[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.

                                
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