[House Report 108-162]
[From the U.S. Government Publishing Office]



108th Congress                                                  Report
 1st Session            HOUSE OF REPRESENTATIVES                108-162
======================================================================
 
            SMALL BUSINESS ADVOCACY IMPROVEMENT ACT OF 2003

                                _______
                                

 June 18, 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

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 1772]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Small Business, to whom was referred the 
bill (H.R. 1772) to improve small business advocacy, and for 
other purposes, having considered the same, reports favorably 
thereon with amendments and recommends that the bill as amended 
do pass.
    The amendments (stated in terms of the page and line 
numbers of the introduced bill) are as follows:

    Page 8, line 18, strike the closing quotation marks and the 
last period.

    Page 8, after line 18, insert the following:

          ``(3) Each such budget shall also include a statement 
        indicating whether the proportion of the funds 
        requested for the Office of Advocacy when compared to 
        the funds requested for the Small Business 
        Administration has increased, decreased, or stayed the 
        same relative to the proportion of the amount 
        appropriated for the Office of Advocacy for the 
        previous fiscal year when compared to the amount 
        appropriated for the Small Business Administration for 
        the previous fiscal year.''.

                         Purpose of Legislation

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

                  Background and Need for Legislation

    There is abundant evidence, which has been the recurring 
focus of hearings of this Committee, that the Nation's small 
businesses continue to be burdened by excessive regulations and 
that this burden falls disproportionately upon small 
businesses. In his speech to the Women's Entrepreneurship 
Summit, held in Washington, D.C., March 19, 2002, President 
George W. Bush 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 * * * comes down to $7000 per worker. That's a lot of 
money, particularly if you are trying to figure out ways to 
expand the employment base. And this is a drag on our economy. 
Hidden costs are a drag upon our economy.''
    The President has pledged to reduce the regulatory burden 
on small businesses. In line with this objection, 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 business 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 businesses in the Nation's 
economy, and the barriers to the growth of small businesses. In 
the past, the Office of Advocacy has not had the necessary 
resources. This legislation helps to ensure that resources are 
available to support the independence of the office and to 
assure that the research, information, and expertise provided 
by an independent office of advocacy is a valid source of 
information and advice for Congress and the federal agencies 
with which the office will advocate for small businesses.

                         Summary of Legislation

    The legislation makes certain amendments, briefly reviewed 
in this summary, to Public Law 94-305 (15 U.S.C. 634a-634g) in 
order to strengthen and improve the Office of Advocacy. The 
Chief Counsel is to be appointed by the President, with the 
advice and consent of the Senate, without regard to political 
affiliation and solely on the grounds of fitness to perform the 
duties of the office. During the history of the Office of 
Advocacy, there have been extended periods where the position 
of Chief Counsel has been vacant. To provide some degree of 
continuity in office, a serving Chief Counsel may remain in 
office, at the pleasure of the incumbent President, for one 
year after a presidential term has expired.
    Small business concerns owned and controlled by women, 
veterans, and service-disabled veterans are added, as 
applicable, to those small business concerns named as requiring 
assistance as a part of the primary functions of the Office of 
Advocacy. Minority owned small businesses are included in the 
present provisions of the Act. In addition as a primary 
function, the Chief Counsel is empowered to make 
recommendations to the President and Congress with respect to 
issues and regulations affecting small businesses.
    As functions in addition to those presently mandated by 
statute, the Office of Advocacy will be required to maintain 
economic databases and share the information with Congress and 
the Small Business Administration, and to maintain a memorandum 
of understanding with the Small Business and Agriculture 
Regulatory Enforcement Ombudsman to provide for greater 
cooperation between the two offices.
    Independence of the Office of Advocacy is contingent upon 
needed resources which in the past have been diminished in the 
executive branch budgetary review process administered by the 
OMB. To ensure that such resources are provided, the Chief 
Counsel is required to transmit to the President annually 
estimated expenditures and proposed appropriations for the 
Office of Advocacy with a concurrent submission to the 
Committee on Small Business of the U.S. House of 
Representatives, the Committee on Small Business and 
Entrepreneurship of the Senate, and the Committees on 
Appropriations of the House and Senate.
    The legislation would permit the appointment of one 
Principal Deputy Chief Counsel. The bill also defines the 
duties of regional advocates, one in each of the ten Federal 
regions. The Small Business Administration is required to 
provide adequate office space, equipment, and personnel to the 
Office of Advocacy.
    The Chief Counsel is specifically required to report to the 
President and Congress, at least annually, concerning federal 
agency compliance with the Regulatory Flexibility Act. The 
legislation reauthorizes the Office of Advocacy for a 3-year 
period, i.e., $10,000,000 for fiscal years 2003 and 2004, 
$12,000,000 for fiscal year 2005, and $14,000,000 for fiscal 
year 2006.

                            Committee Action

    In the 108th Congress, the Subcommittee on Workforce 
Empowerment & Government Programs and Regulatory Reform & 
Oversight held a hearing on April 1, 2003. They received 
testimony from the incumbent Chief Counsel for Advocacy and 
others on the continued importance of greater independence for 
SBA's Office of Advocacy. On April 11, 2003 Congressman Todd 
Akin (R-MO) and Congressman Ed Schrock (R-VA) introduced H.R. 
1772 which was referred to the Committee on Small Business. The 
Committee met to consider the bill on June 4, 2003, at which a 
quorum was present. Ms. Velazquez offered an amendment to the 
bill concerning a budget statement of proportional changes to 
the budgets of the Office of Advocacy and the Small Business 
Administration. The Committee views this as not an additional 
burden on OMB because the President's budget request already 
contains comparisons between last year's actual funding level 
versus the current request. The amendment was agreed to and the 
bill was reported favorably by voice vote without objection.
    In the 107th Congress, the Committee held two hearings on 
this topic, one on March 12, 2001, and another on March 20, 
2002. Both hearings were directed at receiving testimony and 
reviewing draft legislation as to how to strengthen and make 
the Office of Advocacy more independent. Following these 
hearings, the bill then known as H.R. 4231 was introduced by 
Congressman Donald A. Manzullo (R-IL) for himself and 
Congresswoman Nydia M. Velazquez (D-NY) on April 16, 2002, and 
was referred to the Committee on Small Business. On April 17, 
2002, the Committee on Small Business met to consider the bill. 
There were no amendments. The bill was ordered favorably 
reported by voice vote. The bill was taken up on the House 
floor under suspension of the rules on May 21, 2002 and was 
agreed to without objection. No action was taken in the Senate.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the recorded 
votes on the motion to report legislation. There was no 
recorded vote taken in connection with ordering H.R. 1772 
reported.

                      Committee Oversight Findings

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

   New Budget Authority, Entitlement Authority, and Tax Expenditures

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

           Statement of Congressional Budget Office Estimate

    With respect to the requirements of clause 3(c)(3) of rule 
XIII of the Rules of the House of Representatives and section 
402 of the Congressional Budget Act of 1974, the Committee has 
received the cost estimate for H.R. 1772 from the Director of 
the Congressional Budget office as follows:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 13, 2003.
Hon. Donald Manzullo,
Chairman, Committee on Small Business,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1772, the Small 
Business Advocacy Improvement Act of 2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Melissa E. 
Zimmerman.
            Sincerely,
                                          Barry B. Anderson
                               (For Douglas Holtz-Eakin, Director.)
    Enclosure.

H.R. 1772--Small Business Advocacy Improvement Act of 2003

    H.R. 1772 would increase the amount authorized to be 
appropriated under current law for the Office of Advocacy 
within the Small Business Administration (SBA). The Office of 
Advocacy researches and assesses the effects of federal 
programs on small businesses and issues recommendations based 
on those findings.
    CBO estimates that implementing H.R. 1772 would cost $6 
million in 2004 and $32 million over the 2004-2008 period, 
assuming appropriation of the authorized amounts. H.R. 1772 
would not affect direct spending or receipts.
    H.R. 1772 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 1772 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit). Based on information from the 
SBA, CBO estimates that the Office of Advocacy will spend about 
$9 million in 2003. However, under current law, only $1 million 
a year is authorized to be appropriated for the office for 
future years. H.R. 1772 would increase the authorization of 
appropriations for the office to $10 million in 2003 and 2004, 
$12 million in 2005, and $14 million in 2006. Estimated outlays 
are based on historical spending patterns.

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              2003     2004     2005     2006     2007     2008
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION
 Spending for SBA's Office of Advocacy:
    Under Current Law:
        Authorization Level \1\...........................        9        1        1        1        1        1
        Estimated Outlays \1\.............................        9        1        1        1        1        1
    Proposed Changes:
        Authorization Level \2\...........................        1        9       11       13        0        0
        Estimated Outlays \2\.............................        0        6       10       12        3        1
Spending for SBA's Office of Advocacy:
    Under H.R. 1772:
        Estimated Authorization Level \1\.................       10       10       12       14        1        1
        Estimated Outlays \1\.............................        9        7       11       13        4        2
----------------------------------------------------------------------------------------------------------------
\1\ The 2003 level is the estimated spending of the Office of Advocacy in that year.
\2\ CBO assumes that the legislation will be enacted near the end of fiscal year 2003 and will not affect
  spending for this year even though the bill would authorize the appropriation of an additional $1 million for
  2003.

    Intergovernmental and private-sector impact: H.R. 1772 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Estimated prepared by: Federal costs: Melissa E. Zimmerman; 
impact on state, local, and tribal governments: Victoria Heid 
Hall; impact on the private sector: Cecil McPherson.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

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

                        Preemption Clarification

    Section 423 of the Congressional Budget Act of 1994 
requires the report of any committee on a bill or joint 
resolution to include a statement of the extent to which the 
bill, or joint resolution is intended to preempt state, local, 
or tribal law. Except to the extent the Office of Advocacy is a 
federal entity, the Committee states that H.R. 1772 does not 
preempt any state, local, or tribal law.

                    Constitution Authority Statement

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

                  Applicability to Legislative Branch

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

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    The short title is the ``Small Business Advocacy 
Improvement Act of 2003.''

Section 2. Findings and purpose

    Expresses the findings of Congress with respect to the 
Office of Advocacy and the purposes for the legislation.

Section 3. Appointment of Chief Counsel for Advocacy

    The Chief Counsel for Advocacy is to be appointed by the 
President, with the advice and consent of the Senate, without 
regard to political affiliation and solely on the grounds of 
fitness to perform the duties of the office. An individual may 
not be appointed who was employed by the Small Business 
Administration during the 5-year period preceding the date of 
such individual's appointment. 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 the President's term.

Section 4. Primary functions of the 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 database and make 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) maintain 
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. All too often, people are confused between the two 
roles of these offices. Generally, the Office of Advocacy 
intervenes on behalf of small business prior to theadoption of 
a final regulation. The SBA Ombudsman intervenes on behalf of small 
businesses after a regulation has been adopted to insure the 
application and enforcement of a regulation is fair and reasonable to 
all parties. This MOU clarifies the two roles and establishes 
procedures by which to refer small business complaints that would be 
better handled by the other office.
    The Chief Counsel is required to transmit to the Office of 
Management and Budget (OMB), the Committee on Small Business of 
the U.S. House of Representatives, the Committee on Small 
Business and Entrepreneurship of the Senate, and the Committees 
on Appropriations of the House and Senate the estimated 
expenditures and proposed appropriations for the Office of 
Advocacy. Further, each budget of the United States Government 
shall include a separate statement of the amount of 
appropriations requested for the Office of Advocacy. Each 
budget will also include a statement of proportionality between 
increases or decreases in the overall Small Business 
Administration budget versus the Office of Advocacy line item.

Section 6. Principal Deputy Chief Counsel and regional advocates

    The Chief Counsel may appoint one person to serve as 
Principal Deputy Chief Counsel. 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 Regulatory 
Enforcement Ombudsman, assisting the functioning of regional 
small business fairness boards, including, where requested, 
helping small businesses helping to resolve matters that are 
the subjects of complaints made to such boards with respect to 
adverse Federal agency action; (4) assisting and disseminating 
information about programs and services that help small 
business concerns; and, (5) performing such other duties as the 
Chief Counsel may assign.

Section 7. Overhead and administrative support

    The Administrator of the Small Business Administration is 
required to provide the Office of Advocacy with all the 
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 and 2004, $12,000,000 for fiscal year 
2005. and $14,000,000 for fiscal year 2006.

Section 10. Conforming amendments

    This section makes conforming amendments as required by 
changes in this Act to strengthen and improve the Office of 
Advocacy. First, this section moves the Rural Tourism Training 
Program from the Office of Advocacy to the SBA so the mission 
of the office is not encumbered by this initiative more 
properly housed within the SBA.
    Second, this section codifies the requirement for the 
Office of Advocacy and the SBA's Ombudsman to maintain a 
Memorandum of Understanding between each office.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                          ACT OF JUNE 4, 1976


                          (Public Law 94-305)

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

           *       *       *       *       *       *       *


                   TITLE II--STUDY OF SMALL BUSINESS


                             ESTABLISHMENT

  Sec. 201. (a) There is established within the Small Business 
Administration an Office of Advocacy. [The management of the 
Office shall be vested in a Chief Counsel for Advocacy who 
shall be appointed from civilian life by the President, by and 
with the advice and consent of the Senate.]
  (b) The management of the Office shall be vested in a Chief 
Counsel for Advocacy who shall be appointed from civilian life 
by the President, by and with the advice and consent of the 
Senate, and who should be appointed without regard to political 
affiliation and on the basis of fitness to perform the duties 
of the office.
  (c) No individual may be appointed under subsection (b) if 
such individual has served as an officer or employee of the 
Small Business Administration during the 5-year period 
preceding the date of such individual's appointment.
  (d) An individual serving as Chief Counsel on the date of the 
expiration of any term of the President may not continue to 
serve as Chief Counsel for more than 1 year after such date 
unless such individual is reappointed after such date by the 
President, by and with the advice and consent of the Senate. 
The preceding sentence shall not apply in the case of the 
expiration of a term of an individual holding the office of 
President if such individual is elected to the office of 
President for a term successive to such term.

                                 STUDY

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

                                 DUTIES

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

           *       *       *       *       *       *       *

          (4) represent the views and interests of small 
        businesses before other Federal agencies whose policies 
        and activities may affect small business; [and]
          (5) enlist the cooperation and assistance of public 
        and private agencies, businesses, and other 
        organizations in disseminating information about the 
        programs and services provided by the Federal 
        Government which are of benefit to small businesses, 
        and information on how small businesses can participate 
        in or make use of such programs and services[.];
          (6) maintain economic databases and make the 
        information contained therein available to the 
        Administrator of the Small Business Administration and 
        to Congress;
          (7) carry out the responsibilities of the Chief 
        Counsel under chapter 6 of title 5, United States Code; 
        and
          (8) maintain a memorandum of understanding with the 
        Small Business and Agriculture Regulatory Enforcement 
        Ombudsman regarding methods and procedures for 
        cooperation between the Ombudsman and the Office of 
        Advocacy and transmit a copy of such memorandum to the 
        Committee on Small Business of the House of 
        Representatives and the Committee on Small Business and 
        Entrepreneurship of the Senate.
  (b)(1) For each fiscal year, the Chief Counsel shall transmit 
the Office of Advocacy's appropriation estimate and request to 
the Office of Management and Budget, the Committee on Small 
Business of the House of Representatives, the Committee on 
Small Business and Entrepreneurship of the Senate, and the 
Committees on Appropriations of the House of Representatives 
and the Senate.
  (2) Each budget of the United States Government submitted by 
the President shall include a separate statement of the amount 
of appropriations requested for the Office of Advocacy.
  (3) Each such budget shall also include a statement 
indicating whether the proportion of the funds requested for 
the Office of Advocacy when compared to the funds requested for 
the Small Business Administration has increased, decreased, or 
stayed the same relative to the proportion of the amount 
appropriated for the Office of Advocacy for the previous fiscal 
year when compared to the amount appropriated for the Small 
Business Administration for the previous fiscal year.

                            STAFF AND POWERS

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

           *       *       *       *       *       *       *

  (b)(1) The Chief Counsel may appoint 1 individual to serve as 
Principal Deputy Chief Counsel.
  (2) The Principal Deputy Chief Counsel shall be paid at an 
annual rate not less than the minimum rate, nor more than the 
maximum rate, for the Senior Executive Service under chapter 53 
of title 5, United States Code.
  (3) An individual appointed to a position under this 
subsection shall not be counted toward the limitation contained 
in subsection (a)(1) regarding the number of individuals who 
may be compensated at a rate in excess of the lowest rate for 
GS-15 of the General Schedule.
  (c) The Chief Counsel may appoint regional advocates within 
each Standard Federal Region as appropriate. Such regional 
advocates shall--
          (1) assist in examining the role of small business in 
        the economy of the United States by identifying 
        academic and other research institutions that focus on 
        small business concerns and linking these research 
        resources to research activities conducted by the 
        Office of Advocacy;
          (2) assist in representing the views and interests of 
        small business concerns before Federal agencies whose 
        policies and activities may affect small business;
          (3) assist the functioning of regional small business 
        fairness boards in coordination with the Small Business 
        and Agriculture Regulatory Enforcement Ombudsman;
          (4) assist in enlisting the cooperation and 
        assistance of public and private agencies, businesses, 
        and other organizations in disseminating information 
        about the programs and services provided by the Federal 
        Government that are of benefit to small business 
        concerns and the means by which small business concerns 
        can participate in or make use of such programs and 
        services; and
          (5) carry out such duties pursuant to the mission of 
        the Office of Advocacy as the Chief Counsel may assign.

                   ASSISTANCE OF GOVERNMENT AGENCIES

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

                                REPORTS

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

                             AUTHORIZATION

  Sec. 207. There are authorized to be appropriated [not to 
exceed $1,000,000] $10,000,000 for fiscal years 2003 and 2004, 
$12,000,000 for fiscal year 2005, and $14,000,000 for fiscal 
year 2006 to carry out the provisions of this title. Any sums 
so appropriated shall remain available until expended.

           *       *       *       *       *       *       *

                              ----------                              


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


SEC. 311. RURAL TOURISM TRAINING PROGRAM.

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

           *       *       *       *       *       *       *

                              ----------                              


                  SECTION 30 OF THE SMALL BUSINESS ACT


SEC. 30. OVERSIGHT OF REGULATORY ENFORCEMENT.

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


                            ADDITIONAL VIEWS

    Congress created the Office of Advocacy (Advocacy) in 1976 
to serve as the independent voice for small business within the 
federal government and to measure the cost of federal 
regulations on small businesses. Advocacy works to reduce the 
burdens that federal regulations impose on small firms, conduct 
economic research on the impact of policies on small 
businesses, and publish data regarding contributions of small 
businesses to the American economy.
    The Chief Counsel of Advocacy (Chief Counsel) has a dual 
responsibility. First, he/she must act as an independent 
watchdog for small business. Second, he/she is also part of the 
administration. These two roles are difficult to perform 
together without the risk of undue influence from the Small 
Business Administration (SBA), the Office of Management and 
Budget (OMB), or other federal agencies. The influence from 
these offices may compromise Advocacy's independence and 
freedom to take positions that support small business, but may 
be contrary to the administration's policies or regulatory 
actions.

                      IMPEDIMENTS TO INDEPENDENCE

    While the SBA and the Chief Counsel both share the goal of 
helping small businesses flourish, the current structure often 
creates conflicting interest between the two. Advocacy, by 
statute, is an entity within the SBA. As such, it is dependent 
for its budget as well as offices, human resources, and tech 
support. Since SBA has a limited budget to operate all of its 
programs, Advocacy must compete against other deserving 
priorities to receive its allocation. While it may seem that 
having an effective Advocacy would clearly be a priority, this 
is not always the case because of the unique nature of its 
role.
    An Office of Advocacy that is effective can sometimes mean 
that it reveals the inefficiencies of federal agencies. Some 
view its role as a critic of regulatory bodies as an obstacle 
to the president's agenda. When these agencies issue 
regulations, Advocacy must act on behalf of small businesses to 
ensure their needs are considered. The Chief Counsel can make 
the work of agencies difficult and, as such, creates incentives 
for an administration to limit Advocacy's ability to perform 
its role.
    Since Advocacy is located within SBA and the SBA 
Administrator (Administrator) is responsible for carrying out 
the president's agenda, the Administrator may have the 
incentive and capability to limit the ability of Advocacy to 
perform is designated functions. Because of their shared budget 
and resources, the Administrator is in the best position of all 
the agencies to create impediments for Advocacy. In fact, there 
is a growing body of evidence that over the years in both 
Democratic and Republican Administrations, numerous instances 
exist where SBA Administrators have taken/withheld resources 
from Advocacy to supplement shortfalls within the SBA as a 
whole. Whether it be staffing, travel budget or slow turnaround 
on new employee processing, the end result is that Advocacy's 
already scarce resources are further depleted. This lack of 
resources makes the job of the Chief Counsel that much more 
difficult.
    In an effort to create an independent Advocacy, another 
major concern is interference from OMB. OMB is charged with 
setting the president's budget and policy priorities. It has 
one of the greatest incentives to limit Advocacy's 
effectiveness since the Chief Counsel's primary responsibility 
is to provide a second view of regulations overseen by OMB. 
Advocacy's role makes it a target of OMB. Any changes designed 
to create a more independent Advocacy must address OMB's 
ability to reduce Advocacy's funding. If this influence is not 
accounted for, OMB could use budgetary pressure to dictate the 
role that Advocacy serves and compromise the needs of small 
businesses.
    The current budget structure has limited OMB's ability to 
exert undue influence on Advocacy. The Chief Counsel's budget 
is protected from OMB cuts since his/her budget is subsumed in 
the budget of the SBA. Additionally, whereas all other federal 
agency reports are subject to review by the OMB, reports issued 
by Advocacy are not subject to review. This has allowed 
Advocacy to air its concerns without censorship from the 
administration. These safeguards have been critical in making 
sure that Advocacy can perform its role without fear of 
retribution from OMB.
    Given Advocacy's unique charges that allow it to operate, 
in part, outside the auspices of the executive branch and that 
it promotes a Socratic approach which increases scrutiny during 
the regulatory process, it is frequently the target of 
interference from these two entities within the administration. 
This interference limits Advocacy's ability to fulfill its 
designated mission as the true independent voice of small 
businesses. It is this uniqueness that requires the need to 
safeguard Advocacy so that it can be truly independent.

                               H.R. 1772

    The Small Business Advocacy Improvement Act of 2003, H.R. 
1772, is similar to previous legislative proposals in past 
Congresses where the line item is the primary vehicle to create 
a more independent Advocacy. However, a line item in and of 
itself will not achieve an independent office. Under the 
proposal, Advocacy will have a separate line item and submit 
its budget request to OMB and Congress concurrently. Advocacy 
will remain in the SBA building and rely on the SBA for office 
space, human resources etc. Under H.R. 1772, the OMB will not 
have the authority to determine Advocacy funding as part of the 
president's budget submission to Congress. The functions of 
Advocacy remain basically the same and the bill makes some 
technical corrections to the Small Business Act to conform to 
previous legislative changes.
    With the changes made in this bill, if safeguards are not 
added, Advocacy will not be able to perform its stated goals. 
The bill increases the scrutiny and profile of Advocacy, but 
offers no protections to the aforementioned concerns with the 
SBA and OMB that are associated with this heightened role. The 
mere addition of a line item will expose the Chief Counsel to 
interference by the OMB while ensuring no greater protections 
from a meddling Administrator, and could also undercut funding 
to other small business programs.

SBA Administrator and Advocacy under H.R. 1772

    While Advocacy will have its own budget, under Section 7 of 
H.R. 1772, Advocacy will continue to rely on the SBA 
Administrator for administrative support. One of the primary 
reasons for creating this legislation was to remove the 
influence of a meddling SBA administrator. This bill fails to 
adequately protect Advocacy from the SBA Administrator 
siphoning funds.
    If H.R. 1772 were adopted, Advocacy would still be 
dependent on SBA for office space, human resources, information 
technology and other service vital to operation. The 
Administrator could charge Advocacy rent for the space used, as 
well as for the staff support that SBA would provide. In 
addition, what would more than likely occur--even if services 
were not charged for (which is highly unlikely)--is a system 
where the quality of office space used and the staff support 
provided by SBA would decline. Advocacy may be seen as a ``free 
rider'' causing such services to be slow and subpar, thus 
limiting its ability to serve as a small business 
representative in the regulatory process.

            SBA PROGRAM FUNDING AND ADVOCACY UNDER H.R. 1772

    An unintended consequence of this legislation is that it 
could hurt programs designed to assist small businesses. While 
the bill increases the funding for Advocacy, it fails to 
address the reality that these costs may come from other 
budgetary cuts. Due to a lack of safeguards in H.R. 1772, 
Advocacy could affect, and likely reduce, funding for other SBA 
programs.
    Becuase of the correlation between the SBA and Advocacy, a 
president seeking to cut budget costs will likely look to SBA 
programs to provide additional funding for the Chief Counsel's 
office. This could translate into further cuts to the already 
dwindling funds for SBA programs. As a result, funding for such 
programs as Small Business Development Centers (SBDCs), Service 
Corps of Retired Executives (SCORE), and Women's Business 
Centers (WBCs) could be used to provide adequate funding for 
Advocacy.
    In an attempt to add some transparency in the budget 
process, an amendment was adopted by the Committee. It makes 
any moves by the administration to divert funding from valuable 
SBA programs more obvious. It requires the president, as part 
of his/her budget submission, to include a statement as to 
whether Advocacy funding has remained the same compared to the 
SBA budget. While this amendment makes cuts more apparent, it 
still does not prevent the administration from meddling nor 
does it guarantee that Congress can restore such funds without 
cuts to small business programs.
    If an administration underfunds Advocacy, there may be an 
attempt by Congress to rectify these shortfalls during the 
appropriations process. This inevitably would result in 
lawmakers who wish to restore Advocacy funding to look at the 
SBA and its programs for offsets. This reality is based on the 
fact that to make spending changes in the appropriations 
process, an amendment must have dollar for dollar offsets that 
have equivalent ``spend-rates'' and outlays. Historically, the 
account that has been under the greatest attack for SBA 
shortfalls is the agency's salaries and expenses (S & E) 
account.
    Transferring funds from the S & E account would be viewed 
as seemingly harmless and would be the main target as an offset 
to transfer funds to Advocacy. The reality is that many SBA 
programs designed to assist low-income and minority populations 
receive funds from the S & E account--and should funds be taken 
from this portion of the SBA's budget--this would probably 
translate into further cuts to these programs.

OMB and Advocacy under H.R. 1772

    H.R. 1772 is also going to increase the exposure of 
Advocacy to OMB influence. Currently, while OMB has a great 
deal of input in determining overall agency funding levels in 
the budgetary process, it is not involved in determining agency 
spending priorities. This provides protection from an 
administration seeking retribution for a Chief Counsel that is 
overly active. The bill, however, fails to address the ability 
of Advocacy to request and receive funding without interference 
from OMB. The line item created under Section 5(b) of the 
legislation could create a situation where Advocacy would see 
its independence negatively impacted by the increased amount of 
influence that OMB could exert.
    Section 5(b) of the bill that creates the line item places 
Advocacy funding in direct control of OMB. It would require the 
Chief Counsel to go to OMB regarding all funding needed. This 
structure allows OMB to exert a high degree of influence on 
Advocacy--the only entity that has the power to criticize the 
OMB's actions. This could have a chilling effect on Advocacy's 
independent voice.
    In the 107th Congress, Democrats on the Small Business 
Committee attempted to rectify this problem as part of 
legislation to create an independent Advocacy. The legislation 
included a section that called for direct submission of the 
Advocacy budget to the president without review by the OMB. By 
requiring the direct submission, OMB would not have the 
authority to exact retribution on what it deemed as a 
problematic Advocacy. This provision, designed to protect the 
independence of Advocacy, was passed unanimously out of 
Committee, but was struck out by the Republican leadership 
prior to the bill being brought to the House floor.
    H.R. 1772 offers no protections from the OMB. Under the 
bill, the Chief Counsel could one day criticize OMB and the 
administration's policies and then the next day, have to go to 
the very entity it criticized to request funding. This 
structure would, at a minimum, create a perceived, if not 
direct, connotation that lack or underfunding of Advocacy was a 
result of its opposition to the OMB/administration's position.

                               CONCLUSION

    The Committee Democrats strongly support the goal of 
providing Advocacy with a stronger voice. At the same time, it 
is important to ensure that Advocacy stays true to its core 
mission of helping small businesses and entrepreneurs. H.R. 
1772 remains far from the mark and must be considered only a 
start. The Committee has spent many years trying to find ways 
to achieve an independent Advocacy and this approach fails to 
consider the pressures from the OMB and the SBA.
    This Committee has previously considered the creation of 
Advocacy as an independent commission to alleviate concerns 
over a meddling administration. As a commission, Advocacy could 
have its own budget, office space, and human resources. The 
commission proposal was a means to solve the problem of an 
administration using budgetary and other tools to apply 
pressure on Chief Counsels. This solution addresses problem 
areas that H.R. 1772 does not.
    While the bill passed out of the Committee by voice vote, 
it was not without objections and controversy. Democratic 
Members of the Committee expressed concerns over the bill in 
its current form. They were worried that the efforts of the 
Chief Counsel could be compromised by budget concerns and 
interference from both the OMB and the SBA.
    To have a truly independent Advocacy, any legislative 
proposal must ensure that the Chief Counsel can carry out his/
her duties without interference from the SBA Administrator or 
the OMB. Under H.R. 1772, Advocacy may be no better off in 
terms of finances from a meddling SBA Administrator than the 
status quo. Passing this legislation, which makes mere cosmetic 
changes, is poor public policy and sets a dangerous precedent.
    As the forces preventing Advocacy from becoming independent 
are strong, so must the measures designed to ensure its 
independence. A line item is clearly not enough to prevent 
interference from the SBA and the OMB. If there issues are not 
resolved in the final version of the bill, this legislation 
should not be passed into law.

                                                Nydia M. Velazquez.