I would like to thank Chair Snowe for making this process a truly bipartisan effort. This Committee has the reputation for working across party lines to put what’s important for small businesses first, and I appreciate that the Chair and her staff have worked with us on reauthorization with that goal in mind. The result is a comprehensive approach to reauthorizing the SBA for the next three years that includes not Republican or Democratic priorities but instead the priorities of America’s small businesses.



This reauthorization could not have came at a more opportune time to tackle some of the issues that are eating away at our small business programs and at the core mission of the SBA – which is to foster small business growth and bridge the gaps left by the private sector. While the Chair has already outlined the proposal before us, I want to highlight some of the key provisions included in this bill.



One of the most important things we are here to do today is to address the shortcomings and failures of the SBA’s disaster loan program. Nearly a year has passed since Hurricanes Katrina, Rita and Wilma battered the Gulf Coast, and in that year I’ve visited New Orleans on three occasions. I can tell you that many of the streets are still covered in debris, and that many of the region’s small businesses are barely keeping their doors open. The SBA needs to be prepared to handle an emergency of this magnitude. Thanks in large part to the hard work of Senator Landrieu and her dedicated staff, this bill provides the tools to respond swiftly and effectively following future large scale disasters.



Through Federally guaranteed bridge loans, states can offer small businesses short term access to capital so that they can remain open while they wait for other sources of assistance to come through. We provide the President with the authority to declare a new category of disaster—a Catastrophic National Disaster—which triggers nationwide economic injury disaster loans for businesses located outside the immediate geographic disaster area. And we improve the way SBA and FEMA coordinate disaster assistance. A greater importance needs to be placed on serving the victims, by making the process of applying for and receiving federal assistance as painless and user friendly as possible. That is why we give the SBA the authority to work with private lenders to get disaster loans out quickly—an idea that members of this Committee tried to get SBA to embrace last year. This will only work if we can ensure that these loans do not come at a high cost to disaster victims: We are hopeful that our approach will keep interest rates down.



This bill also addresses the effects that the energy crisis is having on America’s small businesses. Gas prices are once again approaching record highs, and for the small businesses that depend on fuel to put food on the table, rising prices mean more than having to decide whether or not to drive to work. Included in the bill is the bipartisan Small Business Energy Emergency Relief Act, a bill which has passed the Senate and this Committee before, which provides low-interest loans to small businesses dependent on fuel. The loans are triggered when oil prices increase significantly over the average price from the previous two years. This proposal is complemented by Chair Snowe’s 7(a) express loans for small businesses that are willing to invest in renewable energy solutions.



In looking at our core programs, this bill makes a strong statement about the need for the SBA to fill the lending gap in our minority communities. It is unacceptable that since 2001, while numbers of 7(a) loans have gone up for African Americans, the actual dollars loaned have remained stagnant. In the Microloan program, African Americans received 28 percent of the total number of microloans made in 2001 as compared to only 21 percent of the total number of loans made in 2005. Native Americans went from 2 percent of the total number of microloans made in 2001 to less than one percent -- a mere .93 percent -- in 2005. If this trend continues – Native Americans alone will be completely cut out of the Microloan program. The stagnant lending in these communities represents a failure of this Administration to expand access to capital to our underserved communities, communities where conventional lending is not meeting the need.



The bill provides an incredible framework for the SBA to reverse this trend. 1) it creates an Office of Minority Small Business Development at the SBA, similar to offices devoted to business development of veterans and women and rural areas, and 2) it creates a grant program to develop a cross campus curriculum at Historically Black Colleges and Universities, Tribal Colleges, and Hispanic-Serving Institutions to encourage minority students in a wide range of fields to consider entrepreneurship. There is much to be done to bridge the wealth gap in minority communities and this is one approach worth pursuing. Finally, the bill incorporates legislation from my colleague, Senator Johnson, to provide financial assistance to tribal governments, tribal colleges, Native Hawaiian organizations, and Alaska Native corporations to create Native American business centers.



One of the keys to ensuring access to capital is making sure that SBA-backed financing remains affordable to the small business community. As we all know, the Administration insisted on eliminating all funding for 7(a) loans, shifting the cost to borrowers and lenders by imposing higher fees. The President’s budget reveals that borrowers and lenders already pay too much in fees, generating more than $800 million in overpayments since 1992 because the government routinely over-estimates the amount of fees needed to cover the cost of the program. This bill seeks to address overpayments by requiring the SBA to lower fees if borrowers and lenders pay more than is necessary to cover the program costs or if the Congress appropriates money for the program.



The bill also reauthorizes the PRIME program through 2009 and includes a provision that Senator Bingaman and I worked closely to develop that will expand PRIME with a separate $2 million authorization to provide technical assistance and counseling to disadvantaged Native American small business owners. The bill also includes technical yet important changes in the Microloan program such as making loans to persons with disabilities as one of the statutorily enumerated “purposes” of the Microloan program and changing the average smaller loan size in the Microloan program from $7,500 to $10,000.



In reauthorizing one of our other core programs, SBA’s 504 loan program, I am pleased that we were able to come up with a bipartisan approach to preserving the local economic development focus of the program. The ability of our Certified Development Companies (CDCs) to expand operations into multiple states, in conjunction with the growing demand for 504 loans, required that we put in place accountability measures. The 504 program was not created for CDCs to expand operations and simply create revenue from one state to another. CDCs are more than lenders and should not act like for-profit banks.

This bill allows CDC board members to serve on another CDC board, but institutes safeguards to prevent control of multiple boards.



The bill also incorporates a “Child Care Lending Pilot” to expand the availability of affordable, quality childcare in this country by using the 504 loan program to spur the establishment and expansion of child care providers. Right now only for-profit child care businesses are eligible for 504 loans, yet in some states a majority of affordable child care is delivered through non-profit providers and in the neediest communities non-profits are often the only provider.



I am pleased that our bill reauthorizes the Women’s Business Centers and makes permanent the Women’s Business Center Sustainability Pilot Program through the creation of three-year “renewal” grants for centers with sustainability grants, and four-year “initial” grants for new centers across the country. We should not be abandoning our existing centers –many of which leverage federal dollars to do excellent work in our communities -- to run and create new ones. The Chair and I have been fighting for this for a long time: It’s time we get this adopted. Our bill also reauthorizes Small Business Development Centers and builds on this excellent resource by creating a pilot program to provide regulatory assistance to small businesses, in addition to the role SBDCs play in the minority entrepreneurship initiative.



One area of our bill which does not deal with reauthorizing SBA programs is just as critical to small businesses – federal contracting. Earlier this month, we heard new SBA Inspector General Eric Thorson testify about the largest impediments to small businesses receiving their fair share of prime and subcontracting opportunities. He explained how many of the problems in applying and enforcing small business contracting statutes are simply due to contracting officer error. Contracting officers do not know or do not care about small business requirements, and small businesses suffer the consequences. This bill seeks to do something about the disregard that is shown to small businesses with respect to federal procurement policy.



Procurement Center Representatives, or PCR’s, are responsible for advocating on behalf of small businesses in cases affecting federal contracting, such as the bundling or consolidation of contracts. Unfortunately, there are not enough of them to effectively get the job done. By requiring the SBA to assign no fewer than one PCR per major procurement center, this bill takes steps to limit the incidence of contractor error referred to by Mr. Thorson. We can no longer tolerate the level of neglect that is currently the norm. It’s time for the SBA to staff up and fulfill its responsibility as a watch dog for small businesses.



In addition to mandating adequate staffing levels, this bill takes many significant steps to enforce subcontracting and bundling laws already on the books. Firms bidding for small business contracts are required to certify annually as small businesses so we do not have large businesses taking small business contracts, and large prime contractors are required to certify that subcontracting goals will be met. If subcontractors are not paid on a timely basis, Federal agencies are permitted to withhold payments and to pay subcontractors directly. We must stop fraudulent misrepresentation by large firms, and require the Administration to start looking out for the interests of small firms that want to do business with the Federal Government.



The time has also come to implement the women’s procurement program. The Administration has postponed implementing a women’s procurement program that became law six years ago! This bill tells SBA to get it done within 90 days. It also makes clear that America’s service disabled veteran small businesses deserve the same advantages as other subgroups with respect to sole source contracting. Our veterans are returning from Iraq and Afghanistan, and we owe it to them to give them every opportunity at fulfilling the dream of entrepreneurship.



Another program sorely needing our attention: The 8(a) program was created to assist socially and economically disadvantaged small businesses, but the financial threshold for inclusion in the program is out dated and too restrictive. This bill allows for an inflationary adjustment to be made so that businesses that belong in this program aren’t being shut out.



Finally, let me say a few words about SBIR. Our Committee had a hearing on this program earlier this month, and at that time, I made clear my concern that we were being premature in going ahead with reauthorizing SBIR when the program is authorized until 2008. There is a $5 million National Academy of Sciences study due to come out at the end of this year that I am certain will give us much to consider. Yet, this bill does reauthorize SBIR, making it permanent, and it includes some strong provisions to protect SBIR companies’ intellectual property and to reign in excessively large awards – which are a particular problem at NIH. While SBIR Phase IIs are supposed to be $750,000, NIH Phase II are often larger. One Phase II award reportedly equalled $6 million. While the firms getting these large awards may be doing important work, we need to keep in mind that if one firm receives $6 million, there are many firms that are not getting Phase IIs at all. That is why I am glad that we have adopted Senator Bayh’s proposal to increase the overall share of SBIR funds from 2.5 percent to 5 percent of federal research budgets, so that more small businesses will have a chance to compete in this program. I also support several provisions in the bill to encourage commercialization, one of the biggest challenges facing the program.



Before I close, I want to note that while this bill is truly bipartisan, so was our last reauthorization bill, S.1375. The reauthorization bill that was finally adopted back in 2004, however, was a notably partisan product, attached to an omnibus appropriations bill, with almost all Democratic provisions dropped. I urge the Chair to maintain today’s spirit of bipartisanship as we move forward, so that the final product truly reflects all of our efforts.