technical, and support services to be provided by
the Association to the participating centers, and standards for
work plans that the participating centers will provide to the
Administrator. The Committee believes that given the potential
interest in the program by SBDCs, it is appropriate for the
Administrator to have a set of standards by which it can
determine which state programs shall be chosen. More
importantly, the standards will provide an appropriate baseline
for the Comptroller General's evaluation of the pilot project.
Section 5 also requires the Administrator to develop
appropriate standards for ensuring the technical qualifications
of experts to whom small businesses will be referred. The
Committee does not intend that someone must have a college or
advance degree to qualify. For example, a contractor licensed
in a state with 20 years experience (who is a high-school
graduate) may be as well equipped to provide advice on
compliance with OSHA construction standards as a professor of
civil engineering. On the other hand, that same contractor
might not be an appropriate individual to provide tax
compliance advice. The Committee does not expect that this
aspect of the Administrator's regulations shall be all
encompassing, i.e., delineate every profession and the
appropriate qualifications. However, the Committee does expect
that the Administrator will recognize, as qualified, those
individuals certified by nationally-recognized accrediting
bodies (whose members must demonstrate substantial educational
and practical experience), meet educational and work standards
established by a federal agency, or are licensed to practice a
particular profession or job pursuant to state law. The
Committee expects that the regulations will provide
participating centers with enough information that the centers
can determine whether the person providing the advice is
competent in the field of regulation.
Section 6. Privacy requirements applicable to Small Business
Development Centers
Section 6 amends section 21 of the Small Business Act. The
Committee has been contacted on a number of occasions by SBDCs
that employees of the Small Business Administration have
attempted to obtain the names and addresses of businesses that
sought the services of SBDCs. The Committee believes that any
attempts by the Administrator or the employees of the Small
Business Administration to obtain the names and addresses of
persons seeking SBDC assistance is inappropriate because it
would act as a disincentive for small businesses to utilize the
centers.
Section 6 prohibits the Administrator, any other employee
of the Small Business Administration, or any agent of the
Administrator (including contractors) from obtaining the names
and addresses of businesses that sought assistance. The
Committee's bill provides for two exceptions: (1) if the
Administrator is ordered by a court in any civil or criminal
action initiated by federal or state agency; or (2) the
Administrator requires the information while undertaking a
financial audit of the SBDC.
To ensure that the Administrator does not unduly abuse the
second exception for disclosure, section 6 requires the
Administrator to promulgate regulations specifying when such
disclosures in an audit shall be made. The Committee expects
that the regulations will strictly limit disclosure during the
audit process and severely circumscribe those individuals who
will have access to the audit information during the audit. The
Committee recognizes that the information collected during the
audit may have to be retained for a variety of purposes, such
as management reviews by the Inspector General or Congressional
oversight. The Committee expects the Administrator's
regulations to cover who, if anyone, shall have access to the
raw data, including the names and addresses of the SBDCs'
users, after the audit is complete. The Committee does not
intend that information obtained during the audit concerning
identifiable individuals or businesses that are retained by the
Administrator shall be releasable pursuant to the Freedom of
Information Act.
5.4 H.R. 2666--Vocational and Technical Entrepreneurship Development
Act of 2001
Legislative History
------------------------------------------------------------------------
Date Action
------------------------------------------------------------------------
H.R. 2666
7/2/2001:............................... Referred to the House
Committee on Small Business.
8/1/2001:............................... Committee mark-up session
held.
9/21/2001 5:50pm....................... Reported by the Committee on
Small Business. H. Rept. 107-
212.
9/21/2001 5:50pm....................... Placed on the Union Calendar,
Calendar No. 127.
10/2/2001 4:12pm....................... Mr. Manzullo moved to suspend
the rules and pass the bill,
as amended.
10/2/2001 4:12pm....................... Considered under suspension of
the rules. (consideration: CR
H6090-6093)
10/2/2001 4:29pm....................... On motion to suspend the rules
and pass the bill, as amended
Agreed to by voice vote.
(text: CR H6090)
10/2/2001 4:29pm....................... Motion to reconsider laid on
the table Agreed to without
objection.
10/3/2001............................... Received in the Senate and
Read twice and referred to
the Committee on Small
Business and
Entrepreneurship.
7/24/2002............................... Committee on Small Business
and Entrepreneurship. Ordered
to be reported without
amendment favorably.
10/9/2002............................... Committee on Small Business
and Entrepreneurship.
Reported by Senator Kerry
without amendment. With
written report No. 107-307.
10/9/2002............................... Placed on Senate Legislative
Calendar under General
Orders. Calendar No. 695.
------------------------------------------------------------------------
Need for Legislation
Many persons within the United States have technical and
vocational skills, but do not have business experience or
training to help them succeed in the small business community.
Presently, small businesses employ mechanics, technicians,
carpenters, plumbers, machinists, and draftsmen. However, H.R.
2666 is needed to provide the essential training and business
counseling necessary for these skilled workers to start their
own businesses, to survive in the business world, and to grow.
In providing these needed services, H.R. 2666 relies upon
the present infrastructure of the Small Business Development
Centers (SBDCs), which has proven by past performance to
deliver services that greatly enhance the chances of a small
business surviving as compared with those who do not receive
such assistance. The present global economy requires that this
Nation remain an agile competitor. Fostering the growth of
small business, as it is anticipated this Act will do, is
another building block in strengthening our international
competitiveness.
Section-by-Section Analysis
Section 1. Short title
The section establishes the short title as the ``Vocational
and Technical Entrepreneurship Development Act of 2001.''
Section 2. Vocational and technical Entrepreneurship Development
Program
This section amends the Small Business Act by adding a new
section at the end entitled: ``Vocational and Technical
Entrepreneurship Development Program.''
Subsection (a) defines the terms: ``Administrator,''
``program,'' and ``small business development center.''
Subsection (b) requires the Administrator to establish a
program by which the Administrator makes grants to SBDCs to
enable such centers to provide technical assistance to
secondaryschools, or to postsecondary vocational or technical
schools, for the development and implementation of curricula designed
to promote vocational and technical entrepreneurship.
Subsection (c) establishes the minimum grant that the
Administrator can make with respect to the pilot program as not
less than $200,000.
Subsection (d) requires the Administrator to design a grant
application that must be completed by any SBDC seeking a grant.
The application shall include information regarding the
applicant's goals and objectives for the educational programs
to be funded.
Subsection (e) requires the Administrator, as a condition
of each grant under the program, that the grantee shall
transmit to the Administrator, within 18 months after receipt
of grant funds, a report describing how the grant funds were
used.
Subsection (f) permits the Administrator to enter into a
cooperative agreement or contract with a small business
development center receiving a grant under this section to
provide additional assistance that furthers the purposes of the
program.
Subsection (g) requires the Administrator to transmit a
report to Congress, no later than March 31, 2004, that
evaluates the program.
Subsection (h) requires the Administrator to select an
association established under section 21(a)(3)(A) of the Small
Business Act to act as a clearinghouse of information and
expertise regarding vocational and technical entrepreneurship
education programs. In each fiscal year, 2002, 2003, and 2004,
the Administrator shall provide additional assistance to the
association selected to serve as the clearinghouse.
Subsection (i) authorizes $7,000,000 be appropriated for
each of the fiscal years 2002, 2003, and 2004. The funds are to
remain available until expended.
5.5 H.R. 2538--Native American Small Business Development Act
Legislative History
------------------------------------------------------------------------
Date Action
------------------------------------------------------------------------
H.R. 2538
7/17/2001.............................. Referred to the House Committee
on Small Business.
8/1/2001............................... Committee mark-up session held.
9/21/2001 5:48pm...................... Reported by the Committee on
Small Business. H. Rept. 107-
211.
9/21/2001 5:48pm...................... Placed on the Union Calendar,
Calendar No. 126.
12/5/2001 11:51am..................... Mr. Manzullo moved to suspend
the rules and pass the bill,
as amended.
12/5/2001 11:52am..................... Considered under suspension of
the rules. (consideration: CR
H8856-8860)
12/5/2001 12:09pm..................... On motion to suspend the rules
and pass the bill, as amended
Agreed to by voice vote.
(text: CR H8856-8857)
12/5/2001 12:09pm..................... Motion to reconsider laid on
the table Agreed to without
objection.
12/5/2001 12:09pm..................... The title of the measure was
amended. Agreed to without
objection.
12/6/2001.............................. Received in the Senate and Read
twice and referred to the
Committee on Small Business
and Entrepreneurship.
4/30/2002.............................. Senate Committee on Small
Business and Entrepreneurship.
Joint hearings held with
Indian Affairs.
------------------------------------------------------------------------
Need for Legislation
Approximately 60 percent of Indian tribe members and Native
Alaskans live on or in the immediate vicinity of Indian lands
and suffer from an average unemployment rate of 45 percent.
Presently, Indian tribe members and Native Alaskans own more
than 197,000 business enterprises and generate revenues in
excess of $34 billion.
The service industry, the largest sector, accounts for 17
percent of the businesses, and 15.7 percent of the total
revenues. The second largest sector is construction, which
accounts for 13.9 percent of the businesses and 15.7 percent of
the total revenues. The third largest sector, the retail
trades, accounts for 7.5 percent of the businesses and 13.4
percent of the total revenues.
The number of businesses owned by Indian tribe members and
Native Alaskans grew by 84 percent during the period from 1992
to 1997, while businesses, generally, grew by only seven
percent. During the same period, the gross receipts for Indian
tribe members and Native Alaskan business owners increased by
179 percent, in comparison with the business community, as a
whole, where the gross receipts for the same period grew only
by 40 percent.
In the past, the SBDC program with more than 1,000 offices
throughout the United States has provided cost-effective
business counseling and technical assistance to small
businesses. For example, clients receiving long-term counseling
under the program in 1998 generated additional tax revenues of
$468 million, which was approximately six times the cost of the
program to the Federal government.
By using the existing infrastructure of the SBDC program,
it is anticipated that small businesses owned by Indian tribe
members, Native Alaskans, and Native Hawaiians, who receive
services under the Act, will have a higher survival rate than
the average small businesses not receiving such services.
Further, increased assistance through SBDC counseling has in
the past been able to reduce defaults under Small Business
Administration (SBA) lending programs.
The business counseling and technical assistance, provided
for under this Act, is critical on Indian land where, without
such assistance, similar services are scarce and expensive.
Past and current efforts by SBDCs to assist Native American
populations located on or along reservation lands have proven
difficult. In addition, the lack of resources makes it
difficult to raise an equal amount of matching funds to
specifically assist Native Americans.
Section-by-Section Analysis
Section 1. Short title
The section establishes the short title of the bill as the
``Native American Small Business Development Act.''
Section 2. Findings and purposes
Subsection (a) states the findings of Congress that include
the fact that (1) the average unemployment rate for Indian
tribe members and Native Alaskans who live on or adjacent to
Indian lands is 45 percent, (2) Indian tribe members and Native
Alaskans own more than 197,000 businesses that generate more
than $34 billion in revenues, (3) for the period 1992-1997, the
number of businesses owned by Indian tribe members and Native
Alaskans grew by 84 percent and gross receipts grew by 179
percent, as compared with seven percent and 40 percent,
respectively, for businesses generally, (4) the SBDC program is
cost effective in that additional tax revenues generated by
businesses counseled under the program in 1998 were
approximately six times the cost of the program, (5) using the
existing SBDC infrastructure it is anticipated that those
receiving services under the Act will have a higher survival
rate than those not receiving such services, (6) business
counseling and technical assistance provided on Indian lands is
critical because such services are presently scarce and where
available are expensive, and (7) SBDC business counseling has
proven to be effective in reducing the default rate of
businesses who have received counseling and who participated in
one or more SBA loan program. The Committee believes that
because of the SBDC program's success and proven track record,
utilizing the existing SBDC network will enhance the success of
H.R. 2538.
Subsection (b) states the purpose of the Act which includes
assisting Indian tribe members, Native Alaskans, and Native
Hawaiians by: increasing jobs and enhancing economic
development on Indian lands; creating new small businesses and
expanding existing ones; providing management, technical, and
research assistance; seeking the advice of Tribal Councils on
where business development assistance is most needed; and,
ensuring full access under the Act to existing business
counseling and technical assistance available through the SBDC
program.
Section 3. Small Business Development Center assistance to Indian tribe
members, Native Alaskans, and Native Hawaiians
Adding a new subsection providing for an additional grant
program to assist Indian tribe members, Native Alaskans, and
Native Hawaiians amends the Small Business Act. An SBDC,
located in an eligible State and funded by SBA, may apply for
an additional grant to be used solely for providing services,
as set forth in the Small Business Act with respect to the SBDC
program, to assist with outreach, development, and enhancement
on Indian lands of small business startups and expansions owned
by Indian tribe members, Native Alaskans, and Native Hawaiians.
Because the majority of Native Americans live on or
adjacent to Indian lands, where economic opportunities are
limited, the Committee expects the SBDCs to be located on or in
close proximity to Indian lands. Although Native Americans who
do not live on Indian lands may seek the assistance of these
centers, the Committee believes that assistance should go to
aid with outreach, development, and enhancement on Indian lands
of small business startups and expansions owned by Indian tribe
members, Native Alaskans, and Native Hawaiians. Native
Americans located near existing centers or subcenters are
encouraged to continue to utilize those existing resources.
An eligible State is defined as a State that has a combined
population of Indian tribe members, Native Alaskans, and Native
Hawaiians that comprises at least one percent of the State's
total population, as shown by the most recent census. Each
applicant is required to complete a grant application that
shall include information as to: (1) the applicants ability to
provide training and services to a representative number of
Indian tribe members, Native Alaskans, and Native Hawaiians,
(2) the proposed location of the SBDC site, (3) the amount of
grant funds needed, and (4) the extent of prior consultation
with local Tribal Councils.
No applicant may receive more than $300,000 in any one
fiscal year, but no matching funds are required. Within 180
days after the Act is enacted, the Administrator is required to
issue final regulations with respect to the grant program
established by the Act. In promulgating the regulations, the
Administrator must provide notice of the proposed regulations
and an opportunity for public comment. In addition, the
Administrator must consult with the Association of Small
Business Development Centers. The regulation must establish
standards relating to (1) educational, technical, and support
services to be provided by SBDCs receiving grants, and (2) any
work plan that is required to be submitted by an applicant.
The Committee believes that setting standards will help
ensure that the grants will be awarded to the most qualified
State programs and provide a mechanism by which the
Administrator can evaluate the success of the program.
The section defines the following terms: ``Associate
Administrator,'' ``Indian Lands,'' ``Indian Tribe,'' ``Indian
Tribe Member,'' ``Native Alaskan,'' and ``Native Hawaiian.''
The section authorizes $7 million to be appropriated for
each of fiscal years 2002 through 2004. Funds appropriated for
the program created by the Act are in addition to funds
appropriated for the SBDC program generally and for other
particular SBDC programs. Monies specifically appropriated for
that purpose might only fund the program created under the Act.
Section 4. State consultation with local Tribal Councils
This section amends section 21(c) of the Small Business Act
by adding a new subsection (9) that requires that a State
receiving grants under the program created by the Act shall
request the advice of local Tribal Councils on how best to
provide assistance to Indian tribe members, Native Alaskans,
and Native Hawaiians and where to locate satellite centers to
provide such assistance.
5.6 H.R. 4231--Small Business Advocacy Improvement Act of 2002
Legislative History
------------------------------------------------------------------------
Date Action
------------------------------------------------------------------------
H.R. 4231
4/16/2002............................... Referred to the House
Committee on Small Business.
4/17/2002............................... Committee Consideration and
Mark-up Session Held.
4/17/2002............................... Ordered to be Reported.
5/2/2002 5:18pm........................ Reported by the Committee on
Small Business. H. Rept. 107-
433.
5/2/2002 5:18pm........................ Placed on the Union Calendar,
Calendar No. 255.
5/21/2002 7:11pm....................... Mr. Manzullo moved to suspend
the rules and pass the bill,
as amended.
5/21/2002 7:11pm....................... Considered under suspension of
the rules. (Consideration: CR
H2784-2787)
5/21/2002 7:25pm....................... On motion to suspend the rules
and pass the bills, as
amended Agreed to by voice
vote. (Text: CR H2784-2785)
5/21/2002 7:25pm....................... Motion to reconsider laid on
the table Agreed to without
objection.
5/22/2002............................... Received in the Senate.
6/28/2002............................... Read the first time. Placed on
Senate Legislative Calendar
under Read the First Time.
7/8/2002................................ Read the second time. Placed
on Senate Legislative
Calendar under General
Orders. Calendar No. 485.
------------------------------------------------------------------------
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 complications 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 * * * come 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.
Section-by-Section Analysis
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 businesses 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 ofinformation and advice for Congress and the
federal agencies with which the office will advocate on behalf of small
businesses.
The purposes 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 in 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 whom the Small Business Administration
employed 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 to 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 the 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 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.
5.7 H.R. 3230--Small Business Emergency Relief and Recovery Act
Legislative History
------------------------------------------------------------------------
Date Action
------------------------------------------------------------------------
H.R. 3230
11/6/2001............................... Referred to the House
Committee on Small Business.
11/14/2001.............................. Committee Consideration and
Mark-up Session Held.
11/14/2001.............................. Ordered to be Reported
(Amended) by Voice Vote.
------------------------------------------------------------------------
Need for Legislation
This emergency legislation is needed to help small
businesses meet their payments on existing debts, finance their
businesses, and maintain jobs in the aftermath of the terrorist
attacks on September 11, 2001 by strengthening and expanding
access to SBA loan and management counseling programs. This
bill provides needed assistance to those who have suffered
directly from the destruction of the World Trade Center, injury
to the Pentagon, and closure of businesses, at least
temporarily, in the interest of National security.
Besides those directly impacted by the physical destruction
of property by terrorists or by closure of facilities in the
interest of National security, there are other small businesses
that are indirectly impacted and are also suffering damage.
They are victims of real and substantial economic losses not
compensated for or assisted by present programs.
In addition, the already struggling economy of the Nation,
and especially the small business sector, has been set back by
the terrorist attacks. This legislation provides a needed
economic stimulus by providing assistance to small business
concerns by means of programs already in place. In the past,
the small business sector has been a major catalyst in
rebounding this Nation's economy in periods of economic
downturn. This bill is needed to help jump-start the economy
now, particularly after the Federal Reserve released a survey
on November 13, 2001, that banks are imposing tougher standards
on business borrowing over the last three months because of the
slowing economy.
Section-by-Section Analysis
Section 1. Short title
Designates the bill as the ``American Small Business
Emergency Relief and Recovery Act of 2001.''
Section 2. Findings and purpose
Describes the Congressional findings regarding the
suffering of small businesses, as a result of the terrorist
attacks perpetrated against the United States on September 11,
2001, directly because of (1) proximity to the World Trade
Center or the Pentagon, or in a disaster area declared by the
President or the Administrator of SBA, (2) closure or
suspension of business for National security purposes, or (3)
located in an airport that was closed, and indirectly because
of being (1) a supplier or provider of services to businesses
that were located in or near the World Trade Center or the
Pentagon, (2) on September 11, 2001, a supplier, service
provider, or complementary industry to any business or industry
adversely affected by the terrorist attacks, in particular, the
financial, hospitality, and travel industries, and airport
concessionaires, and (3) on September 11, 2001, integral to or
dependent upon a business or business sector closed or
suspended for National security purposes.
The result is that small businesses adversely affected by
the terrorist attacks are finding it difficult or impossible
to: make loan payments on existing debt; pay their employees,
vendors, and operating expenses; purchase materials, supplies,
or inventory; and secure financing for their businesses. To
overcome these difficulties, the stated purpose of the Act is
to strengthen the loan, investment, procurement assistance, and
management education programs of SBA, for the purpose of
helping small businesses meet their existing obligations,
finance their businesses, and maintain and create jobs, and
thereby provide stability to the economy.
Section 3. Definitions relating to terrorist attacks
Amends the Small Business Act to include, in Section 3,
definitions of the terms ``directly affected,'' ``indirectly
affected,'' ``adversely affected,'' and ``substantial economic
injury.''
Section 4. Disaster loans after terrorist attacks
Amends Section 7(b) of the Small Business Act by adding a
new paragraph (4) to authorize SBA to make economic injury
loans to small businesses or nonprofit organizations directly
affected by the terrorist attacks of September 11, 2001.
Payment of principal and interest on such loans (other than a
refinancing) shall be deferred and no interest shall accrue
during the 2-year period following the date of issuance of any
such loan. Payment on such loans shall resume at the end of the
2-year period and shall be payable thereafter in the same
manner and subject to the same terms and conditions as any
other economic injury disaster loan.
Economic injury disaster loans made under the new program
may be used to refinance any prior disaster loans outstanding
as to principal or interest on September 11, 2001, and the
refinanced amount shall be considered to be a part of the new
loan. Refinancing of prior outstanding disaster loans are to be
treated in addition to any other loan eligibility the small
business may have under the Small Business Act. Loans under
this temporary economic injury disaster loan program may also
be used to refinance business debt and payments of principal on
such loans shall be deferred, but interest may accrue during
the 1-year period following the dateof refinancing. At the end
of the 1-year period, periodic payment of principal and interest is
required, in the same manner and conditions as would otherwise be
applicable to economic injury disaster loans made under Section 7(b) of
the Small Business Act.
Loans made under the new paragraph (4) of Section 7(b) of
the Small Business Act shall be made at an interest rate that
does not exceed 4 percent. Any reasonable doubt as to the
repayment ability of an applicant should be resolved in favor
of the small business. Assistance under new paragraph (4) does
not require the declaration of a disaster area with respect to
those small businesses directly affected by the terrorist
attacks of September 11, 2001.
New size standards are established for a small business
concern (located in areas of New York, Virginia and the
contiguous areas designated by the President or the
Administrator of SBA as a disaster area) that is, i.e.: a
restaurant, law firm, certified public accounting business,
performing arts business, warehouse or storage business,
special trade contractor, food or apparel manufacturer, travel
agency, limousine service, charted bus service, taxicabs, or
other similar ground transportation service. It is the
intention of the Committee that benefits under the Act to small
businesses such as taxicab concerns should also help drivers of
such vehicles who have suffered from loss of income due to
interruption in service.
Also, included are non-profit small businesses and a
business (other than a depository financial institution) having
a size standard under subsections 522, 523, and 524 of the
North American Industry Classification System and whose size
does not exceed such standard. The Administrator of SBA is
authorized to increase or waive size standards and size
regulations with respect to businesses applying for assistance
as a result of the terrorist attacks. It is the intention of
the Committee that the Administrator will be flexible in
applying size standards to businesses with independently
operated affiliates and that do business from multiple sites by
treating such affiliates and sites as separate entities where
applicable.
Increased loan caps are established for both physical
damage and economic injury loans to any one borrower located in
New York, Virginia, or contiguous areas designated as disaster
areas following the terrorist attacks of September 11, 2001. A
loan cap is also established for economic injury loans made to
small businesses, not located in the designated disaster areas.
The Administrator of SBA is authorized, in his discretion, to
waive the loan caps. Applications for assistance by directly
affected small businesses shall be received for physical damage
loans under paragraph (1) and for economic injury disaster
loans under new paragraph (4) of Section 7(b) until September
10, 2002. No disaster loans made under paragraphs (1) and (4),
as the result of the terrorist attacks on September 11, 2001,
shall be sold until 4 years after the date of the final loan
disbursement.
Section 5. Emergency relief loan program
Amends section 7(a) of the Small Business Act by adding a
new paragraph (31) that creates a temporary loan program for
small businesses directly and indirectly affected by the events
of September 11, 2001. For a 1-year period, commencing on the
date of enactment of the Act, SBA may make loans under the 7(a)
loan program under terms and conditions more favorable to
borrowers who are small business concerns that have been, or
are likely to be, directly or indirectly adversely affected.
Such loan terms and conditions include, e.g.: a larger
portion of the outstanding balance guaranteed by the Federal
government; the annual fee on the outstanding balance reduced
by 50 percent; waiver of the up-front guarantee fee; a rate of
interest not to exceed 2 percentage points over prime; upon
request of the borrower, repayment of principal and interest
may be deferred for 1-year; and any reasonable doubt as to the
repayment ability of a small business applying for a loan
should be resolved in favor of the applicant. For purposes of
this Emergency Relief Loan Program the size standard for a
travel agency shall be $2 million in annual receipts. The
Administrator may make loans under paragraph (31) in
cooperation with insured credit unions through agreements to
participate on an immediate or guaranteed basis.
Section 6. Business loan assistance following terrorist attacks
Amends section 7(a)(18) of the Small Business Act by adding
a new subparagraph (C) that authorizes, for loans approved
during a 1-year period following the date of enactment of the
Act, a 50 percent reduction in the up-front guarantee fee that
may be charged to the borrower. Amends section 7(a)(2) of the
Small Business Act by adding a new subparagraph (E) that
increases the amount guaranteed by the Federal government of
loans under $150,000 (except with respect to loans under the
Express Pilot Program), and reduces by 50 percent the annual
fee charged to the borrower on the outstanding balance of the
deferred participation share of the loan.
Amends section 503 of the Small business Investment Act,
for a 1-year period following the enactment of the Act, with
respect to the ``504 Loan Program,'' to permit the waiver of 50
percent of the annual guarantee fee and a waiver of the up-
front guarantee fee with respect to loans made during the
period.
Implementation of the 1-year loan programs contained in
sections 5 and 6 of this Act, with respect to the 7(a) and 504
loan programs, is to be effective only to the extent that funds
are appropriated to carry out the provisions of those sections.
Loans made under those sections and new section 4 of the Act
shall be treated separately for purpose of subsidy rate
calculations.
Section 7. Approval process
Authorizes the SBA Administrator to adopt such approval
processes for providing assistance to eligible small business
concerns under the Act, as may in the Administrator's
discretion be deemed necessary and appropriate, without being
required to follow any other provisions of law (e.g., the
Administrative Procedure Act). However, before adoption of such
approval processes, the Administrator must consult with the
Committee on Small Business of the House of Representatives and
the Committee on Small Business and Entrepreneurship of the
Senate.
Section 8. Other specialized assistance and monitoring authorized
Increases the level of authorization to Small Business
Development Centers (SBDCs), Service Corps of Retired
Executives (SCORE), Microloan Program intermediaries, and
Women's Business Development Centers, to provide additional
individualized assistance with respect to financing,
refinancing of existing debt, and business counseling to small
business concerns adversely affected, directly or indirectly,
by the terrorist attacks on September 11, 2001. No State
matching funds are required in providing such services. Amends
the Small Business Investment Act of 1958 to encourage small
business investment companies to provide equity capital and to
make loans to small business concerns adversely affected by the
terrorist attacks of September 11, 2001.
During the 1-year period beginning on the date of enactment
of the Act, the Administrator of SBA may make a grant to any
small business concern that suffered substantial economic
injury as the result of the terrorist attacks against the
United States that occurred on September 11, 2001. Upon
application by a small business concern which is the recipient
of a loan under the Small Business Act and which has suffered a
substantial economic injury as the result of the terrorist
attacks against the United States that occurred on September
11, 2001, the Administrator of SBA may: (1) if the loan was
guaranteed by the Administrator, undertake all or part of the
small business concern's obligation; or (2) if the loan was a
direct loan made by the Administrator, discharge all or part of
the indebtedness of the small business concern under such loan.
Section 9. Study and report on effects on small business concerns
Requires the Office of Advocacy within SBA to conduct
annual studies for a 5-year period of the impact of the
terrorist attacks perpetrated against the United States on
September 11, 2001, on small business concerns, and the effect
of assistance provided under this Act on such small business
concerns. The Office of Advocacy is required to submit a report
to Congress in September of each fiscal year beginning in
fiscal year 2002 and ending with fiscal year 2006. The amount
of $500,000 is authorized to be appropriated for each fiscal
year 2002 through 2006 to perform the studies and provide the
reports.
Section 10. Emergency equitable relief for federal contractors
Authorizes the head of a Federal government agency, under
guidance from the Administrator for Federal Procurement Policy
and SBA, to increase the price of a contract entered into by
the agency and performed by a small business concern, as may be
equitable to compensate for any loss to the small business due
to security measures taken by the Federal government at Federal
facilities as the result of the terrorist attacks of September
11, 2001. Written guidance shall be issued not later than 20
days after passage of the Act. Expedited procedures shall be
used, and contained in the written guidance, for determination
by a Federal agency whether to grant equitable relief.
The expedited procedures shall require a Federal agency to
complete action on a contactor's request for adjustment not
later than 30 days after the date on which the contractor
submitted the request to the contracting officer. In addition
to making a price adjustment, an agency may extend the time for
performance. The Administrator of SBA is to establish a fund
from which payments of price contract adjustments are to be
made. Amounts in the fund shall be available until expended. No
request for adjustment shall be accepted if made more than 330
days after the enactment of this Act and the authority to grant
equitable contract relief terminates 1 year after the date of
enactment of this Act. The amount of $100,000,000 is authorized
to be appropriated to SBA for purposes of the fund for payment
of price contract adjustments.
Section 11. Reports to Congress
Requires the Administrator of SBA to submit on December 15,
and quarterly thereafter through December 31, 2003, reports to
the Committee on Small Business of the House of Representatives
and the Committee on Small Business and Entrepreneurship of the
Senate regarding the implementation of this Act, including
program delivery, staffing, and administrative expenses.
Section 12. Expedited issuance of implementing guidelines
Requires the Administrator of SBA to issue interim final
rules and guidelines to implement this Act and the amendments
made by this Act, not later than 20 days after the date of
enactment of this Act.
Section 13. Increased authorizations of appropriations
Amends section 20 of the Small Business Act to increase
amounts authorized to be appropriated to implement this Act and
the amendments made by this Act.
5.8 H.R. 2867--Small Business Opportunity Enhancement Act of 2002
Legislative History
------------------------------------------------------------------------
Date Action
------------------------------------------------------------------------
H.R. 2867
9/6/2001................................ Referred to the House
Committee on Small Business.
4/17/2002............................... Committee Consideration and
Mark-up Session Held.
4/17/2002............................... Ordered to be reported.
5/2/2002 5:17pm........................ Reported by the Committee on
Small Business. H. Rept. 107-
432.
5/2/2002 5:17pm........................ Placed on the Union Calendar,
Calendar No. 254.
------------------------------------------------------------------------
Need for Legislation
The federal procurement system has historically been a
prolific and competitive source of growth for small businesses.
This is understandable since the federal government is the
largest buyer of goods and services in the world, with $200
billion in purchases for fiscal year 2000.
Unfortunately, in the rush to streamline the federal
procurement system, the importance of small business concerns
to the federal marketplace has been neglected. In recent years,
federal agencies have combined requirements, previously
provided by small businesses, into enormous, mega-contracts
that only large corporations can bid on as prime contractors.
The result of resorting to mega-contracts has been a less
competitive marketplace and a steady decline in the number of
prime contracts going to small businesses. In his speech of
March 19, 2002, to the Women's Entrepreneurship in the 21st
Century Summit, the President emphasized that ``government
contracting must be open and more fair to small businesses.''
However, he pointed out that the use by federal agencies of
mega-contracts was the major hurdle impeding small business
from realizing the President's goal of ``more ownership in more
communities all across America.'' In this respect the President
stated:
``But you know as well as I do that there are some large
hurdles for small businesses. One is that--and the main one
is--that agencies sometimes, many times, only let huge
contracts with massive requirements, and they tend to go to the
same group of large corporate bidders. . . . [T]he term of art
in Washington is called bundling. It effectively excludes small
businesses. And we need to do something about it.''
The President has assigned to the head of the Office of
Management and Budget the task of reviewing the federal
procurement process and the responsibility of finding ways ``to
encourage entrepreneurial growth, the capacity for our
government to stimulate small business ownership in all
communities across America.'' Specifically, the President
stated:
``And so one of the things we're going to do is we're going
to examine the federal government's contracting policies; to
make sure the process is open; to make sure the process helps
to achieve a noble objective, which is more ownership in our
country. And wherever possible, we're going to insist we break
down large federal contracts so that small business owners have
got a fair shot at federal contracting.''
H.R. 2867 is bipartisan legislation, in line with the
President's Small Business Plan, and assigns to the Office of
Management and Budget the ultimate responsibility of
determining whether a mega-contract is fair to small businesses
and is in the best interests of the Nation. It also provides
more time for small businesses to respond to a bundled
contract, an essential element to forming teams of small
business who will have an opportunity to compete.
This legislation is necessary to restore needed competition
to the federal marketplace and to reduce use by federal
agencies of mega-contracts that the President has identified as
the major hurdle to restoring openness and fairness to small
business in the federal marketplace.
Section-by-Section Analysis
Section 1. Short title
The short title is the ``Small Business Opportunity
Enhancement Act of 2001.''
Section 2. Submission of certain disagreements to the Director of the
Office of Management and Budget
The section would amend the Small Business Act to require
the Administrator of the Small Business Administration to
submit a dispute to the Director of the Office of Management
and Budget where the Administrator and the contracting
procurement department or agency are unable to agree and the
Administrator believes the procurement, as proposed, will
render small business prime contract participation unlikely.
The Director of the Office of Management and Budget must
make a decision with respect to a disagreement within 10 days
after receiving the matter. The Director may not delegate his
responsibilities with respect to making a decision, except to a
subordinate official nominated by the President, and confirmed
by and with the advice and consent of the Senate.
Section 3. Minimum period for solicitation of offers for a bundled
contract
The section would amend the Small Business Act to require
that small businesses be permitted no less than sixty days,
beginning on the date the solicitation is issued, to respond to
a solicitation for offers with respect to a contract that is
bundled.
5.9 S. 174--Microloan Improvement Act of 2001
Legislative History
------------------------------------------------------------------------
Date Action
------------------------------------------------------------------------
S. 174
1/24/2001............................... Read twice and referred to the
Committee on Small Business.
(text of measure as
introduced: CR S549)
2/28/2001............................... Committee on Small Business.
Ordered to be reported
without amendment favorably.
6/1/2001................................ Committee on Small Business.
Reported by Senator Bond
under authority of the order
of the Senate of 05/26/2001
without amendment. With
written report No. 107-18.
6/1/2001................................ Placed on Senate Legislative
Calendar under General
Orders. Calendar No. 55.
11/16/2001.............................. Measure laid before Senate.
(Consideration: CR S12013-
12014)
11/16/2001.............................. Passed Senate with an
amendment by Unanimous
Consent. (text: CR S12014)
11/19/2001.............................. Message on Senate action sent
to the House.
11/19/2001 2:02pm...................... Received in the House.
11/19/2001.............................. Referred to the House
Committee on Small Business.
4/17/2002............................... Committee Consideration and
Mark-up Session Held.
4/17/2002............................... Ordered to be Reported
(Amended).
------------------------------------------------------------------------
Need for Legislation
This legislation is needed to provide small businesses more
opportunities to participate in the SBA's Microloan program.
The SBA makes funds available to qualified non-profit
organizations, which act as intermediary lenders. These
intermediaries use these funds to make loans of up to $35,000
to the smallest of small business borrowers. These
intermediaries also provide management and technical assistant
to help ensure the success of the small firm. This bill allows
microloan intermediaries to offer revolving lines of credit to
borrowers; broadens the eligibility requirements for
intermediaries to include equivalent experience; frees up the
amount of money an intermediary can use for pre-loan technical
assistance to counsel borrowers; and increases the amount from
25 to 35 percent of technical assistance grant funds the
intermediary can subcontract to another entity to provide
technical assistance. An amendment was adopted unanimously in
committee to remove a set aside of up to $1 million for
microloan trade organizations because it is the belief of the
House Small Business Committee that federal funds should not go
to national trade associations.
Section-by-Section Analysis
Section 1. Sets for the title of the bill, the ``Microloan
Program Improvement Act of 2001.''
Section 2. Subsection (a)(1) would eliminate the
requirement that intermediaries make ``short-term'' loans. This
change would allow Microloan intermediaries greater latitude in
developing microloan products by offering their borrowers
revolving lines of credit, such as for seasonal contract needs.
Subsection (a)(2) would broaden the eligibility criteria
for Microloan intermediaries. Current law requires
intermediaries to have one year of experience making microloans
to startup, newly established or growing small businesses and
providing technical assistance to its borrowers. This provision
would deem a prospective intermediary eligible if it has
``equivalent'' experience, which would be defined by SBA.
Subsection (a)(3) would eliminate the restriction on how
much technical assistance funding an intermediary can use for
pre-loan assistance. Under current law, intermediaries are
limited to using 25 percent of the technical assistance to
assist prospective borrowers. This provision would allow an
intermediary to allocate as much of its technical assistance as
it deems appropriate.
This subsection would also increase the percentage of
technical assistance that an intermediary can use to contract
out technical assistance. Currently, intermediaries can only
contract out 25 percent; this provision would raise the limit
to 35 percent.
Subsection (a)(4) would establish a peer-to-peer mentoring
program for SBA Microloan intermediaries and organizations
seeking to become Microloan intermediaries. This provision
would allow SBA to use up to $1 million of its annual
appropriations for technical assistance grants to subcontract
with one or more national trade associations of SBA Microloan
intermediaries or other entities knowledgeable about, and
experienced in, microlending and related technical experience
to provide peer-to-peer mentoring. (See Senate Report 107-18 at
pp. 6-7 (June 1, 2001)).
CHAPTER 6
SUMMARY OF OTHER LEGISLATIVE ACTIVITIES OF THE COMMITTEE ON SMALL
BUSINESS
6.1 Committee Meetings
6.1.1 organizational meetings
On February 28, 2002 the Committee on Small Business held
an organization meeting. The purpose of this meeting was
threefold: (1) to consider and adopt the Committee rules for
the 107th Congress, (2) to consider and adopt the Committee's
oversight plan for the 107th Congress, and (3) approve the
subcommittee assignments for Members of the Committee. The
Committee rules, oversight plan, and organization of
subcommittees were adopted by a recorded vote of 19-15.
The text of the Committee's oversight plan follows:
6.1.2 OVERSIGHT PLAN FOR THE COMMITTEE ON SMALL BUSINESS
107TH CONGRESS
U.S. HOUSE OF REPRESENTATIVES
DONALD A. MANZULLO, CHAIRMAN
Rule X, clause 2(d)(1), of the Rules of the House requires each
standing Committee to adopt an oversight plan for the two-year period
of the Congress and to submit the plan to the Committees on Government
Reform and Oversight and House Oversight not later than February 15 of
the first session of the Congress.
The oversight plan of the Committee on Small Business includes
areas in which the Committee expects to conduct oversight activity
during the 107th Congress. However, this plan does not preclude
oversight or investigation of additional matters as the need arises.
OVERSIGHT OF THE SMALL BUSINESS ADMINISTRATION
The Committee will conduct hearings on all the major programs of
the Small Business Administration to determine their effectiveness and
possible options for improvements.
FINANCIAL AND MANAGEMENT/TECHNICAL ASSISTANCE PROGRAMS
The Committee will conduct hearings on the effectiveness and
efficiency of the SBA's major programs. In particular, the Committee
will closely monitor the subsidy rate calculations for the loan
programs and take the necessary steps to ensure that the programs are
able to operate in the event of a national economic recession in the
most fiscally prudent manner possible.
The Committee will also consider the possible impacts of the Gramm-
Leach-Bliley Financial Modernization Act of 1999 on the ability of
small businesses to gain access to capital.
In 2000, most of SBA's programs were re-authorized for three years.
Thus, a number of the SBA's key programs will be the subject of on-
going oversight hearings by the Committee to insure that they meet the
goals set for these programs by Congress. These include:
7(a) General Business Loan Program
Certified Development Company Program
Small Business Investment Company (SBIC) Program
Microloan Program
Small Business Development Centers (SBDC)
Disaster Loan Program
Historically Underutilized Business Zones (HUBZone)
New Markets Venture Capital Program
ADVOCACY
The Office of Advocacy was created to provide small business with
an effective voice inside the Federal government. The Committee will
conduct hearings on how to strengthen this voice and make sure that the
Office of Advocacy continues to effectively represent the interests of
small business. (Spring 2001)
VETERANS
In the 106th Congress, Congress created a new office of Veterans
Business Development to enhance and improve small business services to
our nation's veterans. The Committee will conduct hearings on the
implementation of the Veterans Entrepreneurship and Small Business
Development Act (Summer, 2001).
TECHNOLOGY AND RESEARCH ASSISTANCE
Small Business Innovation Research
The Small Business Innovation Research (SBIR) program aids small
businesses in obtaining federal research and development funding for
new technologies. In 2000, Congress reauthorized the SBIR program for
eight years. The Committee will investigate the implementation of the
recent changes to the SBIR program and, more particularly, the outreach
effort of the SBIR program to make sure that all areas of the country
benefit from the program.
Small Business Technology Transfer
Committee oversight will focus on the program's success at helping
small business access technologies developed at federal laboratories
and put that knowledge to work.
FEDERAL PROCUREMENT
The Committee will examine needed changes in federal procurement.
The Committee will continue to monitor and highlight the practice of
creating bundled or mega-contracts that are too large for small
business participation. Additionally, the implementation of legislation
passed in 2000 that provides for the collection of data on bundled
contracts will be closely scrutinized.
Because there is a direct correlation between the ability of an
agency to achieve its goals and contract bundling, the success of
Federal agencies in meeting their small business goals will also be
assessed.
With the continued practice of contract bundling, more small
businesses will become subcontractors. In light of this, the Committee
will work to ensure fair treatment for subcontractors on federal
contracts.
The Committee will also investigate the women's contracting program
to make sure the program is serving the needs of women-owned
businesses.
GOVERNMENT AND NON-PROFIT COMPETITION
The Committee will examine the extent to which non-profit
organizations and the federal government itself compete with small
business. Our focus will include activities in both the private sector
and government procurement. (Summer, 2001)
REGULATORY FLEXIBILITY
The Committee will continue its oversight of agency compliance with
the Regulatory Flexibility Act, as amended by the Small Business
Regulatory Enforcement Fairness Act. (Ongoing)
The Committee will oversee the implementation of the Truth in
Regulating Act. (Winter, 2001)
SBREFA
The Committee will be conducting oversight hearings on agency
implementation of the Small Business Regulatory Enforcement Fairness
Act (SBREFA), which was enacted during the second session of the 104th
Congress. The Committee will also examine the need to further amend and
strengthen SBREFA. (Ongoing)
PAPERWORK REDUCTION
The Committee will hold hearings and work to reauthorize the
Paperwork Reduction Act. (2001)
GOVERNMENT REGULATION
The Committee will continue to examine the regulatory activities of
various federal agencies and assess the impact of regulations on the
small business community. (Ongoing)
TAXATION
The Committee will continue to conduct oversight hearings into ways
to reduce the tax burden on small business. These hearings will include
not only the fiscal but the paperwork burden of the federal tax system
and federal enforcement efforts. (Ongoing)
ELECTRIC UTILITY RESTRUCTURING
The Committee will conduct oversight hearings on the potential
effects of electric utility restructuring deregulation on small
business. (Spring, 2002)
GOVERNMENT PERFORMANCE AND RESULTS ACT
The Committee will continue consultations with the SBA regarding
the preparation and implementation of strategic plans and performance
plans as required by the Government Performance and Results Act.
(Winter, 2001)
EMPOWERMENT
The Committee will conduct oversight hearings on regulations and
licensing policies that impact small businesses located in high risk
communities. The Committee will also examine the promotion of business
growth and opportunities in economically depressed areas, and will
examine programs targeted towards relief for low income communities.
The challenges facing minority-owned businesses will continue to be
evaluated. (Ongoing)
The Committee will specifically look at agency implementation of
the New Markets Initiative Act (Spring, 2002) and the Program for
Investment in Microentrepreneurs (PRIME) program.
WORKFORCE
The Committee will examine issues related to the problems faced by
small businesses in attracting and retaining a high quality workforce.
Specifically, the Committee will investigate vocational education
programs, worker retraining programs, and wage and benefit issues.
(Ongoing)
HEALTH CARE
The Committee will examine ways on how to improve access and
increase affordability of high quality medical care for small business
owners and their employees. (Ongoing)
PENSION REFORM
The Committee will examine ways on how to enhance retirement
security for small business owners and their employees. (Ongoing)
E-COMMERCE AND TECHNOLOGY
The Committee will continue to conduct oversight hearings into ways
to reduce the ``digital divide'' in order to promote business growth
and opportunities in economically depressed areas. These hearings will
also examine ways to help the average small business person exploit the
vast potential of Internet commerce. (Ongoing)
TELECOMMUNICATIONS
The Committee will examine the impact of Telecommunications Act of
1996 on small business. First, the Committee will investigate whether
or not the broadest range of small businesses have benefited from more
competition in the telecommunications market through lower prices and
better service. Second, the Committee will investigate whether or not
small business telecommunication companies have benefited from the Act.
The Committee will explore alternatives to enhance the benefits of the
changes in telecommunications technology for small business. (Ongoing)
INTERNATIONAL TRADE
The Committee will continue to examine ways to expand export
opportunities for small business. The Committee will conduct oversight
hearings on Federal trade policy and export promotion programs to
insure that they serve the needs of small business exporters. (Ongoing)
SELF-EMPLOYED
The Committee will hold oversight hearings on how to reduce the
regulatory and tax burden on the self-employed, particularly those in
home-based businesses. (Ongoing)
AGRICULTURAL/RURAL/FARM ISSUES
The Committee will examine ways to promote business growth and
opportunities in rural areas. The Committee will hold oversight
hearings on agricultural issues that impact small business. (Ongoing)
The Committee will hold oversight hearings on the impact of Federal
lands policy on small business. (Ongoing)
Review of Specific Regulations
In compliance with Rule X, clause 2(d)(1)(B), the Committee will
undertake to review specific problems with Federal rules and
regulations. These include:
(1) Provisions of the New Market Venture Capital Act that
establishes New Market Venture Capital Companies (NMVCCs):
On January 22, 2001, the Federal Register published interim final
regulations implementing the New Market Venture Capital Program Act of
2000. The SBA unfortunately did not provide an opportunity for the
public to comment on the interim final rule. This violates the basic
premise of the Administrative Procedure Act. The Committee plans to
review this regulation and solicit more input from the public prior to
the establishment of NMVCCs. (Spring, 2001).
(2) Rules where small business protections contained in the
Regulatory Flexibility Act (RFA) are ignored or only given cursory
treatment by Federal agencies:
On January 19, 2001, the Health Care Financing Administration
(HCFA) published a final rule governing the Medicaid Managed Care
program but failed to perform any type of analysis pursuant to the RFA.
HCFA's disdainful treatment of small business concerns will be a focus
of the Committee.
On January 18, 2001, the Environmental Protection Agency (EPA)
adopted final regulations that would require the application of
sophisticated new emission controls for heavy-duty vehicles equipped
with diesel engines. The EPA did not identify any small manufacturers
of diesel engines. Neither did the EPA consider the impact of this rule
on small trucking companies that must purchase new engines. How the RFA
assesses indirect impacts on small business will be addressed by the
Committee.
On January 22, 2001, the National Park Service (NPS) promulgated a
final rule prohibiting the use of snowmobiles in Yellowstone and Grand
Teton National Parks after the 2003 winter season. The agency refused
to consider outside economic information on small business impacts that
it disputes. In addition, the NPS refused to consider a full range of
options to achieve their objectives while minimizing impacts on small
business. The Committee will explore methods by which agencies can use
the RFA to develop alternatives that are less burdensome on small
business.
(3) Rules that affect the Paperwork Reduction Act:
On January 19, 2001, the Occupational Safety and Health
Administration (OSHA) promulgated its final rule on reporting and
recordkeeping of injuries that occur in the workplace. OSHA failed to
consider the cumulative economic burden of various regulations on small
businesses. The Committee will turn the attention of the Paperwork
Reduction Act to not just complying with one regulation at a time but
also require agencies to access the cumulative impact of their
proposals in order to lower the total paperwork burden of small
businesses.
On December 28, 2000, regulations promulgated by the Department of
Health and Human Services (HHS) prohibits the improper disclosure of
medical and pharmaceutical information by entities that have this
information. HHS states that the burden on small business is
``insignificant.'' While the basic principle behind this regulation is
good, the estimated cost of compliance for physicians in private
practice is about $2,000 annually.
Almost no mention is made of the cumulative burden on the small
business community of this additional regulation. The Committee will
focus on the reducing the cumulative paperwork burdens associated with
providing medical care and how the amount of paperwork actually
detracts from the ability of physicians to provide medical care.
6.2 Budget Views and Estimates
Pursuant to Section 301c of the Congressional Budget Act of
1974, the Committee prepared and submitted to the Committee on
the Budget its views and estimates on the fiscal year 2002 and
2003 budgets with respect to matters under the Committee's
jurisdiction.
6.2.1 fiscal year 2002 budget
The Committee on Small Business submits these views and
estimates on the FY2002 budget submission on matters within our
jurisdiction in compliance with Rule X, clause (4)(f), of the
Rules of the House of Representatives. These views and
estimates are based on the preliminary outline supplied by the
President's Office of Management and Budget (OMB) for FY2002 as
well the Small Business Administration's (SBA) budget
submission. The President's proposed budget for FY2002 contains
$1.6 trillion in tax relief, mostly in the form lower marginal
rates. The President's proposed budget also requests $539
million for the Small Business Administration, a decrease of
$360 million from FY2001 mainly achieved through eliminating
the subsidies for the various loan and debenture programs of
the SBA.
While the Committee believes that many of the provisions of
the budget are sound and reasonable, we can not agree with all
of the spending proposals in the FY2002 budget proposal. These
views and estimates will be divided between two areas: the
impact of the proposed tax relief on small business and SBA
programs. Within the SBA, the views and estimates will be
further divided into five areas: (1) Financial Programs, (2)
Assistance Programs, (3) Disaster Assistance, (4) Salaries and
Expenses, and (5) Office of Inspector General.
(1) Small Business Tax Relief
The Committee applauds the President for proposing broad-
based tax relief for every income taxpayer. What is not well-
known is the benefits of the plan for small business.
The most important component of the President's tax relief
plan is replacing the current marginal income tax rates of 15,
28, 31, 36, and 39.6 percent with a simplified rate structure
of 10, 15, 25, and 33 percent. Bringing down the top marginal
rate down from near 40 percent to 33 percent will be of
particular assistance to successful small business
entrepreneurs. In fact, this proposal is very similar to a
provision contained in the Small Employer Tax Relief Act of
1999 (HR 2087), which prioritized the top tax policy issues
facing small business in the 106th Congress. Retroactively
reducing individual tax rates to January 1, 2001 will allow
over 20 million small businesses (sole proprietorships, S
Corporations, and partnerships), who file their tax returns
asindividuals, not as corporations, to quickly increase cash flow and
allow them to add jobs. This budget plan should also help to shore up
near-term growth to prevent a further weakening of the economy.
In addition, the Committee commends the President's
commitment to eliminating the estate or ``death'' tax, which is
one of the highest legislative priorities for small business
owners. One of the most powerful reasons why people work at or
start small businesses is to make life better for their
children and loved ones. However, by confiscating up to 55
percent of a family's after-tax savings, the federal death tax
kills off family-owned small businesses--the very businesses
which create two-thirds of the new jobs in this country.
Complete repeal of the estate or death tax was rated the
number four issue at the 1995 White House Conference on Small
Business. Many family-owned businesses do not survive beyond
the first generation because families simply both cannot afford
to pay insurance policies or the death tax and continue to run
the business. Often, families are forced to sell the business
for no other reason than to pay the death tax. Less than 30
percent of all family-owned businesses in America survive to
the second generation and less than 13 percent make it to the
third generation.
While welcoming the President's tax plan, the Committee
believes the President's package could have contained more
small business tax relief including:
1. Accelerate immediately the 100 percent health
insurance deduction for the self-employed;
2. Increase the meal deduction from 50 percent to 80
percent immediately;
3. Increase Section 179 expensing;
4. Repeal or significantly reforming the Alternative
Minimum Tax (AMT) for individuals;
5. Reduce payroll taxes on small businesses by
repealing the Federal Unemployment (FUTA) 0.2 percent
surtax; and
6. Allowing small businesses with average annual
gross receipts of $5 million or less to use the cash
method of accounting without limitation (as opposed to
the accrual method).
These tax relief priorities would also boost long-term
growth that would help small businesses increase cash flow and
allow them to add jobs at relatively little cost to the
Treasury. The Committee will be working on these and other
common-sense small business tax relief and simplification
initiatives throughout the coming year.
(2) Small Business Financial Programs
Summary
The FY2002 SBA proposed budget for small business financial
assistance proposes providing $17.5 billion in loans and
investments, a record level of financial assistance for small
business. The President's budget request will do this while
actually decreasing the need for subsidy budget authority for
financial programs, reducing the appropriations approximately
$150 million from FY2001 levels. In other words, the
President's budget for the SBA's financial programs aims to
help more small businesses at less risk to the taxpayer, which
is an admirable goal.
7(a) LOANS
This is the SBA's leading loan guarantee program. The
Administration proposal for this program is based on an
estimated program demand of $10.7 billion in loans, but
requiring no budget authority. The Committee believes the
program level requested is adequate, as it will provide an
increase of $800 million in loan authority over FY2001 levels.
Recent SBA estimates of demand for 7(a) have proved accurate.
The Administration proposes eliminating the need for
subsidy budget authority by increasing both the upfront and
ongoing fees for borrowers. While the Committee appreciates
that none of these additional user fees will be imposed on
small businesses seeking to borrow less than $150,000, the
Committee still has some concerns over this method of
eliminating SBA subsidy costs. The Committee believes the SBA
should achieve a goal of a zero subsidy rate for the 7(a) loan
program. However, the same result can be achieved by a
comprehensive review of subsidy cost estimates for the 7(a)
program. Previous reports from the General Accounting Office
(GAO) indicate that subsidy costs have been inflated. OMB re-
estimates of the subsidy cost of the 7(a) program consistently
show execution rates are inflated. This has the potential to
lead to the overcharging of small business borrowers. As the
U.S. economy enters a period of zero growth and perhaps even a
recession, the Committee is also concerned about the effect of
these proposed heightened fees on the availability of capital
to small businesses.
The proposed increase in 7(a) fees, despite improvements in
purchases and recoveries, continues to raise concerns in the
Committee. Inaccurate subsidy costs will result in overpayment
of fees and eliminate flexibility in program delivery. The
Committee believes that the 7(a) program is already operating
at or near a zero subsidy rate and the President's budget
request should instead contain a one-time accurate accounting
change to reflect that reality. Thus, there should not be a
need to increase fees.
504 LOANS
Thanks to legislation passed in the 104th Congress, the 504
program has a zero subsidy rate, which means that the program
requires no appropriations. This was accomplished through heavy
fees that were placed on borrowers and lenders--fees needed to
offset a severe increase in the subsidy rate. The
Administration proposes a $3.75 billion program authorization
for the 504 program and the Committee concurs.
The Administration believes that the Section 504 loan
program will not require appropriations for FY2002, and will
also be able to continue to lower fees to the program's
borrowers. Improvements have appeared in the program's
liquidation performance, the largest single factor in the
subsidy rate equation and a source of significant concern to
the Committee.
While the Committee appreciates that the President's budget
request will lead to a slight reduction in fees charged to
borrowers and lenders in the 504 program and agrees that no
appropriation should be required for this program, the
Committee is still concerned that the subsidy estimates for
this program, like 7(a) are overly conservative and
consequently keep fees to borrowers artificially high.
SMALL BUSINESS INVESTMENT COMPANY PROGRAM
The Administration proposes an increased program level for
both parts of the SBIC program. The Administration requests a
$600 million dollar program level for the debenture program and
a $2.5 billion program level for the participating securities
program which represents a $100 million and $500 million
increase respectively.
The Administration requests no subsidy budget authority for
the debenture program. In FY2000 and 2001 the debenture program
operated at a zero subsidy rate requiring no appropriations and
provided leverage up to $800 million dollars (a maximum not
met). The FY2002 request for program level will be $600 million
in debenture leverage, an amount higher than the estimated
FY2001 demand of $500 million.
The request for the participating securities program also
anticipates a zero subsidy rate, based on an increase in fees
to cover the subsidy costs. The Committee has the same
reservations towards this approach for the SBIC program as it
does for the 7(a) program. In the previous budget submission
the SBA revised its estimates due to errors in the subsidy
estimate. The Committee believes that the subsidy estimates for
this program may also be inflated.
While the Committee supports the overall program level, it
has concerns over the change in subsidy costs. There have been
no defaults in this program since 1992 due to improved
management brought about by Congressional action. The Committee
believes a zero subsidy rate is an appropriate goal but it
requires an accurate and trustworthy accounting of program
costs and liabilities
MICROLOAN PROGRAM
The SBA requests a decrease in funding for the microloan
program for FY2002. The program level will decrease from $25
million to $20 million, and subsidy budget authority will
decrease $2.5 million to $1.5 million. The Committee recently
increased the authorization for the number of intermediaries
allowed under the microloan program, and is concerned that the
proposed program level will not allow the expected expansion.
(2) Assistance Programs
Summary
The FY2002 SBA budget submission proposes significant
decreases in spending on its non-credit business assistance
programs. While these programs represent well-intentioned
efforts to aid small business, there is a tendency to fragment
rather than consolidate these efforts.
The SBA proposes to continue or increase several new,
unauthorized programs at a cost of millions. The Committee has
concerns over how these funds will be spent. New programs are
being targeted for substantial expenditures while existing,
proven programs are being dramatically cut. The Committee
believes that non-credit assistance programs are valuable but
must have duties and resources equitably allocated and
justified prior to any increases.
DRUG-FREE WORKPLACE
The Administration requests an increased appropriation of
$5 million in funding for this program. This represents a $1.5
million increase over the previous appropriation and a $5
million increase over the previous Administration's attempt to
eliminate this program. Further, the new Administration's
budget correctly lists this program as fully authorized. The
previous Administration had attempted to describe the program
as a ``Congressional Initiative'' even though it was fully
authorized by Congress and signed into law by the President.
The Committee supports this budget position which recognizes
concrete and significant efforts to improve the small business
climate and workplace conditions.
MICROLOAN TECHNICAL ASSISTANCE
The Administration is requesting $20 million in technical
assistance funds for the microloan program. This represents
level funding for the microloan program. The Committee supports
this funding.
OFFICE OF ADVOCACY
The President's budget proposes to fund the Office of
Advocacy at current year's level, which is about $5.2 million.
The Committee plans a major initiative this year to enhance and
improve the Office of Advocacy and in order to make it more
independent. The Office of Advocacy acts as a champion for
small business, particularly as agencies develop regulations,
without being restricted by the views or policies of the rest
of the Executive Branch. To accomplish the goals of this
legislation, additional funding may be required. There may be
some savings as this legislation proposes to fold in the Office
of the Small Business and Agriculture Regulatory Ombudsman into
the newly transformed Independent Office of Small Business
Advocacy and eliminate the Regional Advocates within the Office
of Advocacy. However, there may some additional costs
associated with moving the Independent Office of Small Business
Advocacy out of the headquarters of the SBA and hiring
additional staff to take on some of the new and expanded
responsibilities contained in the legislation. Even though the
Office ofAdvocacy does not receive a direct line-item
appropriation, the Committee requests the Budget Committee to set aside
a modest increase in the overall budget of SBA of about $1 million to
cover the first steps of this initiative.
The Administration also proposes $1.1 million for the
Office Advocacy to support research and economic analysis. The
Committee supports this proposal.
WOMEN'S BUSINESS PROGRAMS
The Administration proposes funding the Women's Business
Council at $750,000, which is the same level as last year. The
Administration also proposes level funding the Women's Business
Centers at $12 million. The Committee supports these proposals.
BUSINESS INFORMATION CENTERS/USEACs
The Administration proposes level funding for these
programs. BICs will remain at $500,000. USEACs will remain at
$3.1 million. However, the agency fails to explain whether it
intends to co-locate any of these centers with existing Small
Business Development Centers. In fact, there are instances in
several cities where these centers are located in separate
sites within blocks of each other, rather than in a single
central location.
The Committee supports the BIC and USEAC projects but
requests that SBA to provide more substantial information on
the activities of these sites and improve performance.
SMALL BUSINESS DEVELOPMENT CENTERS (SBDCs)
The Administration proposes $78 million in funding for the
SBDC program. This proposal revives the scheme to require SBDCs
to charge fees. The President's budget proposal contains no
specifics on how SBDCs would charge fees to make up for the
loss of $12 million in revenue. The Committee has held numerous
hearings and has even voted against this proposal in the past.
Because of the myriad of services offered by the SBDCs, the
Committee questions the wisdom of a mandatory, nation-wide
uniform fee for services. The Committee believes that because
these small business clients have already paid enough in taxes,
it is futile to charge fees. The Committee believes the
appropriate support for the SBDC program should be maintained
at last year's level of $87.8 million.
HUBZONES
The Administration requests level funding for this program
at $2 million. The Committee supports this appropriation and
the goals and full implementation of the HUBZone program.
ONE STOP CAPITAL SHOPS
The SBA FY2002 budget proposes level funding for this
program at $3.1 million. The Committee notes that information
regarding the use, services and merits of One Stop Capital
Shops is limited. SBA reports that OSCS counseled 43,000 people
last year and yet this resulted in only 430 loans. One percent
is not an impressive return for a program designed to provide
access to capital. The Committee is also concerned that the
efforts of this program and Business Information Centers is
duplicating efforts best left to other more established
programs.
BUSINESS-LINC
This is a newly authorized program designed to encourage
large business to small business mentoring. The Administration
proposes eliminating this program and its $7 million dollar
appropriation. The program has yet to be implemented and the
Committee believes such action to be premature before Congress
has even had a chance to evaluate its record.
NEW MARKET VENTURE CAPITAL COMPANIES
The Administration proposes eliminating the $30 million in
technical assistance grant funding for New Markets Venture
Capital Companies (NMVCC). These NMVCCs will make SBIC-type
loans in Low & Moderate Income (LMI) areas. Because the program
is yet to become operational, the Committee believes such
action to be premature before Congress has even had a chance to
evaluate its record.
The Committee strongly supports the goal of increased
lending in LMI areas. The Committee believes that the New
Market Tax Credit combined with modifying existing SBIC
programs can serve the same purpose. However, the President's
budget request provides no plan on how NMVCC can make this
transition once funding runs out at the end of the fiscal year.
The Committee is concerned about spending $30 million this year
on a brand new program that is still not up and running and
then leaving NMVCC without any support on October 1. The
Committee reserves final judgment on this proposal until
further information is supplied.
PRIME
The Administration's budget proposes elimination of this
program. In previous views the Committee expressed strong
reservations regarding this program and its potential for
duplication of existing SBA efforts. The legislation
authorizing this program was not the language approved by this
Committee to prevent such duplication, consequently the
Committee supports the elimination.
NEW FREEDOM INITIATIVE
This proposal from the Administration requests $5 million
for grants to assist small businesses with the implementation
of the Americans with Disabilities Act. The Committee supports
this request and its goal in helping to pay for this unfunded
mandate.
SERVICE CORPS OF RETIRED EXECUTIVES (SCORE)
The Committee welcomes the additional $250,000 proposed
funding increase in the President's budget for the SCORE
program to cover increased costs. The SCORE program has been
level funded for several years and this increase is needed to
offset the effects of inflation.
WOMEN'S PROCUREMENT ASSISTANCE
The Administration requests $500,000 to fund an initiative
to improve procurement opportunities for women-owned
businesses. The Committee supports this request.
VETERANS BUSINESS DEVELOPMENT ASSISTANCE
The Committee supports this request for $750,000 to fund
implementation of the provisions of P.L. 106-50.
(3) Disaster Assistance
The President's FY2002 SBA budget submission asks for
authority for $300 million in disaster loans. This amount is
significantly below the usual average for disaster loans. The
Administration proposes funding needs in excess of the request
through funds available from an emergency discretionary
account. A significant ``savings''--over $526 million--in the
SBA's budget authority is assumed through this change even
though the actual cost will be transferred to this government-
wide emergency reserve fund. Thus, there may be no real
``savings'' to the taxpayer. While the Committee applauds the
goal of the Administration to bring disaster funding under the
budgetary caps, it is unclear, at this point in time, what the
final impact of this proposal will be on the SBA. The Committee
reserves judgment on the entire proposal until further
information is supplied.
The Committee is particularly concerned about the proposal
to raise interest rates on business disaster loans on
individuals with no credit elsewhere from a flat four percent
to a floating U.S. Treasury rate. While interest rates are
generally low now, it is unclear where they may go during this
period of economic uncertainty. It is the view of the Committee
that during a time of natural disaster, Congress should not
compound an already difficult recovery period by imposing
higher interest rates on small business borrowers.
The budget also requests administrative costs of $70
million. The Committee finds this sum to be adequate for the
requested loan amount but low for annual request. It is unclear
whether the proposed emergency account would also be used for
administrative costs.
(4) Salaries and Expenses
For FY2002 the Administration requests an $11.3 million
increase in SBA non-disaster staffing and expenses. The
Committee has no detailed budget submission on which to base
its estimate, however, the Committee believes that in general
SBA staffing is adequate and requires little or no increase. In
briefings, the SBA explained to staff that the increase was
needed to cover the proposed pay raise. The SBA expects a net
loss of 150 employees through normal attrition in FY2002,
mostly due to retirements.
In FY1997-FY1999 full-time equivalents grew from the FY1997
actual of 2,915 to a FY1999 estimate of 3,133. This was an
eight percent increase. With more functions being outsourced,
privatized and automated it is difficult to comprehend the need
for staffing increases. SBA's staffing efforts may need
rethinking.
The FY2000 budget submission showed an increase of 54 FTEs
over FY1998, with a request for a further 42 FTEs. In FY2001
there was no mention of FTEs in the budget submission. The
number of positions at the agency has apparently dropped from
3,123 in FY1999 to 2,977 for the FY2000 estimate. For FY2001
the Administration requested 86 new SBA positions. The
resulting positions number will still be 63 ``slots'' below
FY1999. However, without the FTE count it is difficult to judge
actual employment. Twenty of these positions would serve the
new NMI program. But the President's budget request proposes to
eliminate the NMVCC technical assistance program. The Committee
reserves final judgment on the salary and expense request until
further information is provided.
The Committee also notes that the Administration has
requested an additional $2 million for retraining and
relocating employees and buying out employees. However, no
details have been forthcoming regarding the nature of this
retraining, or the destination of the relocated employees. This
is the third year this has been proposed with little
explanation of the retraining required.
(5) Office of Inspector General
The Committee supports the proposed appropriation for the
Office of Inspector General of $11.9 million. The Committee
suggests that additional funding be allocated evenly between
audit and investigative uses. The Committee also believes that
funding is required for the Inspector General's efforts at
stemming fraud in the disaster loan program.
Conclusion
The SBA continues to provide important services to the
small business community. SBA's FY2002 budget is an honest
attempt to accomplish more lending and assistance with less
drain on the public purse. The Committee generally supports
these actions but believes the results are achievable through
less drastic steps. The Committee believes that a more detailed
budget submission may shed light on these changes but, in the
interim, has expressed concerns about thebudget request as
outlined above. The Committee expects fuller explanations of the
disaster loan, 7(a), SBIC, Microloan, SBDC, NMVCC, BIC, Business-Linc,
and S & E proposals.
Minority views were also submitted.
6.2.2. fiscal year 2003 budget
The Committee on Small Business submits these views and
estimates on the FY2003 budget submission on matters within our
jurisdiction in compliance with Rule X, clause (4)(f), of the
Rules of the House of Representatives. These views and
estimates are based on the preliminary outline supplied by the
President's Office of Management and Budget (OMB) for FY2003 as
well the Small Business Administration's (SBA) budget
submission. The President's proposed budget for FY2003
emphasizes national defense, homeland security, and economic
vitality. A key part of economic revitalization is creating
jobs. Small businesses, as job creators, have always led this
nation out of economic downturns and they will do so again.
The Committee believes that most of the provisions of the
President's budget request are sound and reasonable. Some of
the contentious initiatives contained in the President's FY2002
budget are not repeated in this year's request, for which the
Committee is grateful. While expressing concern about the
return to deficit spending, the Committee understands the
pressing national defense and homeland security needs.
These views and estimates will be divided between two
areas: the impact of the proposed tax relief on small business
and SBA programs. Within the SBA, the views and estimates will
be further divided into five areas: (1) Financial Programs, (2)
Assistance Programs, (3) Disaster Assistance, (4) Salaries and
Expenses, and (5) Office of Inspector General.
(1) Small Business Tax Relief
The Committee again applauds the President for endorsing
further tax relief proposals, which will help revitalize the
economy. Key elements of the President's plan, as it impacts
small business, include:
Accelerating the bipartisan tax reductions
passed by Congress last year, including the individual
rate reductions, which help 85 percent of small
businesses that pay taxes on an individual, not
corporate, basis;
Making permanent these same tax cuts,
including the all-important estate or ``death'' tax
repeal scheduled to take full effect in 2010;
Reforming the Alternative Minimum Tax (AMT)
on business, which helps the remaining 15 percent of
small businesses that pay their taxes on a corporate
basis;
Offering better tax treatment for small
businesses that invest in new equipment; and
Health care tax credits for up to $1,000 for
individuals and $3,000 for families from low- and
moderate-income means, which would provide further
assistance to help the self-employed purchase health
insurance.
The Committee supports, as long overdue, the Treasury
Department regulations issued last December that allow small
business service providers with average annual gross receipts
of $10 million or less to use the cash method of accounting
without limitation, as opposed to the accrual method. This has
been a small business priority for many years and it has been
resolved to the satisfaction of the Committee and the small
business community.
While welcoming the President's initiative, the Committee
believes the President's tax package could have contained more
small business tax relief including:
1. Accelerating immediately the 100 percent health
insurance deduction for the self-employed; and
2. Increasing the meal deduction from 50 percent to
80 percent immediately.
These tax relief priorities would also boost long-term
growth that would help small businesses increase cash flow and
allow them to add jobs at relatively little cost to the
Treasury. The Committee will be working on these and other
common-sense small business tax relief and simplification
initiatives throughout the coming year.
(2) Small Business Administration Programs
The Committee supports the overall general spending level
at the SBA. The President's budget proposal contains a modest
increase in spending on the SBA, from $782 million in 2002 to
$797 million in 2003,\1\ an acknowledgment by the
Administration of the importance of small business in leading
the way in the economic recovery. However, there are still
several problems with the budget request, which are discussed
in further detail below.
---------------------------------------------------------------------------
\1\ Adjusted to include the full share of accruing employee
pensions and annuitant health benefits, a new initiative of this year's
budget request to require the full share of these benefits be reflected
in each individual agency's budget, as opposed to the budget at the
Office of Personnel Management (OPM). Estimated final spending on the
SBA for FY2002 is actually $762 million but $20 million in pension and
health benefits was added to the 2002 total in order to have an
accurate comparison between the 2002 and 2003 levels of funding at the
SBA.
---------------------------------------------------------------------------
(A) SBA Financial Programs
(1) 7(a) LOANS
SBA guarantee-backed lending is the largest single source
of long-term loans (those with maturities of three years or
longer) to small businesses. SBA loan programs account for
approximately 40 percent of all long-term loans to small
businesses. The President's budget submission for FY2003 with
respect to SBA proposes to increase the subsidy rate for the
7(a) program from 1.07 percent to 1.76 percent. The President's
budget proposes spending $85.36 million for the 7(a) loan
program without increasing fees. While there is some relief
from last year, where the budget request asked to spend no
money on the 7(a) loan program and proposed higher fees, this
subsidy rate increase will have a chilling effect upon this
program at a time when the economy is in need of an economic
stimulus. Why? Because instead of finally obtaining anaccurate
subsidy rate calculation, as the Committee has requested for over seven
years, the President's budget request proposes to decrease the program
level of the 7(a) program in half to $4.85 billion. The impact upon the
7(a) loan program could be especially severe since the result of the
subsidy rate increase, if actually implemented, could be to cut the
loan program in half in the forthcoming fiscal year. While the
Committee appreciates the willingness of the SBA to look at other
alternatives to make up for this shortfall (i.e., moving some larger
7(a) real estate and equipment loans to the 504 loan program), it is
not clear that these suggestions can be implemented.
The subsidy rates for these programs have not accurately
reflected the actual performance of these loan portfolios over
the past 11 years since the passage of the Federal Credit
Reform Act in 1990. Instead of being a prudent sinking fund,
principally to purchase defaulted loans, the subsidy rate has
been continually overstated so as to be a tax and not a
responsible user fee. This fact was underscored in the
conference report accompanying FY2002 Treasury/Postal
Appropriations bill (H.R. 2590 or P.L. 107-67) where the
conferees stated ``borrowers and lenders in both programs [7(a)
and 504 loan programs] have been paying higher than necessary
fees to participate in the programs'' because the subsidy rate
models do not reflect recent performance of the loan
portfolios.
While the subsidy rate calculation for the 7(a) loan
program has changed to weigh loans originated by the Preferred
Lenders Program (PLP) more heavily than other SBA loans, the
subsidy rate still does not take into account the other changes
made by Congress in 1995 that made the loans less risky to the
taxpayer. Simply put, SBA loans made in 1988 are much different
than loans from 1998. Yet, the new subsidy rate calculation
essentially treats them the same, with the exception of those
originated by PLP lenders. The SBA assumes a default rate of
12.87 percent; yet the actual default rate for the past 11
years has been between 8 and 10 percent.
The Committee looks forward to an econometric forecasting
model that reflects the true performance of the loan programs.
The Committee also wishes to be a constructive partner with the
Budget Committee during the re-examination of the Federal
Credit Reform Act of 1990 to see what changes can be made to
obtain a realistic assessment of the cost of government credit
programs like the SBA's 7(a) loan program.
However, relief is needed today for small businesses--not
at some future time. That's why Congress passed S. 1196 last
year (P.L. 107-100) to cut 7(a) loan fees in half starting next
October in order to provide relief to small businesses who have
overpaid the government $1.3 billion, according to the General
Accounting Office (GAO), over the last 11 years to pay for the
cost of running the 7(a) program. The Administration's proposal
that could possibly cut access by small businesses to the 7(a)
loan program, as a response to last year's legislation, is
simply not acceptable. A realistic subsidy rate calculation
could easily have kept the 7(a) program volume operating at
historic levels while providing much needed relief to small
business borrowers and lenders.
The Committee re-states its conclusion from last year's
letter: inaccurate subsidy costs result in overpayment of fees
and eliminates flexibility in program delivery. The Committee
believes that the 7(a) program is already operating at or near
a zero subsidy rate and the President's budget request should
instead contain a one-time accurate accounting change to
reflect that reality. Thus, there should not be a need to cut
in half the availability of the program to small business
borrowers and lenders.
(2) 504 LOANS
Mirroring the situation facing the 7(a) loan program, the
504 loan program is also experiencing a subsidy rate
calculation problem. Ever since 1996, the 504 loan program has
operated at a zero subsidy rate, which means that the program
requires no appropriations. This was accomplished through heavy
fees that were placed on borrowers and lenders--fees needed to
offset a severe increase in the subsidy rate. The
Administration proposes a $4.5 billion program authorization
for the 504 program and the Committee concurs.
However, after several years of fee decreases, the
President's FY2003 budget request proposes to increase the
annual fee charged each small business 504-loan borrower from
0.410 percent to 0.425 percent. While the Committee agrees that
no appropriation should be required for this program, the
Committee is still concerned that the subsidy estimates for the
504 program are overly conservative and consequently keep fees
to borrowers artificially high.
The main factor in the 504-subsidy rate calculation is the
loan default rate. Yet, the SBA assumes a default rate of 8.3
percent when the actual default rate is less then three
percent. Ironically, other parts of the SBA's budget submission
agree that defaults in the 504 loan program have amounted to
about $60 to $70 million annually, which comports to industry
data of a three percent default rate. Other factors that go
into the SBA's subsidy rate formula calculation (the loan
currency rate, the loan recovery rate, and the loan prepayment
rate) also do not comport with industry data. In the progress
report mandated by P.L. 107-67, the SBA pledges to work on an
interim calculation method for the 504 program in FY2004 with a
final resolution of the problem in FY2005. However, this
problem has to be fixed sooner rather than later. The Committee
urges the SBA to work with its industry partners to make sure
that the data going into these models is correct in order to
produce the most accurate subsidy rate calculation. Again, the
Committee would welcome a partnership with the Budget Committee
in an effort to re-examine the Federal Credit Reform Act of
1990 to see what changes can be made to obtain a realistic
assessment of the cost of government credit programs like the
SBA's 504 loan program.
(3) SMALL BUSINESS INVESTMENT COMPANY PROGRAM
The Administration proposes an increased program level for
both parts of the SBIC program, which is welcomed by the
Committee. The Administration requests a $3 billion program
level for the debenture program and a $4 billion program level
for the participating securities program. When added to the
minimum required private capital, this would make $10 billion
in new capital available for SBIC investments in small
businesses. Venture capital from SBICs fill a critical gap as
other private sector sources dries up during this economic
recession.
The Administration requests no appropriations to fund
either the debenture or theparticipating securities program in
accordance with P.L. 107-100, which placed the entire SBIC program on a
zero subsidy or no cost to the taxpayer basis. The Committee concurs
with this aspect of the President's budget request. It is anticipated
that no further legislation will be needed to change the fee structure
to keep the SBIC program operating at no cost to the taxpayer.
(4) MICROLOAN PROGRAM
The SBA requests an increase in funding for the microloan
program for FY2003 from $1.7 million to $3.7 million to reach a
program level of $26.6 million. The subsidy rate increased from
6.78 percent to 13.05 percent because of changes in the
discount rate and the average loan size. The Committee
appreciates that, unlike the 7(a) loan program, the
Administration's budget request proposes to maintain access to
the Microloan program as opposed to cutting it in half when the
subsidy rate nearly doubled.
(B) Assistance Programs
Summary
The FY2003 SBA budget submission proposes decreases in
spending on its non-credit business assistance programs from
$177 million to $144.3 million. Most of these cuts come from
``Congressional Initiatives ($30 million).'' While these
programs represent well-intentioned efforts to aid small
business, there is a tendency to fragment rather than
consolidate these efforts. The Committee believes that non-
credit assistance programs are valuable but must have a proven
record of success before funding is increased.
DRUG-FREE WORKPLACE
The Administration requests an appropriation of $3 million
in funding for this program, keeping it at last year's level.
This is disappointing because the Administration requested $5
million in the previous budget request for this program. The
Committee trusts that this does not represent a withdrawal of
Administration support for this mission. The Committee strongly
supports this initiative, which recognizes concrete and
significant efforts to improve the small business climate and
workplace conditions.
MICROLOAN TECHNICAL ASSISTANCE
The Administration is requesting $17.5 million in technical
assistance funds for the microloan program. This represents
level funding for the microloan program. The Committee supports
this funding.
OFFICE OF ADVOCACY
The Committee plans a major initiative this year to enhance
and improve the Office of Advocacy and to make it more
independent. The Office of Advocacy acts as a champion for
small businesses, particularly as agencies develop regulations,
without being restricted by the views or policies of the rest
of the Executive Branch. To accomplish the goals of this
legislation, additional funding may be required. There may be
some savings as this legislation proposes to streamline some
functions within SBA and the Office of Advocacy. However, there
may be some additional costs associated with this initiative.
Even though the Office of Advocacy does not receive a direct
line-item appropriation, the Committee requests the Budget
Committee to set aside a modest increase in the overall budget
of SBA of about $5 million to cover the first steps of this
initiative.
The Administration also proposes $1.1 million for the
Office of Advocacy to support research and economic analysis.
The Committee supports this proposal.
WOMEN'S BUSINESS PROGRAMS
The Administration proposes funding the Women's Business
Council at $750,000, which is the same level as last year. The
Administration also proposes level funding the Women's Business
Centers at $12 million. The Committee supports these proposals.
BUSINESS INFORMATION CENTERS/US EXPORT ASSISTANCE CENTERS
The Administration proposes a five percent cut in the BICs
from $500,000 to $475,000. USEACs will remain at $3.1 million.
The Committee has questions about the BIC and USEAC request,
particularly in clarifying how the SBA plans to continue to
support the 80 existing BICs and also open between two and five
new BICs with a smaller budget request.
SMALL BUSINESS DEVELOPMENT CENTERS (SBDCs)
The Administration proposes $88 million in funding for the
SBDC program. The Committee is extremely pleased that this
budget request does not contain the proposal to require SBDCs
to charge counseling fees. The Committee has held numerous
hearings and has voted against this proposal in the past. The
Committee believes this budget request is the minimum level of
support that is needed for the SBDC program. However, the
Committee is gravely concerned about the language in the SBA
budget submission where they expressed doubt about the
effectiveness of the SBDC program. It should be made absolutely
clear that the Committee strongly disagrees with this
characterization.
HUBZONES
The Administration requests level funding for this program
at $2 million. The Committee supports this appropriation and
the goals and full implementation of the HUBZone program.
BUSINESS-LINC
This is a relatively new authorized program designed to
encourage large business to smallbusiness mentoring. The
Administration proposes eliminating this program and its $2 million
dollar appropriation. There are several Members of the Committee who
take a personal interest in this program because they believe the
mentoring received in this program is qualitatively different from
other SBA mentoring programs that are more focused around government
procurement opportunities. However, there are many companies that
already engage in this type of mentoring on their own. Perhaps if the
SBA made more of an effort to link up existing private sector efforts
with interested small businesses, particularly from low- and moderate-
income areas of our nation, the Administration's proposal would be more
acceptable to the Committee.
NEW MARKET VENTURE CAPITAL COMPANIES
The Committee supports the New Markets Venture Capital
Companies (NMVCC) program, which make SBIC-type loans in Low
and Moderate Income (LMI) areas. The Committee strongly
supports the goal of increased lending in LMI areas. The
Committee, however, encourages the SBA to move more rapidly on
its rollout of NMVCCs and to extend more opportunities for
other small venture capital firms to become NMVCCs.
PRIME
The Administration's budget proposes elimination of this
program. In previous views the Committee expressed strong
reservations regarding this program and its potential for
duplication of existing SBA efforts. The legislation
authorizing this program was not the language approved by this
Committee to prevent such duplication; consequently the
Committee supports the elimination.
NATIVE AMERICAN OUTREACH
This proposal from the Administration requests $1 million
to improve its Native American small business outreach, which
is a commendable goal. This initiative will make funding
directly available to tribes to assist in economic development
and job creation. Last year, the House passed H.R. 2538, the
Native American Small Business Development Act, authored by one
of our committee Members, which would funnel grants to existing
state Small Business Development Centers (SBDCs) to establish
training programs and services unique to Native Americans. The
Committee believes this is a better and more comprehensive
approach to help Native American small business development,
working through an established network of experts in the field,
rather than the Administration's approach.
SERVICE CORPS OF RETIRED EXECUTIVES (SCORE)
The Committee welcomes the Administration proposal to fund
the SCORE program at last year's level of $5 million.
VETERANS BUSINESS DEVELOPMENT ASSISTANCE
The Committee supports this request for $750,000 to fund
implementation of the provisions of P.L. 106-50 that still fall
within the SBA. Even though the National Veterans Business
Development Corporation is formally out of the SBA's annual
budget request and is funded under a separate line item as an
independent agency, the Committee is still very much interested
in its work, particularly on monitoring its path towards
financial self-sufficiency. In keeping with the path outlined
in P.L. 106-50, the Administration has requested $2 million for
the Corporation in 2003, which the Committee supports.
WHITE HOUSE AND STATE CONFERENCES
The Administration's budget request also contains a new
proposal to spend $1.5 million to fund a series of state and
federal conference to celebrate the success of small business
over the past 50 years and to highlight the emerging issues
that face small business owners. The Committee understands that
this request would be used, in part, to fund a ``down payment''
for a White House Conference on Small Business in 2005 and that
more funding would be required to complete the task in 2004 and
2005. The Committee supports this request.
(C) Disaster Assistance
With the various supplemental appropriations added to the
regular appropriation for the SBA disaster loan in response to
the tragic events of September 11, 2001, the President's FY2003
budget request for disaster loans looks reasonable. While the
budget submission asks for $111.14 million, which is down from
last year, it supports a program level of nearly $795 million.
This program level is a five year average at a 13.98 percent
subsidy rate. Unlike previously, there is no proposal to create
a government-wide emergency reserve fund that caused the
Committee some concern last year. More particularly, the
Committee is grateful that this budget request, unlike last
year, contains no proposal to raise interest rates on disaster
loans for anyone. It continues to remain the view of the
Committee that during a time of natural disaster, our
government should not compound an already difficult recovery
period by imposing higher interest rates on small business
borrowers.
(D) Salaries and Expenses
For FY2003 the Administration requests a $23.6 million
increase to $362.1 million in SBA non-disaster staffing and
expenses. This increase is comprised mainly of the shift of the
pension cost of SBA employees previously funding through OPM
and the general salary pay raise of 3.6 percent due in January
2003.
At the same time, the President's budget request proposes
to decrease the number of non-disaster Full-Time Equivalents
(FTEs) at the SBA from 2,745 in FY2002 to 2,660 in FY2003,
which represents a cut of 85 FTEs, which is expected in the
normal course of attrition and retirement. The Committee is
particularly concerned about the inefficiencies and delays
demonstrated by SBA in making the size standards changes
mandated by law, particularly as it impacts the disaster loan
program, which indicates a decisional process hampered by
unneeded layers of decision makers. A further reduction in the
number of FTEs would reduce the layering and provide more
efficient and timely delivery of services.
The Committee also encourages the SBA to begin to focus on
the problem of reversing ``institutional memory loss'' at the
agency, as it will soon lose a significant portion of its
senior career FTEs over the next decade because of retirements.
(E) Office of Inspector General
The Committee supports the proposed appropriation for the
Office of Inspector General of $15.5 million, of which $500,000
of that total is transferred from the disaster loan program.
The Committee suggests that additional funding be allocated
evenly between audit and investigative uses. The Committee also
believes that funding is required for the Inspector General's
efforts at stemming fraud in the disaster loan program,
particularly in light of the enormous growth of the use of that
program after September 11, 2001.
Conclusion
Overall, the President's budget request for small business
can be supported, with exceptions, both in terms of his tax
relief proposals and the SBA budget. In particular, the SBA's
FY2003 budget recognizes and resolves most of the mistakes from
the previous budget request. The Committee acknowledges the
Administration for changing these prior contentious proposals
on behalf of all small businesses. There is only one major item
of contention, and the Committee on Small Business looks
forward to working with you, Chairman Nussle, to help resolve
the subsidy rate calculation problem in the 7(a) and the 504
loan programs at its relationship to the Federal Credit Reform
Act of 1990.
Minority views were also submitted.
CHAPTER SEVEN
SUMMARY OF OVERSIGHT, INVESTIGATIONS AND OTHER ACTIVITIES OF THE
COMMITTEE ON SMALL BUSINESS AND ITS SUBCOMMITTEES
7.1 Summary of Committee Oversight Plan and Implementation
Pursuant to Rule X, clause 2(d)(1), of the Rules of the
House of Representatives, the Committee on Small Business
adopted, on February 28, 2001, an oversight agenda for the
107th Congress. (For a discussion of the Committee's
consideration of the oversight agenda refer to section 6.1.1 of
this report.) The House rule also requires that each Committee
summarize its activities undertaken in furtherance of the
oversight agenda as well as any additional oversight actions
taken by the Committee.
In the following portions of Chapter Seven, the provisions
of the oversight agenda are addressed in the hearing summaries
of the Committee and its subcommittees. A summary of each
hearing conducted by the full Committee appears in section 7.2
of this report and summaries of each subcommittee hearing
appear in sections 7.3 through 7.7 of this report. An overview
of the Committee's legislative activities appears in Chapter
Five of this report.
7.2 SUMMARIES OF THE HEARINGS HELD BY THE FULL COMMITTEE ON SMALL
BUSINESS
7.2.1 improving and strengthing the office of advocacy
Background
On March 22, 2001, the Committee on Small Business held a
hearing on improving and strengthening Small Business
Administration's (SBA) Office of Advocacy. Since its inception
in 1976, the Office of Advocacy has had the difficult, but
important, task of being an effective voice for small business
within the executive branch of the Federal government. The
purpose of this hearing was to examine various constructive
suggestions to strengthen the Office of Advocacy and to make it
more effective and independent. Prior to the hearing, on
February 27, 2001, the Chairman and Ranking Member of the
Senate Committee on Small Business introduced S.395, ``The
Independent Office of Advocacy Act of 2001.'' In addition, a
discussion draft of a House bill, ``The Independent Office of
Advocacy Act of 2001,'' was prepared for discussion at the
hearing. The draft bill would make the Office of Advocacy more
independent and provide that Office with greater resources and
more authority to represent the interests of small businesses.
Summary
The hearing was comprised of a single panel which included:
Mr. Frank Swain, Partner, Baker & Daniels; Mr. Thomas Kerester,
Real Estate Consultant, Coldwell Banker Stevens, Realtors; Mr.
Keith Cole, Partner, Swidler Berlin Shereff Friedman, LLP; Mr.
John Satagaj, President, Small Business Legislative Counsel;
and, Mr. Giovanni Coratolo, Director of Small Business Policy,
U.S. Chamber of Commerce. Discussion centered on agreed ways to
strengthen the Office of Advocacy and the Chief Counsel to
combat three major problems facing small businesses--preventing
needless and burdensome regulations, assisting small businesses
that have been the victims of Federal agency's unfair
compliance and enforcement actions, and being the focal point
for combating contract bundling. The overall goal of the
hearing was to make the Office more independent so that it can
be a more forceful advocate for small business. The draft
legislation would: (1) empower the Chief Counsel to issue
regulations under the Regulatory Flexibility Act; (2) transfer
the Small Business and Agriculture Regulatory Enforcement
Ombudsman to the Office of Advocacy; (3) allow the Chief
Counsel the right to file comments in all rulemakings where a
Federal agency has requested comments; (4) requiring that all
Federal agencies publish the Chief Counsel's comments about a
proposed regulation and that those comments are given
substantial weight; and (5) give the Office of Advocacy the
responsibility of combating contract bundling.
For further information on this hearing, refer to Committee
publication 107-1.
7.2.2 pension reform for small businesses
Background
On March 28, 2001, the Committee on Small Business held a
hearing on a pension reform proposal, H.R. 10, authored by Rob
Portman (R-OH) and Ben Cardin (D-MD). Through tax and
regulatory relief, H.R. 10 helps Americans save for retirement
by making it easier for small businesses to offer retirement
plans, allowing workers to save more, addressing the needs of
an increasingly mobile workforce through portability and other
changes, making pensions more secure, and cutting the red tape
that has hamstrung employers who want to establish pension
plans for their employees. H.R. 10 contains several provisions
designed to increase pension participation by small business,
including some ideas sponsored by Congressman Roy Blunt of
Missouri in the 105th Congress (H.R. 3870), on which this
Committee's Subcommittee on Tax, Finance, and Exports held a
hearing September 16, 1998. A popular measure, H.R. 10 is
substantially similar to two bills that passed the House last
Congress in 400+ votes, but stalled in the Senate. (Subsequent
to this hearing, H.R. 10 passed the House in yet another 400+
vote on May 2, 2001.) The purpose of this hearing was to
highlight the small business implications of H.R. 10 and
provide additional support for moving it through the Senate
this Congress.
Summary
Witness Panel I was composed of the two main authors of
H.R. 10--Congressmen Portman and Cardin (though Portman was
unexpectedly unable to testify, submitting written testimony
only). Speaking on behalf of both authors, Congressman Cardin
explained the very low pension plan participation rate among
small employers (``Among companies with fewer than 100
employees, as many as 80 percent of the workforce have no
retirement savings plan available to them'') and the provisions
of H.R. 10 designed to improve this participation rate
dramatically. Theseprovisions include revision of ``top heavy''
rules that threaten to disqualify small business owners from meaningful
participation in their own plans; increase in contribution limits for
401(k) and SIMPLE plans, increase in plan ``portability'' for employees
changing jobs, creation of ``catch-up'' provisions that allow increased
savings by workers entering the pension system later in life, and other
changes to make plans more attractive to employees that small
businesses wish to retain; and reduction in fees and regulatory burdens
that discourage small business entry into the pension system. During
questions from Committee members, Congressman Cardin agreed that it
would be desirable to ``add back into the bill'' tax credits to offset
start-up costs for small businesses.
Witness Panel II was composed of the following four private
sector witnesses: (1) Dallas Salisbury, President & CEO of the
Employee Benefit Research Institute, a nonprofit educational
organization in Washington, DC that, among other things,
promotes its national ``Choose to Save'' campaign; (2) Paula A.
Calimafde, an attorney and pension expert with the Paley
Rothman law firm in Bethesda, MD, appearing on behalf of Small
Business Council of America, Small Business Legislative
Council, and American Society of Pension Actuaries; (3) Michael
P. Kelso, President & CEO of ELS, Inc., a small business
engineering consulting firm in Arlington, VA; and (4) John
Bachmann, Managing Partner of the Edward Jones Investment
Company in St. Louis, MO, which markets pension plans. Each of
these witnesses applauded H.R. 10 and explained how it would
provide much-needed incentives to small businesses to establish
new retirement plans for their workers and to enhance existing
plans. Among the few criticisms directed at H.R. 10 during Q&A
was a concern that its accelerated ``vesting'' of benefits
might prove too costly and encourage more rapid employee
turnover.
A clear consensus emerged that H.R. 10 was much-needed
legislation that ought to be enacted this year. The hearing was
aided by strong attendance of Committee members and by
energetic Q&A with good witnesses. For further information
about this hearing, refer to Committee publication number 107-
2.
7.2.3 a tax agenda for small business
Background
On April 4, 2001, the Committee on Small Business of the
United States House of Representatives and the Committee on
Small Business of the United States Senate held a joint
roundtable hearing to discuss a tax agenda for small business.
The purpose of the roundtable hearing was to listen to the
testimony of a broad number of small business representatives,
practitioners and owners on their priorities for tax relief and
tax simplification for small businesses.
Summary
One panel of numerous witnesses, Representatives, and
Senators participated in this roundtable hearing, including:
The Honorable Anibal Acevedo-Vila, a Representative in Congress
from Puerto Rico; Harry Alford, President and Chief Executive
Officer, National Black Chamber of Commerce; Steven Anderson,
President and Chief Executive Officer, National Restaurant
Association; Amy Angelier, Washington Representative,
Associated Builders and Contractors Inc., Robert M. Anderton,
President, American Dental Association, The Honorable Robert F.
Bennett, a United States Senator from Utah, The Honorable
Christopher S. Bond, Chairman, Senate Committee on Small
Business, and a United States Senator from Missouri; Frank D.
Brost, National Cattlemen's Beef Association; The Honorable
Conrad R. Burns, a United States Senator from Montana; Paula
Calimafde, Chair, Small Business Council of America, Bethesda,
MD; The Honorable Donna M. Christian-Christensen, in Congress
from the Virgin Islands; Henry S. Cole, President, Center for
Environmentally Advanced Technologies; Benjamin Y. Cooper,
Senior Vice President, Government and Public Affairs, Printing
Industries of America; Dorothy Coleman, Vice President, Tax
Policy, National Association of Manufacturers; Nancy Coolidge,
Coordinator for Student Financial Support, University of
California; John A. Cox Jr., Manager, Government Affairs,
National Tooling and Machining Association; Michael Dade,
Legislative Assistant, National Association of Enrolled Agents;
William J. Dennis, Jr., Senior Research Fellow, National
Federation of Independent Business Education Foundation; Donna
Fisher, Director, Tax and Accounting, American Bankers
Association; William C. Gager, President, Automotive Parts
Rebuilders Association; Linda Goold, Tax Counsel, National
Association of Realtors; Delna Gray, Director of Government
Affairs and Tax Counsel, National Association of Home Builders;
The Honorable Felix J., Grucci, Jr., a Representative in
Congress from New York; Mark G. Heesen, President, National
Venture Capital Association; Paul Hense, Chairman, Taxation
Committee, National Small Business United; Pete Homer,
President and Chief Executive Officer, National Indian Business
Association; Edward S. Karl, Director, Taxation Division,
American Institute of Certified Public Accountants; Karen
Kerrigan, Chair, Small Business Survival Committee; The
Honorable John F. Kerry, Committee on Small Business, and a
United States Senator from Massachusetts; The Honorable Donald
A. Manzullo, Chairman, House Committee on Small Business and a
Representative in Congress from Illinois; Lee Mercer,
President, National Association of Small Business Investment
Companies; Paul G. Merski, Chief Economist and Director of
Federal Tax Policy, Independent Community Bankers of America;
The Honorable Grace F. Napolitano, a Representative in Congress
from California; Terry Neese, Public Policy Advisor and
Consultant, National Association of Women Business Owners and
on behalf of the National Business Association & Grass Roots
Impact; Wayne Nelson, President, Communicating for Agriculture;
The Honorable Bill Pascrell, Jr., a Representative in Congress
from New Jersey; The Honorable Mike Pence, a Representative in
Congress from Indiana; Bernie Phillips, Tax Manager, National
Society of Accountants; Martin A. Regalia, Vice President for
Economic and Tax Policy and Chief Economist, U.S. Chamber of
Commerce; John Satagaj, President and General Counsel, Small
Business Legislative Council; Les Shapiro, President, Padgett
Business Services Foundation; Jeff Shoaf, Executive Director,
Congressional Relations, Associated General Contractors of
America; Bob Stallman, President, American Farm Bureau
Federation; The Honorable Nydia M. Velazquez, House Committee
on Small Business and a Representative in Congress from New
York; and Michael A. Wolyn, Executive Director, Bureau of
Wholesale Sales Representatives.
Testimony at the roundtable highlighted small business
support for President Bush's proposals to repeal the death tax
and to cut marginal tax rates, and focused also on bipartisan,
bicameral legislation introduced by Chairman Manzullo (H.R.
1037) and Chairman Bond (S. 189), entitled the Small Employer
Tax Relief Act of 2001 (SETRA). SETRA is a bipartisan package
of tax cut priorities and tax simplifications and protections
for small businesses. Complementing themarginal rate reductions
and death tax repeal that were then championed and later signed into
law by President Bush, SETRA 2001 marked additional small business tax
incentives to spur continued economic growth in the new millennium.
Among many important provisions, the bill would provide several long-
championed small business tax cuts, including immediately accelerating
the 100 percent health insurance deduction for the self-employed,
increasing expensing, simplifying cash accounting, repealing the
outdated FUTA 0.2 percent surtax, simplifying the home office
deduction, and repealing the individual alternative minimum.
For further information on this hearing, refer to the
Committee publication 107-4.
7.2.4 black beret procurement: business as usual at the
pentagon?
Background
On May 2, 2001, the House Committee on Small Business held
a hearing regarding the procurement of Black Berets from
foreign suppliers and manufacturers, including the Peoples
Republic of China, to the detriment of U.S. small businesses.
The focus was on the short and long-term implications of the
procurement policies of the Pentagon that favored China and
other foreign countries as the supplier of berets for the Army
rather than this Nation's small businesses. The unfortunate
signal that the beret procurement sent, if uncorrected, was
that the Pentagon had little concern for small businesses or
the procurement laws and that expediency continued to be the
order of the day. There was great concern that this procurement
implied that it was business as usual in the Pentagon, despite
the fact that there was a new Administration in Office.
Participation of small business enterprises in Federal
procurement and Government contracts is a major focus of the
Committee on Small Business.
Summary
This hearing consisted of three panels. The first panel was
comprised of General Eric K. Shinseki, Chief of Staff, U.S.
Army. The second panel consisted of the Honorable Walter B.
Jones, United States House of Representatives (R-NC) and the
Honorable Lois Capps, United States House of Representatives
(D-CA). The third panel was made up of Lt. General Henry T.
Glisson, Director, Defense Logistics Agency (DLA); Ms. Michele
Goodman, President, Atlas Headwear; Mr. David Cooper, Director,
Acquisition and Sourcing Management, U.S. General Accounting
Office; Mr. John D. Whitmore, Jr., Acting Administrator, U.S.
Small Business Administration; Mr. Evan Joffe, Springfield LLC;
Mr. Steven L. Schooner, Associate Professor of Government
Contracts Law, George Washington University Law School; and,
the Honorable David R. Oliver, Acting Under Secretary of
Defense, Acquisition, Technology and Logistics.
General Shinseki appeared as a witness to explain the
Army's decision for requiring the black beret as the standard
headgear for Army personnel. Adopting the black beret was part
of the initiative to change the Army to meet the challenge of
the 21st century. The black beret was described as being all
about building cohesiveness in the Army and was stated to be
the best reflection of the Army of the future. When it was
announced on October 17, 2000 that the black beret would become
the Army's standard, the Chief of Staff was unaware that the
berets could not be procured domestically and would probably
have adjusted the schedule to permit American production had he
been aware of the problem. The Deputy Secretary of Defense made
the decision not to use the black berets made in China. Also,
the Pentagon cancelled contracts with three foreign companies
for the production of black berets. Imposing an artificial
deadline for delivery of the berets resulted in sending the
business overseas. This cost U.S. small businesses millions of
dollars. There are provisions for waiving the Berry amendment,
but, if given enough time, the American apparel industry could
have met the requirements of the procurement. Over the past
decade, the U.S. textile and apparel industries lost 540,000
jobs. One week prior to the beret decision 1,000 textile
workers lost their jobs in North Carolina.
The Army requirement called for the purchase of 3.9 million
berets in a five-month period. The requirement also called for
a one-piece rather than a two-piece beret. One-piece berets
require a circular knitting machine, which is old technology,
since modern, commercial berets are two-piece. American
manufactures were largely shut out from the procurement because
of an impossible delivery schedule. The Small and Disadvantaged
Business Utilization Office at the Defense Supply Center at
Philadelphia was by-passed, apparently inadvertently, in the
procurement process. If the SBA had been consulted concerning
the procurement, the matter would have been appealed. There was
confusion as to who within DLA had the authority, if any, to
waive the Berry amendment, which required the berets to be made
in the U.S. of American materials. The short time period in
which to acquire the berets did not justify avoiding the
congressionally mandated policy contained in the Berry
amendment. In effect the Army asked its procurement system to
do something that it could not do.
For further information on this hearing, refer to Committee
publication 107-5.
7.2.5 health care financing administration paperwork
burdens
Background
On May 9, 2001, the Committee on Small Business held a
hearing to examine the paperwork burdens imposed by the Health
Care Financing Administration on small businesses that provide
healthcare services under the Medicare program. The hearing was
also held to see whether any changes are needed in the
Paperwork Reduction Act--the landmark legislation enacted in
1980 to reduce the paperwork burdens on small businesses.
The Health Care Financing Administration is the government
agency charged with administering Medicare, which often has
been referred to as the country's largest health insurance
provider. Medicare provides health care coverage to 38 million
Americans.
The Office of Management and Budget's Office of Information
and Regulatory Affairs (the agency that implements the
Paperwork Reduction Action) has approved 219 collections of
information for the Health Care Financing Administration. The
total number of responses is about 1.7 billion, which take
nearly 105.8 million hours to complete. The Office of
Information andRegulatory Affairs estimates that completion of
these forms cost $57.4 million. Of course, many in the health care
professions believe that the estimates do not truly reflect the cost
imposed on health care providers, the vast majority of which are small
businesses.
Summary
The panelists were Dr. William H. Mahood; Dr. Alan Morris;
Mr. Bruce D. Cummings, Chief Executive Officer, Blue Hill
Memorial Hospital; Dr. Robert M. Anderton; and Mr. Craig
Jeffries, Chief Executive Officer, Healthspan, Inc.
Dr. Mahood testified that two-thirds of the physicians in
the United States are in practice groups with less than 25
employees and individual physicians spend one hour completing
Medicare forms for every one to four hours of patient care. Dr.
Mahood highlighted problems associated with the documentation
guidelines needed to support billing for Medicare. Dr. Mahood
also testified about the enrollment form that can take months
for the Health Care Financing Administration to process.
Dr. Morris testified that his practice employs 26.5 people,
17 of whom are administrative employees and also retains an
outside company to process paperwork. Dr. Morris noted that not
only must they comply with regulations from the Health Care
Financing Administration but also from the various carriers
that the government has contracted with to process Medicare
claims. Dr. Morris concurred with Dr. Mahood about the
paperwork burdens associated with the evaluation and management
guidelines and enrollment forms.
Mr. Cummings testified that paperwork burdens represented
an insidious assault on the ability of small hospitals to
function. Mr. Cummings presented a one-foot thick cost report
that Blue Hill Hospital spent about $100,000 to prepare for a
25-bed hospital. Mr. Cummings reported that hospital personnel
spent about 30 minutes on paperwork for every hour expended on
patient care. Finally, Mr. Cummings noted that the Medicare
Secondary Payer form must be filled out every time a patient
comes into the hospital, even for daily outpatient visits.
Dr. Anderton noted that dental services are not covered
under Medicare except in certain circumstances. Dr. Anderton
noted that dentists must file Medicare claims with a carrier
when requested to do so by a patient even though the dentist
knows that the claim will be denied. This also requires
dentists to enroll in Medicare even though the burden of doing
so is outweighed by any potential benefit to the dentist or
patient. Finally, Dr. Anderton raised concerns about medical
record privacy rules that now include oral communications.
Mr. Jeffries testified that the Office of Information and
Regulatory Affairs, approved certificate of medical necessity
is regularly rejected by carriers as providing insufficient
information to support reimbursement for durable medical
equipment. This requires home health care agencies to maintain
substantial additional records to demonstrate medical
necessity. Mr. Jeffries concluded with a description of the
OASIS form, the 80 questions contained in the form, and the 90
minutes that it takes to fill out this form. Mr. Jeffries noted
that the OASIS form must be completed every 60 days even if
there is no change in the status of the patient.
For further information on this hearing, refer to Committee
publication 107-6.
7.2.6 u.s. small business administration budget request fy
2002
Background
On Wednesday, May 16, 2001, the Committee on Small Business
held a hearing that focused on the Administration's proposed
FY2002 budget for the U.S. Small Business Administration (SBA).
As brief background, on February 28, 2001, the President
submitted to Congress a budget outline entitled, A Blueprint
for New Beginnings, which contains a plan to fund America's
important priorities, reduce the federal debt, and to provide
for tax relief for the American people. The details of that
plan are contained in the proposed Budget for the United States
for FY2002 submitted to Congress by the President on April 9,
2001. An important feature of the President's budget submission
was the emphasis upon improving the performance of the Federal
government. In line with the President's emphasis upon improved
performance, SBA has included, as a part of its budget request
to Congress for FY2002, the increments of a performance plan.
The hearing focused of the adequacy of the budget request and
the SBA's proposed performance plan.
Summary
The hearing consisted of two panels. The first panel had
one witness, Mr. John Whitmore, Jr. Acting Administrator, SBA.
The budget request of $539 million for the SBA focused on core
programs, providing credit, capital, and technical assistance.
It included $5 million for SBA's portion of the President's New
Freedom Initiatives to help compliance with the American with
Disabilities Act and $5 million as a part of the Drug Free
Workplace Program. The budget proposed increasing the SCORE
program by $250,000 to $4 million and providing $750,000 to
fund veterans' business development programs (which had not
been funded in FY2001). The small business development centers
were proposed to be funded at a level of $88 million, $75.8
million coming from appropriations and $12 million from fees.
An amount of $500,000 was included for a women's contract
initiative study and a contract bundling study. The budget
proposed increasing fees to make the 7(a), 504 loan program,
and the venture capital program self-sufficient.
The second panel was comprised of: Ms. Diane Wolverton,
State Director, Wyoming Small Business Development Centers
(SBDCs); Mr. Anthony R. Wilkinson, President and Chief
Executive Officer, The National Association of Government
Guaranteed Lenders; Mr. Lee W. Mercer, President, National
Association of Small Business Investment Companies; Ms. Zola
Finch, Vice President for Congressional Relations, the National
Association of Development Companies; and, Mr. David Means,
Executive Director, Greater Newark Business
DevelopmentConsortium. The proposal to require SBDCs to charge fees for
business counseling found no support. There was testimony that the
Office of Management and Budget has estimated that 7(a) borrowers and
lenders have returned $1.257 billion to the Treasury since 1992 in
overpayments due to inaccurate calculation of the subsidy rate. There
was support in the venture capital industry for the President's budget
proposal to increase fees since there was a need expressed for $3.5
billion in participating security leverage for fiscal year 2002 which
would require increased fees or $65.5 million in appropriations, a 150
percent increase over FY2001. Concern was expressed with respect to the
calculation of the fees for 504 loans based on rates used to project
default, recovery, and debenture prepayment. General concern was
expressed over a number of items presented in the budget.
For additional information on this hearing, refer to
Committee publication 107-7.
7.2.7 access to capital
Background
On May 17, 2001, the Committee on Small Business held a
hearing to discuss tightening loan standards and the effect of
stricter standards on access to capital for small businesses.
The hearing focused on conditions affecting the Federal
Reserve's March 26, 2001 survey that supported evidence of
tighter loan standards for businesses attempting to obtain
commercial and industrial credit. It was the first time since
the 1998 financial crisis that the Federal Reserve conducted
the survey--normally a quarterly report--ahead of schedule.
While stricter standards do not necessarily mean credit is
unavailable, small and mid-sized businesses must be able to
access the capital necessary for economic growth and survival.
The Committee investigated whether, in the recent slowing
economy, small businesses are accessing necessary credit
through private lending.
Summary
One panel provided testimony for this hearing. Witnesses on
the panel were: the Honorable Roger W. Ferguson, Vice Chairman
of the Board of Governors of the Federal Reserve System; Dr.
William C. Dunkelberg, Chief Economist, National Federation of
Independent Business; Leslie S. Shapiro, President, Padgett
Business Services Foundation; Arthur C. Johnson, Chairman and
CEO, United Bank of Michigan; and Douglass M. Tatum, Partner
and CEO, Tatum CFO Partners, LLP.
Testimony at the hearing highlighted the Federal Reserve's
survey findings that half of bank respondents reported applying
somewhat stricter standards to applications for commercial and
industrial loans and credit lines by large and middle-market
firms, and 43 percent reported tougher standards on small
businesses. At the same time, 40 percent of domestic banks and
23 percent of foreign branches and agencies reported moderately
or substantially weaker demand for loans.
Dr. Ferguson testified that half of our nation's private,
non-farm output comes from small businesses and that our
nation's economy depends greatly on the small business sector.
Discussing the Federal Reserve's March survey and three past
national surveys on small businesses in depth, Dr. Ferguson
concluded that bank credit flows have been well maintained and
that reports from small businesses are relatively upbeat with
regard to the availability of credit. Concurring, Dr.
Dunkelberg testified that NFIB data supports the absence of a
credit crunch and that small businesses can still find capital
despite the tightening of standards.
Accordingly, a timely article by John M. Berry in the
Washington Post on May 4, 2001, entitled ``Fed's Legwork Led to
Quick Rate Cut--Firms Surveyed before April Surprise,''
credited the current attitude of businesses not attempting to
obtain capital as a major factor in the Federal Reserve's
surprise April 18, 2001, half-percentage-point cut in short-
term interest rates. Among the remaining panelists, there was a
lack of consensus on whether the small business community is
experiencing a ``credit crunch'' or such tightening standards
as to restrict small business access to capital. Nonetheless,
anecdotal evidence at the hearing revealed the possibility of
an emerging credit crunch affecting the manufacturing sector--
in particular small and mid-sized manufacturers--and small
businesses generally. Furthermore, Mr. Tatum's testimony
revealed the ongoing difficulty of small and mid-sized
businesses to access capital between $250,000 and $1 million--
referring to this credit gap as ``No Man's Land'' where
companies ``too small to be big and too big to be small''
cannot access the capital they need to grow and to expand.
For further information on this hearing, refer to the
Committee publication 107-8.
7.2.8 sba programs for veterans and the national veterans
business development corporation
Background
On Wednesday, May 23, 2001, the Committee on Small Business
held a hearing to evaluate the past and present performance of
the Small Business Administration in providing assistance to
veterans. The hearing examined the implementation of Public Law
106-50, the ``Veterans Entrepreneurship and Small Business
Development Act of 1999,'' signed into law by President Clinton
on August 17, 1999. The law requires that specific technical,
financial, and procurement assistance be provided to veterans.
The Department of Veterans Affairs, the SBA, the Association of
Small Business Development Centers, and the Service Corps of
Retired Executives (SCORE) are the principal entities mandated
by law to provide this assistance. In the past, many veterans
have expressed concern that SBA and other federal agencies were
ignoring the financial and entrepreneurial needs of veterans
who own or want to start small businesses. In addition, the
statute created the National Veterans Business Development
Corporation to improve veterans access to technical assistance
and to assist veterans, including service disabled veterans,
with the formation and expansion of small business concerns by
working with and organizingpublic and private resources. The
hearing will provide oversight as to the progress that the Corporation
has made in implementing the provisions of the law.
Summary
The hearing was comprised of a single panel which included:
Mr. William Elmore, Associate Administrator for Veterans
Affairs, SBA; Mr. Robert Glassman, Chairman of the Board,
National Veterans Business Development Corporation; Mr. Blake
C. Ortner, Associate Legislative Director, Paralyzed Veterans
of America; Mr. Anthony L. Eiland, Special Assistant for
Veterans Employment, Veterans of Foreign Wars of the U.S.; Mr.
William C. Crandall, Director of Government Relations,
Association for Service Disabled Veterans; and Mr. Rick
Weidman, Director of Government Relations, Vietnam Veterans of
America. SBA is required by law to provide special
consideration to veterans and service-disabled veterans for
their service to this country. Also by law, federal agencies
must meet a procurement goal for prime contracts of three
percent for service-disabled veterans.
Many agencies have ignored these requirements and have
reported a zero percent achievement of the prime contract goal.
There was testimony that that SBA was taking specific measures
to assist veterans, including the establishment of an Office of
Veterans Business Development. Additionally, the National
Veterans Business Development Corporation was established as
the President had appointed a federally chartered corporation
in the District of Columbia in October of 1999, and as of the
hearing, eight of the nine voting directors. Because many
service-disabled veterans have difficulty finding employment,
self-employment and small business ownership is essential to
the well being of many of these individuals. Many participants
testified that, while steps are being taken to improve the
standing of veterans and service-disabled veterans, many more
tangible steps must be taken. Congressional oversight is
essential to seeing that the services to veterans mandated by
statute are in fact provided.
For more information concerning this hearing, refer to
Committee publication 107-10.
7.2.9 federal prison industries and its effects on small
business
Background
On June 6, 2001, the Committee on Small Business held a
hearing on the role Federal Prison Industries (FPI) plays in
government procurement, the effect it has on small business,
and the provisions of H.R. 1577, the Federal Prison Industries
Competition in Contracting Act.
When Congress created FPI in 1934, lawmakers gave FPI a
mandatory source preference that requires federal agencies to
purchase goods made by federal inmates, in most circumstances,
unless the agency receives permission from FPI to use another
source. FPI, which employs 21,000 inmates at factories inside
68 federal prisons, reaped $566 million in contracts from
federal agencies last year. In the past five years, the number
of industries in which FPI is involved nearly doubled, making
FPI the 40th largest federal contractor, ahead of Motorola.
FPI recently has expanded into the services sector, causing
new concerns. Also, a less than transparent decision-making
process (FPI's Board of Directors meets in secret) has made
accountability difficult. This hearing is the latest in a
series of FPI oversight hearings by various congressional
committees in recent years.
H.R. 1577 takes several steps in the right direction, as
reflected in the testimony of its congressional sponsors and
the brief summary of its provisions, below.
Summary
Two panels of witnesses testified. The first panel
comprised two sponsors of H.R. 1577, Representatives Peter
Hoekstra (R-MI) and Carolyn Maloney (D-NY). The second panel
consisted of Joseph Aragon, Chairman, Federal Prison
Industries; Bobbi Gentile, President, Q-Mark; Robert DeGroft,
President, Source One Office Furnishings; Kass Green,
President, Pacific Meridan Resources; and Carl Votteler,
Federal Managers Association.
Representative Hoekstra testified to the disproportionate
way that FPI affects small business owners and entrepreneurs
because they are automatically shut out of bidding on federal
contracts by an agency that is funded through their tax
dollars. Representative Maloney spoke of a constituent company
that overnight lost a contract to FPI because federal law
mandates use of FPI products when FPI certifies that it can
produce to specification. She explained that FPI ignored its
own procedures, by-passing a hearing and other forms of
transparency. She noted that competitive pricing is not a
factor as long as FPI does ``not exceed the highest price
offered to the government.''
During questions, Representative Velazquez, the ranking
member of the Committee, asked whether the legislation would
require FPI to access capital at market rates instead of
preferential, reduced rates from the U.S. Treasury. The bill's
sponsors took this suggestion under advisement.
The second panel testified to various specific instances
involving FPI competition, with only FPI Chairman Aragon
(accompanied by FPI Chief Operating Officer, Steve Schwalb)
defending FPI's practices and advantages. The bulk of the
hearing testimony, along with studies by the General Accounting
Office, indicated that small businesses are shut out of many
federal contracts by prison labor. Panel witnesses called on
Congress to reform the prison system's role in federal
procurement to let small businesses compete for these federal
contracts. Several small business witnesses testified that they
only wanted the ``opportunity to compete'' against FPI for the
office products, furniture, and other supplies the federal
government buys each year.
The Federal Prison Industries Competition in Contracting
Act of 2001 (H.R. 1577) would require competitive procedures
for purchasing prison-made products. It also would require FPI
to comply with Federal occupational, health, and safety
standards regarding its industrial operations. The bill would
mandate an analysis of the probable impact of any proposed
expansionof inmate-work activities on private sector firms
whenever FPI proposes to authorize the sale of a new specific product
or service or to expand production of a current product or service.
For further information about this hearing, refer to
Committee publication number 107-11.
7.2.10 the export-import bank: what has ex-im done for
small business lately?
Background
This hearing on the Export-Import Bank of the United States
(Ex-Im) and its assistance to small business exporters was
conducted on June 13, 2001. Ex-Im is the chief U.S. government
agency that helps finance American exports. Ex-Im provides
guarantees and insurance to commercial banks to make trade
credits available to U.S. exporters on a limited basis,
primarily to counter subsidized trade credits offered to
foreign exporters by their governments.
The purpose of the hearing was to focus on the impact of
Ex-Im on small business. Specifically, the hearing allowed the
witnesses to testify as to how its programs directly benefit
small business and its indirect impact on small business export
growth. Additionally, Ex-Im's authorization expires September
30, 2001. Consequently, the hearing provided Members the
opportunity to examine issues relating to its reauthorization
as well as the Administration's proposed FY2002 budget cut for
Ex-Im.
Summary
The hearing comprised of one panel, including: The
Honorable Vanessa Weaver, Board Member, Export-Import Bank of
the United States; Ms. Sharon K. DeDoncker, Vice President,
Aqua-Aerobic Systems, Inc.; Mr. Joseph Waters, President,
Hoffman International; Mr. George Barr, Founder, Anatech, Ltd.;
and, Mr. Kenneth Petrilla, Senior Vice President, Wells Fargo
HSCB Trade Bank, N.A. In light of the Administration's proposal
to cut Ex-Im's funding by nearly 25 percent, a number of the
witnesses expressed concerns about the potential impact on
small businesses and small business lending.
Conversely, a number of witnesses advocated the expansion
of Ex-Im's budget to ensure they remain competitive with their
foreign counterparts. Additionally, while she did advocate on
behalf of the Administration's budget proposal, Vanessa Weaver
did assure the Committee these cuts will not come at the
expense of small businesses who use Ex-Im to finance export
transactions.
Further, it was acknowledged that Ex-Im frequently finances
aircraft sales for Boeing, thus earning Ex-Im the name
``Boeing's Bank''. However, these sales often have a trickle
down effect for indirect exporters. Further, presently 97
percent of all exports are completed by small businesses.
However, only one percent of small businesses are engaged in
the export market.
Therefore, the potential exists for Ex-Im to significantly
increase their involvement in small business exports.
The hearing concluded with an expression of serious concern
over the impact of the proposed 25 percent cut in Ex-Im and in
support of Ex-Im's overall reauthorization.
For further information about this hearing, please refer to
Committee publication 107-12.
7.2.11 procurement policies of the pentagon with respect
to small businesses and the new administration
Background
On Wednesday, May 20, 2001, the Committee on Small Business
held a hearing that focused on the Pentagon's procurement
policies. Based on figures provided by the Pentagon, in FY2000,
the Department of Defense awarded over $122 billion in prime
contracts to all U.S. business firms, of which approximately
$26.9 billion went to small businesses. It was clear from these
figures that the procurement of goods and services by the
Department of Defense is an important market to small
businesses. The polices that the new Administration at the
Pentagon adopts in the conduct of its procurement programs is
of immediate concern to small businesses and can have an
important impact upon procurement policies implemented by other
Federal agencies. In the past, small businesses have
encountered a number of problems with the Department of
Defense's procurement policies. As examples, the Pentagon has
failed to meet minimum procurement goals established by
statute, the number of prime contract awards to small
businesses has declined, and the bundling of contacts has
severely affected small businesses.
Summary
There was one panel consisting of: Deidre A. Lee, Director,
Defense Procurement, Office of the Secretary of Defense; Susan
M. Walthall, Acting Chief Counsel, Office of Advocacy, U.S.
Small Business Administration; Ken McLaughlin, Small Firm
Council, American Council of Engineering Companies; Maurice
Allain, President, Phoenix Scientific Corporation; Kathleen
Diamond, President and CEO, Language Learning Enterprises,
Incorporated; and, Rick Weidman, Director, Government
Relations, Vietnam Veterans of America.
It was reported that in FY2000, $48 billion was spent by
the Department of Defense (DOD) with small businesses, of which
$29 billion went to small firms as prime contractors. However,
it was pointed out that DOD needs to do better which will
require a great deal of commitment to improve and reach the
statutory goals. The view was expressed with respect to federal
agency use of credit cards that the small business community
was not getting a proportional share of the procurement
dollars. It was also noted that the use by agencies of multiple
award contacts and government-wide contracts reduces
opportunities for smallbusinesses. However, the major force
reducing participation of small businesses in the federal procurement
is contract bundling.
It was emphasized that there is a major difference for a
small business as a prime contractor with the federal
government as compared to a subcontractor. As a prime
contractor a small business is more in control of the outcome,
completely responsible to the contracting agency, are
recognized for a job well done, and are assured of payment
directly from the federal government. Bundling of contracts has
been devastating to small businesses, absorbing many
opportunities formally performed by small businesses. It was
pointed out that there was no incentive to make awards to
women-owned small businesses, assuming the competitors are
equal. It was reported that little progress had been made at
DOD in meeting the goals for veterans and especially service-
disabled veterans.
For further information about this hearing, please refer to
Committee publication 107-13.
7.2.12 small business to healthcare
Background
On July 9, 2001, the Committee on Small Business held a
field hearing in Arlington Heights, Illinois on small business
access to healthcare. The purpose of the hearing was to provide
a forum to discuss the problems that small businesses have
providing their employees healthcare. There was also discussion
of options and solutions to the growing epidemic of rising
health care costs.
Small businesses often lack access to affordable health
coverage. In fact, over 60 percent of the 38.7 million
uninsured Americans have one thing in common; they are either
self-employed or have a family member who is employed by a
small business that cannot afford to provide health benefits.
Currently, the self-employed can deduct only 70 percent of the
high costs of healthcare while large businesses can deduct 100
percent. In 1998, Congress passed legislation to allow full
deductibility for the self-employed in the year 2003. However,
self-employed business people with no health care coverage need
immediate assistance when members of their families become sick
or injured. There are several legislation options that are
being discussed to ease the burdens on small employers, most
notably Association Health Plans (AHPs) and expansion of
Medical Savings Accounts (MSAs).
Association Health Plans (AHPs) will provide greater choice
and access to affordable, high quality, private sector health
insurance for millions of working families employed in small
businesses. AHPs empower small business owners, who currently
cannot afford to offer health insurance to their employees, to
access health insurance through trade and professional
associations and Chambers of Commerce. The small business
owners who are members of the associations can buy into these
plans for themselves and their employees. These associations
would cover very large groups, would enjoy large economies of
scale to that of a large business or union, and could offer
self-funded plans that would not have to provide any margin for
insurance company profits.
Expansion of Medical Savings Accounts (MSAs) will make
insurance more affordable for businesses with qualifying high
deductible plans. Expansion of MSAs will encourage more
individuals to place tax-deductible funds into savings accounts
for use in routine medical care while still allowing a wide
choice among doctors.
Summary
There was one panel of witnesses, comprised of: Ms.
Michelle Kuhn, President, Aeffect, Inc.; Mr. Douglas Weber,
President & CEO, United Way of Lake County; Mr. Sammy Davis,
President and Owner, Handyman at Work; Mr. Patrick H. Canary,
Owner, PHC Enterprises Inc., dba Alphagraphics; Ms. Erika
Berman, Senior Human Resources Manager, The Revere Group.
The participants all testified to the spiraling costs each
year of their health care costs. Small businesses have had
great difficulty providing health insurance to their families,
employees and the families of their employees because of the
expense and that they lack the economies scale that large
corporations or labor unions have when purchasing health
insurance. All the witnesses testified that something must be
done to control the escalating cost of health care.
Of the five witnesses, four were able to provide health
care to their employees. The single witness that was not able
to provide insurance testified that being a small company only
employing six or seven people, he could not afford to cover
them and that all his employees, including himself, received
their health care through their spouse. The remaining witnesses
all testified to double-digit increases in premiums. One
witness who ran a non-profit was only able to provide health
care to his employees; dependents were paid for out of pocket
by the employee. All testified that providing health care was
critical to hiring and retaining quality employees in order to
maintain a competitive business. At the same time, the
spiraling health care cost represented a major threat to small
businesses that typically all operate on tight margins. All the
panelists testified that they wanted to provide health care and
thought providing it was the ``right'' thing to do for
employees.
For further information on this hearing, refer to Committee
publication 107-16.
7.2.13 the regulatory morass at the centers for medicare
and medicaid services: a prescription for bad
medicine
Background
On July 11, 2001, the Committee on Small Business held a
hearing to examine regulatory burdens imposed by the Centers
for Medicare and Medicaid Services (formerly known as the
Health Care Financing Administration) on small businesses that
provide healthcare services under the Medicare program. This
was the second hearing examining regulatory problems associated
withthe Medicare program. In the Committee's May 9, 2001
hearing, the Committee focused on deluge of paperwork generated by
Medicare. The July 11, 2001 hearing addressed non-paperwork burdens
imposed on small healthcare providers.
The premise of Medicare is quite simple--health care
providers render a service to Medicare-eligible recipients and
the Medicare program should reimburse them at a rate that
allows the provider to stay in business. Yet, the Medicare
program appears to be drowning providers in regulatory morass.
Regulations promulgated by the government and additional
material developed by the carriers that process reimbursements
now run to more than 130,000 pages. Federal contractors have
substantial discretion to operate the reimbursement process
with little oversight from the federal government. Health care
providers, the vast majority of which are small businesses,
suffer unduly in this regulatory swamp.
Summary
The first panel consisted of the Hon. Patrick J. Toomey (R-
PA) and the Hon. Shelley Berkley (D-NV). Witnesses on the
second panel were: Dr. Michael Hulsebus, Rockford, IL; Dr.
David Whitson, Allentown, PA; Mr. Brian Seeley, Chief Executive
Officer, Seeley Medical, Inc., Ormond Beach, FL; Phillip Chase,
The Chase Group, Thousand Oaks, CA; Mr. Norman Goldhecht,
Executive Vice President, Diagnostic Health Systems, Lakewood,
NJ.
Representative Berkley first noted that the regulations
governing Medicare significantly outweigh the basic textbooks
used by medical students in learning medicine. Representative
Berkley went on to testify that she knew of a physician whose
practice was decimated while the Health Care Financing
Administration and the Part B carrier audited his practice
resulting in finding $900 of overpayments. She also noted that
another constituent was forced to retire rather than continue
to fight through the regulatory morass created by the Health
Care Financing Administration. Representative Berkley concluded
with an appeal for support of the Medicare Education and
Regulatory Fairness Act.
Representative Toomey noted that the voluminous regulations
associated with the Medicare program represent a fundamental
structural flaw in the program. Representative Toomey noted
that it did not make sense to impose undue regulatory burdens
on most physicians in order to capture a few health care
providers that might try to game the system. He also noted that
these burdensome regulations actually reduce the amount of time
that physicians spend with their patients. Representative
Toomey then noted that the Medicare Education and Regulatory
Fairness Act will: (a) prohibit retroactive application of
regulations; (b) permit repayment plans for overpayments rather
than automatic reductions in future payments; (c) prevents the
federal government from recouping a payment while an appeal is
still pending; (d) authorizes the return of overpayments
without penalties if discovered by a self-audit; (e)
establishes a safe harbor so that providers can submit claims
to learn how to correctly code them without fear of
investigation and penalty; and (f) mandates that new evaluation
and management guidelines be tested before being implemented.
Dr. Hulsebus testified about his experience with an audit
by a Part B Medicare carrier--Wisconsin Physician Services. He
noted that they determined that he owed substantial sums of
money because his chiropractic care was determined to be
medically unnecessary and that he did not document the
procedures that he performed correctly. Dr. Hulsebus noted that
the reviewer did not examine X-rays and was not a chiropractor.
Furthermore, Dr. Hulsebus noted that HCFA (now the Centers for
Medicare and Medicaid Services) agreed with him and reduced the
overpayment down to zero.
Dr. Whitson testified about the evaluation and management
guidelines and their absurdity. Dr. Whitson noted that it
requires significant detail that would not be used by
physicians normally and that make it difficult, if not
impossible, to find relevant medical history information about
a patient. Dr. Whitson noted that the need for this detail is
because Part B carriers assume that if it is not written down
the procedure was not performed. In other words, Dr. Whitson
noted that the carriers automatically assume that the providers
are being dishonest.
Mr. Seeley testified that 99 percent of all providers of
durable medical equipment have revenue of less than five
million dollars. Mr. Seeley explained that CMS, pursuant to
Congressional mandate, established a separate category of
carriers to process claims for durable medical equipment
covered by Medicare. These DMERCs, according to Mr. Seeley,
have sufficient discretion to impose standards that even
directly contradict guidance from CMS. Mr. Seeley noted that a
particularly insidious problem was extrapolation in which CMS
might examine 50 claims and assume that all claims made by the
durable medical equipment supplier followed that identical
pattern.
Mr. Chase commenced his testimony by citing problems, both
operational and financial, that skilled nursing facilities
face. Mr. Chase then testified about the catch-22 facing
nursing home operators. If they have a low number of citations
it is assumed that the state (which inspects nursing homes on
behalf of CMS) is not providing sufficient oversight. On the
other hand, if the number of citations is high, then the
nursing facility must not be providing adequate health care.
Mr. Chase noted that CMS and the skilled nursing facility
industry require a consultative rather than an antagonistic
relationship. Mr. Chase also noted the need for a timely
appeals process that does not unduly burden small businesses
with extraordinary legal expenses in an effort to protect them.
Mr. Goldhecht testified that CMS does not perform an
adequate assessment of the impact of its regulations on small
businesses as required by the Regulatory Flexibility Act. Mr.
Goldhecht also noted that the policy against reimbursing
providers for transportation costs for portable
electrocardiogram diagnosis might be pennywise and pound-
foolish which would be especially problematic in rural areas.
Finally, Mr. Goldhecht noted that consolidated billing for
skilled nursing facilities, as mandated by the BBA of 1997,
created enormous reimbursement problems for portable EKG
providers.
For further information on this hearing, refer to Committee
publication 107-17.
7.2.14 federal government competition with small business
Background
On Wednesday, July 18, 2001, the Committee on Small
Business held a hearing on the impact of direct government
competition with small businesses. The examples showed a
pattern that costs small businesses contracts, revenues, and
jobs. Such competition by government is exceedingly unfair,
since government entities share little or none of the
regulatory and tax burdens imposed on small business. The
government can underbid its private competition because the
government is subsidized and does not have to account for its
spending in the way that a private business does. Moreover, a
small business actually is forced to support its government
competitors through the taxes it pays.
Specific situations explored at the hearing included: (1) a
private laundry owner forced to compete with a VA Hospital in
Illinois; (2) a private mailbox service in Granville, NY forced
out of business by the U.S. Postal Service; (3) an Alaskan
campground owner and a D.C. tourmobile operator forced to
compete with the National Park Service; and (4) a charter bus
service forced to compete with the Federal Transit Authority.
Summary
Two panels of witnesses testified. The first panel
consisted of John Eakes, Owner/President, Royal Laundry
Systems; Arthur Hamerschlag, Deputy Chief Financial Officer,
Veterans Health Administration, Department of Veterans Affairs;
Rick Merritt, Executive Director, Postal Watch; Gregory Tucci,
Past Owner, P.A.S.S. of Granville; and Michael Spates, Manager
of Delivery Options, U.S. Postal Service. The second panel
included Dan Mastromarco, Travel Council for Fair Competition;
Scott Reisland, Owner/Manager, Denali Grizzly Bear Cabins/
Campground; Tom Mack, Owner/President, Tourmobile, Inc.; Clyde
Hart, Jr., Vice-President, American Bus Association; and Greg
Felt, Canyon Marine, Inc. (by written testimony only).
Mr. Eakes testified to unfair competition from a VA
Hospital in Greater Chicago, resulting in several lost
contracts. Mr. Eakes stated it costs him 24 cents per pound to
process laundry (fair market price in Chicago is 29 cents per
pound) and that the VA Hospital has underbid him by offering a
price of 23 cents per pound. A GAO report stated that as of FY
1999 it costs the VA 35 cents per pound for laundry. The VA
underbids Mr. Eakes because the taxpayers, including Mr. Eakes,
subsidize its costs. In welcome responsive testimony, Mr.
Hamerschlag of the VA offered to rectify this situation
immediately and declared that the VA was getting out of the
private laundry business.
Substantial testimony was given against the U.S. Postal
Service (USPS). USPS pays no state or local taxes, has a $15
billion line of credit from the U.S. Treasury, and spends over
$100 million advertising for its goods and services. In March
of 1999, USPS promulgated rules against businesses offering
private mailbox rentals, resulting in the bankruptcy of many
such private competitors. The Postal Service Inspector General,
however, concluded ``the Postal Service did not demonstrate the
need for regulatory change by presenting statistical or
scientific data to support its claims of mail fraud conducted
through private mailboxes.''
Denali National Park (DNP) in Alaska has stated its
intention to build additional campsites and camper convenience
services in direct competition with the private sector. DNP
will charge less for its campsites and RV sites, which already
enjoy the advantage of being ``in'' the National Park, under-
bidding the private operators who offer the same services and
testified they can increase levels of service as needed.
[Subsequent compromises by the National Park Service (NPS)
resolved many of these issues.]
Tourmobile, a private concessionaire to the National Park
Service (NPS), has successfully operated the fleet of
tourmobile trams that ferry tourists around Washington, D.C.
However, DC-BID (Downtown Business Improvement District), in
violation of Tourmobile's NPS concessionaire contract, has
proposed the establishment of a competing, taxpayer-funded
tourmobile service with the approval of NPS and public funding
from the Department of Transportation (DOT) and the museums of
the metropolitan area.
The American Bus Association testified on how small
business charter bus companies are losing contracts to
federally funded local transit authorities. The Federal Transit
Authority of the DOT provides local governments with federal
funds to meet area mass transit needs, but federal law forbids
the use of such funds if there is a pre-existing private
transit service. Many small businesses provide charter services
for group transportation to sporting and other recreational
events. In many cases, however, city buses are providing this
same service at federally funded, significantly reduced cost.
During questions, many members of the Committee actively
questioned Mr. Spates of the USPS, and invited discussion on
his testimony. Chairman Manzullo declared that written
questions from the Committee to USPS would follow the hearing,
which would be held open to receive the answers. [These
questions and related correspondence may be found in the
hearing record.]
For further information about this hearing, refer to the
Committee publication number 107-19.
7.2.15 reducing regulatory and paperwork burdens on small
healthcare providers: proposals from the executive
branch
Background
On July 25, 2001, the Committee on Small Business held a
hearing to obtain suggestions from the Executive Branch on ways
to reduce the regulatory and paperwork burdens imposed by the
Centers for Medicare and Medicaid Services (CMS) on small
health care providers. The hearing was a third in a series of
hearings conducted by the Committee in which examined the
paperwork burdens and regulatory entanglements facing health
care professionals providing services to Medicare recipients.
The recordkeeping and reporting requirements imposed by CMS
provide little in the way of information and probably inhibit
the provision of sound medical care. The non-paperwork
regulatory burdens do not benefit either providers or Medicare
recipients. The system that has been created constitutes a maze
that snares those least able to afford the legal and financial
resources necessary to wend their way out. Legislation
introduced by Mr. Toomey (R-PA), the Medicare Education and
Regulatory Fairness Act is one effort at reducing the
regulatory burdens imposed on physicians. The heads of CMS and
the Office of Information and Regulatory Affairs could offer
non-legislative solutions in their oversight of the
implementation of the Medicare provisions of the Social
Security Act and the Paperwork Reduction Act.
Summary
The panel consisted of the Hon. Thomas Scully,
Administrator, Centers for Medicare and Medicaid Services,
Department of Health and Human Services, Washington, DC; Hon.
Dr. John Graham, Administrator, Office of Information and
Regulatory Affairs, Office of Management and Budget; and Mr.
George Grob, Deputy Inspector General for Evaluations and
Inspections, Department of Health and Human Services.
Mr. Scully concurred with the judgment of the Committee
that changes needed to be made to the operation of the Medicare
program to reduce the regulatory burdens on health care
providers. Mr. Scully noted that changes will take place. Some
may be imminent such as modification to Form 855. Other actions
include the establishment of a regulatory reform task force
within CMS. Mr. Scully also will be overseeing various working
groups of providers to obtain their input on the necessary
changes. Mr. Scully also is conducting listening sessions
around the country to hear about the problems facing health
care providers. CMS also will embolden and empower its
employees to develop creative solutions that reduce and
streamline the Medicare process. Mr. Scully intends to issue
regulations on a specific date each month and reduce the number
of contractors that process claims. Finally, CMS wants to
institute an education program for seniors so that they better
understand Medicare, which could reduce the friction between
providers and patients.
Dr. Graham testified that OIRA will aggressively enforce
the Paperwork Reduction Act. Among the items that OIRA will
assess are the need for CMS to have the information and whether
the burdens of collecting the information outweigh the utility
to the public.
Mr. Grob noted that fundamental structural problems exist
with the contractors that CMS uses to process claims, such as
the absence of dual entry accounting systems that would be
required by any other large business pursuant to SEC
regulations and generally accepted accounting principles. Mr.
Grob also noted the legislative limitations on the type of
contractors that can process claims and the ability of CMS to
cancel those contracts. Mr. Grob also noted that the appeals
process takes too long and has four levels of review in which
each level utilizes a different standard of review. Mr. Grob
also noted that the Office of Inspector General programs have
reduced the number of billing errors by half from 23 billion to
12 billion dollars. Mr. Grob did not specify how much of that
error was due to fraud versus innocent mistakes in coding of
claims.
For further information on this hearing, refer to Committee
publication 107-23.
7.2.16 small business views on federal government
procurement and other programs
Background
On August 27, 2001, the Committee on Small Business held a
field hearing in Albuquerque, NM, to allow New Mexico small
business owners to express their views about federal government
programs, particularly in regard to the Department of Energy.
Despite the importance of small businesses to the economy of
this Nation, some small businesses have had problems in finding
federal procurement opportunities and in doing business with
the federal government. A central focus of this hearing was
reviewing the challenges that small, disadvantaged, and
minority business owners face in the federal procurement arena.
Another focus of this hearing is to learn how small
business owners have succeeded--whether by reliance solely upon
the private sector or with some assistance by federal
programs--in order to help others become, or continue to be,
successful small business owners. This hearing will provide a
forum for the expression of views with respect to federal
government programs for the purpose of addressing any problems,
where feasible, with remedial legislation. The federal
government should be user friendly since it is the taxpayers
who pay for every federal program and the salaries of those who
administer them.
Summary
The hearing was comprised on one panel consisting of: Mr.
John Browne, Director, Los Alamos National Laboratory; Mr. Buck
Coonce, Laboratory Administrative Office, Office of the
President, University of California; Mr. David Cordova, Eight
Northern Indian Pueblo Council, Inc.; Ms. Patty Wagner,
Assistant Manager, Department of Energy, Albuquerque Operation
Office; Mr. Mario Martinez, New Mexico Office Products; Mr.
Antonio Montoya, L&MTechnologies; Ms. Michelle Morales, CJ
Enterprises, Inc.; Ms. Joan Woodard, Executive Vice President & Deputy
Director, Sandia National Laboratories; Mr. Abe Salazar, Computer
Assets, Inc.; and Dr. Inez Triay, Manager, Carlsbad Field Office.
Witnesses testified to their experiences with Sandia
National Laboratories and Los Alamos National Laboratories.
There was a consensus among those who testified with regard to
their experiences with Sandia and Los Alamos. It was felt that
Sandia National Laboratories was accessible for small
businesses to compete for federal contracts and that Sandia
made a concerted effort to ensure that small entrepreneurs
received fair consideration. However, there was an overwhelming
consensus that Los Alamos National Laboratories showed a bias
against area small businesses and showed little incentive to
award prime contracts to them. Moreover, testimony indicated
that contracts routinely were ``bundled'' and awarded to large
companies instead of small businesses.
For further information on this hearing, refer to Committee
publication 107-25.
7.2.17 encouraging the growth of minority-owned small
businesses and minority entrepreneurship
Background
The Committee on Small Business held a field hearing on
August 27, 2001 in Albuquerque, New Mexico. A central focus of
this hearing was reviewing the challenges that small,
disadvantaged, and minority business owners face in the federal
procurement arena. Another focus of this hearing was to learn
how small business owners have succeeded whether by reliance
solely upon the private sector or with some assistance by
federal programs, in order to help others become, or continue
to be, successful small business owners. Are Federal programs
helpful? For example, have the loan programs administered by
the Small Business Administration provided needed access to
capital? Have federal regulations proved burdensome and
needless? This hearing provided a forum for the expression of
views with respect to federal government programs for the
purpose of addressing any problems, where feasible, with
remedial legislation.
Summary
The hearing consisted of one panel: Tina M. Cordova,
President, Queston Construction, Inc.; Ms. Anna Muller,
President, Neda Business Consultants, Inc.; Evaristo J. Bonano,
Ph.D., President of Beta Corporation International; Ms. Joan E.
Schlueter, President and CEO, Onsite Hiring Consultants; Mr.
Joe A. Powdrell, Mr. Powdrell's Barbeque House; Mr. Don
Furtivo, Commercial Loans, SBA Division, Matrix Capital Bank;
Mr. Michael Canfield, President and CEO, Valliant Enterprises,
Inc.; and, Miguel Rios, Jr., Ph.D., CEO, Orion International
Technologies, Inc. It was noted at the start that New Mexico
has the highest per capita ownership of businesses by Hispanics
in the Nation--22 percent of the businesses in New Mexico are
owned by Hispanics.
Growth in Hispanic owned businesses is attributed in large
measure to the rapid growth of Hispanic women-owned small
businesses. However, the view was expressed that Hispanics were
underrepresented in the 8(a) program and that the dollar value
of 8(a) contracts in New Mexico had rapidly declined in the
five-year period from 1995 to 2000. A number of causes were
cited for this decline, e.g., contract bundling, use of GSA
schedules, government-wide acquisition contracts (GWACS) and
credit cards. It was recommended that the net worth limit for
owners of 8(a) businesses be raised and the size standards for
small businesses be increased.
No progress was seen in reducing contract bundling as a
result of regulations put in place in December 1999. Just the
opposite was observed--an increase in contract bundling with
apparently no significant cost savings. Bundling contracts
could be characterized as a method of setting-aside procurement
opportunities for large businesses since the practice
effectively hinders small businesses from competing. Examples
were provided of hurdles faced by women-owned small business in
competing in the federal procurement arena. These obstacles
include slow payment, bundling, preference for large
businesses, and burdensome paperwork.
It was stated that the process used to certify a small
business under the 8(a) program was too complicated and that
there are problems in obtaining access to capital, even with
respect to established businesses. However, the SBA loan
program has been able to provide financing for more than 40,000
borrowers each year, but the view was expressed that the fee
structure at the time was too high. A 7(a) loan assisted one of
the businesses in the purchase of the building in which it
operated. The view was expressed that small businesses have
been under pressure to prosper when competing in the federal
procurement marketplace. The 8(a) program has not had great
successes in helping large numbers of eligible small businesses
enter the mainstream of the private sector.
For further information concerning this hearing, refer to
Committee publication 107-26.
7.2.18 critial issues affecting long island
Background
On August 30, 2001, the Committee on Small Business held a
field hearing in Riverhead, NY to examine issues affecting Long
Island's small businesses and proposed solutions involving the
federal government. Discussion touched on the local impact and
operations of Small Business Administration (SBA) programs
including, Small Business Development Centers (SBDCs), Service
Core of Retired Executives (SCORE), and SBA partners.
Suffolk County is one of the most diverse areas of the
country, encompassing historic Montauk Point, the Hamptons,
Brookhaven National Laboratory, educational institutions such
as State University of New York at Stony Brook, and many ``main
street'' small towns lined with classic small businesses. Local
small businesses run the gamut and balance issues of seasonal
tourism, coastal storms, and the high cost of living. Many of
these businesses are family-owned and have been passed on for
generations. Long Island, including the counties of Nassau and
Suffolk, thrives on its tourism, high-tech, and information
technology sectors, composed almost entirely of small
businesses. Overall, small businesses on Long Island account
for 92 percent of all business and provide more than 75 percent
of all jobs.
Summary
The hearing consisted of one panel as follows: Aubrey
Rogers, New York State Director and Acting Regional
Administrator, Small Business Administration; James King, New
York State Director, Small Business Development Centers; Judith
McEvoy, Director, New York State Small Business Development
Centers at SUNY-Stony Brook; Robert Kozakiewicz, Supervisor,
Town of Riverhead; Anthony Aloisio, Director of Economic
Development, Town of Brookhaven; Marion Cohn, Assistant
Director of Government Affairs, Long Island Association; Roslyn
Goldmacher, President/Founder, Long Island Development
Corporation; Judith Shivak, Executive Director, Greater
Smithtown Chamber of Commerce; Sima Freierman, General Manager,
Montauk Intel Seafood. Mr. William Grimm, Commercial Fisherman
and Partner, Montauk Inlet Seafood submitted written testimony.
SBA witnesses explained SBA's presence on Long Island. In
1978, SBA established a branch office in Melville, NY to
address Long Island's business concerns and provide better
service to this area. Currently, the Melville office is staffed
by nine people and supports two SBDCs and four SCORE chapters.
SBA has launched a New Markets Venture Capital program to
assist with venture capital needs in low-income rural and urban
areas. This office also works with 15 Long Island lenders. SBDC
is a partnership between the SBA, the State of New York, higher
education centers, and the private sector. SBDCs provide
consultation, training, and research for area small businesses.
Witnesses testified to many impediments for Long Island's
entrepreneurs, including poor access to capital (sometimes
brought on by bank mergers); federal regulatory burdens; and
worker-retention difficulties due to an inadequate and over-
burdened transportation system and a chronic lack of affordable
housing. Legislative options included: (1) continue and expand
SBA's guarantee programs; (2) raise the capital expenditure for
Industrial Revenue Bonds (IRBs); (3) increase government
guarantees rather than direct lending programs for small
business; and (4) encourage SBA partnerships instead of
``direct ownership'' of program. Also, there was support for
(1) H.R. 203, the National Small Business Regulatory Assistance
Act, (2) H.R. 2538, the Native American Small Business
Development Act, (3) H.R. 2666, the Vocational and Technical
Entrepreneurship Act, and (4) reauthorization of the Small
Business Technical Transfer Research Program.
During questions, Representative Grucci queried Mr. Rogers
at length about apparent inequities in the distribution of SBA
programs and benefits. Drawing from Mr. Rogers' own written
testimony, Representative Grucci pointed out that Long Island
was receiving a surprisingly small percentage of the SBA
benefits going to New York State--a percentage much lower than
the Island's share of state population would suggest. Mr.
Rogers was unable to explain the disparity and Representative
Grucci held the hearing open for Mr. Rogers' subsequent written
explanation, which may be found in the hearing record. That
explanation narrows the disparity somewhat, but confirms that a
substantial disparity remains and fails to explain its origin
or to propose a remedy.
For further information about this hearing, refer to
Committee publication number 107-27.
7.2.19 procurement policies of the department of defense
with regard to small businesses, finding solutions
to problems that exist
Background
On September 6, 2001 the Committee on Small Business held a
hearing on the procurement policies of the Pentagon with
respect to small businesses and explored problems in doing
business with the Pentagon.
The policies that the new Administration at the Pentagon
adopted in the conduct of its procurement programs is of
immediate concern to small businesses and has an important
impact upon procurement policies implemented by other Federal
agencies. In the past, small businesses have encountered a
number of problems with the Department of Defense's procurement
policies. As examples, the Pentagon has failed to meet minimum
procurement goals established by statute, the number of prime
contract awards to small businesses has declined, and the
bundling of contacts has severely affected small businesses. To
resolve these problems, there is a need for receptivity to new
thinking and new ideas. The hearing focused on past problems
for the purpose of finding solutions to those problems.
Summary
The hearing consisted of one panel which included: Bobbie
Gentile, President/Owner, Q-Mark, Inc.; Curtis A. Wright,
Colonel, USAF, Acting Director of Small and Disadvantaged
Businesses, Department of Defense; Robert B. Spencer,
President, Spenro Industrial Supply; Janice Hoffmann, President
and Owner, Hoffmann Fabricating (on behalf of Women Impacting
Public Policy (WIPP); Dr. William F. Crandell, Ph.D., Director
of Government Relations, Association of Service Disabled
Veterans; and, Thomas J. Kelleher, Jr., Esq., Member, Smith
Currie & Hancock, LLP (on behalf of Associated General
Contractors). Contract bundling was described as having the
effect of displacing small businesses that had successfully
provided goods and services to the Department of Defense (DOD).
It was observed that large prime contractors were receiving
more and more federal procurement dollars.
It was stated that in FY2000, $48 billion of DOD
procurement dollars went to small businesses of which $26.9
billion went to small businesses as prime contractors and that
in eight out of the past 10 years DOD met the statutory prime
contract goals for small businesses and small disadvantaged
businesses. A suggestion was made that a new size standard of
``very small business'' be adopted to include businesses with
25 or fewer employees. Onerous requirements of a large company
in selecting subcontractors were cited as a method used to
restrict competitionamong small businesses. Procurement
conferences that do not result in contracting opportunities for small
businesses were described as both costly and unproductive.
Federal Prison Industries was cited as taking a good share
of the work away from small businesses and the Committee was
asked to review the impact of this agency upon the small
business community. Women-owned businesses are growing at a
rate twice that of all businesses, yet women-owned businesses
have encountered severe obstacles in doing business with the
federal government. DOD has not met the minimum 3 percent prime
contract goal for service-disabled veterans and American
veterans wanted to know what plans have been made to meet this
minimum requirement. DOD was urged to vigorously set and
achieve at least the minimum statutory prime contract goals. It
was pointed out that delay in resolving procurement disputes is
bad both for small businesses and DOD.
For further information on this hearing, refer to Committee
publication 107-28.
7.2.20 the role small business can play in jump starting
the economy
Background
On Wednesday, October 10, 2001, the Committee on Small
Business held a hearing in Washington D.C. on the role that
small businesses can play in the economic recovery of this
nation after the horrific acts of terrorism perpetrated against
the United States. In past periods of economic downturns, it
has been the small business community that has been the major
catalyst to renewed economic growth and the new job
opportunities. Small businesses have always been vital to a
healthy national economy and their vitality has played a large
part in the economic recovery of this nation.
There was a debate as whether they economic stimulus
package should help jump-start the economy. Witnesses were
invited to express their views on what policies should be
included in a stimulus package as well as why changes, if any,
should be made to programs administered by the U.S. Small
Business Administration.
Summary
The hearing was comprised of two panels. The first panel
consisted of The Honorable Hector Barreto, Administrator, and
U.S. Small Business Administration (SBA). The second panel
consisted of: Giovanni Coratolo, Director of Small Business
Policy, U.S. Chamber of Commerce; William Dunkleberg, Chief
Economist, National Federation of Independent Business;
Christianne Ricchi, Owner, I Ricchi Ristorante (on behalf of
the National Restaurant Association); Richard Herring,
Chairman, National Small Business United; Darrell McKigney,
President, Small Business Survival Committee; John S. Satagaj,
President and General Counsel, Small Business Legislative
Council; and Linda Bauer Darr, Vice President for Policy and
External Affairs, American Bus Association.
It was reported that SBA had opened eight locations to
assist victims of September 11 and there were 94 agency people
deployed in the New York area with 205 people at the Niagara
Falls Disaster Loan office that were rotating when needed.
Though disaster loans may be used by small businesses to
recover from economic injury as well as physical damage, SBA
was primarily focused on the small businesses in the New York
City and northern Virginia areas that were suffering economic
injury. While normally small businesses are in direct proximity
to disaster areas, the events of September 11 presented a
unique situation with the closing of airports across the Nation
and the interdependence of small businesses within and without
areas attacked by the terrorists.
The view was expressed that consumers needed to regain
confidence in the economy and that tax incentives are needed
such as the accelerating the marginal rate cuts previously
enacted, provide investment tax credits and repeal the
alternative minimum tax. Blame for the present economic
downturn was attributed at least in part to the federal
government holding onto a surplus and not putting the money
back in the taxpayer's hands. A survey showed that after
September 11 more firms expected sales to go down than those
who thought their sales would rise. Increased government
spending as a remedy was criticized as taking too long to be
effective, being too focused, and being wasteful.
It was reported that the economic harm to the restaurant
industry (which employs 11.3 million people) because of the
terrorist attacks was substantial. People have not been
comfortable dining in urban areas with the attendant drop in
revenues and a loss of 103,000 employees in September. The
similar losses were suffered with respect to small businesses
directly or indirectly associated with the airline industry and
tourism. It was estimated that in the motor coach industry,
there was a loss of one quarter of its usual 2 million daily
riders, and from 20,000 to 40,000 jobs lost in the industry
that employs approximately 200,000 workers.
The President's four point tax relief program which
includes accelerating date of tax cuts, additional tax relief
for low and moderate income workers, stimulating investment by
businesses, and eliminating the alternative minimum tax was
supported. Additional relief was advocated, e.g., repeal of the
death tax, elimination of the capital gains tax, providing the
President with trade promotion authority, and increasing
domestic energy production. There was consensus that something
should be done now and not wait for a future date.
For more information please refer to Committee publication
number 107-30.
7.2.21 impact of financial and professional service
exports on small business
Background
On October 24, 2001, the Committee on Small Business held a
hearing to focus on the important relationship between our
international services trade and the small businesses that
drive our economy. The U.S. service sector accounts for 80
percent of the private Gross DomesticProduct and over 83
million jobs. Small businesses represent 91 percent of all importers
and account for nearly 97 percent of the total number of U.S.
exporters. Over the last decade, the number of small business exporters
has tripled. Not included in this statistic are the many ``invisible
exporters'' that supply goods and services to larger export-driven
firms.
The United States service sector is the fastest growing
segment of the U.S. economy and is the largest exporter of
services. The service sector creates a significant trade
surplus for the U.S., fueling economic growth. This sector has
slowed somewhat, however, due to variety of trade barriers.
Summary
The hearing consisted of two panels of witnesses. The first
panel included John B. Taylor, Under Secretary of Treasury for
International Affairs and Grant B. Aldonas, Under Secretary of
Commerce for International Trade. The second panel consisted of
Robert Vastine, President, Coalition of Service Industries;
Peter Ehrenhaft, Partner, Miller and Chevalier (on behalf of
the American Bar Association); Lawrence Pemble, Executive Vice
President, Chindex International, Inc. (on behalf of the U.S.
Chamber of Commerce); Ed Coffin, President, Technology Export
Management (on behalf of the Small Business Exporters
Association); and James Hoffman, Consultant. Written testimony
was submitted by David L. Aaron, Senior International Adviser,
Dorsey and Whitney, Former U.S. Ambassador and Undersecretary
of Commerce for International Trade; Donald L. Morgan, Partner,
Cleary Gottlieb Steen & Hamilton; Robert Vagley, President,
American Insurance Association; and Lonnie P. Taylor, Senior
Policy Advisor, Powell Goldstein Frazer & Murphy.
Under Secretary Taylor spoke of the great strides made in
the financial service sector, which has benefited the U.S. both
here and abroad. Exporting financial services has stabilized
developing countries' banking systems and improved
transparency. Under Secretary Aldonas explained that while many
critics think that lowering trade barriers benefits only
Fortune 500 companies, it is our small and medium sized
companies that benefit the most. Large companies have options
in addition to cross border exports, such as investing or
building on the other side of trade barriers. Small companies
normally have no such options, but instead may only export.
Small companies therefore benefit disproportionately by reduced
trade barriers and increased market access. Due to lack of
resources and sophistication in international trade, small
companies also benefit disproportionately from increased
transparency and decreased regulatory burdens.
The private sector witnesses expanded on points made by the
two Administration witnesses, with many sector-specific
examples. There was agreement among all witnesses that granting
the President Trade Promotion Authority (TPA) was vitally
important to the continued strength of U.S. exports, because it
will allow the U.S. to negotiate favorable trade agreements.
Without TPA, the U.S. will be left behind the European Union
and Asian countries in terms of favorable trading relations.
Over the last decade, about 132 trade agreements have been
signed worldwide, but the U.S. has been party to only two. TPA
would allow for successful negotiation of the Free Trade
Agreement of the Americas (FTAA) and bilateral trade agreements
with Chile and Singapore, among others.
The World Trade Organization (WTO) has brought countries of
the world together to lower barriers, increase market access,
and promulgate ``rules'' for increased transparency and
openness that encourage commerce. Again, small businesses
benefit the most from ``standardization'' of tariffs and
import/export laws through the reduction of ``red tape.''
During questions, Chairman Manzullo secured the commitments
of both Administration witnesses to help him establish a trade
working group to focus on key trade issues of importance to
small and medium sized enterprises (SMEs). [Chairman Manzullo
convened this SME Trade Working Group (a/k/a The Manzullo
Group) in an organizational meeting on March 12, 2002 and
hosted subsequent major/quarterly meetings on June 4 and
September 12. The group consists of 80+ lawmakers;
Administration officials, congressional trade staff, and
industry leaders, and will continue meeting quarterly. The work
of the group often is conducted informally on a continuous
basis.]
For further information about this hearing, refer to
Committee publication number 107-32.
7.2.22 medicare-endorsed prescription drug discount care:
their impact on small business
Background
On October 25, 2001, the Committee on Small Business held a
hearing to examine the impact of the proposed Medicare-endorsed
prescription drug card on small retail pharmacies. The Centers
for Medicare and Medicaid Services (CMS) announced on July 12,
2001 a proposal for a Medicare-endorsed prescription drug
discount card. The purposes of the discount card is to assist
Medicare beneficiaries in making optimal use of their Medicare-
covered services and provide them with information on ways to
save money on prescription drugs. Consortia of manufacturers,
pharmacy benefit management companies, and retailers would be
authorized to offer a prescription drug discount card that
would have a Medicare endorsement on it if the consortia meet
certain requirements. In developing the proposal, CMS did not
comply with the notice and comment rulemaking requirements of
the Administrative Procedure Act or the analytical requirements
of the Regulatory Flexibility Act.
Summary
The panelists were Mr. Glenn Bower, Director of the
Illinois Department of Revenue; Ms Priscilla Chatman, Senior
Legislative Representative, National Committee to Preserve
Social Security and Medicare; Dr. David Kreling, Ph.D.,
Professor, School of Pharmacy, University of Wisconsin; Mr.
Gary Sims, Owner, Drug Emporium; Ms. LaVarne Burton, President,
Pharmaceutical Care Management Association; and Mr. John
Rector, Senior Vice President for Government Affairs and
General Counsel, National Community Pharmacists Association.
Mr. Bower explained the operation of the Illinois Circuit
Breaker program. The program operates out of the Department of
Revenue because seniors who fall below a certain income
threshold are eligible to obtain a card for the discounted
purchase of prescription drugs. The Illinois program does not
provide discounts for all conditions but only on those
conditions that primarily affect the elderly. All pharmacies
willing to participate are permitted to do so if they are
willing to accept reimbursement at a discount of 10% off the
average wholesale price plus a dispensing fee of $3.60 per
prescription. The pharmacy benefit management company only
negotiated the discounts with the pharmaceutical manufacturers
and processed claims. Any discount savings were returned to the
state treasury.
Ms. Chatman raised numerous concerns about the operation of
the plan. For example, the plan limits the number of drugs to
only one in each therapeutic class. Seniors are only allowed to
have one card and cannot change for a six-month period. Ms.
Chatman noted that this could make it difficult for seniors to
obtain the drugs prescribed by a physician. Furthermore, the
operators of the discount card could be enticed to include name
brand pharmaceuticals and ignore generics, which would have the
perverse result of increasing not decreasing costs for seniors.
Finally, Ms. Chatman was concerned that the requirements for
retail participation might force rural seniors to purchase
their drugs from mail-order pharmacies, which could lead to the
rapid deterioration of retail rural pharmacies.
Professor Kreling testified about the study he did on the
discount program operated by the State of Washington. He noted
that seniors could get discounts of .5% to 2.6% more in
privately-run discount programs than they could through
participation in the state-run program. Dr. Kreling testified
that the primary revenue producer for pharmacy benefit managers
that operate discount programs is rebates from pharmaceutical
manufacturers. He stated that the proposed Medicare-endorsed
discount card would enable pharmacy benefit managers to retain
an undetermined amount of the rebates from manufacturers.
Mr. Sims owns four pharmacies in West Virginia. Mr. Sims
testified he loses money by participating in the West Virginia
discount program given the state's demographics he has no
choice but to participate in the program. Mr. Sims noted that
the state reimburses him average wholesale price less 13
percent plus roughly $3.00 dispensing fee. This is insufficient
to cover his costs. Nor, according to Mr. Sims, does the Golden
Mountaineer Card provide customers with any significant savings
and certainly nowhere the 30 percent claimed by state
officials.
Ms. Burton testified that pharmacy benefit management
(PBMs) companies oversee the drug benefit that many employers
provide to their employees because normal health insurance
carriers are ill equipped to provide this service. PBMs
maintain formularies of approved drugs, process claims, and
negotiate discounts with drug manufacturers. Ms. Burton stated
that the plan sponsor owns the discounts and PBMs only retain
the discounts to the extent authorized in the contract between
the plan sponsor and the PBM. Ms. Burton also noted that mail-
order pharmacies tended to have lower prices than retail
pharmacies for many drugs. Finally, Ms. Burton noted that PBMs,
including any that participated in Administration's program,
must rely on retail pharmacies to provide service.
Mr. Rector testified that his association sued the federal
government to stop the program and the court agreed that CMS
had not demonstrated that it had legal authority to sponsor
such program. Mr. Rector also noted that CMS had not examined
the impact of the program on the approximately 55,000 retail
pharmacies in the United States--the vast majority of which are
small businesses. Finally, Mr. Rector contended that the
biggest problem with the Administration program was that it
gave a significant competitive advantage (with federal
government imprimatur) to mail order pharmacy competitors to
small retail pharmacies.
For further information on this hearing, refer to Committee
publication 107-33.
7.2.23 national sales tax holiday: how will this proposal
impact america's small businesses?
Background
The Full Committee conducted a hearing on November 15,
2002, concerning the proposed sales tax holiday and its
potential impact on our nation's small businesses.
This hearing focused on the potential impacts a national
sales tax holiday would have on America's small businesses. In
particular, the hearing focused on legislation introduced by
Representatives Lindsay Graham and Neil Abercrombie, and
Senator Patty Murray.
Consumer spending accounts for more than two-thirds of
gross domestic product (GDP). Over the last six months, retail
consumer spending has sustained an under-performing economy.
Several economists have cited the July and August increases in
consumer spending as being responsible for keeping the economy
growing during the third quarter despite declines in business
investment and construction.
The proposal being advocated has broad bipartisan support.
If enacted, States and localities that collect sales tax would
temporarily stop collecting this tax on tangible personal
property, except for alcohol and tobacco, for a period of ten
days. Congress would reimburse states and localities for lost
sales tax revenue during this period. Further, states would not
be forced to participate. Each state can determine if it wishes
to participate.
Summary
The hearing included two panels. The first panel included
The Honorable Patty Murray, United States Senate (D-WA), The
Honorable Lindsay Graham, United States House of
Representatives (R-SC), and The Honorable Neil Abercrombie,
United States House of Representatives (D-HI) the sponsors of
companion legislation in the Senate and House. On the second
panel, several interested parties, including Iris J. Lav,
Center on Budget and Policy Priorities; Washington, D.C.;
Grover Norquist, Americans for Tax Reform; Washington, D.C.;
Elmer Karl, Karl TV and Appliance Store; Rapid City, SD;
Elizabeth Holland, Abbell CreditCorporation; Chicago, Ill; Mr.
Rush Wilson, Rush Wilson, LTD, Greenville, SC; and Katherine Gornik,
Thiel Audio Products Company; Lexington, KY; testified about their
experiences with existing state sales tax holidays.
During the first panel, the witnesses unanimously agreed
that, with the economy in its current state of flux, it is
imperative the Federal government make attempts to resuscitate
the economy. Senator Murray provided examples of the sales tax
holiday's successes in a number of states, including Maryland
and Pennsylvania. Representative Abercrombie advised that the
House version of this legislation, H.R. 3172, would establish a
one time reimbursement to states and localities for revenue
that otherwise would have been collected through sales taxes on
virtually all consumer purchases between November 23 and
December 2. Representative Graham testified that the Holiday
sales period represents up to 40 percent of all annual sales
for some retailers. This bill would provide a direct benefit to
our economy. Shopper's benefit from lower overall costs for
their retail purchases during the holiday shopping season.
Merchants, workers and manufacturers benefit from increased
demand, and ultimately our economy benefits from the increase
in consumer spending.
In the second panel, all, except for Ms. Lav, expressed
support for the proposed sales tax holiday. Citing problems
such as timing, the difficulty for states to implement the
plan, and the questionable benefits of the sales tax holiday,
Ms. Lav suggested a more effective benefit would be a rebate to
low and moderate income workers who are more likely to spend
than save the rebate. Conversely, retailers such as Elmer Karl
and Rush Wilson suggested the sales tax holiday would be a boon
for consumers, and thus generate a much needed flurry of
spending which would benefit consumers, businesses, and workers
alike.
The hearing concluded with the acknowledgment that
implementation of the Sales Tax Holiday would be difficult, but
would likely provide some benefit for the economy.
For further information about this hearing, please refer to
Committee publication 107-36.
7.2.24 listening to main street
Background
On November 19, 2001, the Committee on Small Business held
a field hearing at the Chamber of Commerce in Spartenburg,
South Carolina. The purpose of the hearing was to listen to
``Main Street'' America and to understand how small business
owners are surviving in the present economic downturn and to
examine the impact of federal programs designed to assist small
business. The hearing also provided witnesses the opportunity
to express their views with respect to federal regulations for
the purpose of addressing any problems that could be remedied,
if feasible, through legislation would be applicable. The
Federal Government should be user friendly since it is the
taxpayers who pay for every Federal program and the salaries of
those who administer them.
Summary
The hearing was comprised of one panel made up of: Elliott
Cooper, Acting Regional Director of the U.S. Small Business
Administration (SBA); Donald Wilson, President and CEO,
Association of Small Business Development Centers (SBDCs); Rick
S. Beltram, President, Intedge Industries, Inc.; June Lennon,
Senior Partner, Martin and Lennon, CPAs, PA (representing the
National Federation of Independent Business (NFIB)); Bob
Hughes, President, Hughes Development; and Wesley Hammond,
President, HBJ Home Furnishings. SBA reported South Carolina
had over a hundred applications for economic injury loans after
the economic injury disaster loan program was extended to
include areas outside New York and Virginia following the
terrorist attacks of September 11. In addition, South Carolina
was number four in the country in obtaining benefits from the
Economic Adjustment Program, a part of NAFTA.
It was reported that SBDCs nationally see approximately six
hundred and fifty thousand small business owners and aspiring
entrepreneurs annually for a minimum of a one-hour, one-on-one
face-to-face session. The concerns were cited with respect to
the economy: orders for manufactured goods were down,
unemployment was increasing, and needless regulations were
adding to product costs and reducing competitiveness for small
businesses. Those small businesses that produce basic products
were stated to be under great stress, with the result that some
local businesses were going out of business. It was noted that
large businesses could reduce expenses by laying-off employees,
but that small business could not employ the same measure. A
vivid picture was drawn of empty factories, lost jobs and
reduced economic activity.
Various remedies were suggested, such as: allow small
business owners to expense more of equipment acquisitions;
reduce personnel income taxes; provide amnesty for past-due
amounts for federal taxes, penalties, and interest on a case-
by-case basis; provide grants for export marketing; and, permit
tax relief that truly represents the cost to a small business
of owning and operating a vehicle. The view was expressed that
reducing the regulatory burden on small businesses would be of
greater benefit than tax reductions. Lack of access to
affordable healthcare was cited as another burden affecting
small businesses. The bleak picture was drawn of being attacked
by terrorists, experiencing anthrax delivered by mail, rumors
of airlines folding, and the closing of a substantial number of
textile mills. Yet the resolve of the Nation is strong.
For further information on this hearing, refer to Committee
publication 107-37.
7.2.25 90 days after september 11: how are small
businesses being helped?
Background
On December 6, 2001, the Committee on Small Business held a
hearing in Washington, D.C. The hearing focused on the U.S.
Small Business Administration's (SBA) efforts to provide
assistance to those directly and indirectly impacted by the
terrorist attacks of September 11, 2001, upon the World Trade
Center in New York City and the Pentagon in Arlington,
Virginia. Soon after the these tragic events the Committee held
a hearing on Wednesday, October 10, 2001, with respect to the
efforts up to that time by the SBA to respond to the physical
damage and economic injury suffered by small businesses as
result of the events of September 11. Since the last hearing
the SBA issued regulations expanding the scope of the disaster
loan program and has reported making over $140,000,000 in
disaster loans.
Many individuals lost their businesses and homes in New
York City as a result of the terrible terrorist attack on the
World Trade Center, and others have suffered as a consequence
of the attacks though not located in the declared disaster
areas. The Committee wanted to determine whether the benefits
under the Disaster Loan Program were sufficient to meet the
needs of those suffering directly and indirectly from these
treacherous acts of terrorism perpetrated on September 11.
Assistance was needed immediately.
Summary
The hearing was comprised of two panels. The first panel
consisted of: Representative Jerrold Nadler of New York and
Representative James P. Moran of Virginia. On the second panel
were: The Honorable Hector Barreto, Administrator, U.S. Small
Business Administration (SBA); Joan Sweeney, Chief Operating
Officer, Allied Capital Corporation; Alice Yan, Owner and
Operator, Acupuncture Therapeutic Care; Don B. Lee, Disaster
Assistance Coordinator, Chinese Consolidated Benevolent
Association; John Calder, Co-manager (major shareholder),
Steamer's Landing Restaurant; Michael Kramer, Owner, Audio
Systems Technology Sound and Video; and, James King, Director,
Small Business Development Centers, State of New York. It was
reported that there were 14,000 business in lower Manhattan
impacted by the terrorist attacks of September 11 that have
resulted in loss of customers, devastating property damage, and
severe loss of profits. It was also reported that nationally
the unemployment rate went up 10 percent and that 700,000 more
Americans were without jobs.
As of the date of the hearing, SBA had approved 2,029
disaster loans in the declared disaster areas in the total
amount of $163, 282,500, and an average loan size of $80,308.
The Economic Injury Disaster Loan Program to provide for loans
to small businesses directly injured by the events of September
11 and the Federal actions taken as result of those events, but
located outside of ground zero. Small businesses directly and
indirectly impacted by the terrorist attacks are in need of
capital to weather the economic conditions and support for H.R.
3230 was expressed as a means of providing needed capitol.
Concern was expressed as to how many of the businesses in Lower
Manhattan would survive with loss of customers and dropping
sales. At least one community organization provided at no cost
office space, equipment, supplies, food, water and other
services to affected businesses. He opinion was expressed that
SBA's and Federal Emergency Management Administration's
programs were inadequate.
Just reopening businesses in proximity to Ground Zero was
not enough without a customer base. Business interruption
insurance proved inadequate to be inadequate, at least in one
instance, to compensate for cash flow and other losses.
According to one source, before the World Trade Center attack
there were approximately 7,800 businesses with annual revenues
of $10,000,000 or less at Ground Zero and about 34,800 of them
south of 14th Street in Lower Manhattan. The Small Business
Development Centers in New York took action to help small
businesses in New York City in conjunction with other
organizations providing relief. The terrorist attacks were
described as an act of war for which the airlines were baled
out but not small businesses.
For further information on the hearing, refer to Committee
publication 107-39.
7.2.26 protecting small business and the national parks:
the goals are not mutually exclusive
Background
On January 26, 2002, the Committee on Small Business held a
field hearing in West Yellowstone, MT to examine the impact on
small businesses and rural communities of limiting snowmobile
access to Yellowstone and Grand Teton National Parks. The
purpose of the hearing was to obtain testimony from local
business and community leaders on the economic consequences of
modifying the winter use plans for the two parks. The co-chair
of the hearing was the Honorable Dennis Rehberg (R-MT).
The National Park Service (NPS) issued a regulation to
modify the winter use plan for Yellowstone and Grand Teton
National Park just days before the President Bush was to take
office. The plan would eliminate the use of snowmobiles in
Yellowstone and Grand Teton National Park. Winter visitors to
the parks would be limited to non-motorized entry or
snowcoaches (multi-passenger vehicles, such as minivans, with
the wheels removed and snow tracks installed). The NPS, in
developing the rule, severely underestimated the economic
consequences of limiting snowmobile use to the small businesses
in the region, the communities that rely on winter tourism
revenue, and the small manufacturers that supply parts for
snowmobiles. Nor did the NPS assess the environmental impact
that snowcoaches would have on the two parks.
Prior to the hearing, the National Park Service agreed to
reexamine the modifications to the winter use plan. The NPS
developed a supplemental environmental impact statement that
analyzed alternatives other than the elimination of snowmobiles
from the parks. The NPS also agreed to further delay the
implementation of the existing restrictions pending the outcome
of the environmental review.
Summary
The first panel consisted of the Hon. Fran Mainella,
Director, National Park Service, Washington, DC. The second
panel included Mr. Robert Walker, CEO, Flagg Ranch Resort,
Moran, WY; Clyde Seeley, Owner, Yellowstone Tour & Travel, West
Yellowstone, MT; Melissa Buller, Owner, Free Heel & Wheel, West
Yellowstone, MT; Ms. Jackie Matthews for the Greater
Yellowstone Coalition, West Yellowstone and Bozeman, MT; and
Glen Loomis, Owner, Yellowstone Motorsport, West Yellowstone,
MT.
Director Mainella testified that the NPS was going to
revisit the previous Administration's decision to eliminate
snowmobile access to the two parks. Director Mainella promised
that the NPS would examine the economic impact of various
alternatives as required by the Regulatory Flexibility Act. She
also mentioned that witnesses were already taking steps to
reduce environmental impact of snowmobiles by converting to
four-stroke engines and selling advance passes to snowmobile
riders to reduce congestion at the west entrance to Yellowstone
National Park. Finally, Director Mainella explained the
decision-making procedures that the NPS will use to revise the
winter use plan regulations.
Mr. Walker testified that elimination of snowmobile access
to the parks would force him to shut his winter operations. He
would have to lay off 50 people and the community would lose
about $225 thousand in gross salary--a significant multiplier
effect in a small rural Wyoming town. Mr. Walker also noted
that snowcoaches are not comfortable for passengers and can
create safety problems in adverse weather conditions. Mr.
Walker summed up his testimony by noting that, despite NPS
assurances to the contrary, snowcoaches were not an adequate
winter touring substitute to snowmobiles.
Mr. Seeley testified that some of the inns in West
Yellowstone, MT derive more than 50 percent of their annual
revenue during the winter. And much of that revenue comes from
snowmobilers. Even moderate reductions in snowmobile use would
have significant economic consequences to the businesses in
West Yellowstone, MT and to the ability of the community to
deliver vital services, such as police and fire protection and
schooling. Mr. Seeley also concurred with Mr. Walker that
snowcoaches are not an adequate substitute and the two-year
transition period simply is insufficient time to obtain and
market snowcoaches to prospective winter visitors.
Ms. Buller had a somewhat different take on the use of
snowmobiles in the two parks. Her business catered to park
visitors, both in the summer and winter, who were not
interested in motorized access to Yellowstone. She recommended
changes in snowmobile utilization because they did not provide
a quality experience to all park visitors in the wintertime.
She suggested cleaner snowmobiles and greater marketing of the
Yellowstone to non-motorized winter visitors. These
alternatives would reduce the air and noise pollution in
Yellowstone National Park.
Ms. Mathews owns a fly-fishing retail and tour guide
business in West Yellowstone, MT and was testifying on behalf
of the Greater Yellowstone Coalition. She testified that
businesses must become better stewards of the resources, such
as Yellowstone National Park, that they utilize. She noted that
82% of the commenters supported the original decision on
banning snowmobiles. A snowmobile ban would help West
Yellowstone, MT businesses attract many other visitors who are
put off by the concentration of snowmobiles in Yellowstone. She
also noted that because of low snow packs, snowmobile use had
been curtailed in March of 2001 but led to an increase use of
shuttle buses in Yellowstone and a city sales tax collection
increase of 40 percent.
Mr. Loomis, who also serves on the town council, testified
that reductions in visitors cause a significant reduction in
sales tax collections. In turn, this has a severe impact on the
finances of West Yellowstone, MT. Mr. Loomis also criticized
the NPS for not analyzing improved snowmobile technology in the
environmental impact statement. Finally, Mr. Loomis noted that
snowcoaches represented only about 8% of his business and that
snowcoaches could not make up the revenue difference from
snowmobiles.
For further information on this hearing, refer to Committee
publication 107-40.
7.2.27 small business to health care
Background
The Committee on Small Business held a hearing on small
business access to health care on February 6, 2002.
The hearing was called to discuss the concerns of small
business owners as they struggle to provide health insurance to
their families and employees. As Congress debates the issue of
how best to provide coverage for the uninsured, small business
concerns have been notably absent from this debate. Yet roughly
60 percent of the uninsured are small business owners, their
employees, and their families. At the hearing, the committee
discussed some of the innovative solutions pending before
Congress that would help small businesses meet their health
care needs.
In addition, the hearing focused on H.R. 1774, the Small
Business Health Fairness Act of 2001, introduced by
Representative Ernie Fletcher. Dr. Fletcher's legislation, if
enacted, would allow industry and trade group associations to
offer health insurance to their members through Association
Health Plans. Dr. Fletcher was successful in getting his bill
attached as an amendment to the House-passed patient protection
bill (H.R. 2563), and the committee is fully supportive of his
efforts to get H.R. 1774 passed as a stand-alone bill this
year.
The committee also focused on the President's recently
released plan to help employees of small businesses get better
access to affordable health insurance. The President urged
Congress to (1) dramatically improve Medical Savings Accounts
by eliminating the current cap on the number of MSAs allowed
nationwide, and lowering the deductible for individuals and
families; (2) permitting industry associations to provide
health insurance for their members through Association Health
Plans, and (3) allow individuals who purchase health insurance
on their own to receive refundable tax credits to help cover
the cost of insurance premiums.
Summary
The committee heard from two panels of witnesses. The first
panel consisted of The Honorable Ernie Fletcher, M.D, United
States House of Representatives (R-KY). The second panel was
made up of the following witnesses: Ms. Elaine P. Smith,
President of E. Smith & Associates, Granite City, Illinois; Mr.
Raymond Arth, President of Phoenix Products, Inc.; Mr. Robert
Hughes, President of the National Association for the Self-
Employed.; Mr. Rick Curtis, President, Institute for Health
Policy Studies; Ms. Janet Trautwein, Director of Federal Policy
Analysis, The National Association of Health Underwriters; and
Ms. Mary Nell Lehnhard, Senior Vice President for Policy and
Representation, The BlueCross and BlueShield Association.
Dr. Fletcher testified about the benefits of Association
Health Plans. He stated that they would create an affordable
health care option for many small business employees who are
currently uninsured, by leveling the playing field to give
entrepreneurs the same tools big business and labor unions
currently use to make health coverage affordable for their
employees and members. AHPs allow small businesses to pool
their resources and purchasing power by getting health
insurance through a professional association, ensuring that
they will enjoy the same economies of scale, purchasing clout,
and administrative efficiencies that are only available to
employees in large corporations and labor unions.
The second panel testified in favor of a range of health
care options, from Association Health Plans, to tax credits and
Medical Savings Accounts. The small business owners on the
panel discussed the skyrocketing premium increases they were
experiencing, with one witness stating that her company's
premiums went up 26 percent this year, and was told by her
insurance company to expect similar future increases. All the
witnesses thought that the President's proposal was an
important first step, but some were concerned that the amounts
of the tax credits were not high enough to make a difference,
and that individuals would need to receive the credit before
they actually purchased the insurance so that they could afford
coverage. Blue Cross/Blue Shield testified in opposition to
AHPs, stating that they would ``cherry pick'' only healthy
members and not have to follow the same mandates as other
plans. Supporters of AHPs countered that as a result of the
1996 Health Care Portability Act, it is illegal to ``cherry
pick,'' and that opposition to AHPs from health insurance
companies was motivated by a fear of competition in the
marketplace. They also stated that AHPs can help small
businesses reduce health insurance costs by 15-30 percent, and
have the potential to provide health insurance coverage to as
many as 8.5 million currently uninsured workers and their
families.
For further information on this hearing, refer to Committee
publication 107-41.
7.2.28 the president's proposed budget for the small
business administration fiscal year 2003
Background
The Committee on Small Business held a hearing February 13,
2002 at 2:00 pm on the Administration's proposed FY2003 budget
for the Small Business Administration (SBA). The Congressional
Budget Act of 1974 requires the Committee to recommend budget
levels and report legislative plans within the Committee's
jurisdiction to the Committee on Budget.
In performing its duties under this statute and with
respect to the Committee's oversight responsibilities, the
hearing focused on whether the proposed budget adequately
addressed the needs of the small businesses of this nation. In
addition, the Administration has emphasized the need to improve
the performance of the Federal Government and for the Federal
Government to more effectively serve the American people. In
line with the President's emphasis upon the Federal agency
performance, the Committee was also seeking views concerning
SBA's past performance and how the deliver of services by SBA
to this Nation's small businesses could be improved in the
future.
Summary
The hearing was comprised of two panels. On the first panel
was The Honorable Hector Barreto, the Administrator of the U.S.
Small Business Administration (SBA). On the second panel was
Anthony R. Wilkinson, President and CEO, the National
Association of Guaranteed Government Lenders; Phil Black,
Director of Community Economic Development, The Economic
Development Group of People Incorporated of Southwest Virginia;
Lee W. Mercer, President, National Association of Small
Business Investment Companies; Christopher L. Crawford,
Executive Director, National Association of Development
Companies; and, Donald Wilson, President and CEO, Association
of Small Business Development Centers.
SBA announced that it had contracted with the Office of
Federal Housing Enterprise Oversight to create an econometric
model to calculate the subsidy rate for the 7(a) loan program
beginning in fiscal year 2004. In the interim for fiscal year
2003, SBA stated that it would weight the preferred lender
loans in proportion to participation in the program and that
this approach would result in a subsidy rate of approximately
.88 percent. SBA also stated that it was anticipated that the
level of lending in fiscal year 2002 would be $10.5 billion and
that it would be possible to carry over $2 billion guarantee
authority to the next fiscal year to support a program level of
47 billion in fiscal year 2003. SBA intended to encourage large
real estate loans to be funded under the 504-loan program
rather than the 7(a) loan program and to encourage lenders to
make smaller loans.
Dissatisfaction with the Office of Management and Budget's
(OMB) calculation of the subsidy rate was voiced and evidence
was provided that OMB's calculations have resulted in over
payments with respect to the 7(a) loan program of between $1.8
billion and $2 billion in recent years. Support was requested
for a $12 billion 7(a) loan program in fiscal year 2003 and an
appropriation of $176 million (in addition to the prior fiscal
year carryover) to support this proposed program level. The OMB
subsidy rate calculation was criticized as using too high a
default rate. Concern was expressed with respect to any funding
reduction in the Microloan, Low Income Individuals, PRIME or
Women's Business Development Center programs. The view was
expressed that the Administration's proposed budget would
continue the growth of the Small Business Investment Company
(SBIC) program and support for the Administration's proposed
budget for this program. It was reported that the 504-loan
program had exceeded the $5 billion level, of which SBA will
guarantee $2.5 billion and the remainder funded through private
debt financing. Dissatisfaction was expressed with the proposal
to increase the annual fee for the program from 0.410 percent
to 0.425 percent when the forecast projected a $90 million
overage in fees for fiscal year 2003. There was evidence
presented that the 504 loan program had in recent years
returned $400 million to the Treasury in overpayments. It was
reported that in fiscal year 2001 the Small Business
Development Centers increased clients by 4.6 percent and
serviced 610,000 persons with one or more hours of counseling
or two hours of training. Of those clients, 43 percent were
women, 24 percent were minorities, and 7 percent were self-
declared veterans.
For further information on this hearing, refer to Committee
publication 107-43.
7.2.29 disaster loan size standards
Background
On February 27, 2002, the Committee on Small Business held
a hearing to review the promulgation of size standards by the
Small Business Administration (SBA). In particular, the
Committee wanted to examine the SBA's slow response to
developing size standards for its expanded economic injury
disaster loan program established after the events of September
11, 2001.
The SBA operates an economic injury disaster loan (EIDL)
program. Businesses in areas that have been declared disasters
may obtain temporary loans to meet ongoing business expenses,
such as rent, utilities, payroll, and the like while the
business recovers from the disaster. Due to the widespread
economic impacts of the terrorist attacks on September 11,
2001, the SBA made these EIDLs available nationwide if the
business could demonstrate that its operating capital shortage
was directly tied to the events of September 11 and not any
general economic downturn. Many small businesses applied for
EIDL loans but were found to be other than small under the SBA
existing size standards. The SBA was slow to make changes to
those size standards and the Committee wanted to find out why
and what could be done to improve the size standard
modification process to ensure that all small businesses could
take advantage of the expanded EIDL program.
Summary
The witnesses were: The Honorable Hector Barreto,
Administrator, Small Business Administration; the Honorable
John Graham, Ph.D., Administrator, Office of Information
andRegulatory Affairs, Office of Management and Budget; Mr. Rodney
Klassovity, CEO, Albany Travel Unlimited; and Ms. Jacquelyn Alton,
Owner, CWT/Almeda Travel, Inc.
Mr. Barreto first explained that he is given authority to
set size standards but all regulations issued by executive
branch agencies, including the SBA, are reviewed by Dr.
Graham's Office of Information and Regulatory Affairs (OIRA).
While the SBA had done some work on changing size standards,
the Administrator admitted they had not done it quickly enough
or engaged OIRA early enough in the process. Mr. Barreto agreed
to work more closely with the Committee to ensure that all
small businesses can utilize the expanded EIDL program.
Dr. Graham testified that the President requires him to
review all executive branch agencies regulations pursuant to
Executive Order 12866. Under that authority, Dr. Graham
returned the proposed size standard for the EIDL program of 500
employees because the SBA did not adequately justify the need
for the change. Dr. Graham testified that his office was open
to having a continuing dialog with the SBA to reach an
appropriate size standard definition so small businesses would
not be excluded from the expanded EIDL program.
Mr. Klassovity noted that travel agents operated under an
unusually restrictive $1 million size standard (significantly
lower than the other size standards in the retail and services
sectors). Mr. Klassovity testified that he applied for a SBA
loan under the expanded EIDL program. The SBA promoted Mr.
Klassovity's application in a press release only to later learn
that his business would not qualify because his travel agency
was other than small under the existing size standard. Mr.
Klassovity opined that travel agents were unduly suffering as a
result of the events of September 11, 2001 but he could not get
an EIDL for even $60,000. Mr. Klassovity asked the rhetorical
question why travel agents were given that low a standard while
tour operators (who perform the same function as travel agents
except for groups) had a significantly higher size standard.
Ms. Alton testified that travel agents were facing
substantial financial difficulties after September 11, 2001.
Ms. Alton noted that this financial difficulty was exacerbated
by changes in the way airlines and others in the travel
industry were reimbursing travel agents. Ms. Alton went on to
discuss the concentration in the travel agency business where
the top 62 agencies account for 98 percent of the air travel
booked in the United States. Ms. Alton strongly urged the
Committee to support an increase in the size standard to $3
million for travel agencies.
For further information on this hearing, refer to Committee
publication 107-45.
7.2.30 sbrefa compliance: is it the same old story?
Background
On March 6, 2002, the Committee on Small Business held a
hearing to review agency compliance with the Regulatory
Flexibility Act (RFA), as amended by the Small Business
Regulatory Enforcement Fairness Act (SBREFA). In particular,
the hearing addressed whether legislative changes are needed to
ensure agency compliance.
In 1980, Congress responded to increasing federal
regulatory burdens by enacting the Paperwork Reduction Act and
the RFA. The authors of the RFA intended that the Act would
have same effect on agency decision making that the National
Environmental Policy Act had on agency decisions concerning
projects that affect the environment. After 15 years, Congress
had enough with agencies ignoring the analytical mandates of
the RFA and enacted SBREFA. The primary change was to allow
judicial review over agency compliance with the RFA. However,
agencies lawyers are quite innovative and have found new
loopholes and created new interpretations to avoid analyzing
the impact of proposed and final rules on small businesses and
other small entities.
Summary
The panelists were Hon. Thomas Sullivan, Chief Counsel for
Advocacy, Office of Advocay, United States Small Business
Administration; Mr. Victor Rezendes, Managing Director, General
Accounting Office; David Frulla, Esq., Partner, Brand & Frulla;
Mr. Norman Goldhecht, Regulatory Chairman, National Association
Portable X-Ray Providers; Mr. Damon Dozier, Director,
Government Affairs, National Small Business United; Mr. Jeffrey
Gibson, Director of Support Operations, American Pacific Corp.
Mr. Sullivan commenced his testimony by asserting that the
Office of Advocacy's intervention in rulemaking resulted in
billions of dollars of savings for small businesses. Mr.
Sullivan then went on to aver that some agencies regulatory
cultures have changed as a result of the RFA. On the other
hand, many agencies still fail to comply with the RFA and
provisions of SBREFA, including the requirement to publish
compliance guides. Mr. Sullivan concluded his testimony by
pledging to work the Committee on reforming RFA compliance.
Mr. Rezendes noted that GAO has performed a number of
studies on agency compliance with the RFA and in each case
found it wanting. The GAO determined that agencies do not
comply with the periodic review requirement of Sec. 610, fail
to publish compliance guides as required by Sec. 212 of SBREFA,
and failed to adequately assess impacts of rules on small
governmental jurisdictions. According to GAO, the biggest gap
is the failure to have a consistent definition throughout
government on the RFA's threshold question--whether a rule will
have a significant economic impact on a substantial number of
small entities.
Mr. Frulla testified about his experience litigating RFA
non-compliance against the National Marine Fisheries Service.
That lawsuit, with some delays and remands, ultimately was won
in favor of the fishermen and the federal judge prohibited the
Service from implementing its rule until the judge was
satisfied that the agency complied with the RFA. Mr. Frulla
then pointed out some of the weaknesses in the current RFA such
as: asserting the absence of discretion to adopt a different
regulatory standard thereby rendering an analysis under the RFA
meaningless; issuing certifications without adequate supporting
data; claiming that the rule does not directly regulate small
entities; and preparing reams of economic data that is
indecipherable to small entities and reviewing courts.
Mr. Goldhecht testified that the Centers for Medicare and
Medicaid Services (CMS) examined the impact of changes in the
Medicare physician fee schedule for many small physician
practices. However, Mr. Goldhecht noted that CMS did not assess
the impact on his industry--portable X-ray providers even
though they absorbed a significantly higher cut in payments
than other healthcare professionals subject to the physician
fee schedule. Mr. Goldhecht noted, that even though the Office
of Advocacy contended that CMS was wrong, his association would
have to go through the expense of suing CMS to enforce the law.
He ended his testimony with a plea to make the RFA more self-
executing.
Mr. Dozier focused his testimony on one of the primary
flaws uncovered by the GAO studies--the lack of a consistent
definition of ``significant economic impact'' and ``substantial
number of small entities.'' One way to fix this problem is to
perform outreach as mandated by Sec. 609 of the RFA. EPA was
lauded for its efforts in this area. Other agencies did not do
that type of outreach and Mr. Dozier suggested a legislative
change to strengthen outreach would alleviate some of the
problems agencies face in complying with the RFA.
Mr. Gibson testified about a specific instance in which EPA
certified that a rule would not have a significant economic
impact on a substantial number of small entities when in fact
it would. The reductions in the amount of hydro
chlorofluorocarbons (HCFCs) mandated by EPA would create a
duopoly in the industry. EPA did not assess the impact of
creating this duopoly in the HCFC market on users, such as
American Pacific. Mr. Gibson noted that creation of the duopoly
would seriously raise his company's production costs.
Nevertheless, EPA determined that the rule would not have any
impact on small businesses because they were not directly
subject to regulation under the rule. Mr. Gibson recommended
that any legislative fix remove that ``exemption.''
For further information on this hearing, refer to Committee
publication 107-46.
7.2.31 subsidy rate calculation: an unfair tax on small
businesses
Background
On March 13, 2002 the Committee on Small Business held a
hearing in Washington, D.C. on the calculation of the subsidy
rate for the 7(a) and 504 loan programs, administered by the
Small Business Administration (SBA). The President's budget
submission for FY2003 with respect to SBA proposed to increase
the subsidy rates for both the 7(a) and 504 loan programs.
These subsidy rate increases have a chilling effect upon both
programs at a time when the economy is in need of an economic
stimulus. The impact upon the 7(a) loan program is especially
severe since the result of the increase, if actually
implemented, would be to cut the loan program in half in the
forthcoming fiscal year.
Despite the comments contained in the budget document
submitted to Congress about the economic value of SBA
administered loan programs, there is undisputed testimony
before the Committee that SBA guarantee-backed lending is the
largest single source of long-term loans (those with maturities
of three years or longer) to small businesses. SBA loan
programs account for approximately 40 percent of all long-term
loans to small businesses.
The subsidy rates for these programs have not accurately
reflected the actual performance of these loan portfolios over
the past 11 years since the passage of the Credit Reform Act in
1990. Instead of being a prudent sinking fund, principally to
purchase defaulted loans, the subsidy rate has been continually
overstated so as to be a tax and not a responsible user fee.
This fact was underscored in the conference report accompanying
H.R. 2590 (P.L. 107-67) where the conferees stated ``borrowers
and lenders in both programs [7(a) and 504 loan programs] have
been paying higher than necessary fees to participate in the
programs'' because the subsidy rate models do not reflect
recent performance of the loan portfolios.
Summary
The hearing had one panel that was comprised of: The
Honorable Nancy Dorn, Deputy Director, Office of Management and
Budget; The Honorable Hector V. Barreto, Jr., Administrator,
U.S. Small Business Administration (SBA); Mr. Christopher L.
Crawford, Executive Director, National Association of
Development Companies; and, Mr. Anthony R. Wilkinson, President
and CEO, The National Association of Government Guaranteed
Lenders. The Administration expressed the view that the SBA
loan programs were important, but that tax relief and
regulatory fairness were of greater priority. It was pointed
out that the Credit Reform Act requires that the cost of the
loan programs be determined and recorded in the year the loan
is made or guaranteed. It was explained that the subsidy rate
is the amount of appropriated money necessary to cover defaults
of guaranteed loans made in a single fiscal year.
Presently, the subsidy rate is calculated using performance
of prior loans going back 16 years. In nine of the past ten
years the subsidy rate was re-estimated downward. From fiscal
year 1993 to fiscal year 2002, the subsidy rate was lowered
from 5.21 percent to 1.07 percent. The subsidy rate used to
calculate the President's budget request for fiscal year 2003
was .88 percent which would have funded $9.7 billion in
lending, if the fees had not been reduced to make borrowing
less burdensome in a period of economic downturn. With reduced
fees, it was reported that the subsidy rate doubled to 1.76
percent and the amount of loans funded with the amount $85
million the President requested would be cut in half. SBA
pledged to use an econometric model for calculating the subsidy
rate for fiscal year 2004.
For further information on this hearing, refer to Committee
publication 107-47.
7.2.32 making the office of advocacy independent
Background
The House Committee on Small Business met on March 20,
2002, to discuss ways to make the Office of Advocacy of the SBA
stronger and more independent. The Committee held a similar
hearing about a year before, and held the second hearing
because of new legislative activity on the subject.
The small business agenda of the President, announced the
day before the hearing, concurred with the Chairman's feeling
that the Office of Advocacy should have a stronger voice in the
federal government. The desire of the Committee was to ensure
that regulators take into account the interests of small
business before enacting a new rule
Summary
The hearing had one panel comprised of: the Honorable
Thomas M. Sullivan, Chief Counsel, Office of Advocacy, U.S.
Small Business Administration (SBA); Michael Barrera, Small
Business and Agriculture Regulatory Enforcement Ombudsman, SBA;
Jere W. Glover, Esq., Counsel, Brand & Frulla. The view was
expressed that the federal government is accountable to small
businesses through effective enforcement of the Regulatory
Flexibility Act and the Small Business Regulatory Flexibility
Act. It was announced that the Chief Counsel and the Ombudsman
had signed a memorandum of understanding with respect to
cooperation in maximizing assistance to small businesses that
suffer from burdensome and unnecessary regulations and unfair
regulatory enforcement actions. Reference was made to the
President's small business initiatives that include issuing an
executive order to provide greater enforcement powers to the
Office of Advocacy, instruction to the Director of the Office
of Management and Budget (OMB) to seek the views and comments
of small businesses on existing federal regulations, paperwork
requirements and guidance documents, instruction to OMB and the
Office of Advocacy to work together to strengthen the
enforcement of the Regulatory Flexibility Act and for
increasing the coordination between OMB and the Office of
Advocacy.
The President's small business initiatives were
characterized as a great day for small businesses. The
President advocated strengthening the Office of Advocacy and
stopping contract bundling. Less than 2 percent of the assets
of SBA are devoted to the Office of Advocacy, whereas in the
late 1970's 5 percent of SBA's assets were devoted to the
Office of Advocacy. It was stated that the Office of Advocacy
has roughly saved small businesses $16 billion in potential
regulatory costs, which is approximately $800 saved for each
dollar spent. Yet, the number of employees has declined along
with the amount appropriated for running the Office of
Advocacy. It was recommended that the Office of Advocacy be
restored to it prior status and provide the assets to perform
successfully.
For further information concerning this hearing, refer to
Committee publication 107-49.
7.2.33 navigating the small business environment:
challenges and opportunities
Background
The Committee on Small Business met on April 2, 2002 in
Carson, California with The Honorable Darrell E. Issa (R-CA)
presiding. The purposes of the hearing included: learning from
small business experts and participants what the government can
do to help small businesses thrive, trying to help enact the
President's small business agenda, and examine the roles of
women and minority owned businesses within the small business
sector.
Summary
The hearing consisted of two panels. Panel 1 was comprised
of: Alberto G. Alvarado, District Director, U.S. Small Business
Administration (SBA); Colleen Anderson, Area Vice President,
Wells Fargo Bank; Regina Grant-Peterson, Executive Director,
Long Beach Area Certified Development Corporation; Paul
Tambakis, HUB Director, Commercial Service, Department of
Commerce; Isabel Duran, Manager, Capital Partners Loan Program,
Community Financial Resource Center; and Phyllis More Venable,
Business Development Officer, Long Beach, California
(representing the City and Small Business Council, Chamber of
Commerce). Panel 2 was comprised of: Patricia D. Unangst,
Executive Director, Workforce Investment Network; Phil Borden,
Executive Director, Women's Enterprise Development Corporation;
and Rolina Brown, Small Business Development Center.
It was reported that SBA's Los Angeles office in the past
four years had $2.8 billion in loans to small businesses,
including $1.4 billion in loans to 5100 small disadvantaged
businesses and $569 million to women-owned small businesses. It
was stated that Wells Fargo Bank was the leading financial
services provider to small businesses with more than 1.5
million small business customers, and in the year 2000 in
California made more than 62,000 loans totaling more than $2.4
billion, which included more than $692 million to 15,000
California businesses in low and moderate income census tracts.
The view was expressed that there is room for growth in the
504-loan program and in providing greater access to capital and
procurement opportunities for minorities, women and disabled
veterans. With respect to the export market, 97 percent of
businesses that export are small and medium sized enterprises.
Exports account for 30 percent of the economic growth of the
United States since 1989 and accounted for 21 percent of the
GDP growth in the year 2000.
One community organization provided business lending
programs, business plan guidance, technical assistance provided
in English and in Spanish, consumer and business development
workshops, homeownership preparation and counseling, business
automation development, and money management counseling. The
opinion was expressed that the most pressing problem facing
small businesses today was obtaining access to capital. It was
stated that according to the U.S. Census, in the County of Los
Angeles, 40 percent of the small businesses are minority owned.
Problems for providers of services to women entrepreneurs were
said to be the confusing number of government programs and the
paperwork requirements of government agencies. Barriers
togrowth of California small businesses were cited as lack of: access
to capital, business assistance in strategic planning and marketing,
effective use of technology, and access to markets outside of their
traditional areas and participation in social and business networks.
For further information on this hearing, refer to Committee
publication 107-50.
7.2.34 can improved compliance with the regulatory
flexibity act resuscitate small healthcare
providers?
Background
On April 10, 2002, the Committee on Small Business held
another in a series of hearings on the burdens imposed by the
Centers for Medicare and Medicaid Services (CMS) on small
healthcare providers. The hearing focused on CMS's failure to
comply with the Regulatory Flexibility Act (RFA) and whether
improved compliance would reduce the regulatory burdens on
small businesses.
CMS is the government agency charged with administering
Medicare, which often has been referred to as the country's
largest health insurance provider. Medicare provides health
care coverage to 38 million Americans. It imposes some 110,000
pages of regulations, has 219 collections of information
approved by the Office of Management and Budget, and forces
physicians to spend at least one hour of their day in
completing forms for CMS. The regulatory burdens, along with
the reductions in payments under the physician fee schedule, is
making it difficult for physicians and other healthcare
providers, to continue offering services to Medicare eligible
patients.
The RFA requires federal agencies to assess the impact of
their proposed and final rules on small businesses. If the
impacts are economically significant on a substantial number of
small entities, the agency is required to perform a regulatory
flexibility analysis. The core of the analysis is an
examination of alternatives that will reduce the burdens on
small business. CMS's compliance with the RFA has not been
particularly good.
Summary
The panelists were The Honorable Thomas A. Scully,
Administrator, Center for Medicare and Medicaid Services;
Honorable Thomas Sullivan, Chief Counsel for Advocacy, Office
of Advocacy, United States Small Business Administration; David
Nielsen, M.D., Executive Vice President, American Academy of
Otolaryngology; Warren Jones, M.D., President, American Academy
of Family Physicians; Mr. Zachary Evans, Chairman of the Board,
National Association of Portable X-ray Providers; and Mary
Harroun, President, Merry Walker Corp.
Administrator Scully ignored a validly issued subpoena and
failed to attend the hearing.
Mr. Sullivan testified that the Office of Advocacy has
submitted a number of comment letters criticizing CMS
compliance with the RFA. Mr. Sullivan noted that on one
occasion CMS was prevented from implementing a regulation by a
federal district court because it failed to comply with the
RFA. Despite the courts and Advocacy's insistence, CMS still
had not completed the regulatory flexibility analysis required
for the rule. Mr. Sullivan also testified that the Office was
troubled by the agency's failure to examine the impact of its
rules on portable X-ray providers. Mr. Sullivan has directed
his staff to work with CMS staff on improving compliance with
the RFA pursuant to President Bush's March 19, 2002 directive
that all agencies must comply with the RFA.
Dr. Nielsen testified that federal regulations often have a
particularly dramatic and significant effect on physicians. Dr.
Nielsen noted that physicians are subject to many laws; not
just those associated with Medicare reimbursement but include
the Health Insurance Portability and Accountability Act on
privacy, False Claims Act, and the Americans with Disability
Act. For example, the cost of a translator for the limited
English patients often cost more than what an otolaryngologist
can obtain in reimbursement under Medicare or Medicaid. Dr.
Nielsen also noted that CMS had greater discretion to resolve
issues related to payment reductions in the physician fee
schedule than it admits. Finally, Dr. Nielsen recommended that
Congress enact legislation to reform the appeal and audit
process at CMS and force the agency to comply with the RFA.
Dr. Jones testified about the coming crisis in primary care
in rural areas as a result of the fee schedule reductions. He
noted that many physicians are forced to subsidize their
Medicare practices from their own financial resources. New
physicians with substantial medical school loans cannot afford
to do that. Therefore, the number of new physicians in rural
areas that will accept Medicare patients is diminishing. Dr.
Jones requested Congress redress this problem.
Mr. Evans testified that CMS examined the impact of changes
in the Medicare physician fee schedule for many small physician
practices. However, Mr. Evans noted that CMS did not assess the
impact on his industry--portable X-ray providers even though
they absorbed a significantly higher cut in payments than other
healthcare professionals subject to the physician fee schedule.
Mr. Evans explained that his service would save the government
money by not having senior citizens transported in ambulances
to health care facilities for X-ray and electrocardiograms.
Ms. Harroun testified about CMS's guidance to nursing homes
that force them to consider her ambulatory assistance device a
restraint. She testified that this acts as a disincentive to
nursing homes (concerned about ratings and improper use of
restraints) from purchasing her device. She opined that CMS
needed to reexamine this determination because it was
permitting long-term care facilities to put residents in
wheelchairs and subject them to potential muscle atrophy rather
than allowing them the mobility of walking with assistance.
For further information on this hearing, refer to Committee
publication 107-53.
7.2.35 why add an interest rate hike on our struggling
small manufacturers?
Background
On April 24, 2002, the Committee on Small Business held a
hearing to discuss the effect an increase in the interest rate
would have on small manufacturers. The hearing explored how an
imminent increase in interest rates would affect our small
manufacturers who are already struggling to compete in an
increasingly globalized marketplace. Discussion centered on the
manufacturing sector, which was the hardest hit during the
recession and has still not felt the recovery that other
segments have. The hearing provided the Federal Reserve Board
with timely information on an important economic sector before
it was to decide whether to increase interest rates. The
Federal Reserve Board met on May 7, 2002 and voted not to
increase interest rates citing that the economy had not fully
recovered from the recession.
Summary
There were two panels that provided testimony for this
hearing. The Honorable Roger W. Ferguson, Vice Chairman, Board
of Governors of the Federal Reserve Board testified on the
first panel. The second panel consisted of Michael Czinkota,
Ph.D., Professor of International Business, Georgetown
University; Mr. Don Metz, Owner/President, Metz Tool & Die; Mr.
Edward Fedor, President, MASCO Machine, Inc.; Mr. Howard
Habenicht, President/Chief Financial Officer, Vibro/Dynamics
Corporation; and Sara Garretson, President, Industrial and
Technology Assistance Corporation.
Dr. Ferguson spoke of the overall condition of the US
economy and the recent slowdown that the economy had undergone
and stated that the manufacturing sector was hit the hardest.
However, he stated that recently, the economy had shown signs
of strengthening. Because of the downturn in the economy,
credit standards have tightened, limiting access to capital
that is a natural outcome of a recession. Small businesses and
small manufacturers have felt this affect most keenly. Dr.
Ferguson stated Federal Reserve Board looked at broad economic
factors and did not base their decision affecting the interest
rates on either sectoral or regional interests.
The remaining panelists testified that while the economy
had begun to recover from the recession, the manufacturing
sector, which was the first to be impacted by it, had only
belatedly seen improvements. The manufacturing sector was
simultaneously impacted by the high overvaluation of the
dollar, which has caused exports to be priced more expensively
on world markets than comparable products of foreign
competitors. Another by-product of the recession affecting
small businesses and small manufacturing was the tightening of
credit that hampered their access to needed capital. There was
a consensus from the remaining panelists that should interest
rates increase, the nascent recovery of the manufacturing
sector would not only be lost, but could affect the entire US
recovery causing the onset of yet another recession.
During the question and answer period, Chairman Manzullo
invited Dr. Ferguson to tour a tool and die plant in his
congressional district, to which Dr. Ferguson accepted.
For further information on this hearing, refer to the
Committee publication 107-54.
7.2.36 national small business week: small business
success stories
Background
On May 8, 2002, the Committee on Small Business met to hold
a hearing to look at small businesses that displayed
entrepreneurial spirit and business success. This hearing was
conducted in conjunction with National Small Business Week,
sponsored by the Small Business Administration (SBA).
These small businesses managed to grow their businesses,
with the assistance of the SBA, despite the roadblocks of a
burdensome tax and regulatory system. The hearing was also a
forum for them to promote their successes in their respective
industries.
Summary
The witnesses were: Richard Carroll, Founder and CEO,
Digital Systems Resources, Inc.; Gene Berg, President and
Owner, Austin/Westran; Roberto Espat, President and CEO, Roses
Southwest Papers, Inc. Also, witnesses also included: John
Bartoletta, Founder and Chief Executive Officer, High Street
Financial Group; John Francis, Owner, Northern Virginia Roofing
Co. Inc.; Donald Kuntz, Owner, Fine Print of Grand Forks. The
other witnesses were: Billy Shore, Chairman, Community Wealth
Ventures; Frank Siccardi, President, Coenco Inc.; Belinda
Guadarrama, President and Chief Executive Officer, GC Micro
Corp.; Brenda Berkhartsmeier, President, Mountain Mudd and
Mountain Manufacturing.
Chairman Manzullo began the hearing with an opening
statement. He announced the purpose of the hearing. He
commended the owners of small businesses for their
contributions to the U.S. economy, and mentioned some successes
of the Committee on Small Business in removing over-regulation
and lowering tax burdens.
Mr. Carroll testified that his company, which manufactures
computers that process data for sonar on U.S. Navy submarines,
received its first contract through the Small Business
Innovative Research Program (SBIR) when it had only 24
employees. The company now employs 480 scientists and engineers
and has offices not only in Virginia, but also in Florida,
California, and Hawaii. The SBIR allowed this small company to
compete for contracts in its sector with giant companies such
as Lockheed Martin and Raytheon.
Mr. Berg testified that he acquired his company through the
assistance of the SBA. Austin/Westran was going to be purchased
by a European corporation and relocated. While attemptingto
purchase the company, Mr. Berg was contacted by the Chairman of this
Committee, and was put in touch with the SBA. With the resulting 504
loan, Mr. Berg purchased the company and saved 200 jobs for his
community.
Mr. Espat testified that his company, which was once 8(a)
certified, has grown from having 12 employees on one production
line to employing 200 people on 17 lines. Mr. Espat suggested
that the government help the SBA by trying to reduce paperwork
that can frustrate small business, or even keep small
businesses from coming into being.
Mr. Bartoletta discussed the success of his investment
firm. He credits his firm's ability to compete with big finance
as a testimony to the hard work that is reflective of the
entrepreneurial spirit. Mr. Francis focused on the National
Roofing Contractors Association's volunteer efforts. The NRCA
is conducting a re-roofing of the Pentagon to assist with
repairing damage. This is an example of the efforts of small
businesses, including Mr. Francis's roofing company, to help
the community.
Mr. Kuntz testified to the strength of the SBA as a
beneficial partner for small businesses in the area of disaster
relief. The 1997 Red River flood nearly destroyed Mr. Kuntz's
printing company. When banks refused to loan to him, he
informed his Congressman, who put him in touch with the SBA.
The loan was approved in short order and Mr. Kuntz's company is
now doing better than ever.
Mr. Shore testified about the nonprofit sector of small
business and the entrepreneurial spirit that can be found
there. He emphasized the role nonprofits can play in creating
community wealth that can make communities less government
dependent. He also suggested the SBA begin a program to provide
technical and consulting assistance to nonprofits that assist
in setting up for-profit ventures.
Mr. Siccardi is listed in Who's Who of American Science.
His company, Coelco, Inc., creates energy efficient heating
systems for large buildings. He has been an SBA customer for
years, and increased the cash flow of his growing business with
SBA loans in 1995 and 1997.
Ms. Guadarrama's company manufactures computer hardware and
software for both the government and private sector. She
testified concerned the ability of the SBA 8(a) loan program to
help small businesses. She also suggested the Committee pay
close attention to enforcement of small business and minority
business targets for percentages of government contracts.
Ms. Berkhartsmeier testified concerning the problems put in
the way of small business by regulation. In order to expand
into a town or city, her coffee kiosk company undergoes a great
deal of red tape.
For more information on this hearing please refer to
Committee publication 107-56.
7.2.37 pentagon procurement policies and programs with
respect to small businesses
Background
The House Committee on Small Business held a hearing on May
15, 2002 on the Pentagon's procurement policies and programs
with respect to small business. On March 19, 2002, the
President set forth the Administration's Small Business Plan at
the ``Women's Entrepreneurship in the 21st Century'' Summit
here in Washington, D.C. In that speech to over 1500 women
entrepreneurs and to the Nation, the President emphasized the
capacity and responsibility of the federal government to
``stimulate small business ownership in all communities across
America.'' He specifically singled out Federal procurement as a
principal resource for stimulating the growth of small
business.
Based on figures provided by the Pentagon, in FY00, the
Department of Defense awarded over $122 billion in prime
contracts to all United States businesses, of which
approximately $26.9 billion went to small businesses. It is
clear from these figures that the procurement of goods and
services by the Department of Defense is an important market to
small businesses and a key area for implementing the
President's Small Business Plan. One of the hurdles to
achieving greater participation by small businesses in the
procurement process is contract consolidation or more
accurately, ``bundling.'' As the President pointed out, ``It
effectively excludes small business. And we need to do
something about that.'' The Committee heard from small
businesses as to their experiences in doing business with the
Department of Defense and the steps that DoD has taken to carry
out the President's Small Business Plan.
Summary
The hearing was comprised of two panels. The first panel
had one witness: the Honorable Edward C. Aldridge, Jr., Under
Secretary of Defense, Acquisition, Technology, and Logistics,
Department of Defense (DOD). It was announced a new record was
set and that small businesses in the past year had received
over $50 billion in DOD procurement dollars and 54 percent was
due to prime contract awards. Training courses were begun at
the Defense Acquisition University to show managers and buyers
how to better use small businesses. DOD is in full support of
the President's mandate to avoid bundling of contracts and it
was stated that it should be a rare practice for DOD to bundle
procurement requirements. The opinion was given that the reason
DOD is not meeting the procurement goals for small businesses
because there were not enough qualified small businesses
available. The view was expressed that support for small
businesses must be balanced with the obligation to ensure that
the taxpayers are getting maximum value for their tax dollars.
The President put together a task group to look at the issue of
bundling, but the recommendation of the task group had not been
announced at the time of the hearing.
The second panel was comprised of six witnesses. They were:
John E. DeGiacomo, Program Director, Procurement Technical
Assistance Center (PTAC); Cathy S. Ritter, President, The
Constellation Design Group, Inc.; Pamela Brandon, President,
Gryphon Technologies; Mike Tucker, President, George W. Allen
Co, Inc.; Frederick Erwin, Program Manager, Camp, Inc.;and,
Bill Cabrera, President, Lord and Company. The PTAC program, which has
been in existence for about 17 years, has 89 assistance centers around
the country. In 1999, $6.8 billion in contract awards to small
businesses are attributable to the efforts of PTACs. Consolidation of
contracts into very large procurement is a major obstacle to small
engineering firms participating in the federal procurement market. A
bundled contract may be awarded to a large business that is located out
of the locale where the work is to be performed and unacquainted with
the local soil conditions, geographic features, climate, permitting
process, and local construction practices.
The view was expressed that there is a need to enforce the
procurement regulation already in place. Basic Purchasing
Agreements (BPAs) were cited as a contract form that has
resulted in reducing the participation of small businesses.
Large businesses were getting contracts that were formally
awarded to small businesses. A question was raised as to the
efforts by agencies to provide training to the acquisition
workforce as to the proper application of the laws and
regulations pertaining to bundling. Late payments are a special
concern to small businesses and can cause severe cash flow
problems. Congress was urged to extend the prompt payment
requirements applicable to DOD to the civilian agencies. The
failure of the federal government to meet statutory procurement
goals has resulted in a loss of sales by small businesses. The
Postal Service was cited as an entity that had consolidated a
requirement to the detriment of small businesses. The
Electronic Commerce Resource Center (ECRC) Program, that helps
small businesses compete in the E-government procurement arena,
was cited as a helpful to small businesses, but that it had
been recently suspended. A new program was advocated, using
elements of the ECRC program. Government delays in providing
documents necessary to performance and changes in
specifications were cited as typical obstacles that small
businesses might face in completing work on time.
For further information on this hearing, refer to Committee
publication 107-57.
7.2.38 cms: new name, same old game?
Background
On May 16, 2002, the Committee on Small Business held
another in a series of hearings on the burdens imposed by the
Centers for Medicare and Medicaid Services (CMS) on small
healthcare providers. The hearing was held so that
Administrator Scully, who decided not to attend the Committee's
April 10, 2002, could hear from healthcare providers and
respond directly to their concerns.
CMS is the government agency charged with administering
Medicare, which often has been referred to as the country's
largest health insurance provider. Medicare provides health
care coverage to 38 million Americans. It imposes some 110,000
pages of regulations, has 219 collections of information
approved by the Office of Management and Budget, and forces
physicians to spend at least one hour of their day in
completing forms for CMS. The regulatory burdens, along with
the reductions in payments under the physician fee schedule, is
making it difficult for physicians and other healthcare
providers, to continue offering services to Medicare eligible
patients.
Summary
The panelists were The Honorable Thomas A. Scully,
Administrator, Center for Medicare and Medicaid Services; The
Honorable Thomas Sullivan, Chief Counsel for Advocacy, Office
of Advocacy, United States Small Business Administration; Mr.
Zachary Evans, Chairman of the Board, National Association of
Portable X-ray Providers; Mr. Brian Seeley, Chief Executive
Officer, Seeley Medical; W. Stephen Minore, M.D., President,
Rockford Anesthesiologists Associates; Michael Hulsebus, D.C.,
Hulsebus Chiropractic; and Timothy Blanchard, Esq., Partner,
McDermott, Will & Emery.
Administrator Scully apologized for not attending the April
10, 2002 hearing. Then he turned to the problems associated
with overhauling an agency that oversees nearly $550 billion in
spending per year with 4,800 employees and 49 contractors.
Administrator Scully hopes that he will be given the statutory
authority to remove contractors and utilize the federal
acquisition rules to select these contractors. Employees within
CMS are working closely with the Office of Advocacy to improve
the agency's compliance with the Regulatory Flexibility Act
(RFA). Administrator Scully also reiterated his efforts to make
it easier for healthcare providers to follow regulatory changes
at CMS and understand those changes. Finally, Administrator
Scully noted that he working to make significant regulatory
reforms in a variety of arenas including revisiting its
definitions of restraint and modifying the MDS used by nursing
homes.
Mr. Sullivan testified that the Office of Advocacy was
continuing to work with CMS to improve compliance with the RFA.
Mr. Sullivan noted that Advocacy staff had a fruitful meeting
with Administrator Scully's deputy and expected the meetings to
continue.
Mr. Evans testified that CMS examined the impact of changes
in the Medicare physician fee schedule for many small physician
practices. However, Mr. Evans noted that CMS did not assess the
impact on his industry--portable X-ray providers even though
they absorbed a significantly higher cut in payments than other
healthcare professionals subject to the physician fee schedule.
Mr. Evans explained that his service would save the government
money by not having senior citizens transported in ambulances
to health care facilities for X-ray and electrocardiograms.
Mr. Seeley testified about the problems that durable
medical equipment suppliers face in obtaining reimbursement
from the diverse policy interpretations made by CMS
contractors. According to Mr. Seeley, the most egregious
problem is that of contractors not accepting the certificate of
medical necessity as proof that the piece of equipment is
medically necessary. Contractors often require the suppliers to
second-guess and supplement the information provided in the
certificate by physicians. Furthermore, CMS continues to review
payments to suppliers based on utilization factors that may not
be appropriate.
Dr. Minore testified that CMS contractor call centers
provided correct answers to questions only 15 percent of the
time. If its contractors do not understand the regulations, Dr.
Minore wondered how physicians, whose primary job is healing
patients, would be capable of properlycompleting forms and
requests for reimbursement. Dr. Minore added that it is difficult for
physicians to do things correctly when the physician is getting
different answers for the same query depending upon whom the physician
asks. Dr. Minore concluded his testimony by noting that physicians are
often forced to pay back putative overpayments because they do not have
any decent appeal route that is compounded by the attitude that the
physician is guilty of overcharging unless proved otherwise.
Dr. Hulsebus testified about his carrier's inability to
conduct a proper audit of chiropractic services. He first
explained that the overpayments were based on extrapolations
that his procedures were not medically necessary, and the
contractors refused to examine X-rays when doing the audit. He
would have had to pay back nearly a quarter of a million
dollars had not the Chairman of the Committee intervened with
CMS and its contractor.
Mr. Blanchard testified about the amount of ``secret'' law
that CMS and its contractors rely on to make decisions. The
basic problem is that the local policy determinations often are
inconsistent with the decisions made by Department of Health
and Human Services administrative law judges and the appeals
board. The administrative law judges are not bound by the local
policy decisions that the contractors are bound by when
considering physician appeals. However, most physicians neither
have the time nor money to contest contractor decisions due to
the time it takes to appeal through the Department. He
recommended that CMS rely more on national medical
determinations developed through notice and comment rulemaking
rather than granting decision-making authority to local
contractors.
For further information on this hearing, refer to Committee
publication 107-58.
7.2.39 impact of high dollar value on small exporters
Background
The hearing was held on June 12, 2002 in Washington, D.C.
This hearing discussed the impact of the over-valuation of the
dollar on small business exporters and farmers across the
country.
The purpose of the hearing was to explore some of the
factors leading to the current economic state and discusses
possible solutions. Some economists have stated that the dollar
is ``overvalued'' by as much as 30 percent and this adversely
affects the exporting sector. Compounding this is that some
Asian currencies are ``undervalued'' in order to make their
exports cheaper, exacerbating problems for U.S. exporters.
Trade is vitally important to this country and was part of the
reason for the economic expanse of the 1990s.
Trade is also increasingly important for the small business
sector as the number of small business exporters increased by
more than three-fold between 1987 and 1999, going from 66,000
to 224,000. Ninety seven percent of all exporters are small
businesses. Thus, any significant difference in price a small
business can obtain overseas due to currency fluctuations can
have a significant impact on the ability of these small
companies to sell their goods and services.
Summary
There was one panel that was comprised for this hearing and
it included Lawrence Chimerine, Ph.D., Economist; Mr. Tony
Raimondo, President & CEO, Behlen Manufacturing Company; Mr.
Robert J. Westkamp, President, Wes-Tech, Inc.; Mr. Wayne
Dollar, President, Georgia Farm Bureau; Mr. Vargese George,
President & CEO, Westex International, Inc. Discussion centered
on problems facing US exporters that have been compounded by
the overvaluation of the dollar, which was likened to a 30
percent tariff against US made products.
For further information on this hearing, refer to Committee
publication 107-61.
7.2.40 how limiting international visitor visas hurts
small tourism business
Background
On June 19, 2002 the House Committee on Small Business held
a hearing on the impact of proposed changes by the Immigration
and Naturalization Service (INS) on visitor visas by limiting
the duration of a visitors from non-waiver countries from one
year to six months maximum. Visitors must be able to
demonstrate to an INS Inspector their reason for staying in the
U.S. past 30 days and should there be ambiguity over their
explanation, and then the visa will only be issued for 30 days.
The rational for this change in rules is to maintain stricter
control over visitors to this country in the aftermath of the
September 11 terrorist attacks.
Over 25 million international visitors came to this country
in 2000 and save the US a trade surplus of $14 billion. The
Department of Commerce estimated that 939,000 visitors from
non-visa waiver nations contributed almost $2.1 billion to the
U.S. economy in 2000. The travel and tourism industry is a
leader in the services industry and primarily comprised of
small businesses. There is great concern that given the
uncertainty surrounding the issuance of visitor visas, many
will opt not to visit the US. Additionally, this will affect
many Canadian visitors to his country. Under current law,
Canadians crossing into this country do not need a passport and
that policy will continue. However, Canadians, like other
visitors, will be limited to staying no more than six months in
this country, despite the fact that they are not required to
have a visa to enter this country.
Summary
There were two panels that testified before the Committee.
The first panel consisted of: the Honorable James Ziglar,
Commissioner, Immigration and Naturalization Service; the
Honorable John Ellis ``Jeb'' Bush, Governor, State of Florida,
via videotape; and the Honorable Thomas Sullivan, Chief Counsel
for Advocacy, Office of Advocacy, US Small Business
Administration. The second panel was comprised of: Mr. Mark
McDermott, Director, Arizona Office of Tourism, on behalf of
the Western States Tourism Policy Council; Mr. John Lewis,
former Assistant Director, National Security Division, Federal
Bureau of Investigation; Mr. Neil Amrine, President, Guide
Service of Washington, on behalf of the Travel Industry
Association of America; Mr. Del Highfield, Owner, Camping
Resort of Palm Beaches, on behalf of the National Association
of RV Parks and Campgrounds; Ms. Ellen White, President,
Canadian Snowbird Association; and Mr. Mark Hjelle, Vice
President and General Counsel, The Brickman Group, on behalf of
the American Nursery and Landscape Association.
Administrator Ziglar testified that the Immigration and
Naturalization Service (INS) has published a proposed rule that
would change the length of time that visitors to the United
States could stay from a maximum of one year to six months.
This change was triggered because 16 of the 19 hijackers
associated with the events of September 11, entered the US on
visitor visas. Furthermore while visitors may stay for duration
not to exceed six months, visitors must explain their purpose
and reason for their length of stay in the US. If there does
not seem to exist a clear purpose for the visit, then he or she
will only be admitted for a period of 30 days. This change is
based on the assumption that by limiting the time visitors
remain in this country, that US citizens will be safer from
those with intentions to bring about harm. Additionally, INS
statistics show that 73 percent of all visitors complete their
stay in the US less than 30 days, with 51 percent departing in
13 days.
Governor Jeb Bush testified that his state of Florida is
the recipient of 70 million visitors year and nearly eight
million are from another country. While a number of the
visitors to Florida stay only a week or two, others stay
longer. Many stay with relatives for several months; others own
property and winter in Florida. They contribute over $3 billion
to Florida's economy. Governor Bush expressed his concern that
confusion over the new rules could cause tourists to vacation
in other destinations or even sell their property.
Mr. Sullivan testified about the impact the INS proposal
could have on small business. As the Chief Counsel for the
Office of Advocacy, he is charged with monitoring federal
agencies adherence to the Regulatory Flexibility Act and this
law requires agencies to prepare small business impact studies
resulting from new regulations. INS has certified that the
change in proposal for visitor visas will not significantly
affect small business. Mr. Sullivan expressed concern that when
95 percent of all travel agencies and 84.5 percent of tour
operating businesses are small businesses, it was hard
understand that this proposal would not affect small business.
Mr. McDermott testified that for many states, tourism is a
major part of their state's economy and international visitors
play an especially large role. The tourism industry in the
western states is dominated by ``mom and pop'' businesses
including campgrounds, restaurants, motels RV parks and
campgrounds. He is concerned that the when visitors come to the
US, the burden of proof for validating the length of their stay
rests on the visitor. This may make visitorsre-think their
travel plans to the US. In addition, while Canadians are not required
to have visas, they are still governed by the applicability of this new
rule. Travel and tourism plummeted nearly 50 percent after September 11
and has not fully recovered. According to the Department of Commerce,
in 2000 more than 14.6 million Canadians visited the US and spent $6.1
billion. Similarly, 10.3 million Mexicans visited the US and spent more
than $5.1 billion. In Arizona alone, 315,000 Canadians spent $208
million and 1.5 million Mexican visitors spent $740 million. During the
``winter season,'' Canadian visitors occupied between 10-25 percent of
parks and in some sites, almost 50 percent of parks.
Mr. Lewis testified about his concerns that the terrorists
have fully exploited US immigration policies and stated that
visa entry and exit really rests on proper screening and
tracking. He suggests the following ideas: (1) visa
applications need to be better checked against a database that
has all suspected criminals and terrorists; (2) ability to
better detect fraudulent passports in visa waiver countries;
(3) institute a computerized entry-exit system; (4)
fingerprinting all visa applicants from countries with
populations that have supported terrorists; (5) organizations
that sponsor students on a work permit or student visa need to
be responsible to report their location; and (6) Local, state
and federal law enforcement agencies should all have the same
access to data bases related to visitors to the US.
Mr. Amrine testified that his organization is concerned
that the proposal to shorten the admission period for travelers
is poorly defined and will deter visitors from this country
because of confusion surrounding the regulations. Additionally,
he suggested that for many visitors, problems or changes in
itineraries occur and they need flexibility to sort those out.
He further suggested that a reasonable compromise would be to
cut the admission period down to 90 days in order to allow
visitors the maximum flexibility while reducing the stay of
foreign travelers for to safeguard the mainland.
Mr. Highfield testified to the impact that Canadian
visitors have on the economy of Florida, particularly in his
industry of RV parks. He stated that Canadian visitors
represent 25 percent of their revenues each year of over
$200,000 a year and pump another $250,000 into his community.
Additionally, Canadian visitors stay almost twice as long as
other visitors. This trend is echoed throughout the ``sunbelt''
states. While under the proposed rule, home ownership is
declared a valid reason for staying in this country a longer
period of time, leasing or renting a residency or an RV site
does not meet the criteria. Mr. Highfield urges that leasing or
renting be treated in the same manner as home ownership does
for B-2 visas.
Ms. White testified that proposed changes to the visitor
visa program has already caused confusion among Canadian
snowbirds and will result in a decrease of tourism in the US.
Last year alone, 15 million Canadians came to the US, ten
million for vacations and spent more than $7 billion in the US.
Canadians that come to the US to winter fall into the same
category as other visitors to the US, with the sole exception
that they do not have to have a passport. When this regulation
was first proposed Tom Ridge, Director of Homeland Security,
assured Canadians that they would not be affected by the
proposed regulations. Already Ms. White has received word that
a Canadian citizen was turned back at the border because he did
not have the deed to his home in the US with him.
Mr. Hjelle testified that he is concerned about the
proposed rule's affect on migrant labor. The new proposed
regulations for H-2B visas require background checks for guest
workers, but no new resources have been allocated for this
program. Current backlogs can run up to 75 days. Alternatively,
employers can pay a $1,000 for ``premium processing'' which
many feel is a form of government extortion in order to get
needed workers in time to harvest crops.
During the questions from Member of the Committee, Mr.
Ziglar agreed to work on a letter that would clarify that
Canadians have an automatic six-month entry period into the US.
For more information, please refer to Committee publication
107-63.
7.2.41 maximizing organization and leadership in a federal
agency to fulfill its statutory mission:
restructuring of the small business administration
Background
The House Committee on Small Business held a hearing on
July 16, 2002 that focused on the application of sound
management principles and leadership in the structuring or
restructuring of a large business, governmental, or military
unit or entity for the purpose of efficiently accomplishing its
established mission. The hearing also focused on the
application of basic management principles to the restructuring
of the U.S. Small Business Administration (SBA).
The U.S. General Accounting Office (GAO) has done a
management study of SBA and issued a report entitled: ``Current
Structure Presents Challenges for Service Delivery: Small
Business Administration'' (GAO-02-17, Oct. 2001). Among the
structural challenges identified by the report, the SBA faces
``ineffective lines of communication; confusion over the
mission of district offices; overlapping organizational
relationships; and a field structure not consistently matched
with mission requirements.'' Since the SBA is in the process of
restructuring, the GAO report and the discussion of management
principles to guide the organization were most timely.
Summary
The hearing consisted of one panel which was comprised of:
Davi M. D'Agostino, Director, Financial Markets and Community
Investment, U.S. General Accounting Office (GAO); Lloyd A.
Blanchard, Chief Operating Officer, U.S. Small Business
Administration (SBA); Herbert Jasper, Fellow, National Academy
of Public Administration; and, Brigadier General Frank J.
Anderson, Jr., USA (Ret.), President, Defense Acquisition
University. SBA's mission is to maintain and strengthen the
Nation's economy by aiding, counseling, assisting, and
protecting the interests of this country's small businesses and
by helping families and businesses recover from natural
disaster. Three weaknesses in the present organizational
structure of SBA were said to be: (1) complicated, overlapping
organizational relationships and ineffective lines of
communication; (2) confusion over the mission of district
offices; and, (3) field structure inconsistently matched with
SBA's mission requirements.
SBA presented a transformation plan that SBA is seeking $15
million to implement. SBA was said to have 2,100 employees in
the field, 700 at the headquarters in Washington, D.C., and
approximately 1,300 full and part-time employees in the
disaster assistance program. The transformation plan was stated
to have the following main components: (1) regional offices are
to play a more important role in communications from the field
to headquarters and greater responsibility in delivery of
services to taxpayers; (2) government contracting offices need
to be consolidated with surety bond functions within the
regional offices; (3) most loan processing, servicing,
guaranteed purchases and liquidation of business loans as well
as servicing and liquidation of disaster loans should be
consolidated into the present service centers; (4) the
certification, eligibility, and review functions of the
HUBZone, Small Disadvantaged Business (SDB), and 8(a) programs
should be consolidated and the lender oversight functions and
purchase reviews need to be centralized; (5) headquarters
operations should be streamlined by removing excessive
layering; and (6) a training program should be implemented to
prepare employees for implementation of new structure and
changed job requirements.
The transformation efforts are to begin with a phase I
which calls for removal of backroom lending functions from
three districts offices (Miami, Charlotte, and Phoenix); the
transfer from these districts offices to the Santa Ana
liquidation center of 7(a) loan purchases and 7(a) and disaster
loan liquidations; and the transfer from these districts
offices and the Sacramento district office of all 504 loan
processing to the Sacramento PLP processing center. The view
was expressed that reorganizations are always costly and
disrupts the agency, may emphasize certain goals, but is always
without cost savings. Phase I of the plan was cited as not
addressing the problems of a complicated field structure that
has 10 regional offices, 70 district and 16 branch offices,
more than 1,100 centers, 6 area offices, and nine loan
processing centers. It was emphasized that leadership and
management skills would be needed to restructure SBA to better
serve the small businesses of this Nation.
For further information on this hearing, refer to Committee
publication 107-65.
7.2.42 unintended consequences of increased tariffs on
american manufacturers
Background
On July 23, 2002, the House Committee on Small Business
held a hearing to discuss the ramifications of the President's
decision to increase steel tariffs.
In March, President Bush announced his decision to impose
temporary safeguards intended to help the U.S. steel industry
and its workers adapt to the large influx of foreign steel. The
relief is being provided in response to injury findings of the
International Trade Commission (ITC) as part of the Section 201
``safeguard'' trade investigation launched by the
Administration in 2001. Tariff rates as high as 30 percent are
being imposed for three years on selected key categories of
foreign steel products.
Summary
There was one panel of witnesses that testified: Ms. Laura
Baughman, President and Economist, Trade Partnerships
Worldwide; Mr. Michael Nelson, Arnold Engineering; Mr. Lester
Trilla, President and CEO, Trilla Steel Drum Corporation; Mr.
David Pritchard, President & CEO, AJ Rose Manufacturing; Mr.
Robert Herrman, Machine Technician, AJ Rose Manufacturing; Mr.
John Grove, Vice President of Procurement, Cold Metal Products;
Mr. Merle Emery, Vice President & General Manager, GR Spring
and Stamping; Mr. Michael Tanner, President, Wren Industries;
and Mr. Charles Connor, President & CEO, Magneco/Metral.
Ms. Baughman testified that the majority of steel consuming
manufacturers are small businesses, and that unlike the
manufacturing sector as a whole, this sector had added 1.2
million jobs at a time when the other sectors lost jobs.
Moreover, there are millions of union jobs in the steel
consuming sector and that the workers in this industry
outnumber steel industry workers by 59 to one.
There was a consensus between all of the witnesses that the
President's decision to impose tariffs on steel had greatly
hurt many in this sector. First, U.S. steel companies and the
workers they employ compete globally and therefore the
increases in tariffs affect their bottom-lines. Secondly, steel
consumers need a steady and reliable source in order to be
competitive. The tariffs have interrupted steady supplies and
caused delays of weeks and months. Third, steel consumers need
reliable price quotes. That, along with supply has been
interrupted since the President's implementation of tariffs.
Additionally, steel consumers have seen sharp increases in the
cost of purchasing steel, which must either be passed along to
their customers or absorbed. Many cannot pass these prices to
their customers or they will lose the sale to a foreign
competitor and are losing money.
All of these factors that affect steel consumer
manufacturers affect the employees that work in these plants.
Individual workers have felt a loss of wages and threaten their
jobs. Both management and labor are united in their opposition
to President Bush's implementation of tariffs against steel.
Chairman Manzullo stated before the proceedings that he had
asked the Attorney General to investigate collusion and anti-
trust violations on part of some of the U.S. steel producers.
For more information, please refer to Committee publication
107-66.
7.2.43 small business access to health care
Background
The Committee on Small Business held a field hearing on the
subject of small business access to health care on Wednesday,
August 14, 2002, at the McHenry County College in Crystal Lake,
Illinois.
The purpose of this hearing is to discuss the concerns of
small business owners as they struggle to provide health
insurance to their families and employees. As Congress
discussed the issue of how to provide coverage to the
uninsured, small business concerns have been notably absent
from the debate. Yet roughly 60 percent of the uninsured are
small business owners, their employees and their families. The
hearing served as a forum to discuss and promote innovative
solutions to help small businesses meet their health care
needs.
Summary
There was one panel of witnesses who testified: Mr. Ryan
Brauns, Senior Vice President, Rockford Consulting and
Brokerage; Mr. Brad Close, Director, Federal Policy, National
Federation of Independent Business; Ms. Mary Blankenbaker,
Benjamin's Restaurant; Mr. Scott Shalek, Shalek Financial; Mr.
Ken Koehler, Flowerwood, Inc.; Mr. Brad Buxton, Vice President,
Blue Cross Blue Shield of IL, Ms. Isabella Wilson, Chief
Financial Officer, Illinois Blower, Inc.; and Dr. James L.
Milam, Illinois Sate Medical Society.
Ms. Blankenbaker testified that for the restaurant
industry, healthcare premiums had increased by 23 percent and
in her own business; the premiums had gone up 28 percent. She
urged Congress to pass Association Health Plans (AHPs) as way
to help diffuse the cost of health care and increase access to
health care. AHP's would lower premiums by allowing employers
to band together to provide a ``pool'' that would result in
lower premiums. She also expressed concerns that state or
congressional mandates for health care plan often increase the
cost of health care, which can force employers to cut back on
providing it.
Mr. Brauns advocated that an element of ``consumerism'' was
needed for any health care model that as a nation we go forth
with. Consumerism would allow for people to grow a fund of
money as their own so that they become involved in the care and
cost decisions affecting their medical care. This approach
would insert a ``capitalistic approach'' into the equation for
health care.
Mr. Shalek testified to the ability of health brokers to
help employers find different health care insurance options and
alternatives that were suited to the individual needs of their
businesses. He also promoted the idea that purchasers of health
care become health plan consumers and bring more-market driven
plans to the forefront for employers. This in turn can save
employers and employees money and allow them to maintain
affordability.
Mr. Close testified to the need for Congress to pass
Association Health Care Plans (AHPs) as way to allow employers
to purchase health care at reasonable costs and control the
skyrocketing cost of insurance. Specifically, Mr. Close
advocated H.R. 1774, the Small Business Health Fairness Act
introduced by Representatives Ernie Fletcher and Cal Dooley.
This legislation would enable small business to purchase their
health care in the manner that corporations and union do by
having large pools of people. He also pressed for adoption of
Medical Savings Accounts (MSAs) by Congress that would give
employees more control over their health care dollars.
Mr. Koehler testified to the difficulty as a small
businessman that he has in providing his employees with health
care coverage. For many years, his business provided the full
cost of insurance coverage with only a minimum amount coming
from employees. Today, his company funds 40-45 percent of the
cost and the employees now much shoulder 55-60 percent of the
cost. Last year alone, his company was hit with a 45 percent
increase in premiums.
Mr. Buxton spoke about proposals to protect the small group
market from price pressure. He expressed concerns about state
and federal mandates and cautioned that the costs must be
balanced against the benefits. He supported subsidizing
employer-sponsored insurance. He was also concerned that
``patient's bill of right'' legislation could add cost and
liability factors that would cause small business to drop
health care coverage. He also supported expansion of Kid Care.
He promoted the expansion of Medical Savings Accounts (MSAs).
He urged an acceleration of the full tax deductibility for the
self-employed. He also was for legislation removing barriers to
generic drug entry onto the market.
Ms. Wilson spoke of several of the challenges that small
business have when providing their employees with health care
insurance. She said that health care costs not only affect a
company's bottom line, but also can adversely affect employee
morale and productivity. Spiraling health care costs force
small business to make difficult choices pertaining to their
bottom line because they cannot pass these costs along to their
customers.
Dr. Milam spoke to the soaring cost of medical malpractice
insurance rates that drive up health care premium costs. He
said that many of his colleagues are forced to limit services,
retire early or move to other states where insurance rates are
not as high. Data has indicated that medical liability premiums
are driven by increases in lawsuits and the unrestrained nature
of jury awards. In order to inoculate themselves against
lawsuits, many doctors order unnecessary tests. He supports
H.R. 4600, the ``Help Efficient, Accessible, Low Cost, Timely
Health Care Health Act'' that would lead to a stabilized
medical liability insurance market and bring balance to the
medical liability litigation system by capping non-economic
damages at $250,000.
For further information on this hearing, refer to Committee
publication 107-67.
7.2.44 federal procurement and international trade:
assessing the federal government's efforts to meet
the needs of local small businesses
Background
On September 3, 2002, the Committee on Small Business held
a field hearing in Norwalk, California with 18 witnesses to
discuss two key issues affecting small business: opportunities
and challenges in both federal procurement and international
trade. The purpose of this hearing was to examine the numerous
problems facing small businesses in procurement and trade and
what the federal government is doing to help solve these
problems.
Summary
The hearing was comprised of two panels. The first panel,
which had five public and private sector witnesses, discussed
federal procurement issues. The first two public sector
witnesses were the Regional Administrator for the Small
Business Administration (SBA) for Region X, Mr. Bruce Thompson,
and Mr. Frank Ramos, Director of the Office of the Small
Disadvantaged Business Utilization (OSDBU) at the Department of
Defense (DoD), which is the largest purchaser within the
federal government. They both discussed what has been done,
nationally and locally, and they will continue to do to open up
more procurement opportunities for small businesses.
Next, Deborah Cabriera-Johnson, Manager of the Los Angeles
County Procurement Technical Assistance Center (PTACs), spoke
about the mission of PTACs to offer hands-on assistance to
small firms to help them do business with the federal
government. She specifically thanked Chairman Manzullo for his
efforts to get additional funding for PTACs through the Defense
authorization and appropriations process.
Last on this panel were two local small business owners who
testified about their problems in doing business with the
federal government. Eric Espinoza, owner of Stitches Uniforms
of Montebello, California, complained that larger companies
primarily based in the South continue to win various textile
contracts, specifically T-shirts, to the military despite his
lower bids. Adriana Grippa, President of Master Research &
Manufacturing of Norwalk, California testified about her
problems in dealing with the Defense Supply Center in Richmond,
Virginia regarding constant unilateral changes to the
contracts, even after award, in terms of requiring her
aerospace components to be ``flight critical'' when there is
not real justification to do so. In Ms. Grippa's opinion,
making more and more products ``flight critical'' biases
federal procurement officers to look to larger manufacturers
for the good, regardless of the cost. Mr. Ramos of DOD promised
to get to the bottom of these problems brought to his attention
at this hearing.
The second panel was comprised of 13 public and private
sector witnesses to discuss four main issues in international
trade: Trade Adjustment Assistance (TAA) for firms and import
competition in general; federal export promotion programs; the
community adjustment assistance program of the North American
Development Bank; and the impact of the recently imposed higher
steel tariffs on small manufacturers who use steel. First,
David Bearden, Deputy Assistant Secretary of Commerce for
Economic Development and David Holbert, Executive Director of
the Western Trade Adjustment Assistance Center (TAAC) in Los
Angeles, California discussed the programs and services offered
by the TAA program for firms, which help small businesses
overcome the threats from import competition. Next, Bruce
Thompson of the SBA, Mary Delemege of the Trade Promotion
Coordinating Committee (TPCC), and William Redway and David
Josephson of the Export-Import Bank of the United States (Ex-
Im) spoke about the various federal export promotion programs
under their purview and how small businesses interested in
trade can take advantage of these services.
Then the Committee heard from Raul Hinojosa, Research
Director of the North American Integration & Development Center
at UCLA and Hugh Loftus, Director of the Community Adjustment
and Investment Program (CAIP) at the North American Development
(NAD) Bank in the City of Industry, California. Professor
Hinojosa, developed the idea of the NAD Bank, addressed what he
felt were the successes and failures of the NAD Bank in terms
of living up to original expectations. Mr. Loftus discussed the
programs and services of the CAIP and agreed with Professor
Hinojosa on many of the problems but traced them back mainly to
limited funding.
Next, the Committee listened to two perspectives concerning
the steel tariffs. Anita Huseth and John Reynolds of Mace Metal
Sales, a steel supply center in Los Angeles, California and
Bart Alcamo, President of RBK Tool & Die in Modesto, California
testified about the deleterious effects these tariffs were
having on their small businesses. They have seen steel price
increases in excess of 40 percent with lead times going beyond
six months. Terry Bonds, Director of District 12 of the United
Steel Workers of America presented a different perspective,
talking about the current state of the steel industry and the
need for these higher tariffs to protect the workers in this
industry.
Finally, Tom Martin testified on behalf of the Small
Manufacturers Association of California to discuss the myriad
of problems facing small manufacturers in California. He mainly
focused on the problems facing small manufacturers by import
competition and used his company--Coast Foundry and
Manufacturing, a manufacturer of toilet values--as an example.
He recommended that both state and federal officials should
take into account the global competitiveness of manufacturing
before embarking on any new laws or regulations that places
restrictions on manufacturers.
The hearing concluded with an open session, where members
of the audience could address the committee for one minute
regarding any of the issues discussed by the witnesses. The
hearing ended on a positive note for small business owners to
take advantage of the many federal programs and services
available to help them start and grow to be successful.
For further information about this hearing, please refer to
Committee publication number 107-68.
7.2.45 lost jobs, more imports: unintended consequences of
higher steel tariffs
Background
On Wednesday, September 25, 2002, the House Committee on
Small Business held a second hearing on the subject of higher
steel tariff rates and its affect on small manufacturers that
use steel.
The purpose of this hearing was to continue to examine how
small steel-using manufacturers are affected by the increase in
tariffs on imported steel and to see if the exclusion process
brought sufficient relief. In March, President Bush announced
that he would imposetemporary safeguards intended to help the
U.S. steel industry adapt to the large influx of foreign steel by the
imposition of tariffs. Last month, the Administration announced the
last set of products excluded from steel remedies list, bringing a
total of 727 products out of the more than 13,000 that filed for
exemption, representing nearly 25 percent of foreign steel imports into
the United States. However, many small steel-using manufacturers still
suffer from arbitrary price hikes because either the exclusion process
was irrelevant to them (these manufacturers buy only domestic steel) or
the exclusions granted were limited in scope. Another round of
exclusion requests is expected to begin in November, with decisions
expected in March 2003. There was also being a mid-point administrative
review of the entire steel remedies policy by September 2003.
Summary
There were two panels of witnesses that testified at the
hearing. The first panel was the Honorable Grant D. Aldonas,
Under Secretary for the International Trade Administration
(ITA), Department of Commerce. The second panel was comprised
of: Mr. Jon Jenson, Vice Chairman & President, Consuming
Industries Trade Action Coalition (CITAC); Mr. Erick Ajax, Vice
President, EJ Ajax and Sons, Inc.; Mr. Jay Carlson, President,
G & R Manufacturing; Ms. Jennifer Johns Friel, President, Mid
West Fabricating Company; Ms. Christine Dowding, President,
Dowding Industries; Mr. Brian Robinson, President of
Manufacturing, Wilson Tool International, and Mr. Robert Johns,
Director of Marketing, Sheet Mill Group.
Secretary Aldonas testified that the Administration
embarked on this policy in order to help the U.S. steel
industry as it withstands market manipulation by foreign
government intervention. A decade ago, world governments owned
75 percent of the steel industry worldwide. Today, there is
still a 25 percent ownership by governments in that
marketplace. As such, the private U.S. steel industry has had
to withstand a 200 million ton glut of excess capacity from its
foreign competition. Critics have complained that the U.S.
steel industry is a dinosaur and needs to modernize. Yet, half
of all U.S. steel is produced in ``minimills'' that utilize the
latest electric arc furnace technology that has brought about
the highest efficiency of steel manufacturers worldwide.
Mr. Aldonas explained the Administration's three-point plan
is to bring a level playing field to the worldwide steel
market. President Bush declared a three-year moratorium under
``Section 201'' on steel imports that have devastated the U.S.
steel industry. This was designed to bring temporary relief to
the industry and give it a reprieve so that it can consolidate.
This was done after the ITC found that imports had injured the
U.S. domestic industry. Secondly, he has launched international
negotiations to eliminate excess global capacity. Third, the
U.S. is conducting negotiations to address distortions through
subsidies and anti-competitive practices that distort the
market through the OECD.
All of the remaining witnesses, with the exception of Mr.
Johns testified that the imposition of steel tariffs had the
unintended consequences of greatly hurting the steel market for
downstream steel-using manufacturers. The tariffs have made
steel in the U.S. higher priced than almost anywhere else while
hurting U.S. competitiveness in the global market. There has
been an exodus of business to offshore manufacturers because
they can procure steel at cheaper prices making their end
product less expensive. The exclusion process has not helped
many of the small manufacturers that it was intended to
protect. Many stated that the exclusions did not go far enough
to protect them and the tariffs have hurt their business.
Instead they faced numerous obstacles because of the tariffs
including: increased cost of raw materials (between 40-75
percent); shortages and delays of weeks and months to receive
materials; inability to pass the dramatic increases in price
along to their customers and greater competition from abroad
because of their ability to obtain steel for less. All of these
factors have caused many companies to loose business and
profits. Because of these factors, workers have been greatly
affected by either having they're hours decreased or their jobs
eliminated.
Mr. Johns testified in support of the President Bush's
remedy for the steel industry. He stated that the President
acted after the U.S. steel market had been besieged by
illegally traded and dumped steel. The President's decision to
provide Section 201 relief will allow the domestic steel
industry a ``timeout'' that will allow it to consolidate and
prevent dislocations in the market that will benefit steel
users. Since the President's decision, prices for flat-rolled
products have returned to normal levels from a twenty-year low.
He further said that because steel prices have risen worldwide,
U.S. companies should not be at a competitive disadvantage. The
President's decision to implement this policy will have a long-
term positive affect on the steel industry and its
survivability.
For more information, please refer to Committee publication
107-71.
7.2.46 cms regulation of healthcare services
Background
On October 3, 2002, the Committee on Small Business held
another in a series of hearings on the burdens imposed by the
Centers for Medicare and Medicaid Services (CMS) on small
healthcare providers. The hearing was held so that
Administrator Scully could address some of the unresolved
issues that had been brought to the Committee's attention by
small healthcare providers.
CMS is the government agency charged with administering
Medicare, which often has been referred to as the country's
largest health insurance provider. Medicare provides health
care coverage to 38 million Americans. It imposes some 110,000
pages of regulations, has 219 collections of information
approved by the Office of Management and Budget, and forces
physicians to spend at least one hour of their day in
completing forms for CMS. The regulatory burdens, such as the
paperwork burdens associated with performing clinical
laboratory examinations, the fees paid to portable X-ray
providers, and the classification of restraints, all make it
more difficult for small businesses to perform their primary
mission--improving the quality of life of the sick and infirm.
Summary
The panelists were The Honorable Thomas A. Scully,
Administrator, Center for Medicare and Medicaid Services; Mary
Harroun, President, Merry Walker Corp.; Patrick Davey, M.D., on
behalf of the American Academy of Dermatology Association;
Edward L. Probst, M.D.; Mr. Steven Halsey, Partner, Halsey,
Rains & Associates, on behalf of the National Association of
Portable X-Ray Providers; and Nancy Taylor, Esq., Greenberg
Traurig, LLP, on behalf of the National Association for the
Support of Long Term Care.
Administrator Scully stated that he is working to make
significant regulatory reforms in a variety of arenas including
revisiting its definitions of restraint and modifying the MDS
used by nursing homes. He noted that CMS agreed to send out
guidance to long-term care facilities reminding them that the
Merry Walker should not be categorically classified
as a restraint. However, Administrator Scully noted that the
Merry Walker under the Nursing Home Reform Act of
1987 must be considered a restraint for certain individuals.
Accompanying Administrator Scully was Leslie Norwalk who
explained the efforts that CMS went through to resolve the
classification of the Merry Walker by long-term care
facilities.
Ms. Harroun reiterated her concern that nursing home
residents should be ambulatory rather than immobilized in
wheelchairs. Ms. Harroun stated that she was satisfied with the
efforts of CMS in resolving the classification of her device by
nursing homes.
Drs. Probst and Evans testified about the burdens imposed
by the Clinical Laboratory Improvement Act Amendments of 1988
(CLIA) on individual physician practices. Both noted that the
statute was enacted to insure the quality of tests done by
large laboratories rather than those of individual physicians.
They stated that the paperwork burdens made it difficult for
physicians to perform certain critical analyses while the
patient waited. In turn, this reduced the quality of care that
physicians could provide. In response, Judy Yost, a CMS
employee who directs the implementation of CLIA, noted that
some of the information received by physicians concerning the
type of paperwork that they would have to file was inaccurate.
Administrator Scully also promised that a dermatologist would
be placed on the advisory panel that assists CMS in
implementing CLIA.
Mr. Halsey testified portable X-ray providers absorbed a
significantly higher cut in payments than other healthcare
professionals subject to the physician fee schedule and that
portable X-ray providers were going out of business. Ms. Taylor
testified that CMS was attempting to resolve some of the
regulatory issues facing portable X-ray providers.
Administrator Scully, his special advisor, Tim Trysla, and
Terry Kay, a CMS employee charged with implementing the
physician fee schedule all testified that changing the set-up
fee would require reductions in fees to other healthcare
providers under the physician fee schedule. However, all of
them noted that a memorandum would go out to the fiscal
intermediaries and carriers requesting that they reexamine
their reimbursement for transportation to portable X-ray
providers.
For more information on this hearing please refer to
Committee publication 107-72.
7.2.47 federal prison industries' unfair competition with
small business: potential interim administrative
solutions
Background
On Thursday, November 21, 2002, the Committee on Small
Business held a hearing with respect to Federal Prison
Industries' (FPI) unfair competition with small business and
the potential for interim administrative solutions. The
Committee received testimony regarding the views and planned
actions, if any, of the Administration and the Board of
Directors of FPI regarding a series of proposals to provided
interim administrative relief from FPI's unfair competition in
the federal procurement marketplace, especially for small
business. These recommendations were made in a letter sent to
the President on October 17, 2002 by six Members of the House,
who joined together in advancing comprehensive legislative
reform of FPI, including the Chairman and Ranking Democratic
Member of the Committee on the Judiciary. Representatives of
the business community and organized labor made other
recommendations to the FPI Board of Directors during two public
forums held on September 24 and October 24, 2002.
Although not the focus of the hearing, the Committee
received testimony with regard to H.R. 1577, the ``Federal
Prison Industries Competition in Contracting Act of 2002,'' a
comprehensive reform of FPI, which enjoyed broad bipartisan
support within the Committee and the House and was supported by
the small business community, organized labor, and federal
managers. Expressions of support for the bill had been received
from representatives of the Administration, given that it
simultaneously requires the competitive award of contracts,
gives FPI time to adjust, and authorizes an array of
alternative rehabilitative opportunities for inmates, which
were demonstrated to be even more effective at reducing
recidivism.
Summary
The hearing consisted of one panel that included: the
Honorable Angela B. Styles, Administrator, Office of Federal
Procurement Policy, Office of Management and Budget; Mr.
Kenneth E. Rocks, Chairman, Board of Directors, Federal Prison
Industries; Mr. John Palatiello, Executive Director, Management
Association for Photogrammetric Surveyors (MAPPS); Mr. Michael
Mansh, President, Pennsylvania Apparel Corporation; Mr. Gary
Engebretson, President, Contract Services Association of
America; Mr. Paul A. Miller, Director of Government Affairs,
Independent Office Products and Furniture Dealers Association;
and, Donald DeRossi, President, DeRossi and Sons Company. FPI
is the 39th largest government contractor with sales of $580
million a year. The Administration was in favor of reforming
FPI mandatory source preference by permitting the federal
agencies to determine whether the price, quality, and delivery
terms were the best buy. The Administration also favored in the
long run phasing out the mandatory source requirement.
Consideration was to be given to raising the blanket waiver
threshold and to addressing those instances where there is
significant price disparity. FPI was concerned thatinmates are
productively occupied and not idle, but at the same time taking into
account the concerns of small businesses.
The present situation whereby federal agencies are forced
to purchase products from FPI at the price, quality, and
delivery terms dictated by FPI has created a monopoly devoid of
competition. The advantage that FPI has over small business in
selling to federal agencies is all but insurmountable. FPI has
had the effect of putting small entities out of business in the
textile industry. There was a request that textile and apparel
purchases from FPI be suspended. The issue of what constitutes
the marketplace for determining FPI's impact should be based on
the federal marketplace and not the commercial sector where FPI
is prohibited from selling products. It was pointed out that
FPI was now engaging in services in the private sector that
include laundry, data, and telephone support services and it
was suggested that FPI would push aggressively for an increase
in the amount of services it provides. It was indicated that
FPI was engaging, or had engaged, in ``drive-by'' manufacturing
in which the inmates added little value, if any, to the product
sold. The Chairman requested assurances from FPI that it would
not sell products to federal agencies which did not have value
added by inmates and that a letter be delivered containing such
assurances by 5:00 p.m. the day of the hearing. A letter to
that effect was delivered as requested. (The hearing was
broadcast nationally on C-SPAN.)
For further information on this hearing, refer to committee
publication 107-73.
7.3 Summaries of the Hearings Held by the Subcommittee on Workforce,
Empowerment, and Government Programs
7.3.1 reauthorization of the small business technology
transfer program (sttr)
Background
The Subcommittee on Workforce, Empowerment, and Government
Programs and the Subcommittee on Rural Enterprises, Agriculture
and Technology of the Committee on Small Business jointly held
a hearing on June 20, 2001 regarding three legislative
proposals that were under consideration. The first, H.R. 203,
the ``National Small Business Regulatory Assistance Act of
2001,'' introduced by Congressman Sweeney of New York, directs
the Administrator of the Small Business Administration (SBA) to
establish a pilot program to provide regulatory compliance
assistance to small business concerns through participating
SBDCs. Under H.R. 203, small businesses would be able to
receive confidential counseling regarding compliance with
Federal regulations, provided that such counseling does not
constitute the practice of law. In addition, SBDCs would
provide to small businesses training and educational
activities, technical assistance, and referrals to experts and
other providers of compliance assistance. The bill is aimed at
helping small businesses cope with the maze of Federal
regulations.
The second legislative proposal, sponsored by Congressman
Brady of Pennsylvania, would permit the SBA to make grants to
SBDCs to enable them to provide technical assistance to
secondary schools, or to post secondary vocational or technical
schools, for the development and implementation of curricula
designed to promote vocational and technical entrepreneurship.
The third legislative proposal, sponsored by Congressman Udall
of New Mexico, would authorize the SBA to make grants to SBDCs
for the purpose of providing entrepreneurial assistance to
Alaska Natives, members of Indian Tribes, and Native Hawaiians
in starting, operating, and growing small businesses. This
legislation is aimed at stimulating the economies of the areas
served and to promote job creation. The second and third
legislative proposals are in draft form and had not been filed
at the time of the hearing.
Summary
This hearing was presided over by both Chairman of the
Subcommittee on Rural Enterprises, Agriculture, and Technology,
John Thune (R-SD) and Acting Chairman of the Subcommittee on
Workforce, Empowerment and Government Programs Felix Grucci (R-
NY). There was one panel of witnesses consisting of Mr. Maurice
Swinton, Assistant Administrator, Small Business
Administration; Mr. Tim Foreman, Acting Director, Small &
Disadvantaged Business Utilization Office, Department of
Defense; Dr. Walter Polansky, Office of Science, and Ms. Joanna
Goodnight, SBIR/STTR Coordinator, National Institutes of
Health; Mr. Anthony Camarota, President & CEO, Avtek Industries
Inc.; Mr. Richard Carroll, CEO, Digital System Resources.
For further information on this hearing, refer to Committee
publication 107-14.
7.3.2 to investigate the legislation that would increase
the extent and scope of the services provided by
small business development centers
Background
The Subcommittee on Workforce, Empowerment, and Government
Programs of the Committee on Small Business held a hearing on
July 19, 2001 regarding three legislative proposals that were
under consideration. The first, H.R. 203, the ``National Small
Business Regulatory Assistance Act of 2001,'' introduced by
Congressman Sweeney of New York, directs the Administrator of
the Small Business Administration (SBA) to establish a pilot
program to provide regulatory compliance assistance to small
business concerns through participating SBDCs.
The Honorable Brady of Pennsylvania introduced H.R. 2666,
the ``Vocational and Technical Entrepreneurship Development
Act,'' that would permit the SBA to make grants to SBDCs to
enable them to provide technical assistance to secondary
schools, or to post secondary vocational or technical schools,
for the development and implementation of curricula designed to
promote vocational and technical entrepreneurship. Congressman
Udall of New Mexico introduced H.R. 2538, the ``Native American
Small Business Development Act,'' that would authorize the SBA
to make grants to SBDCs for the purpose of providing
entrepreneurialassistance to Alaska Natives, members of Indian
Tribes, and Native Hawaiians in starting, operating, and growing small
businesses.
Summary
There were two panels that provided testimony for the
hearing. The first panel consisted of Representative John
Sweeney (NY-R), Representative Robert Brady (PA-D) and
Representative Tom Udall (NM-D) who spoke of their respective
bills being discussed at the hearing. The second panel was
comprised of Mr. Thomas Grumbles, Vice President, American
Industrial Hygiene Association; Mr. Donald T. Wilson; President
& CEO, Association of Small Business Development Centers; Mr.
Rudolph Cartier, Jr., Small Business Ombudsman, State of New
Hampshire; Mr. Christian Conroy, Associate State Director,
Pennsylvania Small Business Development Centers; and Mr.
Leonard Lopez, Sun Valley Express, Navaho Reservation. All of
the witnesses testified in strong support of the legislation
being discussed.
Witnesses testified that small and medium sized businesses
often had difficulty complying with Federal regulations
regarding workplace safety for several reasons including the
number and complexity of such rules, fear of prosecution and
heavy fines for accidental non-compliance and a
disproportionate cost burden versus large businesses to follow
the letter of the law. There was a consensus of strong support
for H.R. 203. This legislation would allow small businesses to
receive confidential counseling regarding compliance with
Federal regulations, provided that such counseling does not
constitute the practice of law. In addition, SBDCs would
provide to small businesses training and educational
activities, technical assistance, and referrals to experts and
other providers of compliance assistance. The bill is aimed at
helping small businesses cope with the maze of Federal
regulations.
During testimony on H.R. 2666, it was pointed out that
entrepreneurial educational experience is severely lacking in
high schools, community colleges and vocational/technical
schools. Graduates from a vocation/technical school often
gravitate towards using their skills to start their own
business and need the business expertise to do so. Small
business owners who have been trained in entrepreneurship
education have higher success rates in operating success
businesses than those who have not.
Evidence was presented during discussion of H.R. 2538, the
``Native American Small Business Development Act,'' of the very
high unemployment rate among Native Americans residing on
Indian reservations. Yet, at the same time, there were
encouraging numbers about gains in small business ownership,
but more can be done. This legislation would allow for SBDCs to
apply for Federal grants to establish Native American Small
Business Development Centers to assist Native American
entrepreneurs to achieve success. This legislation is aimed at
stimulating the economies of the areas served and to promote
job creation.
All of these bills were referred out of this Committee and
passed by the House of Representatives.
For further information on this hearing, refer to Committee
publication 107-20.
7.3.3 suggestions for improvement in sba programs:
veterans and disaster loans
Background
The hearing before the Subcommittee on Workforce,
Empowerment and Government Programs was held on May 21, 2002 in
Washington, D.C. The purpose of the hearing was to suggest
possible improvements to SBA programs with respect to veterans
and disaster loan sales.
The hearing was comprised of two panels. The first panel
included: William Elmore, Associate Administrator, Veterans
Business Development, U.S. Small Business Administration; Frank
Soares, Chairman, Board of Directors, National Veterans
Business Development Corporation; Major General Charles R.
Henry, U.S.A. (Ret.), President and CEO, National Veterans
Business Development Corporation; Wayne M. Gatewood, Jr.,
President and CEO, Quality Support, Inc.; John Lopez,
President, Association of Service Disabled Veterans; Tony
Eiland, National Office of Veterans Employment, Veterans of
Foreign Wars of the United States; and, Rick Weidman, Director,
Government Relations, Vietnam Veterans of America.
The second panel was comprised only of Ronald E. Bew,
Associate Deputy Administrator for Capital Access of the U.S.
Small Business Administration.
Summary
SBA reported that it had taken steps to cooperate with
other federal agencies and the Corporation to make more
resources available to veteran entrepreneurs. It was announced
that there were seven candidates selected for the Advisory
Committee on Veterans Business Affairs, but that the clearance
process had not been completed. Though legislation creating the
Corporation passed in 1999, the funding did not begin until
2001, which is the suggested date that should be used in
judging the progress of the Corporation.
One of the goals of the Corporation is to establish and
supervise the creation of guidelines and standards for
professional certification of members of the Armed Forces. It
was reported that 70% of the Army's enlisted military
occupational specialties have private sector counterparts that
require a license or a certification. It was announced that the
Corporation had created strategic business units which include
a venture capital fund called the ``Veterans Venture Capital
Fund,'' an electronic marketplace for buying and selling goods
and services, a network of banks that are willing to make loans
to veterans, and providing training to veterans under a program
known as ``Fast Trac.''
It was pointed out that the Corporation had not, at the
time of the hearing, developed a database of veteran- and
disabled veteran-owned businesses. It was further pointed out
that the government-wide contracting goal for small businesses
owned by service-disabled veterans had not been met and that
during the three years in which the requirement had been in
effect, little progress had been made. Some headway in the
SBA's efforts was seen in the cooperative effortsbetween SBA,
the Corporation, and the Department of Veterans Affairs. It was
emphasized that the law requires that veterans, especially service-
disabled veterans, be given priority status with respect to every
program administered by SBA.
Mr. Bew testified concerning SBA's Asset Sales Program. It
was reported that since August of 1999, SBA had sold over
111,000 loans totaling over $2.5 billion, and that it intended
to continue the program with two or three asset sales per year.
It was explained that the purpose of the program was to allow
SBA to concentrate governmental functions, in this instance,
making the loans and not servicing them. It was reported that
the bidders included New York investment banks, regional banks,
loan servicing companies, and small investment companies. It
was stated that a loan purchaser would have to adhere to the
terms of the note as originally executed before sale unless the
borrower requests a change and that there was a two-year
waiting period before disaster loans could be sold.
For further information on this hearing, refer to Committee
publication 107-59.
7.4 Summaries of the Hearings Held by the Subcommittee on Regulatory
Reform and Oversight
Background
On April 3, 2001, the Subcommittee on Regulatory Reform and
Oversight of the Committee on Small Business held a hearing to
address Internet entrepreneurship and whether any legal or
regulatory barriers exist to the commencement, operation, and
growth of Internet-based small businesses. The purpose of the
hearing was to examine the types of businesses that utilize the
Internet, whether they faced unique legal and regulatory
problems, and obtain recommendations concerning actions that
federal decision makers should take or avoid taking to promote
the growth of Internet entrepreneurship.
The expansion of commerce on the Internet has been
staggering. In 1998, retail transactions on the Internet were
estimated at $7 billion. Two years later that figure has almost
tripled to $20 billion dollars. But business-to-consumer
transactions pale in comparison to global business-to-business
transactions on the Internet. Estimates are that these
transactions will exceed $6 trillion by January 1, 2004. The
increase in electronic commerce means that Internet has become
the new central business district, the new ``Main Street'', and
the new shopping mall. It also has the possibility of replacing
existing newspapers, telephone directories, cable systems, and
telephone networks.
Summary
The panelists were: Mr. Joseph Clark, CEO, LocalWeb4U; Mr.
Douglas K. Mellinger, Chairman, National Commission on
Entrepreneurship; Mr. Joshua Engel, General Counsel,
BigStep.Com; Ragan Hughs, Co-Owner, Capital Baby Rentals; Mr.
Jonathan Draluck, Vice President for Legal Affairs, iBasis; and
Mr. Robert McCord, President and CEO, Eastern Technology
Council.
Mr. Clark testified that the critical need for Internet
entrepreneurs is the need for financing. Mr. Clark then stated
that the current tax structure does not benefit either
investors or small businesses seeking capital. Mr. Clark
suggested that the capital gains tax be eliminated or, if not
eliminated, at least modified so that investors would not be
taxed if they rolled their capital gains into new stock
investments.
Mr. Mellinger noted that Internet entrepreneurs face a
number of problems and that the government, in certain
instances, might be part of the solution. For example, there is
a dire need to have qualified workers for an Internet-based
economy. This may mean creating incentives for American
students to obtain postgraduate degrees in computer science and
electrical engineering. But to do that elementary and secondary
education in math and science must improve. In the interim, Mr.
Mellinger, noted that the H-1B visa program must be updated to
ensure that enough foreign workers can enter the United States
to fill the needs of high technology companies, including small
businesses.
Mr. Engel highlighted one existing problem and one looming
problem. Mr. Engel noted that small businesses do not have
broadband access or high-speed Internet connections. This makes
it impracticable for small businesses to utilize the Internet
as a component or primary means of operation. Mr. Engel also
was concerned that the elimination of the tax moratorium on
Internet sales would impose substantial burdens on small
businesses seeking to expand their markets using the Internet.
Ms. Hughs echoed the concerns raised by Mr. Engel. She
noted that, while one of her businesses would not be affected
by the lifting of the Internet tax moratorium, her other
business, Partybug.Com, would probably go out of business
because she would not be capable of handling the regulatory
burdens associated with collecting sales tax from multiple
jurisdictions, maintaining records for audits, and reporting
sales taxes. She strongly urged that Congress renew the
moratorium.
Mr. Draluck testified about providing voice telephone
communication using the Internet instead of the public switched
telephone network. Mr. Draluck noted that the Internet was a
more efficient mechanism for transmitting voice traffic
throughout the world. However, many countries imposed barriers
in an effort to raise revenue and protect their indigenous
monopoly (in many cases government-owned) local telephone
company.Furthermore, Mr. Draluck warned Congress that the
Federal Communications Commission could impose access charges on voice
over Internet-protocol telephony, which would increase costs without
providing any benefits.
Mr. McCord testified about the tremendous synergies between
the information technology arena and the biotechnology arena.
According to Mr. McCord that requires a skilled workforce that
America may not be producing. He strongly urged the
Subcommittee and Congress to rectify that situation, at least
initially through the modification of the H-1B visa program.
For further information on this hearing, refer to Committee
publication 107-3.
7.4.2 broadband access in rural areas
Background
On May 17 and 24, 2001, the Subcommittees on Regulatory
Reform and Oversight and Rural Enterprises, Agriculture and
Technology of the Committee on Small Business held a hearing to
address issues of broadband access in rural America. The first
day of hearings examined the importance of broadband access to
economic development in rural America. The second day of
hearings addressed the entities that would provide broadband
services in rural America.
Infrastructure development always has been a key component
of economic development. Today communities that do not have
broadband access to the Internet face the same economic
barriers to economic development that communities, mostly
rural, faced in previous generations when railroads or
interstate highways bypassed them. Without broadband access,
rural communities will be unable to attract businesses that
need connectivity to the world. In turn, the rural areas will
lose population as children seek their fortunes in urban areas
connected to the global economy.
One of the biggest obstacles to rural broadband access is
affordability. Because of the sheer cost of new technology and
the associated access costs, the vast majority of small
business owners in rural America find themselves unable to
obtain services that the other parts of the country take for
granted. Estimates of providing broadband access in rural areas
may run to $11 billion. Little doubt exists that a digital
divide exists between rural and urban areas. The solutions may
involve panoply of different broadband providers such as
wireline and wireless local telephony, cable, and satellite
service.
Summary
The panelists for the first day of hearings were Mr. Robert
Nolley, President of Tubesock.Net; Mr. Gene Reich, Telehealth
Coordinator, Avera St. Luke's Hospital; Mr. Marvin Imus, Vice
President, Paw Paw Shopping Center; Mr. Jonathan D. Linkous,
Executive Director, American Telemedicine Association; and Ms.
Nancy Stark, Director of Community and Economic Development,
National Small Center Communities.
The panelists for the second day of hearings were Mr.
Michael Cook, Vice President & General Manager, Hughes Network
Systems; Mr. Thorpe Kelly, Senior Vice President for Sales &
Marketing, Western Wireless Corp.; Ms. Susan McAdams, Vice
President for External & Legal Affairs, New Edge Networks; Mr.
Randy W. Houdek, General Manager, Sulley's Butte Telephone
Cooperative; Mr. Kirby J. Campbell, Chief Executive Officer,
Armstrong Group of Companies.
Mr. Nolley testified his company was interested in
reselling high-speed Internet access. SBC decided not to
provide DSL service in the area of Indiana in which
Tubesock.Net operates. Mr. Nolley was able to obtain broadband
service to resell from the local cable operator. Mr. Nolley
noted that the service is used regularly by a variety of small
businesses and the Shelby County government. Mr. Nolley
concluded that broadband access was vital to the economic
health of Shelbyville, IN.
Mr. Reich testified that advanced technology would be a key
component of Avera St. Luke's survival. The hospital uses ISDN
service but is looking to upgrade to a higher speed service,
such as DSL or T-1 service. St. Luke's uses telecommunications
to provide continuing medical education, telemedicine services,
and community health programs. Mr. Reich noted that St. Luke's
uses its telecommunication services to reduce cost and cut down
on dangerous winter travel.
Mr. Imus testified that the grocery business relies heavily
on computer technology. Databases maintain what customers
purchase and high-speed Internet connections are necessary to
directly connect with wholesale suppliers thereby enabling more
efficient restocking of goods. The grocery store would utilize
more web-based services for customers if those customers had
access to broadband services.
Mr. Linkous noted that telemedicine represents a marriage
of advanced telecommunications technology and new approaches to
improving medical and health care. Telemedicine provides
consultations between rural clinics and specialists at major
medical centers, tele-homecare for patients unable to travel,
and access to a variety of medical databases. Mr. Linkous noted
that telemedicine couldn't properly function without broadband
access due to the amount of information being transmitted and
the need for high-quality transmission. Mr. Linkous concluded
that Congress should consider adopting a national strategy of
nationwide deployment of broadband and continue to fund
programs that assist rural health providers established by the
Telecommunications Act of 1996.
Ms. Stark testified that the National Center for Small
Communities published a guide for local communities on how to
obtain broadband access. The Center also is conducting a
yearlong project to assess the best practices for rural
communities to ensure that they can obtain broadband access.
Ms. Stark testified that less than one percent of residents in
communities with fewer than 10,000 residents have access to DSL
service. In contrast, 86 percent of the residents in cities
with more than 100,000 people have access to DSL service.
Similarly, 72 percent of the residents in cities with more than
250,000 people have access to cable modem service while only
onepercent of the residents in towns with less than 10,000
people have access to cable modem service. Small and medium-sized
enterprises are being forced to migrate to the Internet in order to do
business with larger companies. The inability to obtain broadband
access represents a substantial detriment to rural-based enterprises.
Ms. Stark concluded that market forces might not be sufficient to
ensure deployment of broadband technology in rural areas.
Mr. Cook testified that Hughes Network Systems was
developing a geostationary orbit satellite to provide broadband
access. Mr. Cook noted that three satellites will serve all of
North America without the need for non-traffic sensitive high
cost local telephone wires. Uplink and downlink speeds will be
substantially greater than typical broadband connections
utilizing T-1 technology. Mr. Cook concluded that the federal
government needs to ensure that satellite users have clear
spectrum without interference from terrestrial uses.
Mr. Kelly testified that Western Wireless first entered
rural markets to provide cellular telephone service. Western
Wireless then recognized that wireless telephony might be the
way to bring local competition, including broadband services,
to small businesses in rural areas. That avenue was enhanced
with the enactment of the Telecommunications Act of 1996
allowing any telecommunications provider to be an eligible
telecommunications carrier and thereby receive subsidies that
help defray the cost of serving low-density rural populations.
Mr. Kelly noted that designation as an eligible
telecommunications carrier is often caught between decisions by
the states and the Federal Communications Commission. Mr. Kelly
also concurred with Mr. Cook concerning the need for a sound
spectrum allocation policy to ensure that all providers have
access to the resources they need to deliver low-cost wireless
broadband access to rural Americans.
Ms. McAdams testified that the New Edge Networks is only
interested in serving communities with between 5,000 and 25,000
residents. New Edge Networks focuses on providing DSL service
by utilizing the existing network of the incumbent local
telephone company as mandated by the Telecommunications Act of
1996. Ms. McAdams concluded that the best way for her and
similarly situated companies to succeed was to leave the
Telecommunications Act of 1996 the way it is and provide the
FCC with greater enforcement powers.
Mr. Houdek testified that Sulley Buttes Cooperative serves
more than 13,600 customers in rural South Dakota. In contrast
to an urban area, which has 100 customers per mile of line,
Sulley Buttes has two customers per mile of line. Despite the
cost of installing broadband access given the non-traffic
sensitive costs, Mr. Houdek testified that Sulley Buttes will
have DSL-qualified lines in all of its 19 central offices by
the end of the year. Mr. Houdek concluded that competition in
rural areas must be tempered with concerns about universal
service and the funding for universal service assistance
overseen by the FCC.
Mr. Campbell testified that small cable operators, such as
Armstrong, are already providing broadband access in rural
America. Those customers include 1,100 businesses. Mr. Campbell
noted that it was illogical to provide incentives to larger
companies to provide broadband service in rural areas when
companies, such as Armstrong and other small cable operators
were already doing that. Mr. Campbell noted that the federal
government could take a number of actions to improve the
capability of small cable operators to provide broadband
services by ensuring access to capital through low-interest
loans, prohibiting forced carriage of analog and digital
broadcast signals, barring mandatory open access to internet
service providers in smaller markets, and ensuring that large,
vertically-integrated program providers do not abuse their
market power.
For further information on this hearing, refer to Committee
publication 107-9 (Part 1 and Part 2).
7.4.3 removing red tape from the department of labor's
apprenticeship approval process
Background
On September 25, 2001, the Subcommittee on Regulatory
Reform and Oversight of the Committee on Small Business held a
hearing to address the problems associated with approval of
apprenticeship programs pursuant to the National Apprenticeship
Act. Congress enacted the National Apprenticeship Act in 1937
to protect apprentices from abuse. After more than 40 years of
informal guidance, the Department of Labor issued regulations
to implement the National Apprenticeship Act. Those regulations
authorized states, using State Apprenticeship Councils (SACs),
to approve apprenticeship programs. In states that were not
ceded authority, the Department of Labor's regional offices
would approve apprenticeship programs. Companies operating
approved apprenticeship programs are authorized to pay a lower
wage to apprentices than the journeyman that would otherwise be
required for federal contracts under the Davis-Bacon Act.
Evidence exists that open shop apprenticeship programs have
substantial difficulties in obtaining approval from SACs.
Summary
The first panel consisted of the Honorable Roger F. Wicker,
United States House of Representatives (R-MS). The second panel
consisted of Mr. Ken Dunham, Executive Director, Inland
Northwest AGC; Mr. John Bonk, President M. Davis & Sons, Inc.;
Mr. John Herzog, Staff VP for Public Policy, Air Conditioning
Contractors of America; Mr. Robert J. Krull, National
Apprenticeship Coordinator, United Union of Roofers, et al.
Representative Wicker testified that contractors from
Mississippi have had substantial difficulties in obtaining
approval of apprenticeship programs. He noted that one
construction company spent nearly one million dollars and five
years to obtain approval of an apprenticeship program.
Representative Wicker then mentioned that applicants could not
even obtain a consistent answer from a SAC concerning
deficiencies in the application. Representative Wicker
testified that he introduced H.R. 1950 to ensure that
applicants can obtain information concerning the deficiencies
in the application and have an appeal right to the national
office of the Department of Labor.
Mr. Dunham testified for the need to enact H.R. 1950. He
noted that it in some circumstances it has taken nine years and
hundreds of thousands of dollars in litigation fees to obtain
approval of an open shop apprenticeship program from the
Washington SAC.
Mr. Bonk testified that his company has spent large sums on
training. Mr. Bonk noted that the SAC in Delaware will not
approve an open shop apprenticeship program so Mr. Bonk's
company has not even bothered to apply. Mr. Bonk said that H.R.
1950 would help his company obtain approval of apprenticeship
programs.
Mr. Herzog first noted that heating, ventilation, and air
conditioning contractors have an inordinately difficult time in
getting workers. Mr. Herzog then testified about the
continually shifting standards, none of which were specified in
writing, that Oregon would impose on open shop air conditioning
contractors seeking approval of an apprenticeship. Mr. Herzog
noted that H.R. 1950 would prevent the state of Oregon from
operating in this manner.
Mr. Krull testified that the apprenticeship process has
worked for more than 60 years. While changes may need to be
made, legislation should not be introduced that lessens the
standards in apprenticeship programs. Mr. Krull recognized that
some changes may be required in the approval process but those
changes should occur through regulation not legislation.
For further information on this hearing, refer to Committee
publication 107-25.
7.4.4 september 11, 2001 plus 30: are america's small
businesses still grounded?
Background
On September 11, 2001, terrorists associated with the Al-
Qaeda network founded and overseen by Osama Bin-Laden hijacked
four commercial airliners. Two of the airlines were crashed
into the World Trade Centers (which subsequently collapsed
killing approximately 2,900 people). One was crashed into the
Pentagon and the fourth crashed in rural Pennsylvania.
Immediately thereafter, and pursuant to the authority to
regulate aviation in the country, the Federal Aviation
Administration grounded all non-military aviation in the United
States. The federal government then instituted security
measures, which allowed commercial aviation to resume flying.
Restrictions on general aviation were continued and only slowly
removed. In the areas of impact--Washington, DC and New York,
NY, greater restrictions on general aviation remain in effect.
The economic consequences of the post-September 11, 2001
events exacerbated an already weakening economy. The federal
government provided financial assistance to the troubled
commercial aviation business. For small businesses located in
the Washington, DC and New York metropolitan areas, the Small
Business Administration provided economic injury and physical
disaster loans. However, many aviation-related businesses
(including general aviation) and aviation-dependent businesses
(including most businesses in the travel industry) suffered
without the provision of governmental assistance. The hearing,
by the Subcommittee on Regulatory Reform and Oversight of the
Committee on Small Business was held on October 11, 2001 to
examine the effect of the events of September 11 on small
business and what assistance is needed to help the small
businesses recover.
Summary
The first panel consisted of the Honorable James K. Coyne,
United States House of Representatives (Ret.) President,
National Air Transportation Association; Ms. Maureen Tarascio,
President, Air East Management; Mr. David Wartofsky, Partner,
Potomac Airfield; Mr. Quintin DeGroot, President, Spencer
Avionics; and Mr. George Doughty, Executive Director, Lehigh
Valley International Airport. The second panel consisted of Ms.
Bonnie Adams, President, Lewiston Travel Bureau; Mr. William H.
Swift, President, Business Traveler Services, Inc.; Mr. Hector
Torres, Vice President, Capital Hotels; and Mr. David
Cheseboro, President, DOTS Motorcoaches.
Mr. Coyne testified that general aviation provides an
important contribution to the American economy and is often the
only provider of air transportation in many rural areas. Mr.
Coyne noted that general aviation, even after one month,
continued to suffer dramatically due to restrictions imposed by
the Federal Aviation Administration. Mr. Coyne recommended
enactment of H.R. 3007, the General Aviation Small Business
Relief Act of 2001, which would provide, among other things,
grants to general aviation businesses that have suffered due to
the restrictions on their operations.
Ms. Tarascio testified that Air East is a family run
business operating within the very restrictive no-flight zone
around New York City. In other words, Air East has been
fundamentally been unable to operate since the events of
September 11, 2001. That has resulted in a loss of $4,000 per
day. Even after partial reopening on October 6, 2001, Air East
continued to face substantial financial difficulties. Ms.
Tarascio also supported the enactment of H.R. 3007.
Mr. Wartofsky operates an airfield in Fort Washington,
Maryland not far from the Pentagon, the way the crow flies. The
airfield is technically open but if any planes try to fly in or
out they will be shot down. The financial losses will amount to
$603,000 if the airport would reopen immediately which Mr.
Wartofsky noted was not imminent. Mr. Wartofsky recommended the
enactment of H.R. 3007.
Mr. Doughty testified that the small airports face three
problems: (1) increased operating costs through additional
security measures; (2) service reductions by major airlines
into smaller markets thereby reducing landing fee revenues; and
(3) fewer passengers result in less revenue from parking,
concessions, and other airport businesses. Mr. Doughty noted
that Lehigh Valley International Airport would lose
approximately 1.8 million dollars a year if the changes wrought
by the events of September 11, 2001 were permanent. Mr. Doughty
made two recommendations: (a) federal financial assistance
should be provided to cover financial security; and (b) reduce
restrictions on the use of Airport Improvement Program and
Passenger Facility Charges.
Mr. DeGroot testified that his business relies on the
ability of general aviation planes to fly to his shop at the
Spencer, IA airport. The restrictions on flights resulted in a
9-day loss exceeding $15,000, which continued unabated as of
the hearing. Mr. DeGroot noted that he had to cut his own pay
33 percent to keep his technicians employed. He also noted that
there are substantial premium increases for insurance. Mr.
DeGroot recommended that the federal government develop a plan
to allow the delivery of registered aircraft (both American and
foreign-owned) to repair stations. Mr. DeGroot also requested
that the disaster area declared by the President be expanded to
include areas outside Washington, DC and New York. Subsequent
to the hearing, the Small Business Administration took action
to increase the availability of economic injury disaster loans
beyond the New York and Washington metropolitan areas.
Ms. Adams noted that travel agencies operated through the
September 11 aftermath by helping their clients find
alternative routes of getting to their destinations and
rebooking flights when the government permitted the resumption
of commercial aviation. Nevertheless, the events of September
11 exacerbated the unwillingness of Americans to travel
resulting in the cancellation of many plans. This dramatically
reduced income for travel agents. Ms. Adams noted that her
travel agency has, with the cooperation of creditors, been able
to continue to operate but for how long she was unsure. Travel
agents need immediate cash to stabilize their businesses,
expansion of the Small Business Administration's Economic
Injury Disaster Loan program, low interest loans, and loan
forgiveness in certain cases.
Mr. Swift testified that airport concessionaires are
typically small minority or women-owned businesses and have
suffered severe economic injuries. Mr. Swift recommended a
number of options to assist concessionaires: (a) a set
percentage of federal airport assistance be dedicated to
airport concessionaires; (b) a moratorium on declaring
concessionaires in default of their concession contracts; (c)
restructuring existing concession contracts; and (d) allow
concessionaires to restructure their pricing of goods and
services.
Mr. Torres noted that the closure of Ronald Reagan National
Airport had a devastating impact on the travel industry in
Washington, DC because it gives the appearance that the
nation's capital is closed for business. Mr. Torres testified
that hospitality industry in the Washington, DC area was losing
$10 million a day since the events of September 11. Mr. Torres
requested that the federal government resume full operation of
Ronald Reagan National Airport, expedite the launch of the
General Service Administration's Premier Lodging Program, and
provide tax credits to employers to maintain health care
coverage for their workers.
Mr. Cheseboro testified that intercity motor coach
operators are typically small businesses with about ten buses
in operation. Mr. Cheseboro noted that his primary source of
income is providing transportation from Daytona Beach, FL to
the Orlando airport for businesses. Due to the events of
September 11 and the subsequent unwillingness of people to fly,
Mr. Cheseboro expected that his revenue will be reduced by
about 25 percent but he still must cover all of his costs,
including payments on motor coaches and salaries for employees.
Like the other witnesses, Mr. Cheseboro requested federal
financial assistance for those travel businesses harmed by the
events of September 11.
For further information on this hearing, refer to Committee
publication 107-31.
7.4.5 small business access to competitive
telecommunication services
Background
On November 1, 2001, the Subcommittee on Regulatory Reform
and Oversight of the Committee on Small Business held a hearing
to examine Federal Communications Commission (FCC)
implementation of the Telecommunications Act of 1996. In
particular, the hearing examined whether the implementation of
the Act was inhibiting the ability of firms competing with
incumbents to serve small business customers. The genesis of
the hearing stems from the FCC's failure to comply with the
Regulatory Flexibility Act and Small Business Act when it made
the determination that switching would not be available as an
unbundled network element for carriers serving customers with 4
or more telephone lines.
In 1996, Congress passed the Telecommunications Act. The
Act was designed to remove the barriers that prevented
competition in the local telephone market. The Act mandates
incumbent local telephone companies (those that were members of
the National Exchange Carriers Association as of February 8,
1996) to offer competitors unbundled network elements. The FCC
was charged with determining which elements the incumbents had
to offer and develop an appropriate pricing scheme for state
commissions to implement. In Iowa Utilities Board v. FCC, the
Supreme Court held that the FCC improperly determined which
elements needed to be unbundled for purposes of the Act and
remanded the case to the FCC for reconsideration. The FCC
reexamined that decision and in November of 1999, issued an
order limiting the availability of switching (the functionality
that routes telephone calls) as an unbundled network element to
those competitors serving customers with less than four
telephone lines. The former Chairman of the Committee on Small
Business, the Honorable James Talent (R-MO), sent an ex parte
communication to the FCC noting that the decision on the
availability of switching as an unbundled network element
violated the Regulatory Flexibility Act and the size standard
determination provisions of the Small Business Act. The FCC
failed to take any action, which demonstrated its intention to
comply with the law so the Subcommittee convened this hearing.
Summary
The panelists were Mr. Joseph A. Gregori, CEO, InfoHighway
Communications Corp.; Mr. Richard Burk, President & CEO, NII
Communications; Mr. Robert A. Curtis, President, Z-Tel Network
Services, Inc; and Laurence May, Esq., Partner, Angel &
Frankel.
Mr. Gregori testified that InfoHighway is a small business
trying to serve small business customers who are often
overlooked by the incumbent local telephone companies. While
InfoHighway is interested in building its own network, it is
taking a smart build approach to that process by constructing
only when it is certain that it has the customer base needed to
support the considerable capital investment required for
network construction. In the interim, InfoHighway uses
something called UNE-P or unbundled network element--platform
to offer service. It takes certain unbundled network elements
that it needs to provide service and combines that with its own
facilities to offer service. One of the requirements that it
needs is unbundled switching service because it does not have
the customer base to invest in a switch to serve all of the
customers in a particular area. Furthermore, it cannot obtain
switching service for many small business customers from
existing competitors that might have a switch in the area.
Mr. Burk testified that his company is breaking even which
is unusual for a start-up telecommunications provider. His
company has $20 million in revenue, which may seem like a lot
of money but is very small for the telecommunications business.
Mr. Burk's small business customers are spread out over 250
small Texas towns and it would be prohibitively expensive for
him to install switches to serve these customers given their
geographic breath throughout Texas. If the Commission
eliminates switching as an unbundled network element, he will
not be able to provide UNE-P service and his customers, such as
Longmeyer Plumbing in Abilene, will have no competitive choice.
Mr. Robert Curtis testified about the explosive growth of
Z-Tel, which in the last two years went from a company with no
revenue to one with $300 million in revenue and 250,000
customers in 35 states. That growth has occurred because of the
availability of switching as a component in the UNE-P. Without
it, Z-Tel would have faced the financially impossible task of
constructing a network to serve its far-flung customers. Z-Tel,
which wants to offer a telecommunications solution to insurance
agents of a big insurance company, is unable to do so because
they cannot get switching capacity that they need in large
metropolitan areas. Absent economies of size and scale, it is
impossible for Z-Tel to compete without access to unbundled
network elements. Mr. Curtis concluded that it discriminates
against small business providers and small business users of
telecommunication services.
Mr. May testified that he is partner in a small (for New
York) law firm that employs 20 people. Mr. May relies heavily
on telecommunication services for legal research and, because
his firm does bankruptcy work, for electronic filing of court
papers. Mr. May switched carriers to InfoHighway because they
provided service better tailored to the firm's needs at a lower
price than the incumbent. Mr. May concluded that maintenance of
choice for local telephone service was important to his firm.
For further information on this hearing, refer to Committee
publication 107-34.
7.4.6 epa rulemaking: do bad analyses lead to irrational
rules?
Background
On November 8, 2001, the Subcommittee on Regulatory Reform
and Oversight of the Committee on Small Business held a hearing
to examine whether Environmental Protection Agency (EPA)
regulations have sufficient grounding in economics and science.
The genesis of the hearing was a roundtable of small business
groups convened by the Subcommittee in June, 2001. One of the
primary issues raised by small business groups was the
inadequacy of EPA scientific and economic analyses.
The polestar of the rulemaking process is that regulations
must be rational. When Congress passed the Administrative
Procedure Act in 1946, it believed that the process of notice
and comment rulemaking would be sufficient to insure a rational
outcome. After the regulatory onslaught of the 1970s, which saw
the creation of the EPA and the enactment of many statutes that
EPA implements by rulemaking, Congress and the executive branch
determined that further refinements were necessary. Congress
imposed new analytical requirements through the Paperwork
Reduction Act and the Regulatory Flexibility Act to assess the
impact of regulations on small businesses and other small
entities. Presidents Reagan, Bush, and Clinton also imposed
cost-benefit analysis requirements through Executive Orders.
The hearing addressed whether EPA's analysis under these
various requirements were adequate.
Summary
The panelists were Mr. Randall Lutter, Ph.D., Resident
Scholar, AEI-Brookings Joint Center for Regulatory Studies; Ms.
Fern Abrams, Director of Environmental Policy, IPC--Association
Connecting Electronics Industries; Mr. Andrew Bopp, Executive
Director, Society of Glass & Ceramic Decorators; James Conrad,
Esq., Counsel, American Chemistry Council; Ms. Anne Giesecke,
Ph.D., Director, Environmental Activities, American Bakers
Association.
Dr. Lutter stated that the primary reason for poor analyses
from EPA was the lack of incentive for better research. EPA's
analyses are rarely peer-reviewed and courts almost always
defer to EPA on these matters. Furthermore, most statutes that
EPA implements do not require any sort of cost-benefit analysis
and courts will not impose one if Congress did not. Dr. Lutter
made four recommendations for improving EPA's analyses: (1)
Congress should create a separate Office of Policy Analysis
within EPA and charge that office with doing all risk
assessments and cost-benefit analyses; (2) Congress should
require that EPA cost-benefit analyses adhere to established
principles of high quality; (3) Congress should ask an agency
other than EPA to conduct peer review of their analyses; and
(4) Congress should fund the office within the General
Accounting Office created by the Truth in Regulating Act.
Ms. Abrams testified about the impacts that EPA's proposed
Metal Processing & Machining rule would have on small
businesses, including most members of her trade association.
According to Ms. Abrams, the Clean Water Act requires that
effluent limits be based on best available technology that is
economically achievable but the proposed limits are neither
achievablenor economical. For example, EPA assumed that there
will be no increase in monitoring costs when many small businesses will
face costs of $1,000 to $350,000 per facility. Furthermore, EPA
considered that the compliance costs, which often exceed a firm's
profits, would still be profitable by passing on costs to customers
even though competition in the circuit board industry would prevent
that.
Mr. Bopp testified that EPA failed to adequately assess the
economic impact of changes to the lead Toxic Release Inventory
(TRI) rule. Despite EPA's finding that stone, clay, glass, and
concrete products was among the five largest lead reporting
groups under its TRI rules, EPA did not perform a separate
assessment of the impact on glass and ceramic decorators. Mr.
Bopp went on to state that large manufacturers may only use a
few lead-based colors because they have manufacturing runs of
the same item in hundreds of thousands or millions while
smaller manufacturers use dozens of lead-based colors for runs
in the single digits. EPA also assumed, incorrectly according
to Mr. Bopp, that there would be no first time filers even
though EPA's new rule reduced the threshold reporting
requirement to 100 pounds from 10,000.
Mr. Conrad expressed significant concerns over the failure
of EPA to assess the economic impact of its proposed Cross
Media Electronic Reporting and Recordkeeping Rule (CROMERR).
For example, utilizing EPA's own data, the American Chemistry
Council estimated that the cost of compliance for all
industries would be $48 billion. EPA did not consider these
costs because EPA concluded that CROMERR implementation would
be voluntary--a conclusion disputed by Mr. Conrad. Mr. Conrad
also noted that the proposed regulation was based on a similar
rule adopted by the Food and Drug Administration (FDA) for
pharmaceutical manufacturers. As Mr. Conrad concluded, the
purposes of the FDA rule and the EPA proposal are quite
different--one protects the environment; the other is designed
to ensure that drugs taken by sick people will actually have
the prescribed prophylactic effect. The risks associated with
the latter are sufficient to warrant a costly electronic
reporting and recordkeeping requirement. EPA failed to
recognize this in its analysis according to Mr. Conrad.
Dr. Giesecke testified that EPA's total maximum daily load
rule (TMDL) seriously misconstrued the available science and
severely underestimated the impacts on small businesses and
small governmental entities. Dr. Giesecke noted that EPA
estimated the economic cost for establishing TMDLs on an annual
basis at between $63 and $69 million. In contrast, the state
regulators who would actually have to develop the TMDLs
calculated that the cost would be between $1 and $2 billion
annually. Dr. Giesecke did not take account of the fact that
most states did not have the data needed to construct a
scientifically sound TMDL. Finally, Dr. Giesecke stated that
EPA severely underestimated the cost to industry of compliance
with the TMDL program. Even the National Academy of Sciences
found numerous methodological, scientific and economic errors
in EPA's analysis, according to Dr. Giesecke.
For further information on this hearing, refer to Committee
publication 107-35.
7.4.7 issues in the travel agency business
Background
On May 2, 2002, the Subcommittee on Regulatory Reform and
Oversight of the Committee on Small Business held a hearing to
address issues affecting travel agencies. In particular, the
hearing examined the impact of changes in the distribution and
sale of airline tickets.
Travel agents play a vital role in ensuring that Americans
reach their intended destinations. Their necessary role was
evident in the aftermath of the events of September 11, 2001
when travel agents were in their offices trying to help
stranded air travelers get to their destinations. Travel
agents, who used to rely on commissions from airlines for a
large segment of their revenue, are facing economic change
forced by reductions and eliminations of those commissions.
Travel agents are now facing competition from on-line services,
such as Onetravel.com and Orbitz. Customers are also using the
Internet to investigate travel options besides airline tickets
and are doing there own travel reservations and booking. These
profound changes will require travel agencies to readjust.
However, to the extent that travel agencies are being forced
out of business by unfair trade practices of airlines trying to
extend their market power from air transportation to the travel
agencies, the government may need to take action particularly
in light of the funds that Congress has committed to rescuing
the commercial airline industry after September 11.
Summary
There were two panels. The first panel consisted of The
Honorable Mark Foley, the United States House of
Representatives (R-FL). On the second panel were: Mr. Lou
Fenech, General Manager, Royal Holiday Travel; Celeste Siemsen,
President, Empress Travel; Mr. Stanley Morse, President,
Marstan Travel; Ms. Jacquelyn Alton, Owner, CWT/Almeda Travel;
Gary Doernhoefer, Esq., Vice President & General Counsel,
Orbitz, Inc.; and Mr. Michael Thomas, President, OneTravel.com.
Mr. Foley testified that he was troubled by the bailout of
the airlines because that the funds used to bail them out would
not filter down to the airline's employees or the many
businesses that rely on airline travel, such as travel agents.
Mr. Foley testified the cancellation of commissions by airlines
bore out his concern. Mr. Foley concluded by noting that the
ratcheting down and cancellation of commissions did not stem
from the events of September 11, 2001 but had been going on for
a number of years.
Mr. Fenech testified that most travel agencies are small
businesses with a majority owned by women. He went on to state
that travel agencies are suffering as a result of a downturn in
the economy, changes in how airlines do business, and the
lingering effects of September 11, 2001. Mr. Fenech noted that
airlines received an estimated $15 billion from the government
as a result of the economic fallout from September 11, 2001.
Nevertheless, the airlines have gone on to cut commissions from
travel agents, boost their own on-line web service (Orbitz),
and raise prices. Mr. Fenech further noted that the
cancellation of commissions is not happening in other
countries,just in the United States. Mr. Fenech concluded with
a plea to enact H.R. 1734, which would give travel agents access to all
fares established by airlines, including exclusive web-based fares.
Ms. Siemsen testified about two threats to travel agents.
The first is unfair commission policies and the second is
restrictions on selling airline tickets over the Internet.
According to Ms. Siemsen, the airlines took their taxpayer-
funded bailout monies and then proceeded to eliminate
commissions paid to travel agents in an attempt to drive them
out of business. Ms. Siemsen opined that travel agents should
get some form of antitrust immunity to level the playing field
in bargaining with commercial airlines.
Mr. Morse commenced his testimony with the statistic that
travel agents played a key role in the increase in air travel
during the previous decade by producing over 80 percent of the
airline tickets for the traveling public from 1991 to 2000.
Despite this, airlines have cut commissions resulting in a loss
of more than 5,000 travel agencies since 1995. The elimination
of airline fees has caused many travel agents to start charging
fees for their travel planning services. Mr. Morse noted that
travel agents cannot book airlines' web-based fares and this
inability reduces the likelihood that a customer would use a
travel agent for obtaining air travel. In turn, that traveler
is more likely to make other travel arrangements by themselves
further impinging on travel agency revenue.
Ms. Alton testified that travel agents do not have
sufficient opportunities to bid on and retain federal
contracts. There are few small business set-asides for travel
agents. Ms. Alton further mentioned that federal agencies
contracting officers are bundling travel management and
information technology services making it nearly impossible for
small businesses to bid. Ms. Alton noted that federal agencies
must perform A-76 studies (to assess whether they can save
money by contracting out services) before issuing travel
management contracts. Delays in payment from the federal
government have only exacerbated the financial predicament of
travel agencies caused by the elimination of commissions from
commercial airlines. Ms. Alton summarized her testimony with
the conclusion that small travel agents remain at a serious
disadvantage in bidding for federal contracts, an arena that
they could move to in order to replace the lost commissions
from commercial airlines.
Mr. Doernhoefer testified that the airlines created Orbitz
because the existing distribution system for tickets was
inefficient and expensive. The distribution costs included
computerized reservation systems which charged the airlines for
each ticket booked not the travel agents for supplying the
system. If airlines could find a way to reduce their
distribution costs, that would result in lower fares to
consumers. Mr. Doernhoefer suggested consumers would be willing
to pay for good service by travel agents and travel agents have
started requiring customers to pay for their reservation
services. Mr. Doernhoefer testified that the real problems
faced by travel agents are not competition from Orbitz but the
spiraling costs incurred by airlines through the operation of
independent computer reservation systems. Mr. Doernhoefer noted
that Orbitz was designed to promote competition among computer
reservation systems. The system is not selective but allows any
airline into the distribution system. Mr. Doernhoefer expects
that the Internet will ultimately force computerized
reservation systems out of business and allow travel agents to
focus on providing a fee-based service to their customers.
Mr. Thomas owns a computerized travel agency and raised two
primary concerns about Orbitz. First, Mr. Thomas noted that
Orbitz has a most-favored nations clause in its contracts. This
requires airlines to offer to Orbitz any fare that they offer
elsewhere even those on their own websites that are special
promotional Internet fares. Without access to these fares,
Orbitz's competitors, like OneTravel.com, cannot hope to
compete. Second, Orbitz requires each airline to meet certain
promotional support mandates, which can be satisfied by
developing Orbitz-only fares. Even if the difference in fares
is only a few dollars, Mr. Thomas believes that customers will
seek out those Internet sites, such as Orbitz, that
consistently have the lowest fares. Mr. Thomas rejected
contentions that Orbitz's spectacular growth was because of a
better search-engine technology. Rather, Mr. Thomas believes
that Orbitz has grown because of the anti-competitive nature of
its contracts with airlines. Mr. Thomas concluded that Orbitz
competitors must have access to all airline fares.
For further information on this hearing, refer to Committee
publication 107-55.
7.4.8 the cost of regulation to small business
Background
On June 6, 2002, the Subcommittees on Regulatory Reform and
Oversight and Workforce, Empowerment, and Government Programs
held a joint hearing on the cost of regulation to small
business.
The purpose of the hearing was to discuss the
disproportionate burden of regulations to many small
businesses. Current efforts to take small businesses into
account when federal agency rules are drafted as well as future
regulatory reform initiatives were discussed.
Two reports were the background for the hearing. First, the
SBA Office of Advocacy's report entitled ``The Impact of
Regulation on Small Firms'' by Drs. Crain and Hopkins, which
estimated that small firms pay 60 percent more per employee for
regulations than large firms. The second, ``Draft Report to
Congress on the Costs and Benefits of Federal Regulations''
written by Dr. John Graham and his staff at the Office of
Information and Regulatory Affairs (OIRA) in the Office of
Management and Budget detailed the net loss and net benefit to
the country from regulation.
Summary
The first panel consisted of the Honorable John Graham,
Ph.D., Administrator of the Office of Information and
Regulatory Affairs (OIRA) in the Office of Management and
Budget and the Honorable David McIntosh, former Member of
Congress (R-IN) and a partner at Mayer, Brown, Rowe, and Maw.
The second panel included: Robert Hahn, Ph.D., Director of the
AEI-Brookings Joint Center on Regulatory Studies, Mr. Andrew
Langer, Manager of RegulatoryAffairs at the National Federation
of Independent Business, and Raymond Arth, President, Phoenix Products
who also represented National Small Business United.
Dr. Graham discussed OIRA's progress on holding agencies
accountable to the Regulatory Flexibility Act (RFA). He touted
his 20 returned regulations as serious progress. He also made
special note of his partnership with SBA's Office of Advocacy
on implementing the RFA and taking into account the effects of
regulation on small businesses. Dr. Graham noted that his staff
is sufficiently small to require the expertise of the Office of
Advocacy to communicate to OIRA when an agency has violated the
RFA and SBREFA requirements in writing regulations.
Representative McIntosh discussed future regulatory reform
initiatives including: improvements to the Regulatory
Flexibility Act and SBREFA to ensure agency compliance and
expansion of Executive Order 12360 to provide greater
protection against private property takings by the federal
government. He also noted that in his time at the White House
Council of Competitiveness chaired by then Vice President
Quayle, that oftentimes larger firms saw federal regulation as
a competitive advantage against smaller firms because it
created an increased cost to entry in certain businesses.
Dr. Hahn discussed OIRA's current analytical work and its
efforts to improve analyses in federal agencies. He recommended
making regulatory impact analyses publicly available on the
Internet; providing a regulatory impact summary table for each
regulatory impact analysis that includes information on costs,
benefits, technical information, and whether the regulation is
likely to pass a benefit-cost test; establishing an agency or
office outside the executive branch to independently assess the
economic merits of existing and proposed federal rules;
requiring that the head of a regulatory agency balance the
benefits and costs of a proposed regulation; and requiring that
all regulatory agencies adhere to established principles of
economic analysis when doing a regulatory impact analysis.
Mr. Langer testified that federal policy makers often view
the business community as a monolithic enterprise that is
capable of passing taxes and regulatory costs onto consumers
without suffering negative consequences. He argued that for
small businesses that is not the case. They are small entities
without payroll departments, tax departments or attorneys on
staff. He identified tax related paperwork burdens as greatest
to his members as well as health, environment, safety, and
employment regulations like the Family and Medical Leave Act.
Mr Arth discussed agency non-compliance with the Regulatory
Flexibility Act and the importance of legislative changes
including adding the IRS to the SBREFA process. Full Committee
Chairman Manzullo was praised for his Small Business Advocacy
Improvement Act and Ranking Member Velazquez gets praise for
her act aimed at tracking the paperwork burden to small
businesses. He also stressed the importance of better cost-
benefit analysis and risk assessment in determining regulatory
priorities.
The hearing concluded with a consensus on improvements to
the regulatory process and enhancing its sensitivity to the
disproportionate burden on small business.
For further information on this hearing, please refer to
Committee Publication 107-60.
7.4.9 the tri lead rule: costs, compliance, and science
Background
On June 13, 2002, the Subcommittee on Regulatory Reform and
Oversight held a hearing to examine the impact on small
businesses of EPA's final rule lowering the threshold for
reporting releases of lead and lead compounds.
The purpose of the hearing was to discuss the Environmental
Protection Agency's rule for lead and lead compounds on the
Toxic Release Inventory (TRI). The new lower threshold for lead
reporting set July 1, 2002 as the due date for 2001 reporting.
Thousands of small businesses were required to report for the
first time under the TRI regime. EPA had undertaken several
efforts to inform and guide newly regulated businesses. The
hearing sought to investigate the cost and burden of compliance
to small businesses as well as the science behind the rule's
designation of lead as a persistent, bioaccumulative, and toxic
(PBT) chemical.
Summary
The first panel consisted of the Honorable Kim Nelson,
Assistant Administrator for Environmental Information, U.S.
Environmental Protection Agency. The second panel included: Mr.
Dennis McGuirk, President of the IPC-Association Connecting
Electronics Industries; James Mallory, Executive Director of
the Non-Ferrous Founders' Society; Ms. Nancy Klinefelter,
President of the Baltimore Glassware Decorators for the Society
of Glass and Ceramic Decorators; and Mr. Hugh Morrow, President
of the North American Office of the International Cadmium
Association. Written testimony was also submitted from the
SBA's Office of Advocacy, the National Association of
Manufacturers, and the Mercatus Center.
Administrator Nelson defended the EPA's TRI Lead rule and
the process by which it was promulgated. She felt there were
few scientific issues in question and that her office had done
an unprecedented amount of outreach and compliance assistance
on this rule. Representatives from regulated industries would
later disagree. She also discussed an upcoming Science Advisory
Board review of an agency-wide framework for characterizing and
ranking metals. During questioning, she disagreed with
Committee Members on doing the science review before the rule
was finalized and rejected criticism of her outreach to small
businesses as inadequate. She also downplayed the primacy of
science in agency policymaking until confronted with quotes
from Administrator Christine Todd Whitman's confirmation
hearing where she stated that ``science would drive policy'' at
the EPA.
Mr. McGuirk discussed the impact of the rule on small
circuit board makers who use lead solder in their products. He
suggested that EPA failed in its SBREFA responsibilities by
certifying that this rule would not have a significant impact
on small businesses. He showed the panel EPA's compliance guide
and other information that run to 746 pages. He also shared
EPA's own estimate for compliance in the first year, which was
$7,000 per facility.
Mr. Mallory presented testimony on the uniqueness of some
industries affected by the TRI Lead rule. He showed that EPA
failed to account or take into consideration the effects its
rule would have on the foundry industry in particular.
Commercial grade aluminum contains trace quantities of lead,
which are not measured or calculated currently. Each of 70
different aluminum alloys would have to be tested to find their
exact trace lead content to comply with the new EPA rule. Under
past iterations of the rule a de minimis exemption was allowed
for reporting.
Ms. Klinefelter, a small business owner, described the
process by which she has to attempt to calculate her lead usage
in her ceramic mug decorating shop. Each colored dye she uses
has trace amounts of lead in different quantities. She
estimated that it will take hundreds of hours per year to
accurately track and report lead usage in her shop that will
ultimately include zero releases of the substance. She also
expressed concern that in the first reporting year she was
being retroactively required to account for four months before
the rule was actually finalized.
Mr. Morrow discussed the scientific problems behind the
rule. He mentioned the fact that in both EPA sponsored
workshops and from the House Science Committee, questions have
been raised about the validity of applying PBT methodology to
metals. He argued that even the criteria themselves are
inappropriate for metals such as persistence. Persistence is an
appropriate criterion for organic chemicals but all metals by
their nature are persistent. Also the uses of bioaccumulation
or bioconcentration factors are not useful indicators of hazard
for metals. In fact, he stated, higher BAFs/BCFs may indicate a
lower risk for toxicity. He cited the same EPA Metals Framework
Document that Administrator Nelson cited as evidence that EPA
has called these same criteria into question.
The hearing concluded with calls for further investigation
and additional questions for Administrator Nelson and EPA to
answer.
For further information on this hearing, please refer to
Committee Publication 107-62.
7.4.10 the small business health market: bad reforms,
higher prices, and fewer choices
Background
On July 11, 2002, the Subcommittee on Regulatory Reform and
Oversight held a hearing to examine the small group health care
reforms of the 1990s that have led to exceedingly high rates
for small employers. According to Milliman USA (the nation's
largest health care actuarial company) the small group market
no longer exists in 41 states. The hearing would explore the
problems of access to small group coverage as well as proposed
solutions.
Summary
The hearing comprised one panel of witnesses including: Mr.
Mark Litow, Consulting Actuary for Milliman USA; Mr. Ray
Keating, Chief Economist for the Small Business Survival
Committee; Merrill Matthews, Ph.D., Director of the Council for
Affordable Health Insurance; Wayne Nelson, President of
Communicating for Agriculture and the Self-Employed; and Mr.
Robert de Posada, President of the Latino Coalition.
Mr. Litow discussed the small group health market and how
guaranteed issue and community rating legislation at the
federal and State level have driven up prices and driven out
competition in many markets. He suggested that limited rating
bands or community rating force prices up for healthy customers
and eventually drive them out of the market. The development of
state based high-risk pools or health insurance safety nets as
some are called would help to alleviate such problems.
Guaranteed issue provisions in HIPAA and other State
legislation have given healthy people incentives not to buy
coverage until they are sick, thus driving up prices further.
The small group market functions the same way as the individual
market
Mr. Keating noted the dramatically escalating price of
insurance premiums for small businesses. He cited New Jersey's
experiment with guaranteed issue in 1994 that led four of the
biggest family coverage plans to increase costs by 344-612
percent by 2002. Kentucky passed similar legislation and 45
insurers left the market. Mr. Keating recommended Medical
Savings Accounts as one option to help restore sanity to the
health marketplace. Vouchers or tax credits should be used to
help those who truly can not afford health insurance rather
than expanding government provided health care.
Dr. Matthews compared guaranteed issue regulation to
allowing a person to purchase auto insurance after being
involved in a car wreck. He described community rating as
against our country's strong belief in the marketplace. Dr.
Matthews said that we don't allow the poor to just walk into
supermarkets and take whatever they want or raise the price of
those goods to provide for the free food; instead we provide
vouchers or food assistance to allow them to pay for the same
food in a market. He suggested premium assistance plans like
the Armey/Lipinski Fair Care bill were on track and state
established high-risk pools with some federal assistance would
provide corrections to current market trends.
Mr. Nelson expressed concern about similar state and
federal regulation and noted particularly some state rules that
required serving groups as small as one in group insurance. Mr.
Nelson expressed the satisfaction of small businesses with 100
percent deductibility for the self-employed for insurance
premiums, but that deductibility is important for individuals
who are not self-employed and purchase their own insurance.
Mr. de Posada discussed the high-uninsured population of
Hispanics in the United States. Over one third of Hispanics
were uninsured compared to 12 percent of non-hispanic whites.
Hispanicworkers are disproportionately employed in the service
industry or in small businesses that can not afford health insurance
for their employees. He suggested legislation already introduced on
Individual Membership Associations and Association Health Plans that
can dramatically reduce the cost to individuals and small businesses.
He also discussed tax law changes to help low-income individuals have
access to affordable health insurance.
For further information on this hearing, please refer to
Committee Publication 107-64.
7.4.11 federal farm programs: unintended consequences of
fav rules
Background
On September 19, 2002, the Subcommittee on Regulatory
Reform and Oversight held a hearing to examine the dramatic
effects that prohibitions on the planting of fruits and
vegetables (FAVs) will have on small growers and food
processors in the Midwest.
The Farm Security and Rural Investment Act of 2002 added
soybeans as a program crop for subsidy. Rules prohibiting the
growing of FAVs on program acreage were retained from the
previous farm legislation. The net result of these two choices
meant that large amounts of acreage would now be off limits for
the planting of fruits and vegetables for processing and could
have particularly dramatic effects on growers and processors in
the Midwest who rely heavily on rotating FAVs with soybeans and
other crops. The U.S. Department of Agriculture was in the
process of promulgating implementing regulations for these
rules when the hearing took place.
Summary
The hearing comprised one panel of witnesses including: Mr.
Dave Howell, President, Howell Farms; Brian Reichart, President
and CEO, Red Gold, Inc.; Dan Hartung, President of Hartung
Brothers; Mr. Paul Palmby, Vice President of Manufacturing,
Seneca Foods Corporation.
Mr. Howell, a farmer in Indiana, discussed the FAV rule
restrictions and how it would affect his business. He derives
50 percent of his gross revenue and a larger share of the
profits from fruit and vegetable production. He described the
difficulty of the regulations, which would potentially penalize
him in multiple ways for rotating his crops through program
acreage. Not allowing crop rotation because of these
restrictive rules would lead to a greater need for
insecticides, fungicides, and bactericides. These rules prevent
diversification, which is often necessary to fight off
difficult economic times for certain crops. It also makes
passing on assets to family members more difficult because of
the way FAV production history is calculated.
Mr. Reichart, head of tomato processing business, noted
that in a state like Indiana where 100 percent of tillable
acres are planted in corn or soybeans, then all land is
legislatively unavailable for fruit and vegetable production
unless a farmer removes himself from the federal farm program
permanently. One problem, as he sees it, is that there is no
way under the current rules to replace acreage lost when a
farmer closes up shop or changes to other crops. He made clear
that he did not support growing fruits and vegetables on acres
that receive a government payment. They advocate an acre for
acre reduction in federal payments for those acres planted in
FAVs.
Mr. Hartung, a Wisconsin grower, argued that the true
consequences of this rule would be to increase the amount of
acreage dedicated to soybeans and increase the cost to
taxpayers for that program. It will also reduce the amount of
acres available to processed FAVs and will in turn make canned
and processed fruits and vegetables more expensive to the
consumer.
Mr. Palmby, a Wisconsin-based processing executive,
discussed the unanimity of the Canned, Frozen Food and Grower
coalition which includes Seneca, Del Monte Foods, Chiquita
Processed Foods, Allen Canning, Lakeside Foods and many other
companies. He stressed the difference between the kind of
fruits and vegetables grown for processing from those that are
grown for fresh consumption. Many who favor these restrictive
rules believe it benefits fresh fruit and vegetable growers.
Often processing companies contract with growers ahead of time
for these crops. One of the more immediate impacts he noted is
that renters of land have stopped allowing those that rent from
them to grow FAVs on those acres.
The hearing concluded with calls to watch the USDA
regulations as they are promulgated and investigate ways to
recalculate base acreage through legislative corrections.
For further information on this hearing, please refer to
Committee Publication 107-69.
7.5 Summaries of the Hearings Held by the Subcommittee on Rural
Enterprises, Agriculture, and Technology
7.5.1 regrowing rural america through value-added
agriculture
Background
The Subcommittee on Rural Enterprises, Agriculture and
Technology held this hearing on the issue of value-added
agriculture on July 17, 2001.
This hearing was called to discuss how Congress could help
regrow rural America by providing opportunities for farmers to
create new value-added ventures. Farmers and ranchers want to
become ``price makers'' instead of just ``price takers,'' and
value-added enterprises will give them the ability to reach up
the agricultural marketing chain and capture profits generated
from processing their raw commodities. Agriculture is the life-
blood of many rural state's economies, and allowing producers
to participate in more value-added enterprises will greatly aid
the revitalization of rural communities.
The hearing also focused on two pieces of legislation
introduced by the Subcommittee Chairman. The first bill, H.R.
1093, The Value-Added Development Act for American Agriculture,
would provide $50 million in grant money to states to form
agriculture innovation centers. These centers would provide
desperately needed technical advise (engineering, business,
research, and legal services) to assist producers in forming
producer-owned value-added endeavors.
The second piece of legislation, H.R. 1094, The Value-Added
Agriculture Investment Tax Credit Act, would allow producers to
receive a 50 percent tax credit on investments in producer-
owned value-added enterprises. The bill provides a maximum tax
credit of up to $30,000 per year per producer, and the tax
credits may be applied over 20 years.
Summary
The subcommittee heard from a panel of four witnesses,
including: Mr. Wayne Nelson, President, Communicating for
Agriculture and the Self-Employed; Ms. Terry Jorde, President
and CEO, Country Bank USA; Mr. David Reis, President-elect;
Illinois Pork Producers Association; Mr. Jay Truitt, Executive
Director for Legislative Affairs, The National Cattlemen's Beef
Association.
The witnesses were all very supportive of value-added
agriculture, and stated that Congress needs to ensure that
producers are able to enter into value-added ventures. The
witnesses testified that developing new value-added agriculture
enterprises is vital part of Congress' efforts to improve the
economic standing of rural America. Value-added agriculture
helps farmers plan for the future by providing long-term
opportunities to market their products, and will help create
more jobs in rural areas. Witnesses involved in cattle and hog
production testified that the only way for family farmers to
survive in an era of consolidation among agriculture companies
is by creating value-added enterprises, allowing them to
capture more profits as they process their commodities into
value-added products.
All of the witnesses were very supportive of both H.R. 1093
and H.R. 1094, stating that government support in the form of
tax credits and research money would allow producers to create
new value-added businesses that would become self-sustaining.
In addition, the witness expressed their concerns about the
decline in rural America's economic situation, and testified
that value-added agriculture can be a great help in ending
rural America's declining economic fortunes.
For further information on this hearing, refer to Committee
publication 107-18.
7.5.2 renewable fuels
Background
The Subcommittee on Rural Enterprises, Agriculture and
Technology held a hearing on renewable fuels, on July 17, 2001.
The hearing was called to discuss the issue of renewable
energy and its importance in solving our nation's energy
crisis, and to explore ways in which Congress can help create a
more productive environment for the use of renewable fuels.
Renewable energy can take many forms, including ethanol,
biodiesel, wind, hydroelectric, and power generated by the
earth and sun. Increased use of renewable energy sources is
crucial to building a stronger domestic energy policy, and will
provide a positive economic impact to many rural areas.
The hearing also focused on two pieces of legislation
introduced by the Subcommittee Chairman. The first, H.R. 2423,
The Renewable Fuels for Energy Security Act of 2001, calls for
renewable fuels to play a larger role in America's
transportation market. The bill sets a national fuel standard,
gradually increasing the market share for renewable fuels to 2
percent by the year 2008, 3 percent by 2011, and 5 percent by
2016. A 3 percent market share for ethanol and biodiesel in the
U.S. would displace about 9 billion gallons of gasoline
annually, or between 500,000 and 600,000 barrels of crude oil
per day--the amount we now import from Iraq. H.R. 2423 sets a
nation-wide fuel standard, not a gallon-by-gallon mandate, and
will not force a level of compliance in places where compliance
may be difficult.
The second bill, H.R. 1636, would make ethanol cooperatives
eligible for the current small producer ethanol tax credit.
Under current law, a small ethanol producer is eligible for an
income tax credit of 10 cents per gallon, up to 15 million
gallons of production. H.R. 1636 expands eligibility for the
credit to producers whose annual ethanol production capacity is
below 60 million gallons. New cooperative ethanol processing
plants that are coming on line will have production capacities
of 40 to 60 million gallons per year, and this legislation will
ensure that small producers continue to be eligible for the
ethanol tax credit.
Summary
The subcommittee heard from one panel of witnesses,
including: Mr. Ron Heck, Member of the American Soybean
Association; Mr. Guy Donaldson, President of the Pennsylvania
Farm Bureau and member of the Board of Directors of the
American Farm Bureau; Mr. Robert Dinneen, Vice President,
Renewable Fuels Association; Mr. Conn Abnee, Executive
Director, Geothermal Heat Pump Consortium; Ms. Megan Smith, Co-
Director, American Bioenergy Association.
All of the witnesses testified about the benefits of
renewable fuels for meeting our nation's future energy needs,
and the importance of exploring new ways to meet the energy
demands of consumers. The witnesses stated that the public
wants alternative energy sources, and that the government can
help provide a boost to research and production by rewarding
companies that develop and/or produce different types of
renewable energy. The initial costs for producing renewable
energy sources can be high compared to current forms of energy,
and government help by tax credit or subsidy would help new
enterprises get a foothold in the market. In addition, all of
the witnesses testified about the environmental benefits
renewable energy sources provide, especially when ethanol and
biodiesel are used as additives to gas and diesel fuel.
The witness also discussed the importance of renewable
fuels to the farm economy. Many farmers are looking for new
markets for their products, and an increased use of renewable
energy would provide them with a large market for their
products. Some of the witnesses testified that the
infrastructure is in place to supply renewable fuel,
particularly ethanol, across the country. The witnesses also
discussed the problem of getting more renewable fuels accepted
by the petroleum refining industry, and stated that government
regulations setting standards for using additives are very
helpful.
For further information on this hearing, refer to Committee
publication 107-21.
7.5.3 small business access to technology
Background
The Subcommittee on Rural Enterprises, Agriculture and
Technology held this hearing on small business access to
technology on February 7, 2002.
The hearing was called to discuss the U.S. Department of
Commerce Study entitled ``Main Street and the Digital Age: How
Small and Medium-Sized Businesses are Using the Tools of the
New Economy.'' The study examines the differences in technology
investment and usage by small, medium and large companies. The
hearing explored how small businesses are using new
technologies to their advantage, difficulties they might be
experiencing in gaining access to new and necessary
technologies, and how employees of small businesses are
utilizing new technology skills at their jobs.
In addition, the subcommittee examined how small business
owners in rural areas are utilizing new technologies. Job
creation is vital to the small communities and rural areas of
our country, and access to technology will help stem population
loss in rural areas. Farmers and ranchers, health care workers
and retail store owners realize that if they want to keep and
attract quality employees, they need to have better access to
technology. These entrepreneurs understandthat in order to
remain competitive in an increasingly consolidated marketplace, they
need reliable and affordable access to technology. Small business
owners are looking at technology to better manage inventory and
customer needs, allow the business to purchase and sell online, and
help consolidate the massive amounts of paperwork owners are faced with
on a daily basis.
The Commerce Department study found that small employers
are investing less in technology on a per employee basis than
their larger competitors, and in two crucial Information
Technology (IT) categories, computers and communications, the
difference is pretty significant. The study also found that
small businesses are less likely than larger firms to buy or
sell over the Internet, and that their employees are much less
likely to regularly use a computer at work.
Summary
The subcommittee heard from one panel of witnesses,
including: The Honorable Kathleen Cooper, Undersecretary for
Economic Affairs, U.S. Department of Commerce.; Mr. Tim
Aughenbaugh, President and CEO of IdentityPreserved.com; Mr.
Ralph Richmond, President of USA Cartage; Mr. Per Hugh-Jensen,
Owner, Bowhe & Pear; and Mr. Steve Pequigney, President of I-
CUBE, Inc.
Undersecretary Cooper discussed the Commerce Department
study and the administration's agenda for improving access to
technology. She stated that the department intends to complete
follow up studies on the issue of small business investment in
technology, so that they can begin to get a clearer picture of
what policies the government should pursue to provide
incentives for small businesses to access the technology they
need. She noted that while the data is preliminary, it seems to
indicate that small businesses recognize the need to invest in
technology, and are trying to close the gap with their larger
competitors.
The other witnesses, all small business owners, talked
about how they have successfully incorporated new technologies
into their businesses, and how crucial new technology is to
their continued prosperity and growth. All the witnesses
indicated that access to broadband Internet service is vital to
small business, especially in rural areas. In addition, Mr.
Aughenbaugh testified that it is hard to get good employees to
relocate to small, rural towns, but that technology, especially
broadband, enables employees to work from anywhere in the
country. Broadband access and new technology is also helping to
keep rural residents from leaving their communities, especially
as younger generations become more comfortable and
knowledgeable about technology.
For further information on this hearing, refer to Committee
publication 107-42.
7.5.4 access to health care in rural america
Background
The Subcommittee on Rural Enterprises, Agriculture and
Technology held this hearing on access to health care in rural
America on March 19, 2002.
The hearing was called to discuss the concerns of farmers
and other small business owners in rural areas as they struggle
to provide health insurance for their families and employees.
Small business owners, employees, and their families account
for over 60 percent of the uninsured population, and this
problem greatly impacts rural small businesses. Of added
importance for rural states, the ability of small business
owners to obtain and provide affordable health insurance for
their employees is a crucial component to rural states' efforts
to attract new jobs and prevent population loss.
The hearing also focused on the President's recently
released plan to help small businesses create new jobs, support
their workers, and improve the nation's economy. The President
made health security a major part of his plan, and urged
Congress to: (1) dramatically improve Medical Savings Accounts
by eliminating the current cap on the number of MSAs allowed
nationwide, and lowering the deductible for individuals and
families; and (2) permitting industry associations to provide
health insurance for their members through Association Health
Plans.
Summary
The subcommittee heard from one panel of witnesses,
including: Ms. Mary DeVany, manager, Avera McKennan Telehealth
Services; Mr. Ron Hatch, owner of Hatch Furniture; Mr. Wayne
Nelson, President, Communicating for Agriculture and the Self-
Employed; and J. Edward Hill, M.D., Chair-Elect of the American
Medical Association's Board of Trustees, and a family
physician.
All of the witnesses testified about the health care access
problems facing rural states, especially states such as
Mississippi and South Dakota. South Dakota, for example, has
only ten communities with a population over 10,000, and health
care specialists are concentrated on the eastern (Sioux Falls)
and western (Rapid City) edges of the state, with about 350
miles separating these two communities. According to the 1990
Census, 61.7 million Americans (24.8 of the population) live in
rural areas, and 14.3 of rural Americans live in poverty. In
addition, the Centers for Disease Control recently reported
that most rural counties have a statistically higher percentage
of uninsured than nonrural counties, and that there remains a
relative scarcity of health care resources in rural areas.
The witnesses voiced their support for various proposals to
increase access to health care, including: Association Health
Plans; refundable tax credits for individuals to purchase
health insurance; and permanently extending and expanding
eligibility for Medical Savings Accounts. In addition, some of
the witnesses voiced their strong support for increasing
Medicare reimbursement rates to physicians and hospitals in
rural areas, which have been disproportionately hurt by rate
cuts. The reimbursement rates have been declining more and more
each year, and rural hospitals and physicians are finding it
difficult to stay in business, and find themselves in the
position of reducing their Medicare patient loads and cutting
back on the services they provide. This hits rural areas
particularly hard, since many rural residents are elderly who
rely on Medicare.
For further information on this hearing, refer to Committee
publication 107-48.
7.6 Summaries of Hearings Held by the Subcommittee on Tax, Finance,
and Exports
7.6.1 access to capital: proposed solutions for the
capital funding needs of start-up and emerging
growth businesses
Background
The Subcommittee on Tax, Finance, and Exports and the
Subcommittee on Workforce, Empowerment, and Government Programs
conducted this joint hearing on access to capital on June 26,
2001. This hearing followed the Full Committee hearing on
access to capital conducted on May 17, 2001. Attracting outside
capital is difficult not only because of the uncertainties
related to new and growing small businesses, but also because
of the high cost of financing these small transactions.
The purpose of this hearing was to allow small businesses
to testify as to how they address this important issue and
their recommendations for a solution. Additionally, the
Subcommittees examined two pieces of legislation introduced by
Subcommittee Chairman DeMint, which would assist small
businesses as they address this problem. H.R. 1923, the Start-
Up Success Accounts (SUSA) Act of 2001 would allow small
businesses with gross receipts of up to $2 million to deduct
and place up to 20 percent of taxable income into a SUSA
account for each of the first five years of business operation.
Representative DeMint has also proposed the Business
Retained Income During Growth and Expansion (BRIDGE) Act. The
BRIDGE Act would allow a firm that has experienced a sales
growth of 10 percent or more above the average gross receipts
for the prior two taxable years to temporarily defer a portion
of its Federal income tax liability.
Summary
The hearing comprised of one panel, including: Mr. John
Brinson, President, Lehigh Valley Racquet & Fitness Centers;
Mr. Ed Rankin, Founder & CEO, People Solutions, Inc.; Mr. Doug
Tatum, Chief Executive Officer, Tatum CFO Partners; Ms. Karen
Kerrigan, Chair, Small Business Survival Council; Mr. Bob
Morgan, President, Council of Growing Companies; and Mr. Lee
Mercer, President, National Association of Small Business
Investment Companies (NASBIC). A number of the witnesses
acknowledged that finding adequate financing at a reasonable
cost and in a timely manner is a critical problem for small,
emerging growth businesses. Lack of capital financing restricts
growth potential for these businesses, which also limits new
employment opportunities.
A number of witnesses advocated on behalf of both the SUSA
Act and the BRIDGE Act. Mr. Rankin opined that if he had been
able to take advantage of the tax deferral provisions of the
proposed BRIDGE Act, he would have been able to retain enough
capital to be more self-sufficient, and could have gotten out
of the financial ``no man's land'' much faster. Ms. Kerrigan
advised that, because the tax code discourages capital
retention, many small businesses are often faced with cash
shortfalls at critical phases. The SUSA option, whereby new
small businesses would be allowed to place up to 20 percent of
taxable income into tax-deferred savings accounts for each of
the first five years of operation, opens up new financial
planning and financing opportunities for small firms most in
need of these tools.
Additionally, the witnesses agreed that meaningful capital
gains relief would help provide a remedy to the current cash
shortage. Capital gains relief would provide investors more
incentive to invest in both new and emerging growth businesses
through an increased return on their risk.
The hearing concluded with an expression of concern over
the impact of lack of capital on new and emerging growth
businesses, and the need for a prompt resolution to this
problem.
For further information about this hearing, please refer to
Committee publication 107-15.
7.6.2 trade promotion authority and trade adjustment
assistance: how will small business exporters and
farmers benefit?
Background
The Subcommittee on Tax, Finance, and Exports conducted
this hearing on Trade Promotion Authority and Trade Adjustment
Assistance on on July 24, 2001. The purpose of this hearing was
to allow small business exporters to testify as to how
Presidential Trade Promotion Authority would affect their
businesses as well as to examine the reauthorization of the
Trade Adjustment Assistance (TAA) program.
The President was granted fast-track authority almost
continuously from 1974 to 1994. Unfortunately, the authority
lapsed after the 1994 passage of the Uruguay Round legislation
that established the World Trade Organization (WTO), and has
not been renewed. Renewal of the President's trade promotion
authority is critical to U.S. leadership and negotiating
credibility in the global market.
Additionally, in a more open trade environment, some firms
and industries will grow; others will contract, merge, or
perhaps fail. The Trade Adjustment Assistance (TAA) program
provides assistance to eligible workers and firms disadvantaged
by reduction in U.S. trade barriers. Authorization for the TAA
program expired September 30, 2001. Consequently, the
Subcommittee will examine legislation introduced by
Representative Phil English (R-PA), which reauthorizes the TAA
program through 2006.
Summary
The hearing comprised of two panels. The first panel
included: The Honorable Grant Aldonas; Undersecretary for
International Trade, U.S. Department of Commerce; Mr. Don Lloyd
Williams; President & CEO; Princeton Medical Enterprises; Mr.
Paul Hartman; and Mr. Suresh K. Gursahaney; MicroAutomation,
Inc. The second panel, which focused on Trade Adjustment
Assistance reauthorization, included: Mr. William Bujalos; Mid-
Atlantic Trade Adjustment Assistance Center Director; and Ms.
Denise Froning, Policy Analyst; The Heritage Foundation.
During the first panel, the witnesses unanimously agreed
that Trade Promotion Authority is a valuable tool for the
President, and would result in an expanded international
market. Mr. Williams advised the Committee that he is at a
disadvantage with his European counterparts because the United
States does not have an existing trade agreement in Brazil. He
believes if the President had the power to negotiate trade
agreements on a more expedited basis, his business would
experience a more level playing field in the international
market. Additionally, Mr. Hartman expressed his desire to see
the President use Trade Promotion Authority to obtain more
favorable trading conditions for farm commodities.
In the second panel, Mr. Bujalos expressed his support for
the continued authorization for the Trade Adjustment Assistance
program, and provided several examples of the assistance he has
provided to businesses in the Mid-Atlantic area, which have
been negatively affected by trade agreements. However, Ms.
Froning pointed out there have been numerous problems with the
Trade Adjustment Assistance program for workers, including, its
ineffectiveness in retraining impacted workers. Instead, Ms.
Froning suggested replacing the Trade Adjustment Assistance
program with a wage insurance program.
The hearing concluded with the acknowledgment of the need
to further review the TAA program and the upcoming debate on
Trade Promotion Authority.
For further information about this hearing, please refer to
Committee publication 107-22.
7.6.3 farm and ranch risk management accounts (farrm): how
will lehigh valley farmers benefit?
Background
This field hearing on Farm and Ranch Risk Management
Accounts was conducted on August 9, 2001, in Pen Argyl,
Pennsylvania. The purpose of this hearing was to allow farmers
in Lehigh Valley, inform the Subcommittee how this risk
management tool would provide them additional financial
security during years in which their profits fall.
Farmers and ranchers face almost constant uncertainty from
the weather and the markets. The Farm and Ranch Risk Management
Act, if enacted, would allow farmers and ranchers to put up to
20 percent of their annual income derived from farming and
ranching into a tax deferred trust account. Money would not be
allowed to remain in a FARRM account for more than five years.
However, at any time during this period, money could be
withdrawn to help stabilize an individual's income during a bad
year of low crop prices or harsh weather. The FARRM account
proposal, which was included in the President's initial broad
tax cut proposal, was originally introduced by The Honorable
Kenny Hulshof. The FARRM account proposal passed both the House
and Senate during the 106th Congress
Summary
The hearing comprised of one panel, including: Mr. Kenneth
R. Wedde, Mr. Brian Dietrich, Mr. Arland Schantz, and Ms.
Cheryl Bennecoff.
During the first panel, the witnesses unanimously agreed
that Trade Promotion Authority is a valuable tool for the
President, and would result in an expanded international
market. Mr. Williams advised the Committee that he is at a
disadvantage with his European counterparts because the United
States does not have an existing trade agreement in Brazil. He
believes if the President had the power to negotiate trade
agreements on a more expedited basis, his business would
experience a more level playing field in the international
market. Additionally, Mr. Hartman expressed his desire to see
the President use Trade Promotion Authority to obtain more
favorable trading conditions for farm commodities.
In the second panel, Mr. Bujalos expressed his support for
the continued authorization for the Trade Adjustment Assistance
program, and provided several examples of the assistance he has
provided to businesses in the Mid-Atlantic are that have been
negatively impacted by trade agreements. However, Ms. Froning
pointed out there have been numerous problems with the Trade
Adjustment Assistance program for workers, including, its
ineffectiveness in retraining impacted workers. Instead, Ms.
Froning suggested replacing the Trade Adjustment Assistance
program with a wage insurance program.
The hearing concluded with the acknowledgment of the need
to further review the TAA program and the upcoming debate on
Trade Promotion Authority.
For further information about this hearing, please refer to
Committee publication 107-24.
7.6.4 tax relief: the real economic stimulus for america's
economy
Background
The Subcommittee on Tax, Finance, and Exports, conducted a
hearing on December 6, 2001, to address a number of economic
stimulus proposals, and their possible impacts on the nation's
economy.
Heightened concerns about an economic slowdown have spawned
a number of proposals, ranging from tax relief to spending
increases, to stimulate the economy. Despite the passage of an
economic stimulus package by the House, the Senate considered
its own version of this legislation. Unfortunately, this
inaction has consequences, as it was recently announced the
economy has now slowed to an annual rate of negative 1.1
percent.
At a time when the nation is struggling to jump-start the
economy, the most viable remedy is to provide meaningful tax
relief to stimulate long-term growth. This hearing focused on
the positive impacts meaningful tax relief would have on the
nation's immediate and long-term economic growth, and for small
businesses in particular.
Summary
The hearing consisted on one panel, including Mr. Chris
Edwards, Director of Fiscal Policy Studies, CATO Institute, Mr.
Stephen Moore, Senior Fellow, CATO Institute, Mr. William
Beach, Center for Data Analysis, The Heritage Foundation, Mr.
Charles M. Lauster, Lauster & Radu Architects, P.C.
During the hearing, Mr. Edwards, Mr. Moore, and Mr. Beach
all agreed that, in order for an economic stimulus package to
be effective, it should include an immediate personal rate
reduction. Across the board tax reductions are one of the
strongest tonics for an ailing economy. It is particularly
important to reduce the top tax rate, since it is this levy
that imposes the greatest disincentive on investors,
entrepreneurs, and small business owners. Additionally, there
should be firm limits on the growth of domestic spending since
a bigger government is likely to harm economic performance. In
times of war, it is both necessary and desirable to increase
spending on programs that help defend the nation. However,
government spending, even for legitimate purposes, diverts
resources from the productive sectors of the economy.
Mr. Lauster disagreed, stating that capital gains cuts and
a reduction of the alternative minimum tax do little to assist
small businesses. Conversely, Mr. Lauster proposed additional
small business loans, tax credits for hiring, and federal
support for local efforts to provide manufacturing space and
empowerment zones are programs that can serve as examples for
new legislation. He believes these efforts will get contracts
and money directly to small businesses, especially if aimed at
areas that are particularly hard hit.
For further information about this hearing, please refer to
Committee publication 107-38.
7.6.5 how can technical assistance stimulate new jersey's
manufacturing base?
Background
The Subcommittee conducted a field hearing on February 20,
2002, concerning the impact of the New Jersey Manufacturing
Extension Program, The New Jersey Institute of Technology's
Defense Procurement Technical Assistance Center, and the SBA's
Small Business Development Center program on New Jersey's small
and medium sized manufacturers. The hearing was conducted at
the Passaic City Hall, 330 Passaic Street, Passaic, New Jersey.
Small business manufacturers throughout the nation work to
compete in the global market place. A number of these programs
have provided New Jersey's manufacturers valuable technical
assistance as they search for additional procurement
opportunities, employee training, and strive to improve quality
of their existing business practices.
Summary
The hearing consisted of two panels. The first panel
included Mr. Mike Patel, President & CEO, PPI/Time Zero; Mr.
John Watson, President, Premium Color Graphics Company; Mr.
Jack Yecies, President, Herman W. Yecies, Inc.; and Mr. Cliff
Lindholm, III, The Folstrum Company. The second panel included
Mr. Robert Loderstedt, N.J. Manufacturing Extension Program;
Mr. James Mitchell, N.J. Procurement Assistance Center; and Mr.
Burt Rashkow, N.J. Small Business Development Center.
During the first panel, the small business witnesses
expressed their gratitude toward the assistance provided by the
Manufacturing Extension Program, which is administered in New
Jersey by Rutgers University. They advised that without
assistance by MEP and the New Jersey Small Business Development
Centers, their attempts to grow would be stunted by the
overwhelming task of navigating the federal procurement
process.
The second panel expressed their concerns about the
possibility of funding cuts to the MEP program in the Commerce-
Justice-State Appropriations bill. They advised that their
resources are already spread thin, and if anything, they are in
need of a funding increase to help facilitate their assistance
to the manufacturing community.
For further information about this hearing, please refer to
Committee publication 107-44.
7.6.6 payroll industry at risk due to ach system used for
direct deposit
Background
The Subcommittee conducted a hearing on the subject of
small payroll-processing companies on April 9, 2002. The
purpose of this hearing was to discuss the concerns of small
payroll-processing companies as they face increasing costs of
operations at the hands of large banks that hold them liable
for the transacted funds. The Subcommittee examined
alternatives and solutions to this problem, including the
promotion of real-time automated clearinghouse services,
regulation of bank fees, and relaxing regulations on payroll
processors.
Summary
This hearing consisted of one panel, including Mr. Chip
Dawson; Payroll 1; Mr. Nick Antich; AD Computer; Ms. Dena
Brunskill, President, IPPA; Mr. Gene Krause; ACH Direct; and
Ms. Rita Zeidner; American Payroll Association.
Throughout the hearing, all witnesses agreed that, as a
result of ``direct deposit'', the payroll process has been made
simpler for both employees and employers. Typically, employees
who use direct deposit have their pay available to them on the
morning of payday, and there is no waiting for checks to clear.
NACHA statistics indicate that the chance of having a problem
with a negotiable check is 20 times greater than with direct
deposit. However, the existing system was designed in the
1970s, and has not been updated to coincide with the upgraded
technology of today. Consequently, many small businesses find
it too expensive to participate in direct deposit and many
payroll-processing companies cannot afford to assume the
liability, which goes along with these transactions.
Several solutions were offered at the hearing, including
the regulation of fees banks could charge for direct deposit
and allowing companies to do reversals from employee accounts
when an employer does not fund its account. A long-term
solution is to change the ACH system to a debit card network,
with real time electronic authorization.
For further information about this hearing, please refer to
Committee publication 107-52.