I am pleased to convene this field hearing of the United States Senate Committee on Small Business & Entrepreneurship. The subject of this hearing is “Rebuilding the Gulf Coast: Small Business Recovery in South Louisiana.” In particular, we are focusing on recovery here in southwest Louisiana in the parishes impacted by Hurricane Rita of 2005.

Let me take this opportunity to thank Chairman Kerry and Ranking Member Snowe for working with us to hold this field hearing here in Lake Charles, Louisiana. I would also like to thank Mayor Randy Roach and the City of Lake Charles for hosting this hearing as I sincerely believe that it is essential to focus more attention on recovery efforts in this part of our state. Lastly, let me thank the Federal, State, and local officials here today as well as members of the business community who are in the audience.

Hurricanes Katrina and Rita

Everyone around the country is familiar with the impact of Hurricane Katrina on the New Orleans area and the southeast part of our state. Images from the devastation following Katrina, and the subsequent Federal levee breaks, were transmitted around the country and around the world. This is because Katrina was the deadliest natural disaster in United States history, with 1,800 people killed - 1,500 alone here in Louisiana. Katrina was also the costliest natural disaster in United States history with over $81.2 billion in damage. While Katrina has received a great deal of national attention and focus, the impact of Hurricane Rita on southwestern Louisiana and southeastern Texas has received little attention in comparison.

Hurricane Rita made landfall between Sabine Pass, Texas and Johnson’s Bayou, Louisiana on September 24, 2005. Many people do not know but Rita is the most intense hurricane ever in the Gulf of Mexico. It broke the record set by Hurricane Katrina just three weeks earlier. Rita also was the seventh-most costliest disaster in United States History with over $11 billion in damage. Furthermore, the storm resulted in the evacuation of 3 million people in Louisiana and Texas. On the local level in Louisiana, many communities in Cameron Parish were heavily damaged or destroyed. Here in Lake Charles, they experienced tropical force winds and areas near Lake Calcasieu experienced six to eight feet of water. This is a story which is well known in this area but the national press has not heard these stories nor really toured these impacted areas. Our hearing today hopefully will help get the word out and identify additional areas where the Congress can provide targeted assistance for these businesses.

In my discussions with local businesses, there are three areas in which I consistently hear a need for Federal action: increased insurance costs, Federal recovery contracts, and technical assistance/business counseling. Some of the testimony today will highlight these issues but for my part, I would like to try to provide some real solutions for spurring recovery in southwest Louisiana.

Insurance

On the issue of insurance, I have heard loud and clear from our businesses that we need to be more aggressive with insurance companies. Insurance costs have steadily increased since Katrina and Rita and, especially for our small businesses, these increased fees are proving to be an obstacle to recovery. To these ends, I am proud to be an original cosponsor of S. 618, the “Insurance Industry Competition Act of 2007,” which was introduced by Senate Judiciary Committee Chairman Leahy. S. 618 would repeal the anti-trust exemption for insurance companies. This exemption has enabled insurance companies to engage in blatantly anti-competitive conduct. The most notorious instance occurred in 2004 when the insurance broker, Marsh & McClennan, and several of the nation’s largest insurance companies were caught engaged in a bid-rigging scheme. Such conduct would have constituted a per se violation of the anti-trust laws, but because of the exemption, federal antitrust enforcers were powerless to act.

Next week, I will introduce the “Flood Insurance Accountability Act” which would create an ombudsman at the Federal Emergency Management Agency (FEMA) to strengthen financial oversight of the National Flood Insurance Program (NFIP). The need for this particular bill was highlighted by a recent Government Accountability Office report that found "an inherent conflict of interest" in having private insurance companies determine how much the government should pay on flood claims. This report reiterated what we've long known - when it comes to making sure the big insurance companies are living up to their promises, there's no one at the NFIP minding the store. My legislation would create an independent office to make sure private insurers are acting in good faith, giving their customers the coverage they paid for. This ombudsman would be isolated from the political pressures of the powerful insurance lobby and have broad authority to hear and investigate complaints and stand up for insurance policyholders and taxpayers alike.

Gulf Coast Recovery Contracts

In regards to recovery contracts, I strongly believe that our local firms should get their fair share of these contracts. Our local businesses can do this work and it is commonsense to allow them to help in the rebuilding of their communities. The Federal government should do more to ensure our local small businesses get more contracts and subcontracts on this recovery-related work. That is because the recovery will be a 10-year process so it is yet another way to help these impacted areas. Along these lines, I propose three ways that we can help Gulf Coast businesses secure their share of contacts. First, we should designate the Katrina and Rita-impacted areas as a Historically Under-utilized Business Zone, or HUBzone. This proposal, which has passed the Senate at least three times since Katrina, would provide businesses in these areas with a special preference when bidding on Federal recovery contracts. To ensure that it is strictly for recovery purposes, we should include a two year sunset on the provision. As I said, the Senate is on the record as supporting this proposal so we need to work with our House colleagues on the next Emergency Supplemental to ensure it passes this year.

Next, we also need to provide contracting assistance to our local minority businesses. For example, the 8(a) business development initiative helps minority entrepreneurs access Federal contracts. This program allows companies to be certified for increments of three years, for a maximum of nine years. Due to Hurricanes Katrina and Rita, many 8(a) firms in the disaster area lost valuable time to participate in this program - time which they cannot get back. To assist these impacted businesses, Congress should extend by twenty four months eligibility for these businesses. With this reasonable extension, businesses can continue to pay a vital role in their communities. I note that this provision has already passed the House of Representatives, with the strong support of the Louisiana House delegation. For my part, I am willing to champion the proposal here in the Senate if we can amend the House-passed version to include Rita-impacted areas here in southwest Louisiana as well as make the extension for twenty four months.

Lastly, when Katrina and Rita struck Louisiana we did not have a Procurement Contracting Representative (PCR) located in our state. PCRs are responsible for initiating small business set asides for contracts, counseling businesses, and providing other contracting-related assistance. To its credit, the U.S. Small Business Administration (SBA), after a push from the Louisiana Congressional delegation, included funds in last year’s Budget to hire a PCR for New Orleans. However, given the vast number of Federal recovery contracts and the fact that this recovery will be a 10-year process, I strongly feel that we need another PCR in Louisiana. Businesses right here in southwest Louisiana need this type of assistance and I am concerned that our current PCR needs additional help to better serve our state. In fact, Congress has called for the hiring of 100 PCRs nationwide, with the Administration filling 57 of these position so far. As a member of both the Senate Appropriations Committee and the Senate Small Business Committee, I intend to work closely with the SBA to ensure that as they fill these remaining positions, that Louisiana secures an additional PCR.

Technical Assistance

We will hear testimony today from our local Small Business Development Center (SBDC), Women’s Business Center (WBC), and U.S. Export Assistance Center (USEAC). All of these programs have been critical resources for businesses recovering from Katrina and Rita. This is because our impacted businesses, in many cases, have lost some of their client base or are dealing with communities that have changed significantly post-storms. As a result, these businesses are in desperate need of technical assistance to reach out to new clients, new markets or to revise their business plans to deal with changes to the local economy.

Unfortunately, some of these programs are those hardest-hit by cuts in the President’s Budget this year. For example, the President’s Budget proposes drastic cuts to grants for Small Business Development Centers and Women’s Business Centers. In particular, he proposes to reduce the SBDC program by $10 million and the WBC program by $1 million. For programs which have essentially been flat-funded since 2001 and have been dealing with increased costs due to inflation, these funding cuts go straight to the bone. To show how these cuts impact our local technical assistance providers, consider our Women’s Business Center in New Orleans. Similar cuts and other budgetary constraints resulted in the center facing a $45,000 shortfall in funding - despite the fact that there is increased demand for their services post-Katrina. With this in mind, I worked hard to secure $45,000 in the recent Omnibus Appropriations bill to help keep this center in operation. This is a prime example of how Congressional earmarks can benefit Louisiana. As we have done in the past few years, Congress will increase funding levels for the Women’s Business Center and Small Business Development Center programs through the Appropriations process.

In closing, let me say that I am hopeful today’s hearing can serve as a forum to highlight these and other areas where Congress can help recovery efforts on the ground. Local industries, such as the seafood and tourism industries, are making great strides in their recovery. For example, the rest of the country has seen in prime time that Louisiana is “open for business” as evidenced by the recent Sugar Bowl, Bowl Championship Series Title Game, and National Basketball Association All-Star Game - all held in New Orleans. These sporting events, along with Mardi Gras and steady convention traffic has spurred recovery in southeast Louisiana. Although there is a friendly rivalry between southeast and southwest Louisiana, what is good for New Orleans is good for the rest of south Louisiana. At the same time, however, we should focus on specific areas in which southwest Louisiana needs additional Federal funding or Congressional help. Without our essential small business and industries here in southwest Louisiana, our state cannot fully recovery from these storms.

I thank the Chair and ask that a full copy of my statement appear in the record.