Recommendation Of Changes In Law That Help Achieve Deficit Reduction By Reducing Waste, Fraud, Abuse, And Mismanagement, Promoting Efficiency And Reform Of Government; And Controlling Spending Within Government Programs, Pursuant To H. Res. 1493

Floor Speech

* Ms. VELÁZQUEZ. Madam Speaker, pursuant to section (c)(2)(C) of H. Res. 1493, the Small Business Committee has taken steps to ``identify changes in law that help achieve deficit reduction by reducing waste, fraud, abuse, and mismanagement, promoting efficiency and reform of government, and controlling spending within Government programs'' that fall within the Committees' legislative jurisdiction. With the economy beginning to show promising signs of recovery, it remains imperative that Congress and this Committee effectively oversee that taxpayer funds are used effectively. This includes not only terminating duplicative programs, but also taking steps to eliminate wasteful practices in federal agencies.

* The Committee has taken its oversight role very seriously. H. Res. 40, which was passed at the beginning of this Congress, amended Clause 2(n) of House Rule XI by requiring that committees undertake intensive and regular examination of executive branch activities. We have exceeded the 1 hearing per 120 day requirement under H. Res. 40 and held 10 hearings on the Small Business Administration (SBA) and its programs. This has included 4 Government Accountability Office (GAO) investigations, all of which were requested by this Committee.

* As a direct result of these oversight activities, the Committee makes the following recommendations pursuant to H. Res. 1493:

* 1. Termination of Patriot Express Loan Program: The Increased Veteran Participation Program contained in P.L. 110-186, the Military Reservist and Veteran Small Business Reauthorization and Opportunity Act of 2008, provides a more suitable financing alternative for veteran-owned small businesses than the Patriot Express Loan program. In particular, the program established in P.L. 110-186 provides for a higher guarantees, larger loan sizes, and reduced fees than the Patriot Express pilot program currently operated by the SBA. For this reason, the Committee recommends the termination of the Patriot Express initiative because the alternative program established in P.L. 110-186 will better serve veteran entrepreneurs.

* 2. Termination of SBA Express Loan Program: Given increasing defaults and the projected costs associated with the SBA Express program, the Committee recommends that this program be immediately terminated. The initiative has grown costly and does not satisfy any public policy goal, making it a poor use of scarce taxpayer funds. With a reduced guarantee of only 50 percent, the SBA Express Loan program fails to provide a sufficient incentive for lenders to make loans that they would otherwise not make.

* 3. Termination of the HUBZone Program: In the last three years, GAO has found that the program was continually subject to widespread fraud and mismanagement. The program places taxpayer funds at substantial risk for fraud, waste, and abuse. Given the high frequency of fraud, legitimate small business contractors are placed at a distinct disadvantage due to the continued operation of this program. As a result, the Committee recommends that it be terminated.

* 4. Termination of the Emerging Leaders Initiative: While the goals of this program are justifiable, the Committee is concerned about the effectiveness and efficiency of the initiative due to its program design and past performance. As a pilot program, the initiative failed to demonstrate the capacity to generate a significant economic impact despite the large share of resources allocated to it. This program only produced 132 jobs at a cost of $800,000--an average of cost of $6,000 per job created. This amount is almost twice as much as the job creation cost of the Small Business Development Center program, which costs $3,500 to create one job. In addition, this program is duplicative of SBA's extensive network of entrepreneurial development providers. As a result, the Committee recommends that it be terminated.

* 5. Termination of the Regional Innovation Clusters Initiative: The Committee has major concerns over the design of the regional cluster program. Although the program's goal is to target significant resources to regional industry clusters, the institutional framework to implement the proposal has not been clearly established. Plans for the allocation of resources, partnership agreements among local, private, and federal service providers in the targeted areas, and decision-making coordination remain unclear. In addition, the program lacks a specific implementation strategy, has inadequate federal oversight over the allocation of resources, and does not contain sufficient performance measures to determine its success. Due to these limitations, there is significant concern over abuse of thirds for this initiative. As a result, the Committee recommends that this program be terminated.

* 6. Termination of the National Veterans Business Development Corporation: This Corporation was created to provide training and entrepreneurial development services to veterans. Unfortunately, it has not reached its full potential and the American Legion and Veterans of Foreign Wars have called for its termination. Given concerns that the organization is insufficiently fulfilling its purpose to provide comprehensive assistance to separating members of the nation's military forces, the Committee has authored and the House passed an alternative program in H.R. 1803, the Veterans Business Center Act of 2009. This legislation establishes a dedicated national network to deliver the services more efficiently than the Corporation. The Committee's commitment to promoting veteran entrepreneurship remains strong. Therefore, it is critical that assistance programs to the sector are effective and that veterans have access to these resources so they can establish successful enterprises in all stages of the economy.

* 7. Termination of the Drug-Free Workplace Program: The Drug-Free Workplace program was originally created to assist small firms in the implementation of a plethora of substance abuse counseling and training activities. This included creating workplace drug policies, drug prevention training and education seminars, providing for drug-testing, and counseling employees on substance abuse. Instead, the program has evolved into a subsidy solely for drug-testing centers, a private industry that does not warrant funding from the SBA, an agency whose mission is to promote and assist small businesses. Given the financial challenges facing the government, it is not prudent to use scarce taxpayer funds to purchase drug-testing services from and for viable private sector companies. As a result, the termination of program funding is appropriate due to the lack of meaningful returns on the public investment.

* 8. Termination of the National Women's Business Council (NWBC)--The NWBC mandate is to conduct research on women entrepreneurship, which is duplicative of the research work of the SBA's Office of Advocacy. Having two research entities conduct similar research is unnecessary and the NWBC funding should be terminated. The Office of Advocacy is the appropriate entity to conduct all entrepreneurship-related research as it benefits from both economies of scale and scope in its organization structure and staff capabilities.

* In the last 18 months, small businesses have increasingly turned to the SBA for assistance. This has helped stem job losses and, in some parts of the country, created pockets of new growth. As a result, we are now beginning to see signs of strength, as private sector jobs continue to be added. To this end, the National Association for Business Economics recently found that 31 percent of companies added jobs between April and June, the highest level since 2007. Additionally, 39 percent of businesses surveyed reported that they expect to hire more workers over the next six months, which is the most since January 2008. Such growth is promising and it suggests that the business climate is becoming ripe for the establishment of new firms. This means that the SBA needs to be prepared to help these firms succeed, while also containing its costs. The Committee's proposals, if implemented, will accomplish this by reducing the federal deficit, curtailing fraud, and enabling the SBA to focus on its most important and successful programs. By increasing efficiency, the agency's existing tools and resources can be improved, without imposing additional costs on the taxpayer. This is a means to not only act in a fiscally prudent manner, but also a way to meet the needs of our nation's small businesses.

Source