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2098 11^th^ Avenue E

North St. Paul, MN 55125

651-779-5651

Congresswoman Betty McCollum

Minnesota Families Panel, January 30, 2006

Patricia Brady, Director Employment and Training

Ramsey County's Workforce Solutions

# Impact of Administration's State of the Union on Small Businesses

I recently went to my local gym to enroll in a special exercise course
they were advertising. As it turned out, the class was being conducted
at 11:00 in the morning. I was extremely disappointed, and of course
surprised. I spoke with the personal trainer directly to register my
dismay and to lobby for an evening course. She explained to me that the
best time, economically speaking, for the class *[was]{.underline}* in
the morning.

She went on to say that there was so much interest for a class at that
hour that they were starting another class to keep up with the demand.
"Don't these people work?" I asked, mostly kidding and expecting a
laugh. "They do," she said, they are mostly middle-aged people who are
self-employed - consultants."

That's when I remembered reading an article in the fall of 2005 in *USA
Today* that focused on research that indicated 5.6 million workers age
50 and older are now self-employed, **a 23% jump from 1990**.  As a
result of corporate downsizing and mergers, tens of thousands of workers
over 50 have faced loss of employment in recent years. After exhausting
their unemployment benefits and failing to find work, these individuals
had turned their misfortune into small businesses.

When President Bush makes his State of the Union address to Congress
this week, he is expected to ask lawmakers to support a decrease in
funds that would support another vital segment of the nation's economy
that is too often taken for granted: America's 25 million small
businesses.

Small businesses are the fast lanes to economic growth for the United
States and for Minnesota. There are 25 million small businesses in the
United States, 456, 000 of them right here in Minnesota. Small
businesses are employers of 53 percent of the Nation\'s private
workforce and the source of about half the country\'s private gross
domestic product. More recent studies indicate that small business will
likely **lead** medium to large businesses in future employment growth,
especially in technology-intensive industries.

So, I had two concerns when I read that the President will be requesting
a 2.8 percent decline in funding for the Small Business Administration
for 2006. I am concerned for

Patricia Brady, Director Employment and Training

Ramsey County's Workforce Solutions

# Impact of Administration's State of the Union on Small Businesses

small business survival and growth, and concern for current and
potential workers who depend on economic development of these businesses
for their very livelihood. These two concerns are inextricably tied. We
cannot expect to stimulate job growth if we do not assist small
businesses that are struggling to survive and grow.

Since many large corporations continue to downsize, and there is no end
in sight for corporate mergers, we need the federal government to
allocate resources in a way that will help insure we can increase the
number of job opportunities for those being laid off and for the
emerging workforce. Our economy will look to small businesses for new
job creation just as we have for the last decade or more. The question
is, will there be enough new small businesses being formed, and existing
small businesses expanding to generate the nearly 160,000 new jobs we
need every month simply to provide jobs for new workers seeking to enter
the workforce? 

These small businesses, new and mature, will need a well-trained
workforce or they will not survive. This means that we need to become
skills-focused with our current and potential workers. Research has
shown that we are going into a future that will not be plagued with a
shortage of workers, as much as a shortage of skilled workers. Moreover,
many new jobs will require more technical skills and a greater
understanding of math and science---subjects in which American students
fail to show a suitable level of competence.

Tuition at public institutions rose by 10.5% last year and 400,000 low
and moderate-income, qualified, high school graduates will not pursue a
full-time, four-year degree, because of an inability to pay. But it's
not just low and moderate-income students that face a difficult time
paying for college. The non-partisan National Center for Public Policy
and Higher Education concluded that a four-year college education is
getting priced out of the reach of most American families.

So when I hear that the president may freeze funding for work-study,
supplemental educational opportunity grants and eliminating funding for
the LEAP program, which matches state financial aid targeted toward
low-income students, I become concerned about small businesses that need
skilled workers, and our ability to educate and train jobseekers for the
future.

Where will our small businesses find the qualified workers they need to
grow their businesses and how will our economy grow with skilled
workers. I am already concerned about the number of jobs loss to
offshore concerns. Businesses are not just relocating for lower wage
earners, but also for more skilled workers. We can decrease this trend
by assuring that we meet the needs at home for skilled workers. A highly
skilled, workforce will assist small business as they expand and
continue to stimulate economic development.

Patricia Brady, Director Employment and Training

Ramsey County's Workforce Solutions

# Impact of Administration's State of the Union on Small Businesses

I am also concerned about health insurance premiums that are rising
faster than inflation. The number of employers offering health coverage
is declining and the numbers of the uninsured are growing. These
developments explain why health care is near the top of many small
businesses' list of worries. The president may be undertaking a campaign
to transfer much of the cost of health care to the consumer, which
discourages people \-- particularly the poor \-- from seeking the care
they need. Focusing on providing tax advantages to individuals for
health spending draws the healthiest and wealthiest out of traditional
employer-based insurance. Left behind, are less well off in a system
that is increasingly expensive and thus eventually less available. On
the surface it may appear that the small business owner is relieved. In
the end, this may make good jobs less attractive to skilled workers.

This new policy will not really solve the problem for small businesses,
only shift the problem to workers who may have to choose between their
own care and other more pressing issues. This will weaken small
businesses.

Finally, I am encouraged that small businesses may have the opportunity
to collaborate with other small businesses in providing healthcare
benefits. I would offer that this must be done in a way that does not
just benefit insurance companies, but small businesses and consumers as
well. Administratively, this could further raise the cost of premiums if
not very well done, or may require small businesses to expend more from
their own administration budget to make the processes workable.

Thank you for the opportunity to participate in this conversation about
the State of the Union, Minnesota families.