prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.



Report 2: The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs to enhance small business access to capital; contracting programs to increase small business opportunities in securing federal contracts; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion  Congressional interest in these programs has increased in recent years, primarily because assisting small business is viewed as a means to enhance economic growth  The SBA's Surety Bond Guarantee Program has been operational since April 1971  It is designed to increase small business' access to federal, state, and local government contracting, as well as private-sector contracting, by guaranteeing bid, performance, payment, and specified ancillary bonds "on contracts … for small and emerging contractors who cannot obtain bonding through regular commercial channels " The program guarantees individual contracts of up to $6 5 million, and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary  The $6 5 million limit is periodically adjusted for inflation  The SBA's guarantee currently ranges from 80% to 90% of the surety's loss if a default occurs  In FY2018, the SBA guaranteed 10,800 bid and final surety bonds (a payment bond, performance bond, or both a payment and performance bond) with a total contract value of nearly $6 5 billion  Although the surety industry does not report the total value of the bonds it issues each year, estimates based on the total amount of premiums collected by the private sector in recent years suggest that the SBA's Surety Bond Guarantee Program represents, by design, a relatively small percentage of the market for surety bonds (from about 1 1% to 6 7% of the value of surety bonds issued by the private sector)  A surety bond is a three-party instrument between a surety (that agrees to be responsible for the debt or obligation of another), a contractor, and a project owner  The agreement binds the contractor to comply with the contract's terms and conditions  If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed  The surety bond reduces the risk of contracting  Surety bonds are viewed as a means to encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and are considered to be at greater risk of failing to comply with the contract's terms and conditions  The four general types of surety bonds are bid bonds guarantee that the bidder on a contract will enter into the contract and furnish the required payment and performance bonds if awarded the contract, payment bonds guarantee that suppliers and subcontractors will be paid for work performed under the contract, performance bonds guarantee that the contractor will perform the contract in accordance with its terms and conditions, and ancillary bonds ensure completion of requirements outside of performance or payment, such as maintenance  Surety bonds are important to small businesses interested in competing for a federal contract because the federal government requires prime contractors, prior to the award of a federal contract exceeding $150,000 for the construction, alteration, or repair of any building or public work of the United States, to furnish a performance bond issued by a surety satisfactory to the officer awarding the contract, and in an amount the contracting officer considers adequate, to protect the government  Prime contractors are also required to post a payment bond with a surety satisfactory to the contracting officer for the protection of all persons supplying labor and material in carrying out the work provided for in the contract  Both bonds become legally binding upon award of the contract and their "penal amounts," or the maximum amount of the surety's obligation, must generally be 100% of the original contract price plus 100% of any price increases  Most state and local governments have adopted similar legislation, often called "Little Miller Acts," referencing the Miller Act of 1935 that established the federal requirement  Many private project owners also require contractors to furnish a surety bond before awarding them a contract  This report opens with an examination of the SBA's Surety Bond Guarantee Program's legislative origin and provides a historical summary of the major issues that have influenced the program's development, including the decision to supplement the original Prior Approval Program with a Preferred Surety Bond Guarantee Program (PSB program) that initially provided SBA-approved sureties a lower guarantee rate (not to exceed 70%) than those participating in the Prior Approval Program (not to exceed 80% or 90%, depending on the size of the contract and the type of small business) in exchange for allowing preferred sureties to issue SBA-guaranteed bonds to small businesses without the SBA's prior approval; P L  114-92 , the National Defense Authorization Act for Fiscal Year 2016, which increased the PSB program's guarantee rate from not to exceed 70% to not to exceed 90% of losses; and the decision to increase the program's bond limit  It then examines the program's current eligibility standards and requirements, and provides performance statistics, including the number and amount of bond guarantees issued annually  In addition, it provides data concerning the number and amount of final bonds guaranteed from FY1971 through FY2017 (see Table A-1 ) and for bid and final bonds combined from FY2000 through FY2017 (see Table A-2 )  P L  91-609, the Housing and Urban Development Act of 1970, authorized the SBA's Surety Bond Guarantee Program  The act amended Title IV of the Small Business Investment Act of 1958 (P L  85-699, as amended) to provide the SBA authority to guarantee any surety against loss as the result of a breach of the terms of a bid bond, payment bond, or performance bond by a principal on any contract up to $500,000  The act specified that (1) the principal of the bond is a small business, (2) the bond is required as a condition of bidding on the contract or serving as a prime contractor or subcontractor on the project, (3) the small business is not able to obtain such bond on reasonable terms and conditions without the guarantee, (4) the SBA determines that there is a reasonable expectation that the small business will perform the covenants and conditions of the contract, (5) the contact meets SBA requirements concerning the feasibility of the contract being completed successfully and at a reasonable cost, and (6) the bond's terms and conditions are reasonable in light of the risks involved and the extent of the surety's participation  The act also required that the SBA's guarantee not exceed 90% of the loss incurred by the surety in the event of a breach of the bond's terms and conditions by the small business  The SBA was authorized to finance the program through the Leasing Guarantee Revolving Loan Fund within the Department of the Treasury, which renamed that fund the Lease and Surety Bond Guarantee Revolving Fund  The act authorized the transfer of $5 million from the SBA's Business Loan and Investment Revolving Fund to the Lease and Surety Bond Guarantee Revolving Fund, raising that fund's capital to $10 million available without fiscal year limitation, to support both the lease guarantee program and the surety bond guarantee program  The act also recommended that the program be appropriated up to $1 5 million each fiscal year for three fiscal years after its date of enactment (December 31, 1970) if additional funding were needed to offset the program's expenses  The SBA was directed to administer the program "on a prudent and economically justifiable basis " It was authorized to offset the program's administrative costs by charging a uniform annual fee, subject to periodic review to ensure that the fee is the "lowest fee that experience under the program shows to be justified," and uniform fees for the processing of applications for guarantees  The SBA also was authorized to "obligate the surety to pay the Administration such portions of the bond fee as the Administration determines to be reasonable in light of the relative risks and costs involved " The program's sponsors argued in 1970 that "there is widespread evidence that a significant number of construction contracting organizations find varying degrees of difficulty in obtaining surety bonds" and that "the major share of these organizations are small businesses, and many of them are headed by minority groups " They argued that the Surety Bond Guarantee Program would "facilitate the entry and advancement of small and minority contractors in the construction business " At that time, witnesses at congressional hearings testified that surety bonds were not necessarily required for most private sector construction contracts, but they were required for most public sector construction contracts  The SBA implemented the program on a pilot basis on April 5, 1971, in Kansas City  The program later was expanded to Los Angeles and became nationwide on September 2, 1971  Initially, the SBA guaranteed 90% of the amount of all of the surety bonds in the program and charged sureties 10% of the bond premium paid to the surety company by the contractor  It also charged small business applicants for payment and performance bonds 0 2% of the contract price upon their obtaining the contract  It did not charge for the processing of bid bonds, rejected applications, or applications that did not result in a contract award  Contractors wishing to participate in the program were required to have less than $750,000 in gross annual receipts for the past fiscal year or to have averaged less than $750,000 in gross annual receipts over the past three fiscal years  This size standard was more stringent than for other SBA programs, and it was designed "to reach that segment of small business which was obviously intended to benefit from the legislation as evidenced by the limit of $500,000 on any one contract " Demand for the program exceeded the SBA's expectations  In 1971, the SBA estimated that it would guarantee about 8,000 contracts amounting to about $540 million from FY1972 through FY1974  Instead, it guaranteed 16,118 contracts amounting to nearly $1 1 billion (see Table A-1 in the Appendix)  Because the demand for the program exceeded expectations and the initial fees proved to be insufficient to recoup the program's expenses, in 1974, the SBA requested an additional $25 million for the program  The SBA argued that the additional funds were necessary to take into account the program's projected growth and to establish a reserve fund "to protect against having to suspend [the] program in the fact of more rapid growth than is projected " In response to the SBA's request for additional funding for the program, Congress held congressional hearings to reassess the need for the program and to explore options concerning how to finance the program's proposed expansion  The financing discussions focused on the relative merits of relying primarily on higher fees to increase the program's revenue, reductions in the guarantee percentage to reduce the program's expenses, or additional appropriations to finance the program's proposed expansion  Although the SBA has periodically increased the program's fees and later instituted a tiered system of guarantee percentages, historically, the SBA has tried to keep the program's fees as low as economically feasible and the guarantee percentage as high as economically feasible to encourage the program's use  As an SBA official testified before Congress in 1975: SBA's loss exposure could be reduced by a decrease in the guarantee extended to sureties from 90% to 80%  Before proceeding with this recommendation, a thorough analysis will have to be made of the adverse effect on the willingness of sureties to participate in the program which would result from the increase from 10% to 20% of the sureties' share of the loss potential  An increase in contractor's fees would obviously be beneficial to the operating income of the program, but would also increase the bids which small business-contractors would have to make, thus placing them at a competitive disadvantage with contractors with more ready access to bonding  Moreover, as mentioned previously, the SBA is required by statute to ensure that the fees are the lowest "that experience under the program shows to be justified " Determining the program's appropriate size became a recurring theme at congressional hearings, and continues to be of congressional interest today  For example, Congress has regularly requested testimony from representatives of the surety bond industry and various construction organizations concerning the extent to which the program is necessary to assist small businesses generally, and minority-owned small businesses in particular, in gaining access to surety bonds  Congress has also periodically asked the Government Accountability Office (GAO) to examine the need for the SBA's surety bond guarantee program and to recommend ways to improve the program's management  That testimony and GAO's reports have supported a need for the program, but, as will be discussed, have had somewhat limited usefulness in helping Congress determine the program's appropriate size  In 1974, Congress responded to the SBA's request for additional funding by passing P L  93-386 , the Small Business Amendments of 1974  It established a separate Surety Bond Guarantees Revolving Fund account (hereinafter Revolving Fund) within the Department of the Treasury to support the program  The act also increased the total contract amount that could be guaranteed to $1 million from $500,000 and recommended that the Revolving Fund receive $35 million in additional funding  The Ford Administration objected to providing additional appropriations for the Revolving Fund  Instead, the Administration recommended that the Revolving Fund receive a $20 million transfer from the SBA's Business Loan and Investment Revolving Fund  The transfer would provide the program access to additional capital without affecting the federal budget deficit  Congress approved the Administration's proposal  As shown in Table 1 , the Revolving Fund received $130 5 million in additional appropriations for FY1976 through FY1979 and continued to receive additional appropriations during the 1980s and 1990s  In addition, the program's bond limit was increased to $1 25 million from $1 million in 1986  As discussed below, the increased appropriations and bond limit were not sufficient to continue the program's growth  Instead, both the number and amount of final surety bonds guaranteed by the SBA began to slowly diminish  This general trend continued until the maximum individual surety contract amount was increased, first on a temporary basis by P L  111-5 , the American Recovery and Reinvestment Act of 2009, and later, on a permanent statutory basis, by P L  112-239 , the National Defense Authorization Act for Fiscal Year 2013  As shown in Table 1 , Congress did not appropriate funding for the Revolving Fund from FY2000 to FY2004, allowing the program to cover the cost of claim defaults through its reserve  Congress also increased the program's bond limit to $2 million from $1 25 million in 2000  Congress provided the Revolving Fund $2 9 million in FY2005, $2 86 million in FY2006, $2 86 million in FY2007, and $3 million in FY2008  During the 111 th Congress, P L  111-5 provided the Revolving Fund a separate appropriation of $15 million to support a temporary increase in the program's bond limit to $5 million, and up to $10 million if a federal contracting officer certified in writing that a guarantee in excess of $5 million was necessary, from $2 million  Those funds were in addition to the $2 million appropriation that had already been approved for FY2009  In FY2010, the Revolving Fund received $1 million  Congress has not approved appropriations for the Revolving Fund since then, noting that there have been sufficient funds in the program's reserve to cover the cost of anticipated claim defaults  As mentioned previously, the SBA relied primarily on increased appropriations to finance the program's expansion during the 1970s, but it also increased the program's fees charged to applicants and sureties  For example, in 1976, the SBA increased its fees to sureties to 20% from 10% of the bond premium, instituted a deductible clause on bond claims, and generally limited its approval for bid, participation, and performance bonds to $250,000 unless specified circumstances were met  In 1977, it increased the contractor applicant fee for payment and performance bonds to 0 5% from 0 2% of the contract price upon obtaining the contract  The program's current fee structure is discussed later in this report  Both the number and amount of final surety bonds guaranteed by the SBA increased relatively rapidly during the 1970s (see Table A-1 in the Appendix)  The number of final surety bonds guaranteed by the SBA increased from 1,339 in FY1972 to 20,095 in FY1979, and the amount guaranteed by the SBA increased from $94 4 million in FY1972 to $1 39 billion in FY1979  During the 1980s and 1990s, both the number and amount of final surety bonds guaranteed by the SBA generally declined, in both nominal and inflation-adjusted dollars  A review of congressional testimony during that period suggests that there was no single, discernible factor to account for the program's slow contraction  Because the demand for surety bonds tends to fluctuate with changes in the economy, the program might have been expected to contract somewhat during recessions, but the economy experienced periods of both economic growth and decline during the 1980s and 1990s  There also was no indication that the ability of small businesses to access surety bonds in the private marketplace without the SBA's assistance had materially improved, which, if that had been the case, might have contributed to the decline by reducing the number of small businesses applying for assistance  One possible contributing factor to the decline in SBA-guaranteed surety bonds during that period was the continuing reluctance of many surety companies to participate in the program, either because they did not view the program as particularly profitable or they "had developed alternative methods to the program, such as requiring collateral or funds controls and underwriting programs based in part on credit scores, in order to write small and emerging contractors " Another possible contributing factor was a change in the way the program was perceived by congressional leaders and their reluctance to provide additional resources to continue the program's expansion  During the 1970s, at congressional hearings, witnesses praised the program as a great success in helping small businesses access surety bonds and compete for government contracts  During the 1980s and 1990s, congressional hearings focused less on the program's successes and more on its shortcomings  For example, in 1982, the chair of the Senate Committee on Small Business indicted that the program was subject to "the most insidious types of fraud," including "evidence of involvement of organized crime figures " In addition, reports by both GAO and the SBA's inspector general questioned the SBA's management of the program, arguing, among other things, that the SBA lacked useful underwriting guidelines for surety companies and adequate procedures for verifying applicants' information  During the 1980s, the SBA guaranteed, on average, 11,840 final surety bonds each fiscal year, with the SBA's share of those bonds' value averaging $1 0 billion  During the 1990s, the SBA guaranteed, on average, 5,859 final surety bonds each fiscal year, with the SBA's share of those bonds' value averaging $823 million  During the first decade of the 2000s, the SBA guaranteed, on average, about 1,802 final surety bonds each fiscal year, with the SBA's share of those bonds' value averaging about $385 million  Since then, as indicated in Table 2 and Table A-1 , the number and amount of final surety bonds guaranteed by the SBA has generally increased  This increase is likely due to generally improving economic conditions and the increase in 2013 of the maximum individual contract amount that could be guaranteed from $2 million to $6 5 million, and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary  The surety bonding process begins when a contractor applies for a bond  As GAO has reported Surety companies are generally corporations that are licensed under various insurance laws and, under their charters, have legal power to act as a surety (making themselves responsible for another's obligations) for others  Most surety companies accept business only through independent agents and brokers  In screening a bond applicant, a surety attempts to measure the contractor's ability to undertake and complete the job  When the surety's evaluation of the contractor's acceptability to perform the contract is favorable, the surety underwrites the bond  If the surety does not provide a bond to the bond applicant, the appropriate forms are forwarded to SBA for consideration of a surety bond guarantee  Initially, the SBA surety guaranteed program's bonds were underwritten and issued by large, "standard" surety companies  However, these companies' participation in the program soon began to decline, reportedly because of the administrative burdens associated with the program, such as the SBA's requirement that sureties submit all bond applications to the SBA for review and approval  In addition, the administrative costs of dealing with relatively small bonds versus relatively large ones may have also played a role in the larger, standard surety companies leaving the program  As a congressional witness testified in 1976: You have a professional underwriter, who     is going to be asked to spend 3 or 4 days looking into a $25,000 first-time application  There are many expenses involved  That same underwriter could very easily be writing four or five bonds for $10 million for contractors that everyone knows can perform  And it becomes a matter of how much time and resources can the surety industry devote to this type of business  Another reason may have been the outbreak of the Israeli-Egyptian War in 1973, which was followed by a tripling of oil prices and double-digit inflation  This led to the failure of many smaller contracting companies  In response to the economic downturn, many surety companies enhanced their underwriting standards to protect themselves from rising defaults  As a result, many of the larger surety companies became increasingly reluctant to participate in a program in which the profit margins were relatively small given the required paperwork and the program's limitation on the bond amount, and when the risk of defaults was at a historically high level  As standard sureties left the program, "specialty" surety companies filled the void  Initially, specialty sureties devoted almost all their business exclusively to SBA-guaranteed surety bonds  These companies later expanded their business into offering other high-risk bonds not normally handled by standard sureties  Specialty sureties typically required the contractor to provide collateral for the projects they bonded, and, in most cases, charged higher premiums than standard sureties  In 1982, the SBA invited officials from the Surety Association of America, representing the standard surety companies, to recommend ways to encourage their participation in the program  As mentioned previously, at that time, some specialty surety companies had been accused of associating with organized crime and GAO and the SBA's inspector general had reported fraud and mismanagement in the program  This may help to explain why the SBA was interested in encouraging the larger, more established surety companies to return to the program  The SBA also hoped that greater participation by the larger sureties would lead to lower premiums for small business contractors  During this outreach period, standard surety companies indicated a willingness to increase their participation in the program if the SBA would create a second special program, similar to the SBA's 7(a) loan guarantee program's Preferred Lenders Program  Under the proposal, a surety meeting specified qualification standards would be designed as a "preferred surety" and would be allowed to issue SBA-guaranteed surety bonds prior to receiving the SBA's approval  To participate in the preferred program, the surety's underwriting and administrative standards and procedures would be pre-approved by the SBA, and the surety's decisions would be subject to regular, annual audits  In addition, the SBA's reporting and access to records requirements would be retained  As a measure of their confidence in their own underwriting standards and claims decisions, the standard surety firms indicated that they would accept a 70% guarantee against losses as opposed to the then-allowed 80% or 90% guarantee against losses, as long as firms would not be required to seek the SBA's prior approval for underwriting decisions, bond administration, and claims procedures  Congress subsequently authorized the proposed Preferred Surety Bond Guarantee Program in P L  100-590 , the Small Business Administration Reauthorization and Amendment Act of 1988 (Title II, the Preferred Surety Bond Guarantee Program Act of 1988)  The program was initially authorized on a three-year trial basis, and it was provided permanent statutory authority by P L  108-447 , the Consolidated Appropriations Act, 2005  As discussed in " 114th Congress: Preferred Surety Bond Guarantee Rates " below, P L  114-92 , the National Defense Authorization Act for Fiscal Year 2016, increased the SBA's guarantee for preferred sureties from not less than 70% to not less than 90% of losses  The SBA is authorized to guarantee surety bonds issued to contractors or subcontractors when the business, together with its affiliates, meets the SBA's size standard for the primary industry in which it is engaged; the bond is required; the applicant is not able to obtain such bond on reasonable terms and conditions without a guarantee; and there is a reasonable expectation that the applicant will perform the covenants and conditions of the contract, and the terms and conditions of the bond are reasonable in light of the risks involved and the extent of the surety's participation  The applicant must also "possess good character and reputation," as demonstrated by (1) not being under indictment, being convicted of a felony, or having a final civil judgment stating that the applicant has committed a breach of trust or has violated a law or regulation protecting the integrity of business transactions or business relationships; (2) not having a regulatory authority revoke, cancel, or suspend a license held by the applicant, which is necessary to perform the contract; and (3) never having obtained a bond guarantee by fraud or material misrepresentation or failing to keep the surety informed of unbonded contracts or of a contract bonded by another surety  Applicants must also certify the percentage of work under the contract to be subcontracted  The SBA does not guarantee bonds for applicants that are primarily brokers or have effectively transferred control over the project to one or more subcontractors  Applicants must also certify that they are not presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from transactions with any federal department or agency  In addition, the SBA will not guarantee a bond issued by a particular surety if that surety, an affiliate of that surety, or a close relative or member of the household of that surety or affiliate owns, directly or indirectly, 10% or more of the business applying for the guarantee  This conflict of interest prohibition also applies to ownership interests in any of the applicant's affiliates  As mentioned previously, the SBA guarantees contracts up to $6 5 million, and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary  There is no limit to the number of bonds that can be guaranteed for any one contractor  The SBA guarantees up to 90% of the loss incurred and paid by a surety if the contract is $100,000 or less, or if the bond is issued on behalf of a socially and economically disadvantaged-owned and controlled small business, a qualified HUBZone small business, a veteran-owned and controlled small business, or a service-disabled veteran-owned and controlled small business  The guarantee rate is 80% if the contract is greater than $100,000, and the business is not owned and controlled by socially and economically disadvantaged individuals, a qualified HUBZone small business, or a veteran-owned or service-disabled veteran-owned small business  The SBA does not charge principals (small business applicants) application or bid bond guarantee fees  If the SBA guarantees a final bond, the principal must pay a contractor fee equal to a percentage of the contract amount, which is determined by the SBA and published in the Federal Register   The FY2019 contractor fee is 0 6% of the contract price for a final bond
Report 2:  According to the department, U N  assessments of U S  contributions to the United Nations and its affiliated agencies exceeded the request for funds to pay these contributions  Therefore, if the department's request was enacted, the United States may have accumulated arrears to some organizations  The Contributions for International Peacekeeping Activities (CIPA) account provides U S  funding for U N  peacekeeping missions around the world that the State Department says "seek to maintain or restore international peace and security " The State Department's FY2019 request for CIPA totaled $1 20 billion  According to the department, this request "reflects the Administration's commitment to seek reduced costs by reevaluating the mandates, design, and implementation of peacekeeping missions and sharing the funding burden more fairly among U N  members " Under this request, no U S  contribution would have exceeded 25% of all assessed contributions for a single operation, which is the cap established in Section 404(b) of the Foreign Relations Authorization Act, Fiscal Years 1994 and 1995 ( P L  103-236 )  The State Department maintained that it expected that the "unfunded portion of U S  assessed expenses will be met through a combination of a reduction in the U S  assessed rate of contributions, reductions in the number of U N  peacekeeping missions, and significant reductions in the budgets of peacekeeping missions across the board " The department also requested that Congress provide two-year funds for CIPA (in other words, that Congress make funds available for both the fiscal year for which the funds were appropriated and the subsequent fiscal year) "due to the demonstrated unpredictability of the requirements in this account from year to year and the nature of multi-year operations that have mandates overlapping U S  fiscal years " The House committee bill would have provided $1 36 billion for CIO and $1 59 billion for CIPA, for a combined total of $2 95 billion for these accounts, which was 29% higher than the department's request and 4% higher than the FY2018 funding levels  The Senate committee bill would have provided $1 44 billion for CIO and $1 68 billion for CIPA, for a combined total of $3 12 billion  This figure was 36% higher than the department's request and 9% higher than the FY2018 level  The Senate committee bill included a provision not present in recent appropriations laws mandating that funds appropriated for CIO "are made available to pay not less than the full fiscal year 2019 United States assessment for each respective international organization " With regard to CIPA, both the House and Senate committee reports noted that appropriated monies were intended to support an assessed peacekeeping cost at the statutory level of 25% rather than the U N  assessed rate for the United States of 28 4%  Both committee reports called on the department to review peacekeeping missions for cost savings and work to renegotiate rates of assessment  For FY2019, P L  116-6 provided $1 36 billion for CIO and $1 55 billion for CIPA, for a total of $2 91 billion—slightly less than both the House and Senate committee bills  This figure was still 2% higher than the FY2018 figure and 27% higher than the department's request  While the law did not include the aforementioned Senate committee bill provision regarding payment of full U S  assessments for organizations funded through the CIO account, the law's joint explanatory statement noted that it assumed the payment of the full United States assessment for each relevant organization (with some exceptions, including organizations from which the United States has withdrawn) and required the Secretary of State to consult with the Committees on Appropriations with respect to any decision not to provide the full assessment for any such organization  With respect to CIPA, the joint explanatory statement noted that sufficient funds are provided for contributions to peacekeeping missions at the statutory level of 25%  The enacted legislation, like the House and Senate committee bills, provided a share of CIPA funds as two-year funds, as requested by the department  The State Department requested $246 2 million for FY2019 to implement the Leadership and Modernization Impact Initiative (hereinafter, the Impact Initiative)  The Impact Initiative constitutes the implementation phase of the State Department's "Redesign" project  Former Secretary Tillerson initiated the redesign in 2017 to implement Executive Order 13781 and Office of Management and Budget (OMB) Memorandum M-17-22, which aim to "improve the efficiency, effectiveness, and accountability of the executive branch " The Impact Initiative constitutes 16 keystone modernization projects in three focus areas: Modernizing Information Technology and Human Resources Operations; Modernizing Global Presence, and Creating and Implementing Policy; and Improving Operational Efficiencies (see Table 5 )  According to the State Department, these focus areas and modernization projects are derived from the results of the listening tour that former Secretary Tillerson launched in May 2017, which included interviews conducted with approximately 300 individuals that the department said comprised a representative cross-section of its broader workforce, and a survey completed by 35,000 department personnel that asked them to discuss the means they use to help complete the department's mission and obstacles they encounter in the process  Of the $246 2 million requested, $150 0 million was requested from the IT Central Fund (which is funded through funds appropriated by Congress to the Capital Investment Fund account and, separately, expedited passport fees) and $96 2 million from the D&CP account to implement modernization projects  Proceeds from the IT Central Fund were intended to implement projects focused on IT, including modernizing existing IT infrastructure, systems, and applications based on a roadmap to be created in FY2018 and centralizing management of all WiFi networks  Funds from the D&CP account were intended to implement modernization projects focusing on Human Resources issues, including leadership development, management services consolidation, data analytics, and workforce readiness initiatives  Like the House and the Senate committee bills and reports, neither P L  116-6 nor the joint explanatory statement accompanying the law specifically mentioned the Impact Initiative by name  However, both the law and the joint explanatory statement included provisions explicitly prohibiting the Department of State from using appropriated funds to implement a reorganization without prior consultation, notification, and reporting to Congress (for example, see Section 7073 of P L  116-6 )  Like the Senate committee bill, P L  116-6 stated that no funds appropriated for SFOPs may be used to "downsize, downgrade, consolidate, close, move, or relocate" the State Department's Bureau of Population, Refugees, and Migration  Foreign operations accounts, together with food aid appropriated through the Agriculture appropriations bill, constitute the foreign aid component of the international affairs budget  These accounts fund bilateral economic aid, humanitarian assistance, security assistance, multilateral aid, and export promotion programs  For FY2019, the Administration requested $28 60 billion for foreign aid programs within the international affairs (function 150) budget, about 28% less than the FY2018 actual funding level  None of the requested funds were designated as OCO  The FY2019 enacted appropriation provided $37 92 billion for foreign operations account, including $3 63 billion designated as OCO  Together with food aid accounts in the Agriculture appropriation, total enacted foreign aid within the international affairs budget was $39 85 billion, or 0 7% below the FY2018 actual funding level and 39% above the FY2019 request  Table 6 shows foreign aid funding by type for FY2017 and FY2018 actual, and the FY2019 request, committee-approved legislation, and enacted legislation  Account Mergers and Eliminations   The Administration aimed to simplify the foreign operations budget in part by channeling funds through fewer accounts and eliminating certain programs  These account mergers and eliminations were also proposed in the FY2018 budget request Under bilateral economic assistance, the Development Assistance (DA), Economic Support Fund (ESF), Assistance to Europe, Eurasia and Central Asia (AEECA) and Democracy Fund (DF) accounts were zero funded in the FY2019 request  Programs currently funded through these accounts would have been funded through a new Economic Support and Development Fund (ESDF) account  The proposed funding level for ESDF, $5 063 billion, was more than 36% below the FY2018 funding for the accounts it would have replaced  Fifteen countries that received DA, ESF, or AEECA in FY2017 would no longer have received funding from these accounts or from ESDF under the FY2019 request  Within multilateral assistance, the International Organizations & Programs (IO&P) account, which funds U S  voluntary contributions to many U N  entities, including UNICEF, U N  Development Program, and UN Women, would also have been zeroed out  Budget documents suggested that some unspecified activities currently funded through IO&P could have received funding through the ESDF or other accounts  Related to humanitarian assistance, the P L  480 Title II food aid account in the Agriculture appropriation would have been zero-funded and all food assistance would have been funded through the International Disaster Assistance (IDA) account, which would have nevertheless declined by about 17% from FY2018 actual funding (see " Humanitarian Assistance " section below)  The Emergency Refugee and Migration Assistance (ERMA) account would have been subsumed into the Migration and Refugee Assistance (MRA) account  Closeout of Inter-American Foundation and U S -Africa Development Foundation   The FY2019 request proposed to terminate the Inter-American Foundation (IAF) and the U S -Africa Development Foundation (ADF), independent entities that implement small U S  assistance grants, often in remote communities  The Administration proposed to consolidate all small grant programs aimed at reaching the poor under USAID, as a means of improving their integration with larger development programs and U S  foreign policy objectives, as well as improving efficiency  Funds were requested for IAF and ADF only for the purposes of an orderly closeout  Development Finance Institution   The Administration requested, for the first time in FY2019, the consolidation of the Overseas Private Investment Corporation (OPIC) and USAID's Development Credit Authority (DCA) into a new standalone Development Finance Institution (DFI)  The request called for $96 million for administrative expenses and $38 million for credit subsidies for DFI, but assumed that these expenses would be more than offset by collections, resulting in a net income of $460 million (based on OPIC's projected offsetting collections)  In addition, $56 million in ESDF funds would have been used to support DFI activities  The Administration sought congressional authority for the new standalone entity, which it described as a means of incentivizing private sector investment in development and improving the efficiency of U S  development finance programs  Both the House and Senate committee bills, as well as the enacted FY2019 appropriation, rejected these account changes, with the exception of the elimination of the ERMA account, which the House bill eliminated and the Senate and final bill funded with $1 million  All the FY2019 SFOPS legislation, including P L  116-6 , used the same bilateral account structure used for FY2018, not a new ESDF, and funded IAF and ADF at the FY2018 levels  Prior to enactment of the final FY2019 SFOPS appropriation, Congress passed the BUILD Act ( P L  115-254 ), which authorized the establishment of a new International Development Finance Corporation (IDFC), consistent with the Administration's DFI proposal  The IDFC is expected to become operational near the end of FY2019, and P L  116-6 made FY2019 appropriations for OPIC and DCA using the same account structure as in prior years, but authorized $5 million in the OPIC noncredit account to be used for transition costs  Top Country Recipients   Under the FY2019 request, top foreign assistance recipients would not have changed significantly, continuing to include strategic allies in the Middle East (Israel, Egypt, Jordan) and major global health and development partners in Africa (see Table 7 )  Israel would have seen an increase of $200 million from FY2017, reflecting a new 10-year security assistance Memorandum of Understanding  Zambia and Uganda would both have seen an 11% increase  All other top recipients would have seen reduced aid in FY2019 compared with FY2017 (comprehensive FY2018 country allocations were not yet available), though unallocated global health and humanitarian funds (added to the request after passage of the Bipartisan Budget Act of 2018) may have changed these totals  Figure 1 and Table 7 show the requested FY2019 foreign operations budget allocations by region and country  Under the FY2019 request, foreign assistance for every region would have been reduced compared to FY2018 funding  The Middle East and North Africa (MENA) region and Sub-Saharan Africa would continue to be the top regional recipients, together comprising nearly 80% of aid allocated by region ( Figure 2 )  Proposed cuts ranged from 61% in Europe and Eurasia to 2% in the MENA  Aid to Sub-Saharan Africa would have declined by 31%, aid to East Asia and Pacific by approximately half (51%), aid to South and Central Asia by about 4%, and aid to Western Hemisphere by 35%  The House bill ( H R  6385 ) and accompanying report did not provide comprehensive country and regional allocations, but did specify aid levels for some countries and regional programs, including Israel ($3 300 billion), Egypt ($1 457 billion), Jordan ($1 525 billion), Ukraine ($441 million), the U S  Strategy for Engagement in Central America ($595 million), and the Countering Russian Influence Funds ($250 million)  The Senate bill ( S  3108 ) and report specified aid allocations for several countries and regional programs, including Israel ($3 300 billion), Egypt ($1 082 billion), Jordan ($1 525 billion), Iraq ($429 million), West Bank & Gaza ($286 million), Afghanistan ($698 million), Pakistan ($271 million), Colombia ($391 million), Ukraine $426 million), U S  Strategy for Engagement in Central America ($515 million) and the Countering Russian Influence Fund ($300 million)  The enacted legislation, P L  116-6 , and the accompanying explanatory statement, specified FY2019 aid levels for several countries, including Israel ($3 300 billion), Egypt ($1 419 billion), Jordan ($1 525 billion), Iraq ($407 million), Colombia ($418 million), Mexico ($163 million), and Ukraine ($446 million), as well as for the U S  Strategy for engagement in Central America ($528 million) and the Countering Russian Influence Fund ($275 million)  The budget submission did not identify any new foreign assistance initiatives  The FY2019 request called for decreases in foreign aid funding generally while continuing to prioritize the aid sectors that have long made up the bulk of U S  foreign assistance: global health, humanitarian, and security assistance  The Administration requested $6 70 billion for global health programs in FY2019  This was a 23% reduction from the FY2018 funding level, yet global health programs would have increased slightly as a proportion of the foreign aid budget, from 22% of total aid in FY2018 to 23% in the FY2019 request, due to deeper proposed cuts elsewhere  HIV/AIDS programs, for which funding would have been cut about 27% from FY2018 actual levels, would have continued to make up the bulk (69%) of global health funding, as they have since the creation of the President's Emergency Plan for AIDS Relief (PEPFAR) in 2004  Family planning and reproductive health services (for which the Administration proposed no funding for FY2018) would have received $302 million, a 42% reduction from FY2018 funding  Assistance levels would have been reduced for every health sector compared to FY2018, including maternal and child health (-25%), tuberculosis (-31%), malaria (-11%), neglected tropical diseases (-25%), global health security (-0 1%, funded through a proposed repurposing of FY2015 Ebola emergency funds), and nutrition (-37%)  The House committee bill included $8 69 billion for global health programs, the same as FY2018 funding  While total funding would remain the same, the House proposal would have reduced funding for family planning and reproductive health by about 12% compared to FY2018, while slightly increasing funding for polio, nutrition, and maternal and child health, and more than doubling funding for global health security and emerging threats  The Senate committee bill would have funded global health programs $8 792 billion, 1 2% above the FY2018 level  No subsectors would have received reduced funding and allocations for tuberculosis, HIV/AIDS, family planning, nutrition, neglected tropical diseases and vulnerable children would all have increased slightly  While both bills included long-standing language preventing the use of appropriated funds to pay for abortions, the House bill, but not the Senate bill, also included a provision prohibiting aid to any foreign nongovernmental organizations that "promotes or performs" voluntary abortion, with some exceptions, regardless of the source of funding for such activities  P L  116-6 provides $8 84 billion for global health programs for FY2019, a 1 7% increase over FY2018 funding  Every health subsector was funded at the same or slightly higher level than in FY2018  The Trump Administration's FY2019 budget request for humanitarian assistance totaled $6 358 billion, which was roughly 32% less than FY2018 actual funding ($9 37 billion) and about 22% of the total FY2019 foreign aid request  The request included $2,800 4 million for the Migration and Refugee Assistance (MRA) account (-17% from FY2018) and $3,557 4 million for the International Disaster Assistance (IDA) account (-17%) ( Figure 2 )  As in its FY2018 request, the Administration proposed to eliminate the Food for Peace (P L  480, Title II) and Emergency Refugee and Migration Assistance (ERMA) accounts, asserting that the activities supported through these accounts can be more efficiently and effectively funded through the IDA and MRA accounts, respectively  (Congress did not adopt the proposed changes to Food for Peace for FY2018, appropriating $1 716 billion for the account through the Agriculture appropriation, but did appropriate only $1 million for ERMA, a 98% reduction from FY2017 funding ) The Administration also sought authority to transfer and merge IDA and MRA base funds (current authority only applies to OCO-designated funds)  The Administration described its IDA request as focused "on crises at the forefront of U S  security interests, such as Syria, Iraq, Yemen, Nigeria, Somalia, and South Sudan " The MRA request focused on "conflict displacement in Afghanistan, Burma, Iraq, Somalia, South Sudan, Syria and Yemen," as well as strengthening bilateral relationships with "key refugee hosting countries such as Kenya, Turkey, Jordan, Ethiopia and Bangladesh " Consistent with last year, the request suggested that the proposed funding reduction assumes that other donors will shoulder an increased share of the overall humanitarian assistance burden worldwide  The House committee bills proposed $9 145 billion for humanitarian assistance accounts, about 2% less than FY2018 funding  The total included $1 5 billion for Food for Peace from the Agriculture appropriation but would not have funded the ERMA account  The Senate committee bills proposed $9 534 billion for humanitarian assistance, about 2% more than FY2018 funding  The total included $1 716 billion for Food for Peace and $1 million for the ERMA account  Neither bill included language authorizing broad transfers and mergers between the IDA and MRA base funding account, though both bills include provisions allowing for the transfer and merger of funds from several accounts, including IDA and MRA, as an extraordinary measure in response to a severe international infectious disease outbreak  As in FY2018, Congress did not adopt the significant humanitarian aid changes proposed by the Administration  P L  116-6 provided a total of $9 534 billion for humanitarian assistance in FY2019, almost level with FY2018 funding (-0 5%), of which about 21% was designated as OCO  This total included $3 434 billion in MRA funds, $1 million for ERMA, and $4 385 billion for IDA in the SFOPS division of the bill, as well as $1 716 billion for Food for Peace in the Agriculture division  The FY2019 security assistance request within foreign operations accounts totaled $7 304 billion, a 19% reduction from the FY2018 actual funding level and about 26% of the total foreign aid request  Consistent with recent years, 63% of the entire security assistance request was for FMF aid to Israel and Egypt  However, six countries were identified in the request as joint Department of Defense (DOD) and State Department security sector assistance priorities: Philippines, Vietnam, Ukraine, Lebanon, Tunisia, and Colombia  The International Narcotics Control and Law Enforcement (INCLE) account would have been reduced by about 36% from FY2018 actual levels, Nonproliferation, Antiterrorism, Demining and Related (NADR) by 21%, and International Military Education and Training (IMET) by about 14%  In each of these cases, the Administration described the proposed reductions as concentrating resources where they offer the most value and U S  national security impact  As in the FY2018 request, the Peacekeeping Operations (PKO) account, which supports most non-U N  multilateral peacekeeping and regional stability operations, including U S  training and equipment for African militaries and funding for the U N  Support Office in Somalia (UNSOS), would have seen the biggest reduction (-46%) under the FY2019 request  This is because Administrations generally request UNSOS funds through the CIPA account, while Congress usually funds the office through the PKO account  The Foreign Military Financing (FMF) account would have been reduced by 13% compared to FY2018, with specific allocations for 11 countries and a proposed $75 million Global Fund to be allocated flexibly  This was a notable change from the FY2018 FMF request, in which funds were allocated to four countries and a larger global fund, and from FY2018-enacted funding, for which allocations were specified for more than 20 countries  The House committee bill would have provided $9 274 billion for security assistance, a 3% increase over FY2018 funding, with funding increases proposed for the INCLE (+7%) and FMF (+4%) accounts and a reduction proposed for the PKO account (-9%)  Consistent with the request, and in contrast to recent year appropriations, no security assistance funding in the House committee bill was designated as OCO  The Senate committee bill included $8 789 billion for security assistance programs, a 2 6% total decrease from FY2018 funding  The INCLE account would have increased by 2 6% while the FMF and PKO accounts would be reduced by 3% and 11%, respectively  About 16% of the security assistance funding in the Senate bill was designated as OCO  In the final FY2019 appropriation, P L  116-6 , security assistance funding totaled $9 153 billion, a 1 4% increase from FY2018  Of the total, $555 million within the PKO and FMF accounts (6% of total security funding) was designated as OCO  Funding provided for most accounts was similar to FY2018 levels, with the exception of INCLE, which increased by 9 4% in part to support increased efforts to address the flow of illegal opioids, and PKO, for which funding decreased by about 9 2%  Bilateral economic development assistance is the broad category that includes programs focused on education, agricultural development and food security, good governance and democracy promotion, microfinance, environmental management, and other sectors  While the majority of this aid is implemented by USAID, it also includes the programs carried out by the independent Millennium Challenge Corporation (MCC), Peace Corps, Inter-American Foundation and the U S -Africa Development Foundation  Excluding global health assistance, bilateral economic development assistance in the Administration's FY2019 request totaled $6 354 billion, a 33% reduction from FY2018 funding levels  Proposed FY2019 allocations for key sectors, compared with FY2018 levels prescribed in legislation, included the following: food security, $518 million (-48% from FY2018); democracy promotion programs, $1,235 million (-47% from FY2018); and education, $512 million (-51% from FY2018)  The Administration requested $800 million for MCC and $396 million for Peace Corps, representing cuts of 12% and 3%, respectively  As discussed above, the budget request also proposed to merge I-AF and USADF into USAID, and requested only small amounts of funding to close out their independent activities  The House committee bill would have provided $9 383 billion for economic development assistance and specified allocations for several development sectors, including education ($1 035 billion), conservation programs ($360 million), food security and agricultural development ($1 001 million), microenterprise and microfinance ($265 million), water and sanitation ($400 million) and democracy programs ($2 4 billion)  The Senate committee bill would have provided $9 764 billion for economic development activities and specifies allocations for education ($750 million), environment and renewable energy ($943 million), food security and agricultural development ($1 001 billion), small and micro credit ($265 million), water and sanitation ($435 million), and democracy programs ($2 4 billion), among others  Both the House and Senate bills would have funded the I-AF, USADF, Peace Corp, and MCC at the FY2018 funding level, and both bills explicitly rejected the Administration's proposal to merge I-AF and USADF into USAID  The enacted appropriation for FY2019, P L  116-6 , provided about $9 239 billion for nonhealth economic development aid  Minimum allocations specified for key sectors included $1 035 billion for education (basic and higher), $285 million for biodiversity conservation, $125 million for sustainable landscapes, $1 001 billion for food security and agricultural development, $265 million to support micro and small enterprises, $67 million to combat trafficking in persons, and $435 million for water and sanitation programs  The independent agencies were all funded at the same level as in FY2018  Appendix A  State Department, Foreign Operations, and Related Agencies Appropriations, by Account Appendix B  International Affairs Budget The International Affairs budget, or Function 150, includes funding that is not in the Department of State, Foreign Operations, and Related Programs appropriation: foreign food aid programs (P L  480 Title II Food for Peace and McGovern-Dole International Food for Education and Child Nutrition programs) are in the Agriculture Appropriations, and the Foreign Claim Settlement Commission and the International Trade Commission are in the Commerce, Justice, Science appropriations  In addition, the Department of State, Foreign Operations, and Related Programs appropriation measure includes funding for certain international commissions that are not part of the International Affairs Function 150 account  Appendix C  SFOPS Organizational Chart Appendix D  Glossary

ground_truth: Federal law contains a wide variety of disclosure requirements, including food labels, securities registrations, and disclosures about prescription drugs in direct-to-consumer advertising. These disclosure provisions require commercial actors to make statements that they otherwise might not, compelling speech and implicating the Free Speech Clause of the First Amendment. Nonetheless, while commercial disclosure requirements may regulate protected speech, that fact in and of itself does not render such provisions unconstitutional. The Supreme Court has historically allowed greater regulation of commercial speech than of other types of speech. Since at least the mid-1970s, however, the Supreme Court has been increasingly protective of commercial speech. This trend, along with other developments in First Amendment law, has led some commentators to question whether the Supreme Court might apply a stricter test in assessing commercial disclosure requirements in the near future. Nonetheless, governing Supreme Court precedent provides that disclosure requirements generally receive lesser judicial scrutiny when they compel only commercial speech, as opposed to noncommercial speech. In National Institute of Family and Life Advocates v. Becerra, a decision released in June 2018, the Supreme Court explained that it has applied a lower level of scrutiny to compelled disclosures under two circumstances. First, the Supreme Court has sometimes upheld laws that regulate commercial speech if the speech regulation is part of a larger regulatory scheme that is focused on conduct and only incidentally burdens speech. If a law is properly characterized as a regulation of conduct, rather than speech, then it may be subject to rational basis review, a deferential standard that asks only whether the regulation is a rational way to address the problem. However, it can be difficult to distinguish speech from conduct, and the Supreme Court has not frequently invoked this doctrine to uphold laws against First Amendment challenges. Second, the Supreme Court has sometimes applied a lower level of scrutiny to certain commercial disclosure requirements under the authority of a 1985 case, Zauderer v. Office of Disciplinary Counsel. In Zauderer, the Court upheld a disclosure requirement after noting that the challenged provision compelled only "factual and uncontroversial information about the terms under which . . . services will be available." The Court said that under the circumstances, the service provider's First Amendment rights were sufficiently protected because the disclosure requirement was "reasonably related" to the government's interest "in preventing deception of consumers." Lower courts have generally interpreted Zauderer to mean that if a commercial disclosure provision requires only "factual and uncontroversial information" about the goods or services being offered, it should be analyzed under rational basis review. If a commercial disclosure requirement does not qualify for review under Zauderer, then it will most likely be analyzed under the intermediate standard that generally applies to government actions that regulate commercial speech. Some legal scholars have argued that recent Supreme Court case law suggests the Court may subject commercial disclosure provisions to stricter scrutiny in the future, either by limiting the factual circumstances under which these two doctrines apply or by creating express exceptions to these doctrines. If a court applies a heightened level of scrutiny, it may require the government to present more evidence of the problem it is seeking to remedy and stronger justifications for choosing a disclosure requirement to achieve its purposes.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.

Report 1: Disclosure provisions that require commercial actors to convey specified information to consumers occupy an uneasy and shifting space in First Amendment jurisprudence  The First Amendment's Free Speech Clause protects the right to speak as well as the right not to speak, and at least outside the context of commercial speech, courts generally disfavor any government action that compels speech  Indeed, the Supreme Court in 1943 described the First Amendment's protection against compelled speech as a "fixed star in our constitutional constellation " Accordingly, government actions mandating speech are generally subject to strict scrutiny by courts, and will be upheld "only if the government proves that they are narrowly tailored to serve compelling state interests " However, the Court has also long accepted a variety of laws that require commercial actors to make certain disclosures to consumers, confirming that Congress can compel certain disclosures, even those involving protected speech, without running afoul of the First Amendment  Commercial disclosure requirements have largely withstood constitutional scrutiny in part because, historically, commercial speech has received less protection under the First Amendment than other speech  The government's ability to more freely regulate commercial speech has been linked to its general authority "to regulate commercial transactions " Thus, notwithstanding the fact that commercial disclosure requirements compel speech, courts generally have not analyzed such provisions under the strict scrutiny standard  Instead, courts have often employed less rigorous standards to evaluate such provisions  The precise nature of a court's First Amendment analysis, however, will depend on the character of the disclosure requirement at issue  In a recent decision, the Supreme Court distilled and explained its prior cases on this subject  First, the Court said that it has upheld some commercial disclosure requirements that target conduct and only incidentally burden speech  This rubric likely only applies if the disclosure provision is part of a larger scheme regulating commercial conduct  If the disclosure provision instead regulates "speech as speech," it might be subject either to intermediate scrutiny, as a government regulation of commercial speech, or to something closer to rational basis review, if the disclosure provision qualifies for review under the Supreme Court's decision in Zauderer v  Office of Disciplinary Counsel   Some of the Court's recent cases, however, have suggested that in certain circumstances, disclosure requirements may be subject to heightened scrutiny  This report begins with a short background on how courts generally view commercial speech under the First Amendment, then reviews in more detail the possible legal frameworks for analyzing the constitutionality of commercial disclosure requirements  Supreme Court precedent explaining the application of the First Amendment to commercial disclosure requirements is relatively recent  The Court did not squarely hold that purely commercial speech was entitled to any protection under the First Amendment until 1976 in Virginia State Board of Pharmacy v  Virginia Citizens Consumer Council   The Court has defined commercial speech alternately as speech that "does 'no more than propose a commercial transaction'" and as "expression related solely to the economic interests of the speaker and its audience " In Virginia Board of Pharmacy , the Court said that commercial speech was protected, but it also emphasized that the First Amendment did not prohibit all regulations of such speech  In particular, the Court said that it foresaw "no obstacle" to government regulation of "false" speech, or even of commercial speech that is only "deceptive or misleading " In subsequent cases, the Court has explained why "regulation to assure truthfulness" is more readily allowed in the context of commercial speech, as compared with other types of speech  While the First Amendment usually protects even untruthful speech, in order to better encourage uninhibited and robust debate, the Court has recognized that regulating "for truthfulness" in the commercial arena is unlikely to "undesirably inhibit spontaneity" because commercial speech is generally less likely to be spontaneous  Instead, it is more calculated, motivated by a "commercial interest " In particular, if a particular advertisement concerns a subject in which "the public lacks sophistication" and cannot verify the claims, the Court has suggested that the government may have a freer hand to address such concerns  Four years after Virginia Board of Pharmacy , in 1980, the Supreme Court set out the standard that generally governs a court's analysis of government restrictions on commercial speech in Central Hudson Gas & Electric Corp  v  Public Service Commission   The Court first explained that commercial speech enjoys "lesser protection" than "other constitutionally guaranteed expression " After emphasizing that First Amendment protection for commercial speech "is based on the informational function of advertising," the Court said that "there can be no constitutional objection to the suppression of commercial messages that do not accurately inform the public about lawful activity " Accordingly, the Court held that the government may prohibit "forms of communication more likely to deceive the public than to inform it" as well as "commercial speech related to illegal activity " But if the regulated "communication is neither misleading nor related to unlawful activity," the government's action is subject to intermediate scrutiny  Under Central Hudson 's intermediate standard, the government must prove that the government's interest is "substantial," and that the regulation "directly advances" that interest and is "not more extensive than is necessary to serve that interest " The Central Hudson test continues to govern the constitutional analysis of government acts that infringe on commercial speech  However, in certain circumstances, commercial speech may lose its commercial character if "it is inextricably intertwined with otherwise fully protected speech " And more generally, some members of the Supreme Court have questioned whether commercial speech should categorically receive less protection under the First Amendment, suggesting that in at least some circumstances, infringements on commercial speech should instead be subject to strict scrutiny  Commentators have pointed out that, as a practical matter, Supreme Court decisions have increasingly struck down, rather than upheld, restrictions on commercial speech  Also relevant to the discussion of disclosure requirements, judges and legal scholars have noted that the Court may be adjusting the role of the content neutrality doctrine with respect to commercial speech  As a general matter, if a law is "content-based," in the sense that it "target[s] speech based on its communicative content," it will be subject to strict scrutiny  The Supreme Court stated in Reed v  Town of Gilbert that a regulation is content-based if it "applies to particular speech because of the topic discussed or the idea or message expressed," if it "cannot be 'justified without reference to the content of the regulated speech,'" or if it was "adopted by the government 'because of disagreement with the message [the speech] conveys '" Disclosure requirements are generally considered content-based, given that they require regulated parties to speak a certain message, and outside the commercial context, ordinarily trigger the application of strict scrutiny  In Central Hudson , however, the Supreme Court explained that in the context of commercial speech, "regulation of its content" is permissible  And, as commentators have pointed out, "the very category of commercial speech is a content-based category " Nonetheless, the Court has struck down certain regulations that prohibit commercial speech solely because its content is commercial, suggesting that content neutrality might be relevant in the commercial sphere  In its 2011 decision in Sorrell v  IMS Health, Inc  , the Supreme Court considered the constitutionality of a state law prohibiting pharmacies from disclosing certain pharmacy records for marketing purposes  After observing that the law included "content- and speaker-based restrictions on the sale, disclosure, and use of" covered information, the Court concluded that the law was "designed to impose a specific, content-based burden on protected expression" because it applied specifically to marketing, a particular type of speech  Consequently, the law was subject to "heightened judicial scrutiny," notwithstanding the fact that the "burdened speech result[ed] from an economic motive" and was therefore commercial  Ultimately, however, the Court declined to say definitively whether Central Hudson or "a stricter form of judicial scrutiny" should apply because, in the Court's view, the law failed to pass constitutional muster even under Central Hudson   As discussed in more detail below, the shifting role of content neutrality in commercial speech doctrine holds special significance for commercial disclosure requirements: these requirements are content-based because they "compel[] individuals to speak a particular message " At least one legal scholar has suggested that lower courts have read Sorrell as an expression of the Supreme Court's increasing skepticism toward restrictions on commercial speech and, since that decision, have been more likely to strike down commercial disclosure requirements  However, the Court did not expressly limit the reach of Central Hudson in Sorrell or in subsequent cases, suggesting that, at least for now, Central Hudson 's standard of review applies even when a challenged action would otherwise trigger strict scrutiny as a content-based regulation of speech  Indeed, lower courts analyzing commercial disclosure requirements usually ask whether Zauderer or Central Hudson supplies the appropriate standard of review, contemplating at most only intermediate scrutiny —even in cases decided after Sorrell   In its First Amendment jurisprudence, the Supreme Court has generally distinguished between laws that regulate conduct and laws that regulate speech  The Court has held that conduct-focused regulations will not violate the First Amendment by merely incidentally burdening speech  For instance, while the government may regulate prices, attempts to regulate "the communication of prices" implicate the First Amendment  To take another example, the Court has noted that pursuant to "a ban on race-based hiring," a regulation "directed at commerce or conduct," the government "may require employers to remove 'White Applicants Only' signs " To differentiate a regulation targeting conduct from one targeting speech, the Court generally looks to the purpose of the law, asking whether the law appears to target certain content or certain speakers  As part of this inquiry, the Court may also ask whether a regulation applies because of the communicative content of the regulated party's actions  This distinction between speech and conduct is especially significant in the context of commercial speech, given that such speech "occurs in an area traditionally subject to government regulation " Thus, in 1978, the Supreme Court said: "[I]t has never been deemed an abridgment of freedom of speech or press to make a course of conduct illegal merely because the conduct was in part initiated, evidenced, or carried out by means of language, either spoken, written, or printed " Numerous examples could be cited of communications that are regulated without offending the First Amendment, such as the exchange of information about securities, corporate proxy statements, the exchange of price and production information among competitors, and employers' threats of retaliation for the labor activities of employees  Each of these examples illustrates that the State does not lose its power to regulate commercial activity deemed harmful to the public whenever speech is a component of that activity  The Court has previously "upheld regulations of professional conduct that incidentally burden speech " For example, the Court upheld an informed consent requirement in Planned Parenthood of S outheastern Pennsylvania v  Casey   The Casey challengers argued that a law requiring doctors to inform patients seeking abortions about "the nature of the procedure, the health risks of the abortion and of childbirth, and the probable gestational age of the unborn child" compelled doctors to speak in violation of the First Amendment  The Court rejected that argument, concluding that while "the physician's First Amendment rights not to speak are implicated," this was "only as part of the practice of medicine, subject to reasonable licensing and regulation by the State " In National Institute of Family and Life Advocates (NIFLA) v  Becerra , the Supreme Court emphasized that the informed consent requirement upheld in Casey was part of the broader regulation of professional conduct: specifically, the practice of medicine  By contrast, the Court held that the disclosure requirement at issue in NIFLA , which required certain health facilities to provide clients with information about state-sponsored services, could not be upheld as "an informed-consent requirement or any other regulation of professional conduct" because it was not tied to any medical procedure  Instead, in the Court's view, the requirement "regulate[d] speech as speech," as opposed to regulating speech only incidentally  While the Court has made clear that the First Amendment does not prohibit such incidental regulation of commercial speech, it has not articulated one overarching standard for evaluating whether such provisions are constitutionally permissible  Its decisions in this area have considered a wide variety of government actions incidentally burdening speech, and it may be that the standard varies according to the nature of the particular speech restriction evaluated  In some cases, the Court has suggested that "the First Amendment is not implicated by the enforcement" of a broader regulatory scheme where the regulated conduct does not have "a significant expressive element" or the statute does not inevitably single out "those engaged in expressive activity " In other cases where the Court has upheld a regulation that it characterized as focused on conduct rather than speech, the Court investigated the strength of the government's interest and asked whether the regulation advances that interest, suggesting that the Court subjected the regulation to some First Amendment scrutiny—albeit using a relatively relaxed standard  The Court has never explicitly held that a commercial disclosure requirement qualifies as a constitutionally permissible incidental restriction on commercial speech  While Planned Parenthood of Southeastern Pennsylvania v  Casey did involve a disclosure requirement, the Court did not address whether the informed consent requirement involved commercial or noncommercial speech either in Casey or when discussing that requirement in NIFLA   In NIFLA , the Court held that a state law imposing disclosure requirements on clinics providing pregnancy-related services could not be characterized as a regulation that only incidentally burdened speech because the requirement was not tied to any specific medical procedures  However, the Court never expressly stated whether it considered the disclosures to consist of commercial or noncommercial speech  Similarly, in Expressions Hair Design v  Schneiderman , the Court rejected the application of this doctrine without expressly characterizing the government action as a commercial disclosure requirement  In that case, the Court considered the constitutionality of a state law prohibiting sellers from imposing surcharges on customers who use credit cards  The Supreme Court rejected the argument that this law primarily "regulated conduct, not speech," concluding that the law did not merely regulate pricing, but regulated the communication of prices by prohibiting merchants from posting a cash price and an additional credit card surcharge  The Court then remanded the case to the lower courts to consider the First Amendment challenges in the first instance, leaving open the question of whether the provision could be characterized as a requirement for sellers to disclose an item's credit card price, rather than as a prohibition of certain speech  As these cases suggest, the Court has seemed reluctant in recent years to uphold government actions as conduct-focused regulations that merely incidentally burden speech, especially in the context of compelled disclosure requirements  Instead, the Court has distinguished the few cases upholding government acts as incidental restrictions and subjected disclosure requirements to further scrutiny  Nonetheless, the Court has left open the possibility that commercial disclosure requirements might, in the future, qualify as permissible incidental speech regulation, if they are part of a broader regulatory scheme  If the government regulates "speech as speech," its actions will implicate the First Amendment's protections for freedom of speech and may trigger heightened standards of scrutiny  However, the First Amendment does not prescribe a single analysis for all government actions that potentially infringe on free speech protections  Instead, a court's review will depend on the nature of both the government action and the speech itself  This section first introduces the three possible levels of scrutiny a court might use to analyze a speech regulation and then explains their application to compelled commercial disclosures in more detail  In the context of commercial disclosure requirements, there are three primary categories of First Amendment analysis that may be relevant  First, as a general rule, government actions that compel speech are usually subject to strict scrutiny  To survive strict scrutiny, the government must show that the challenged action is "narrowly tailored to serve compelling state interests " Laws are unlikely to meet this "stringent standard " Second, as discussed above, government actions regulating commercial speech generally receive only intermediate scrutiny  The intermediate scrutiny standard, pursuant to Central Hudson , requires a "substantial" state interest and requires the government to prove that the law "directly advances" that interest and "is not more extensive than is necessary to serve that interest " This standard is less demanding than strict scrutiny, but laws may still be struck down under this test  The final and most lenient category—one specific to commercial disclosure requirements—comes from a 1985 case, Zauderer v  Office of Disciplinary Counsel   In that case, the Supreme Court considered the constitutionality of state disciplinary rules regulating attorney advertising  As relevant here, the rules required advertisements referring to contingent-fee rates to disclose how the fee would be calculated  An attorney who had been disciplined by the state for violating these provisions argued that this disclosure requirement was unconstitutional because the state failed to meet the standards set out in Central Hudson   The Court acknowledged that it had previously held that prohibitions on commercial speech were subject to heightened scrutiny under Central Hudson , and that it had "held that in some instances compulsion to speak may be as violative of the First Amendment as prohibitions on speech " "But," the Court said, "[t]he interests at stake in this case are not of the same order as those" implicated in cases involving the compulsion of noncommercial speech  Instead, the Court noted that the state's provision only involved "commercial advertising, and its prescription has taken the form of a requirement that appellant include in his advertising purely factual and uncontroversial information about the terms under which his services will be available " In this commercial context, the Court said that the attorney's "constitutionally protected interest in not providing any particular factual information in his advertising is minimal," noting that in previous cases it had stated that states might "appropriately require[]" warnings or disclaimers "in order to dissipate the possibility of consumer confusion or deception " Rather than applying heightened scrutiny, the Court held that under these circumstances, "an advertiser's rights are adequately protected as long as disclosure requirements are reasonably related to the State's interest in preventing deception of consumers " The Zauderer Court did warn, however, that commercial disclosure requirements raise First Amendment concerns, observing that "unjustified or unduly burdensome disclosure requirements might offend the First Amendment by chilling protected commercial speech " But the Court rejected the contention that the disclosure requirement before it was unduly burdensome  Instead, the Court concluded that "[t]he State's position that it is deceptive to employ advertising that refers to contingent-fee arrangements without mentioning the client's liability for costs is reasonable enough to support a requirement that information regarding the client's liability for costs be disclosed " Although the state had not submitted evidence that clients were in fact being misled, the Court stated that "the possibility of deception" was "self-evident," making the state's "assumption that substantial numbers of potential clients would be       misled" regarding the terms of payment reasonable  Zauderer sets out the most lenient of the three standards of review discussed above, and, as a result, a commercial disclosure requirement is most likely to be upheld if it is reviewed under the rubric of that case  However, the Zauderer standard of review has been interpreted to apply only to certain types of disclosure requirements  As described by the Court and discussed above, the state regulation upheld in Zauderer required "purely factual and uncontroversial information about the terms under which [attorneys'] services [would] be available," and the provision was "reasonably related to the State's interest in preventing deception of consumers " Subsequent cases in both the Supreme Court and the lower courts have tested the extent to which this reasonableness review applies outside of the specific factual circumstances presented in Zauderer   The Supreme Court has decided whether to apply Zauderer review to government acts compelling commercial speech in three significant cases  First, in United States v  United Foods , decided in 2001, the Court invalidated a federal statute that compelled "handlers of fresh mushrooms to fund advertising for the product " United Foods thus involved a compelled subsidy, rather than a compelled disclosure  The Court concluded that these statutorily compelled subsidies for government-favored speech implicated the First Amendment and that "mandat[ing] support" from objecting parties was "contrary to       First Amendment principles " The Court held that Zauderer was inapplicable, noting that in the case before it, there was "no suggestion       that the mandatory assessments       are somehow necessary to make voluntary advertisements nonmisleading for consumers " By contrast, the Court applied Zauderer in a 2010 decision, Milavetz, Gallop & Milavetz, P A  v  United States , another case concerning attorney advertising  In that case, the Court considered an attorney's First Amendment challenges to a federal statute that required "debt relief agencies" to "make certain disclosures in their advertisements " "Debt relief agencies" was a statutorily defined term covering some attorneys who provided clients with bankruptcy assistance  Among other things, agencies advertising "bankruptcy assistance services or       the benefits of bankruptcy" were required to disclose that they were "a debt relief agency" that "help[ed] people file for bankruptcy relief under the Bankruptcy Code " Rejecting the challenger's contention that Central Hudson 's intermediate scrutiny governed the disclosure requirement, the Court held instead that "the less exacting scrutiny described in Zauderer " governed its review  The Court concluded that the provision "share[d] the essential features of the rule at issue in Zauderer  " The disclosure requirement was "intended to combat the problem of inherently misleading commercial advertisements—specifically, the promise of debt relief without any reference to the possibility of filing for bankruptcy, which has inherent costs " Further, the law required the covered entities to provide "only an accurate statement identifying the advertiser's legal status and the character of the assistance provided " As in Zauderer , where the "possibility of deception" was "self-evident," the Court was not troubled by the lack of evidence that current advertisements were misleading  Instead, "evidence in the congressional record demonstrating a pattern of advertisements that hold out the promise of debt relief without alerting consumers to its potential cost" was "adequate " The Court ultimately upheld the disclosure requirement as "reasonably related to the [Government's] interest in preventing deception of consumers " Most recently, in 2018, the Court considered the application of Zauderer in NIFLA   That case involved two distinct disclosure requirements imposed by California's Reproductive Freedom, Accountability, Comprehensive Care, and Transparency Act (FACT Act), which regulated crisis pregnancy centers  First, the FACT Act required any " licensed covered facility" to notify clients that "California has public programs that provide immediate free or low-cost access to comprehensive family planning services (including all FDA-approved methods of contraception), prenatal care, and abortion for eligible women," and give the telephone number of the local social services office  Second, any " unlicensed covered facility" had to provide notice that the "facility is not licensed as a medical facility by the State of California and has no licensed medical provider who provides or directly supervises the provision of services " The Court first held that Zauderer 's reasonableness review did not apply to the licensed notice  In the Court's view, the notice was "not limited to 'purely factual and uncontroversial information about the terms under which       services will be available '" The Court explained that the disclosure requirement "in no way relate[d] to the services that licensed clinics provide " The Court said that instead, the law "require[d] these clinics to disclose information about state -sponsored services—including abortion, anything but an 'uncontroversial' topic " The Court ultimately held that the licensed notice could not "survive even intermediate scrutiny " Turning to the unlicensed notice, the Court determined that it did not need to "decide whether the Zauderer standard applies to the unlicensed notice" because the disclosure requirement failed scrutiny even under Zauderer   The Court said that "under Zauderer , a disclosure requirement cannot be 'unjustified or unduly burdensome '" The Court interpreted this statement to require that the government prove it was seeking "to remedy a harm that is 'potentially real, not purely hypothetical '" Based on the record on appeal, the Court found that California's stated interest in "ensuring that pregnant women in California know when they are getting medical care from licensed professionals" was "purely hypothetical " Further, the Court held in the alternative that "[e]ven if California had presented a nonhypothetical justification for the unlicensed notice, the FACT Act unduly burden[ed] protected speech" by requiring a government statement to be placed in all advertisements, regardless of an advertisement's length or content  The Court also expressed concern that the unlicensed notice "target[ed]" certain speakers in imposing those burdens by focusing on "facilities that primarily provide 'pregnancy-related' services " While the Supreme Court has emphasized that Zauderer 's reasonableness review is available only for certain types of compelled commercial disclosures, lower courts have disagreed on the precise circumstances required to apply Zauderer   A few requirements have emerged in the case law  First, courts agree that to qualify for review under Zauderer , a commercial disclosure requirement must compel speech that is "factual and uncontroversial " Next, the disclosure must be related to the goods or services the speaker provides  Finally, courts have disagreed on the type of government interest that may be asserted to justify a Zauderer -eligible regulation: while Zauderer itself approved of the challenged disclosure requirement after concluding that the state was permissibly seeking to "prevent[] deception of consumers," lower courts have sometimes applied Zauderer review even where the regulation is not specifically intended to prevent deception  Before discussing the particulars of these requirements, it is worth noting that these elements are related to the Court's overarching justifications for affording the government more leeway to regulate commercial speech  The seminal Supreme Court case establishing that commercial speech is protected by the First Amendment, Virginia State Board of Pharmacy v  Virginia Citizens Consumer Council , tied commercial speech's value to its ability to inform consumers  Critically, the Court said that governments could continue to ban false or misleading commercial speech , noting in another case that "the public and private benefits from commercial speech derive from confidence in its accuracy and reliability " It was against this background that the Court in Zauderer concluded that the provision requiring the disclosure of factual information about contingent fee arrangements did not involve First Amendment interests "of the same order as those" involved in other cases involving the compulsion of noncommercial speech  Accordingly, the state acted reasonably by prescribing that attorneys had to include in their advertising "purely factual and uncontroversial information about the terms under which [their] services [would] be available " The first element for a commercial disclosure requirement to be eligible for Zauderer review is that the government regulation must require the disclosure of "factual and uncontroversial" information  The two parts of Zauderer's initial requirement are often evaluated as one, although courts have sometimes pointed out that "factual" and "uncontroversial," logically, connote two different things  Viewing the two words together, some have characterized the "factual and uncontroversial" requirement as distinguishing regulations that compel the disclosure of facts from those that compel individuals to state opinions or ideologies  As discussed, the Supreme Court has said that the value of commercial speech largely lies in its ability to inform consumers  And in Zauderer , the Court emphasized that because protection for commercial speech is justified by its informational value, the attorney challenging the disclosure requirement had a "minimal" First Amendment interest "in not providing any particular factual information in his advertising " As the Second Circuit has explained: Commercial disclosure requirements are treated differently from restrictions on commercial speech because mandated disclosure of accurate, factual, commercial information does not offend the core First Amendment values of promoting efficient exchange of information or protecting individual liberty interests  Such disclosure furthers, rather than hinders, the First Amendment goal of the discovery of truth and contributes to the efficiency of the "marketplace of ideas " Protection of the robust and free flow of accurate information is the principal First Amendment justification for protecting commercial speech, and requiring disclosure of truthful information promotes that goal  In such a case, then, less exacting scrutiny is required than where truthful, nonmisleading commercial speech is restricted  In this vein, the Supreme Court upheld disclosure requirements regarding the nature of contingent fee arrangements in Zauderer and statements clarifying the nature of the bankruptcy-related assistance provided by debt relief agencies in Milavetz   Lower courts have approved as "factual and uncontroversial" within the meaning of Zauderer a variety of other commercial disclosure requirements, including regulations requiring the disclosure of: country-of-origin information for meat; calorie information at restaurants; the fact that products contain mercury; and textual and graphic warnings about the health risks of tobacco products  By contrast, in a 2015 opinion, the D C  Circuit concluded that a federal regulation requiring firms to disclose whether their products used "conflict minerals" that originated "in the Democratic Republic of the Congo or an adjoining country" could not be characterized as factual and uncontroversial  The court said that "[t]he label '[not] conflict free' is a metaphor that conveys moral responsibility for the Congo war        An issuer, including an issuer who condemns the atrocities of the Congo war in the strongest terms, may disagree with that assessment of its moral responsibility        By compelling an issuer to confess blood on its hands, the statute interferes with that exercise of the freedom of speech under the First Amendment " Similarly, the Seventh Circuit, in a 2006 opinion, held that disclosure requirements in a state law regulating sexually explicit video games were not "factual and uncontroversial" as required for Zauderer to apply  In relevant part, the law required "video game retailers to place a four square-inch label with the numerals '18' on any 'sexually explicit' video game," and to post signs and provide brochures "explaining the video game rating system " The court held first that the sticker "ultimately communicates a subjective and highly controversial message—that the game's content is sexually explicit " Similarly, the panel concluded that "the message" communicated by the signs and brochures was "neither purely factual nor uncontroversial" because it was "intended to communicate that any video games in the store can be properly judged pursuant to the standards described in the       ratings " As mentioned above, some courts have treated "factual" and "uncontroversial" as two distinct requirements  But at times, courts have struggled to define "controversial," standing alone  The D C  Circuit has suggested that controversial must mean that a disclosure "communicates a message that is controversial for some reason other than dispute about simple factual accuracy " One trial court interpreting a decision of the Second Circuit suggested that "it is the nature of the regulation of compelled speech that controls, not the nature of the legislative debate that gave rise to its enactment " That court then noted that other courts had equated controversial messages with disclosures that are "opinion-based " Courts have disagreed about whether a disclosure may be characterized as "controversial" because it is "inflammatory" or "evoke[s] an emotional response " In NIFLA , the Supreme Court struck down the licensed notice after noting that the required disclosures related to "abortion, anything but an 'uncontroversial' topic," although it did not further explain when a topic is "uncontroversial" for purposes of Zauderer  Second, to be eligible for review under Zauderer , a commercial disclosure requirement must be related to the services provided by the speaker  In Zauderer itself, the Court had noted that the disputed disclosure required the attorney to provide information in his advertising "about the terms under which his services will be available " By and large, lower courts, at least prior to NIFLA, had not treated this relationship to the speaker's services as a distinct requirement  The Court in NIFLA , however, said that this was a necessary prerequisite for Zauderer review and held in that case that the notice requirement for licensed clinics at issue was not "relate[d] to the services that licensed clinics provide" because it instead provided information "about state -sponsored services " Judges have disagreed on whether there exists a third requirement for Zauderer review  In Zauderer itself, the Supreme Court noted that the disclosure requirements at issue in that case were intended to "prevent[] deception of customers " Further, when applying Zauderer review to the bankruptcy-related disclosures at issue in Milavetz , the Court stated that the disclosures were "intended to combat the problem of inherently misleading commercial advertisements " Perhaps most notably, in United Foods , the Court explained its decision not to apply Zauderer by noting that there was "no suggestion" that the compelled subsidies at issue in that case were "somehow necessary to make voluntary advertisements nonmisleading for consumers " The Supreme Court's decisions applying Zauderer have thus suggested that one factor in deciding whether to apply this "reasonably related" review is whether the targeted commercial speech is misleading, or whether the state's interest in requiring the disclosure is to prevent "consumer confusion or deception " Nonetheless, the Court has not squarely held that this is a necessary condition for Zauderer review, and several lower courts have rejected this position  The D C  Circuit concluded that Zauderer 's justification characterizing "the speaker's interest in opposing forced disclosure of such information as 'minimal' seems inherently applicable beyond" the state's "interest in remedying deception " The Second Circuit has also held that Zauderer review applies more broadly  In rejecting a litigant's argument that the Supreme Court's decision in United Foods limited Zauderer only to laws intended to prevent consumer deception, the Second Circuit said that United Foods "simply distinguishes Zauderer on the basis that the compelled speech in Zauderer was necessary to prevent deception of consumers; it does not provide that all other disclosure requirements are subject to heightened scrutiny " If a commercial disclosure requirement involves only "purely factual and uncontroversial information" about the goods or services being sold, and is therefore eligible for review under Zauderer , then it will be constitutional so long as the disclosure requirement is "reasonably related" to the government's interest  This reasonableness review is relatively lenient, especially as compared with the standards that would otherwise apply to compelled speech  But, as emphasized in NIFLA , even under Zauderer , "unjustified or unduly burdensome disclosure requirements might offend the First Amendment by chilling protected commercial speech " Lower courts had previously come to different conclusions regarding whether "unjustified or unduly burdensome" presented an additional inquiry, to be conducted separately from the reasonableness inquiry otherwise prescribed by Zauderer , or whether instead this inquiry was subsumed by the "reasonably related" inquiry  NIFLA did not entirely resolve this issue, although it did frame its analysis using the "unjustified or unduly burdensome" language rather than the language of rational basis review  In Zauderer , the Supreme Court upheld the contingent fee disclosure after concluding that the requirement was "reasonably related to the State's interest in preventing deception of consumers " But as noted above, lower courts have largely concluded that Zauderer 's reasonableness review may govern the analysis even when the government asserts an interest other than preventing consumer deception  The D C  Circuit has, so far, largely declined to articulate a clear standard for "what type of interest might suffice " That court did conclude in one case that where the government's interest was "substantial under Central Hudson 's standard," that would qualify as a sufficient interest under Zauderer   Perhaps taking a different approach, in a case upholding a disclosure requirement under Zauderer , the Second Circuit described the state's interest as "legitimate and significant " Other than "the interest in correcting misleading or confusing commercial speech," the federal courts of appeals have upheld commercial disclosure requirements where the government asserted interests in food safety, preventing obesity, "protecting human health and the environment from mercury poisoning," and in protecting health benefit providers "from questionable       business practices " By contrast, the Second Circuit held in International Dairy Foods Association v  Amestoy that "consumer curiosity alone is not a strong enough state interest to sustain the compulsion of even an accurate, factual statement " In NIFLA , the Supreme Court indicated that under Zauderer , the government must assert an interest that is "more than 'purely hypothetical '" As discussed above, the State of California's justification for the notice requiring unlicensed clinics to disclose that they were unlicensed was to "ensur[e] that pregnant women in California know when they are getting medical care from licensed professionals " The Court concluded that the state had "point[ed] to nothing suggesting that pregnant women do not already know that the covered facilities are staffed by unlicensed medical professionals " NIFLA 's requirement that the government provide evidence supporting an asserted interest differs from the Court's approach in Zauderer itself and in Milavetz   In both Zauderer and Milavetz , the Court rejected arguments that the government had failed to present sufficient evidence to support its interest in the disclosure requirement, concluding that in both of those cases, "the possibility of deception" in the regulated advertisements was "self-evident " Although the standard is not entirely clear, it is possible that in future cases the Court could conclude again that a particular advertisement is so obviously deceptive that the government does not need to submit significant evidence proving that the advertisements are misleading  If the government has asserted a sufficient interest, then under Zauderer , it needs to show only that the disputed disclosure requirement is "reasonably related" to that interest  Describing the Supreme Court's decision in Zauderer , the D C  Circuit has said that the "evidentiary parsing" required by more rigorous First Amendment tests "is hardly necessary when the government uses a disclosure mandate to achieve a goal of informing consumers about a particular product trait, assuming of course that the reason for informing consumers qualifies as an adequate interest " That court further elaborated that "[t]he self-evident tendency of a disclosure mandate to assure that recipients get the mandated information may in part explain why, where that is the goal, many such mandates have persisted for decades without anyone questioning their constitutionality " Similarly, the Second Circuit has observed in one case that "while the First Amendment precludes the government from restricting commercial speech without showing that 'the harms it recites are real and that its restriction will in fact alleviate them to a material degree,'" the First Amendment "does not demand 'evidence or empirical data' to demonstrate the rationality of mandated disclosures in the commercial context " Notwithstanding the suggestion that little evidence is required to show that a disclosure requirement is reasonably related to an appropriate government interest, lower courts have often relied on the government's evidence supporting the disputed requirement when they uphold the provision  This showing may be easiest where the government asserts an interest in preventing misleading speech, given "the self-evident tendency of a disclosure mandate to assure that recipients get the mandated information " Additionally, courts have sometimes held that commercial disclosure requirements fail even this lenient test for rationality, particularly where the government has asserted an interest other than preventing consumer confusion  For example, in National Association of Manufacturers v  SEC , the D C  Circuit held that a provision requiring companies to disclose whether their products were "conflict free" violated the First Amendment  In defending this rule, the government asserted an interest in "ameliorat[ing] the humanitarian crisis in the [Democratic Republic of the Congo (DRC)] " In the court's view, however, the government had failed to demonstrate that its measure would achieve this interest  The D C  Circuit observed that the government had "offered little substance beyond" statements by political officials to support "the effectiveness of the measure " The court assumed that the government's theory "must be that the forced disclosure regime will [lead to boycotts that] decrease the revenue of armed groups in the DRC and their loss of revenue will end or at least diminish the humanitarian crisis there " But in the view of the court, this theory could not justify the regulation, as the idea was "entirely unproven and rest[ed] on pure speculation " To take another example, the Third Circuit struck down a commercial disclosure requirement concerning attorney advertising in Dwyer v  Cappell   In that case, an attorney challenged a state regulation that prohibited attorneys from using quotations from judicial opinions in their advertising unless they presented "the full text" of those opinions  The state argued that such quotations were "inherently misleading because laypersons       would understand them to be judicial endorsements " The court, however, said that even assuming "that excerpts of judicial opinions are potentially misleading to some persons," the state had failed "to explain how [an attorney's] providing a complete judicial opinion somehow dispels this assumed threat of deception " The court reasoned that "providing a full judicial opinion does not reveal to a potential client that an excerpt of the same opinion is not an endorsement " Additionally, the court held that the disputed requirement was "unduly burdensome," as it "effectively rules out the possibility that [an attorney] can advertise with even an accurately quoted excerpt of a judicial statement about his abilities " And in the view of the Third Circuit, "that type of restriction—an outright ban on advertising with judicial excerpts—would properly be analyzed under the heightened Central Hudson standard of scrutiny " As Dwyer suggests, courts may strike down disclosure requirements under Zauderer if the requirement is "unduly burdensome " In NIFLA , the Supreme Court held that the unlicensed notice was likely unconstitutional because it "unduly burden[ed] protected speech," noting that it applied to all advertisements for these licensed facilities, regardless of their content  In particular, the majority opinion highlighted one hypothetical discussed at oral argument, noting that "a billboard for an unlicensed facility that says 'Choose Life' would have to surround that two-word statement with a 29-word statement from the government, in as many as 13 different languages " In this instance, the Court said, the notice would "drown[] out the facility's own message," and therefore be unduly burdensome  If a commercial disclosure requirement is not a factual and uncontroversial disclosure related to the speaker's goods or services under Zauderer , courts will likely apply a heightened standard of review  Under prevailing Supreme Court precedent, if a provision does not qualify for Zauderer 's reasonableness review, a court may review the challenged regulation under Central Hudson   As discussed above, Central Hudson established the general standard of review for government restrictions on commercial speech  The Supreme Court described "a four-part analysis:" At the outset, we must determine whether the expression is protected by the First Amendment  For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading  Next, we ask whether the asserted governmental interest is substantial  If both inquiries yield positive answers, we must determine whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest  The Court has described the Central Hudson test as "intermediate" scrutiny  If a disclosure requirement affects commercial speech but does not qualify for Zauderer review, courts have generally held that Central Hudson 's intermediate scrutiny applies  However, courts have sometimes suggested that some higher standard of review, more stringent than Central Hudson 's intermediate scrutiny, should apply to commercial disclosure requirements that do not qualify for review under Zauderer   Some lower court judges have concluded that because such disclosures compel particular speech and are by definition not content-neutral, they should be evaluated under strict scrutiny  In contrast to Central Hudson review, which requires the government to show that a law is "not more extensive than is necessary to serve" a "substantial" interest, strict scrutiny "requires the Government to prove that the restriction furthers a compelling interest and is narrowly tailored to achieve that interest " The Supreme Court has suggested—but not squarely held—that at least some types of commercial disclosure requirements might be subject to some form of scrutiny more strict than Central Hudson   In NIFLA , the Supreme Court considered the constitutionality of state provisions requiring crisis pregnancy centers to make certain disclosures to clients and in their advertising  The Court suggested that the provision requiring licensed facilities to disseminate notices about state-provided services might be subject to strict scrutiny as a content-based regulation of speech, but concluded that it did not need to resolve that question because the notice could not "survive even intermediate scrutiny " Significantly, however, the NIFLA Court never described the licensed notice as involving commercial speech  In the decision below, the Ninth Circuit had held that the notice should not be subject to strict scrutiny because it regulated "professional speech " That court, like other federal courts of appeals, had recognized "speech that occurs between professionals and their clients in the context of their professional relationship" "as a separate category of speech that is subject to different rules " The Ninth Circuit had concluded that speech that was part of the practice of a profession could be regulated by the state, subject only to intermediate scrutiny  The Court rejected this idea, saying that the First Amendment does not encompass a tradition of lower scrutiny "for a category called 'professional speech '" Ultimately, the Court said that it saw no "persuasive reason" to treat "professional speech as a unique category that is exempt from ordinary First Amendment principles " To the extent that "professional speech" could be seen to overlap with commercial speech, this sentence could be read to suggest that commercial speech should also be subject to "ordinary First Amendment principles " This suggestion would seem to conflict with prior cases saying that commercial speech occupies a "subordinate position in the scale of First Amendment values " Although the NIFLA Court implicitly suggested that disclosure requirements for professionals might constitute commercial speech by evaluating the FACT Act's requirements under Zauderer and Central Hudson , it never expressly clarified whether "professional speech" overlaps with commercial speech  Because the FACT Act's requirements applied outside of the advertising context, it may be open to some debate whether these licensed notices involved commercial speech  The unlicensed notice challenged in NIFLA was required to be included in advertising, and advertisements are "classic examples of commercial speech " But the unlicensed notice was also required to be posted on-site, and the state required licensed facilities to post disclosures on-site or to otherwise distribute the notice to clients directly  Further, in a similar context, at least one federal court of appeals concluded that a Baltimore ordinance requiring certain pregnancy centers to make specified disclosures regulated noncommercial speech  That court said the pregnancy centers were not motivated by economic interest or proposing a commercial transaction, but were instead "provid[ing] free information about pregnancy, abortion, and birth control as informed by a religious and political belief " If the licensed disclosures in NIFLA did not regulate commercial speech, then it would be unsurprising that the Court would consider applying strict scrutiny rather than Central Hudson   Others, however, have pointed out that crisis pregnancy centers, even if they do not charge fees, operate "in a marketplace where other providers generally charge fees," and argued that these centers "are engaged in commercial activity by providing physical and mental health services to pregnant women " And more generally, some have pointed out the similarities between "professional" and commercial speech  The fact that the NIFLA Court did not directly address the relationship between professional and commercial speech may suggest that heightened scrutiny may be necessary with respect to some commercial disclosure requirements  Specifically, the Court did not cite the commercial speech doctrine as "a persuasive reason for treating professional speech as a unique category that is exempt from ordinary First Amendment principles " At least one commentator has argued that the Court's failure to mention Central Hudson —"not even to dismiss it as       another inapposite exception to Reed 's general rule [of strict scrutiny]"—may suggest that the Court is seeking to limit Central Hudson 's holding that commercial speech may be more freely regulated than other speech under the First Amendment  Although NIFLA may not have expressly altered the framework used to evaluate commercial disclosure requirements, it may nonetheless signal that the Supreme Court will view them with more skepticism in the future  The majority opinion, authored by Justice Thomas, emphasized that "[t]he dangers associated with content-based regulations of speech are also present in the context of professional speech " Even if "professional speech" is not coterminous with "commercial speech," this statement does seem to suggest that the Court believes content neutrality principles are relevant in the commercial sphere  In dissent, Justice Breyer, viewing the majority opinion as adopting such a view, argued that the majority's approach, "if taken literally, could radically change prior law, perhaps placing much securities law or consumer protection law at constitutional risk " He pointed out that "[v]irtually every disclosure law could be considered 'content based,' for virtually every disclosure law requires individuals 'to speak a particular message '" In response to Justice Breyer, the NIFLA majority stated that it did not "question the legality of health and safety warnings long considered permissible, or purely factual and uncontroversial disclosures about commercial products " This view echoed the Court's prior statement that "[p]urely commercial speech is more susceptible to compelled disclosure requirements " Following the Court's 2010 decision in Reed , in which the Court articulated a more "precise test to determine whether speech regulations are content based," many lower courts had rejected the idea that content-based requirements affecting only commercial speech should be subject to strict scrutiny, even if they otherwise discriminated based on content under Reed   But because NIFLA appeared to suggest that content neutrality is relevant in the commercial sphere, it seems reasonable to think that lower courts may now be more likely to conclude that strict scrutiny could apply to content-based commercial disclosure requirements  This would be consistent with what some commentators have described as the Court's increasingly heightened scrutiny of restrictions on commercial speech  For now, though, Central Hudson generally continues to govern the analysis of government actions affecting lawful, non-misleading commercial speech, including commercial disclosure requirements that do not qualify for Zauderer review  As discussed, Central Hudson requires that the government prove that its interest is "substantial," and that the regulation "directly advances" that interest and is "not more extensive than is necessary to serve that interest " Government regulations are more likely to fail this more rigorous standard than the Zauderer reasonableness standard, often because a court believes there is some less restrictive means available for the government to achieve its goals  Courts will require more "evidence of a measure's effectiveness" under Central Hudson , as compared to Zauderer   However, Central Hudson is more forgiving than strict scrutiny, and courts do uphold government actions infringing on commercial speech under Central Hudson   For example, in Spirit Airlines v  Department of Transportation , the D C  Circuit concluded that a federal regulation governing the way that airlines must display flight prices "satisfie[d]       the Central Hudson test " In the court's view, "[t]he government interest—ensuring the accuracy of commercial information in the marketplace—[was] clearly and directly advanced by a regulation requiring that the total, final price be the most prominent" price displayed  And the regulation was "reasonably tailored to accomplish that end" because the rule "simply regulate[d] the manner of disclosure " Government actions are unlikely to be upheld if a court applies strict scrutiny  Nonetheless, some scholars have argued that many disclosure requirements might survive strict scrutiny, and the Supreme Court has, in rare instances, said that the government may "directly regulate speech to address extraordinary problems, where its regulations are appropriately tailored to resolve those problems without imposing an unnecessarily great restriction on speech " It is possible that a court could hold that the government has a compelling interest in protecting consumers, for example, and that particular disclosures are narrowly tailored to meet that interest  The Supreme Court has long emphasized that the government can regulate commercial activity "deemed harmful to the public " But a court would likely require more proof from the government under strict scrutiny and likely would not simply accept the government's allegations as "self-evident" under such review  Congress has enacted a wide variety of disclosure requirements, many of which arguably compel commercial speech  For example, the Securities and Exchange Act of 1934 sets out disclosure requirements for registering securities  Federal law, among a host of other food labeling requirements, requires "bioengineered food" to bear a label disclosing that the food is bioengineered  Direct-to-consumer advertisements for prescription drugs must contain a series of disclosures, including the drug's name and side effects  Certain appliances must contain labels disclosing information about their energy efficiency  Bills in the 115 th and 116 th Congresses have proposed additional disclosure requirements, including a bill that would require large online platforms to disclose any studies conducted on users for the purposes of promoting engagement, and a bill that would require public companies to disclose climate-related risks  Recent Supreme Court precedent suggests that the Court is more closely reviewing commercial disclosure requirements, perhaps moving away from a more deferential treatment of such provisions  In NIFLA , the Court held that a disclosure requirement was likely unconstitutional under Zauderer because the government had not presented sufficient evidence to justify the measure —even though in other cases, the Court had rejected similar challenges to commercial disclosure requirements, saying that the government did not need to present more evidence because the harm it sought to remedy was "self-evident " Further, the Court has recently suggested that if a law regulating commercial speech discriminates on the basis of content—as all disclosure requirements seemingly do —then this content discrimination might subject the law to heightened scrutiny  If the Court further embraces this view, it could be a marked departure from its opinions holding that commercial speech could be regulated on the basis of its content, so long as the government's justification for the content discrimination were sufficiently related to its legitimate interests in regulating the speech  In concurring and dissenting opinions that have been joined by other Justices, Justice Breyer has argued that insofar as the Court's recent decisions suggest that commercial disclosure requirements should be subject to heightened scrutiny, they are inconsistent with prior case law and are not a proper application of the First Amendment  The Supreme Court said in NIFLA that it was "not question[ing] the legality of health and safety warnings long considered permissible, or purely factual and uncontroversial disclosures about commercial products " And lower courts have frequently upheld commercial disclosure requirements, perhaps suggesting that disclosures of the kind cited by Justice Breyer are not in danger of wholesale invalidation under the First Amendment  However, the majority opinion in NIFLA did not clarify what kind of disclosures it would consider permissible, and its opinion made clear that disclosure requirements should be scrutinized in light of the speakers they cover and the burdens they pose  Moreover, although the NIFLA Court said that it was not questioning these disclosures' "legality," it left open the possibility that these disclosure should nonetheless be subject to heightened scrutiny  This statement may mean only that the Court believes that many commercial disclosure requirements would meet a higher standard of scrutiny  At least one federal appellate court seems to have taken NIFLA as a signal that lower courts should more closely scrutinize commercial disclosure requirements  In American Beverage Association v  City & County of San Francisco , the Ninth Circuit, sitting en banc , relied on NIFLA to reverse a prior decision that had upheld an ordinance requiring "health warnings on advertisements for certain sugar-sweetened beverages " While a panel of judges had previously concluded that the disclosure requirement was constitutional under Zauderer , the full Ninth Circuit, reviewing that decision, said: " NIFLA requires us to reexamine how we approach a First Amendment claim concerning compelled speech " Namely, the court held that, in light of NIFLA , the health warnings were likely unjustified and unduly burdensome under Zauderer , noting that the regulation required the warnings to "occupy at least 20% of those products' labels or advertisements"—but that the record showed that "a smaller warning—half the size—would accomplish [the government's] stated goals " As such, the court held that the warnings violated the First Amendment "by chilling protected speech " Accordingly, when Congress and federal agencies consider adopting new commercial disclosure requirements, or reauthorizing old ones, it may be wise to develop a record with more evidence demonstrating a need for the regulation  Under any level of scrutiny, courts will examine the government's asserted purpose for the legislation, as well as how closely tailored the disclosure requirement is to achieve that purpose  Under Zauderer , particularly in light of NIFLA , courts may ask for evidence to support the government's claim that the regulated speech is misleading or that the government has some other interest in regulating that speech, and will likely scrutinize the disclosure requirement to make sure it is not unduly burdensome  Under intermediate scrutiny or strict scrutiny, a court may also ask whether the government considered alternative policies that would be less restrictive of speech, examining more closely the government's justifications for choosing a disclosure requirement 


Report 2:  The contractor fee is rounded to the nearest dollar, paid to the surety, and the surety remits the fee to the SBA  Sureties also charge principals a premium for issuing and servicing the bond  Sureties are not allowed to charge principals a premium that is more than the amount permitted under applicable state law  Premiums vary depending on the surety's assessment of the risk involved and job size; typically ranging from 1 5% to 3 0% of the contract amount  Sureties interested in participating in the Prior Approval Program or the Preferred Surety Bond Guarantee Program (PSB program) must apply in writing to the SBA  Applicants must be a corporation listed by the U S  Treasury as eligible to issue bonds in connection with federal procurement contracts  The SBA considers several factors when evaluating sureties for the PSB program: the surety must have an underwriting limitation of at least $6 5 million on the Department of the Treasury's list of acceptable sureties; the surety must agree that it will neither charge a bond premium in excess of that authorized by the appropriate state insurance department nor impose any non-premium fee unless such fee is permitted by applicable state law and approved by the SBA; the surety's premium income from contract bonds guaranteed by any government agency (federal, state, or local) can account for no more than one-quarter of the surety's total contract bond premium income; and the surety must vest the underwriting authority for SBA guaranteed bonds to its own employees and final settlement authority for claims and recovery to employees in the surety's permanent claims department  The SBA also considers the surety's rating or ranking designation assigned by a recognized authority  Sureties participating in the PSB program are not eligible to participate in the Prior Approval Program  However, this prohibition does not apply to the surety's affiliates provided that the affiliate is not a participant in the PSB program, their affiliation has been fully disclosed to the SBA, and the affiliate has been approved to participate in the Prior Approval Program  Sureties in the Prior Approval Program must obtain the SBA's approval before issuing a guaranteed bond  Sureties in the PSB program may issue, monitor, and service SBA-guaranteed bonds without prior approval  However, these sureties must notify the SBA electronically of all bonds issued and, for final bonds, they must report and submit to the SBA on a monthly basis all contractor and surety fees that are due  These sureties are also subject to a periodic maximum guarantee authority amount set by the SBA  In addition, effective August 21, 2017, sureties are required, during their initial nine months in the PSB program, to obtain the SBA's prior written approval before executing a bond greater than $2 million  The SBA argued that it was in the taxpayer's interest to require newer sureties to "demonstrate an understanding of the program before being allowed to issue bonds larger than $2 million without SBA's oversight " The terms and conditions of the SBA's bond guarantee agreements with the surety, including the guarantee percentage, may vary from surety to surety, depending on past experience with the SBA  The SBA may take into consideration, among other things, the rating or ranking assigned to the surety by recognized authorities, the surety's loss rate, average contract amount, average bond penalty per guaranteed bond, and the ratio of bid bonds to final bonds, all in comparison with other sureties participating in the same SBA Surety Bond Guarantee Program (Prior Approval or PSB programs)  Sureties are required, among other things, to evaluate the credit, capacity, and character of a principal using standards generally accepted by the surety industry and in accordance with the SBA's standard operating procedures on underwriting and the surety's principles and practices on unguaranteed bonds; reasonably expect that the principal will successfully perform the contract to be bonded; provide bond terms and conditions that are reasonable in light of the risks involved and the extent of the surety's participation; be satisfied as to the reasonableness of cost and the feasibility of successful completion of the contract; ensure that the principal remains viable and eligible for the program; monitor the principal's progress on guaranteed contracts; maintain documentation of job status requests; take all reasonable action to minimize risk of loss, including, but not limited to, obtaining from each principal a written indemnity agreement, secured by such collateral as the surety or the SBA finds appropriate, which covers actual losses under the contract and imminent breach payments; and in the case of loss, pursue all possible sources of salvage and recovery  Participating sureties are subject to audits by SBA-selected and -approved examiners  Prior Approval Program sureties are audited at least once each year and PSB sureties are audited at least once every three years  The SBA does not charge sureties (or small businesses) application or bid bond guarantee fees  It does require sureties to pay a guarantee fee on each SBA-guaranteed bond (other than bid bonds)  The surety fee, which is determined by the SBA and published in the Federal Register , is a percentage of the bond premium  The FY2019 surety fee is 20% of the bond premium that the surety charges the small business, rounded to the nearest dollar  The surety fee is due within 60 days after the SBA's approval of the prior approval payment or performance bond  The SBA does not receive any portion of a surety's non-premium charges  As shown in Table 2 , the number and amount of bid bonds guaranteed by the SBA has generally increased in recent years  For example, in FY2007, the SBA guaranteed 4,192 bid bonds totaling $1 7 billion  In FY2018, the SBA guaranteed 7,354 bid bonds totaling $4 7 billion  Table 2 also shows that the number and amount of SBA-guaranteed final bonds declined somewhat from FY2007 through FY2009 (coinciding with the 2007-2009 recession), and has generally increased since then  Recent increases are likely due to generally improving economic conditions and legislation that temporarily ( P L  111-5 ) and then permanently ( P L  112-239 ) raised the program's maximum individual contract amount from $2 million to $5 million, and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary  As shown in Table 3 , excluding program costs of about $4 million annually, the program has experienced a net positive cash flow in each of the past 12 fiscal years  There is about $97 million in the Surety Bond Guarantee Program Revolving Fund  Historically, the program's default rate has averaged about 3% to 5%  According to the SBA, on average, the default rate on larger contracts tends to be lower than for smaller contracts and the recovery rate for larger contract defaults tends to be greater than for smaller contract defaults  Currently, 28 sureties participate in the Prior Approval Program and 6 participate in the PSB program  Agents empowered to represent a participating surety company are located, or licensed, in all 50 states, American Samoa, the District of Columbia, Guam, the Marshall Islands, Micronesia, the Northern Mariana Islands, Palau, Puerto Rico, and the Virgin Islands  About 80% of the SBA's surety bonds are issued through the Prior Approval Program and 20% through the PSB program  P L  111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), provided the program an additional appropriation of $15 million and temporarily increased, from February 17, 2009, through September 30, 2010, the maximum bond amount from $2 million to $5 million  The act also authorized the SBA to guarantee a bond of up to $10 million if a federal contracting officer certified in writing that a guarantee in excess of $5 million was necessary  It also revised the program's size standard to "the size standard for the primary industry in which such business concern, and the affiliates of such business concern, is engaged, as determined by the Administrator in accordance with the North American Industry Classification System " The new size standard (e g , up to $36 5 million in average annual receipts over the previous three years for most heavy construction contractors, and up to $15 million in average annual receipts over the previous three years for specialty trade contractors) increased the number of businesses that qualified for the program  Using its rulemaking authority, the SBA made ARRA's temporary size standard permanent on August 11, 2010  Proponents argued that the increased bond limit and size were necessary to "ensure that small businesses are able to secure the surety bonds they need to compete for contracts, grow, and hire more employees " They also argued that "in our current economic recession, small businesses are finding it even more difficult to secure the credit lines necessary to get bonds in the private sector " In their view, the temporary changes would create "significant opportunities to create jobs now in which small businesses will participate and be the driving engine for creation of new jobs in our country " There was no apparent organized opposition to these specific temporary changes to the Surety Bond Guarantee Program  However, there was opposition to ARRA's package of program enhancements for the SBA as a whole, which among other things, provided the SBA $730 million in additional funding, including $255 million for a temporary, two-year small business stabilization program to guarantee loans of $35,000 or less to small businesses for qualified debt consolidation, later named the America's Recovery Capital (ARC) Loan program and $375 million to temporarily subsidize fees for the SBA's 7(a) and 504/CDC loan guaranty programs and increase the 7(a) program's maximum loan guaranty percentage to 90%  Instead of modifying the SBA's program requirements and increasing the SBA's appropriation, opponents advocated business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small businesses, generate economic growth, and create jobs  On September 12, 2011, the Obama Administration advocated, as part of its proposed American Jobs Act, a temporary increase in the SBA surety bond limit to $5 million until the end of FY2012  The Administration argued that raising the program's bond limit "will make it easier for small businesses to take advantage of contracting opportunities generated by the American Jobs Act's proposed infrastructure investments " On December 7, 2012, the Administration also recommended, as part of its request for an additional $60 4 billion in federal resources to address damage caused by Hurricane Sandy, that the SBA surety bond limit be increased to $5 million to enable "more small businesses to participate in the recovery efforts " There were several legislative efforts during the 112 th Congress to increase the program's bond limit  S  1334 , the Expanding Opportunities for Main Street Act of 2011, and its companion bill in the House, H R  2424 , would have reinstated and made permanent ARRA's higher limits (up to $5 million and up to $10 million if a federal contracting officer certifies in writing that a guarantee in excess of $5 million is necessary)  Neither of these bills was reported by a committee for consideration by the House or the Senate  S  1660 , the American Jobs Act of 2011, and its companion bill in the House, H R  12 , would have provided $3 million in additional funding to pay for the cost of temporarily increasing the program's bond limit to $5 million from $2 million until the end of FY2012  Cloture on a motion to proceed to S  1660 was not invoked in the Senate on October 11, 2011, by a vote of 50 to 49  H R  12 was not reported by a committee for consideration in the House  On December 12, 2012, the Senate Committee on Appropriations released its draft of the Hurricane Sandy Emergency Assistance Supplemental bill  It included a provision to increase the program's bond limit to $5 million  This provision was later removed following congressional approval of H R  4310 , the National Defense Authorization Act for Fiscal Year 2013, which became law ( P L  112-239 ) on January 2, 2013  It increased the program's bond limit to $6 5 million, and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary  There was relatively little discussion in the legislative record concerning the reasons for increasing the surety bond program's bond limits, and even less discussion of the reasons for not increasing the limits  Hearings were not held on S  1334 and H R  2424   Also, only one witness during hearings on H R  4310 addressed the SBA surety bond program  That witness supported an increase in the surety bond limit to $5 million, and up to $10 million if a contracting officer certifies its necessity  Advocates argued that bond limits should be raised to bring them more in line with the contracting amounts for other small business programs, such as the 8(a) Minority Small Business and Capital Ownership Development Program, the Historically Underutilized Business Zone (HUBZone) program, the Women-Owned Small Business Federal Contract program, and the Service-Disabled Veteran-Owned Small Business Concerns Program  For example, under 8(a) Minority Small Business and Capital Ownership Development Program, federal contracting officials, at that time, could provide a sole source award to a 8(a) small business if the anticipated award price of the contract did not exceed $6 5 million for manufacturing contracts (now $7 0 million) or $4 million for other contract opportunities, and the contracting officer believed that the award could be made at a fair and reasonable price  Advocates argued that raising the program's bond limit would provide more consistency across small business contracting programs and make it easier for agencies experiencing difficulty issuing contracts in increments of $2 million or less (e g , the Department of Defense [DOD], the General Services Administration, and the Department of State) to participate in the program  Advocates also argued that small businesses awarded contracts exceeding $2 million under the other small business contracting programs are at risk of not being able to complete those contracts due to difficulties in securing a surety bond  For example, the House Committee on Armed Services' Panel on Business Challenges in the Defense Industry argued that the SBA surety bond program's limit should be increased to $6 5 million to match the 8(a) program's $6 5 million threshold for manufacturing contracts and to "increase the opportunities for small businesses to compete for federal contracts, especially in those departments, such as the Department of Defense, where the average size of construction contracts awarded to small businesses for FY2010 exceeded $5 9 million—nearly triple the size for which SBA can provide bonding support " There was no organized opposition to raising the program's bond limits  One possible argument that could have been raised is that higher limits could lead to higher amounts being guaranteed by the SBA and, as a result, increase the risk of program losses  However, the SBA's experience with Recovery Act bonds (over $2 million) suggested that raising the limit may not lead to an increased risk of program losses  The SBA reported that the program's default rate on Recovery Act bonds was lower, in 2009 and 2010, than for its other bonds  The SBA guaranteed 166 Recovery Act bid bonds valued at $518 million and 52 Recovery Act final bonds valued at $145 4 million  There were two defaults, with a bond value of $2 7 million and $2 2 million, respectively  In an effort to enhance surety participation in the SBA's program, H R  776 , the Security in Bonding Act of 2013, introduced and referred to the House Committee on the Judiciary and the House Committee on Small Business on February 15, 2013, would have increased the PSB program's guarantee rate from not to exceed 70% to not to exceed 90% of losses  The bill was reported favorably by both committees on May 21, 2014, and included in H R  4435 , the Howard P  "Buck" McKeon National Defense Authorization Act for Fiscal Year 2015, which was passed by the House on May 22, 2014  This provision was not included in the final version of the bill which was subsequently passed by Congress  Advocates of increasing the PSB program's guarantee rate argued that Despite the different guarantee amounts and the differing levels of review, both the PAP [Prior Approval Program] and PSBP [Preferred Surety Bond Guarantee Program] have similar levels of default  However, over the years, the PSBP program has become less effective for small businesses since only four sureties currently participate in the program because the guarantee rates are no longer competitive enough to encourage commercial sureties to participate  Therefore, since the PSBP is the more efficient program and … does not expose taxpayers to any risk, this legislation amends the SBIA [Small Business Investment Act] to standardize the guarantee rate at 90 percent  The SBA did not formally endorse the proposed guarantee rate increase  However, in its FY2015 and FY2016 congressional budget justification documents, the SBA indicated that it "will investigate establishing a single guaranty percentage in the Prior Approval and PSB programs and restructuring the Prior Approval program " Also, when asked at a congressional hearing held on May 23, 2013, about the proposed guarantee rate increase, an SBA official testified that We are looking very closely at the program  We have seen a decline in the preferred sureties going down from 50% to 14% of our program, which is a very small number  We would like to see more participation in that program  Because of the additional cash flow we have, we do not expect it to increase our costs  And we have some history in our other programs that demonstrate that having the same guarantee level is not a disincentive  There was no discussion in the legislative record during the 113 th Congress opposing an increase in the guarantee rate for the PSB program  One possible objection might have been that increasing the guarantee rate could increase the risk of program losses and result in higher program fees  Higher fees, in turn, could cause hardship for some companies seeking a surety bond  H R  838 , the Security in Bonding Act of 2015, was introduced and referred to the House Committee on the Judiciary and the House Committee on Small Business on February 10, 2015  The bill would have increased the PSB program's guarantee rate from not to exceed 70% to not to exceed 90%, specify requirements concerning the pledge of assets by individual sureties, and require GAO to examine the effects of these changes on small businesses  The House-passed version of H R  1735 , the National Defense Authorization Act for Fiscal Year 2016, included H R  838 's provisions  The Senate-passed version of the bill did not  The conference agreement for H R  1735 , which became P L  114-92 , included H R  838 's provision to increase the PSB program's guarantee rate from not to exceed 70% to not to exceed 90% of losses and its provision to specify requirements concerning the pledge of assets by individual sureties, subject to a one-year delay "to allow for the necessary rulemaking " Congress specified additional requirements concerning the pledge of assets by individual sureties as a means to ensure that "individual sureties have sufficient assets to redeem the bonds " The SBA's final rule implementing the increased PSB program's guarantee rate was effective as of September 20, 2017  The SBA has reported that it is focusing on "strengthening relationships with individual surety companies and the large network of bond agents and producers across the country in order to reach more small businesses in need of bonding " As part of this outreach effort, the SBA has reported that it will continue to emphasize "process improvements that will streamline the application requirements for small businesses and surety companies and their agents " For example, in August 2012, the SBA announced a "Quick APP" for surety bonds up to $250,000 that provides a streamlined underwriting and application process by combining "two applications into one to make it easier and faster for small businesses and contractors, including veteran-owned small businesses, to compete for contracts " The SBA increased the Quick APP (now called the Quick Bond Program) eligibility threshold to $400,000 in 2017  In addition, the SBA reported in 2016 that it was also considering combing the Prior Approval Program and PSB program into a single program featuring the streamlined bond approval and monitoring processes under the PSB program  Several industry groups, including the National Association of Surety Bond Producers and The Surety & Fidelity Association of America, have recommended that the programs be merged, the emphasis on reduced regulatory burdens under the PSB program be maintained, and the program's fees kept as low as economically feasible as a means to encourage more sureties to participate in the program  Perhaps because the proposal has not been formally introduced as a bill, there are no public statements opposing the merger of the two programs  Opposition might come from (1) those who are not convinced that the Surety Bond Guarantee Program is necessary to supplement the private market for surety bonds and would prefer that the program be eliminated rather than reformed or (2) those who believe that a federal program is necessary to supplement the private market for surety bonds, but the existing program is sufficient to meet that need and does not require changes to encourage its expansion  Still other opponents might argue that providing additional authority to sureties to approve and monitor bonds could increase the risk of defaults and program losses  Throughout the program's history, both congressional testimony and GAO examinations have indicated that smaller contracting firms, and especially minority-owned and women-owned small business contracting firms, often have a more difficult time accessing surety bonds in the private marketplace than larger firms  For example, in 1995, GAO reported that "it is not unusual for a small construction company to have some difficulty in obtaining a surety bond " GAO found that about one in three of the smallest contracting firms it surveyed, compared with about one in six of the larger contracting firms it surveyed, reported that they were required to provide collateral  GAO also reported The experiences of the minority-owned firms differed from those of the firms not owned by minorities in several areas  For example, these firms were more likely to be asked to provide certain types of financial documentation, as well as to provide collateral or to meet other conditions; were more likely to be denied a bond and to report losing an opportunity to bid because of delays in processing their request for a bond; and were more likely to depend on jobs requiring bonds for a higher proportion of their revenues  The women-owned firms differed from the firms not owned by women in a few key respects  For example, they … were more likely to be asked to provide more types of financial or other documentation to obtain a bond  In addition, the minority-owned firms reported more often than the firms not owned by minorities that they had to (1) establish an escrow account controlled by the surety company, (2) hire a CPA or a management or consulting firm selected by the surety company to manage the contract, and (3) enter into an arrangement that allows the surety company to manage the job even when the firm is not in default  Although congressional testimony and GAO examinations have supported the need for a program such as the SBA's Surety Bond Guarantee Program, that testimony and GAO's surveys of businesses have been somewhat less useful in helping Congress determine the appropriate size for the program  For example, a review of congressional hearings since the program's inception suggests that congressional witnesses representing the surety companies and various construction organizations, including minority-owned small contracting businesses, have focused their testimony on the need to reduce the SBA's paperwork requirements, which are designed to prevent fraud but increase the sureties' costs; keep the program's fees as low as possible; and keep the program's guarantee rates as high as possible  The SBA's testimony has tended to focus on the need to attract more sureties to the program so that it can reverse the slow downward trajectory the program has experienced over the past two decades in the number and amount of final bonds guaranteed  There has been relatively little testimony provided concerning the broader issue of how large the program should be in comparison with the private sector and what measures or metrics could be used to help make that determination  One possible starting point for determining the program's size in comparison with the private sector is to examine congressional testimony concerning the supply and demand for sureties in the private sector  That testimony suggests that the supply and demand for sureties tends to fluctuate with changes in the overall economy, with the supply of sureties contracting during economic recessions and expanding during economic expansions and the demand for sureties slowing during economic recessions and increasing during economic expansions  Arguably, federal policies could take these fluctuations into account—enacting policies that expand federal support for surety guarantees when supply is tight and reducing federal support for surety guarantees when supply is more plentiful  Of course, when making these decisions, it is necessary to first establish measures or metrics to determine current market conditions  In addition, this line of reasoning assumes that having a federal presence in the surety marketplace is desirable, an assumption not held by all  Ultimately, although having established measures or metrics concerning the supply and demand for surety bonds might be helpful in determining the appropriate size for the SBA's Surety Bond Guarantee Program, that decision will largely rest on personal views concerning the role of the federal government in the private marketplace and the level of acceptable risk in assisting small businesses to gain greater access to surety bonds 

ground_truth: The Small Business Administration's (SBA's) Surety Bond Guarantee Program is designed to increase small businesses' access to federal, state, and local government contracting, as well as private-sector contracts, by guaranteeing bid, performance, and payment bonds for small businesses that cannot obtain surety bonds through regular commercial channels. The program guarantees individual contracts of up to $6.5 million, and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. The SBA's guarantee currently ranges from 80% to 90% of the surety's loss if a default occurs. In FY2018, the SBA guaranteed 10,800 bid and final surety bonds with a total contract value of nearly $6.5 billion. A surety bond is a three-party instrument between a surety (who agrees to be responsible for the debt or obligation of another), a contractor, and a project owner. The agreement binds the contractor to comply with the contract's terms and conditions. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. Surety bonds encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and may be at greater risk of failing to comply with the contract's terms and conditions. Surety bonds are important to small businesses interested in competing for federal contracts because the federal government requires prime contractors—prior to the award of a federal contract exceeding $150,000 for the construction, alteration, or repair of any building or public work of the United States—to furnish a performance bond issued by a surety satisfactory to the contracting officer in an amount that the officer considers adequate to protect the government. P.L. 112-239, the National Defense Authorization Act for Fiscal Year 2013, increased the program's bond limit to $6.5 million, or up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. The limit had been $2 million since 2000, with a temporary increase from February 17, 2009, through September 30, 2010, to $5 million, and up to $10 million if a federal contracting officer certified in writing that such a guarantee was necessary. Advocates of raising the program's bond limit argued that doing so would increase contracting opportunities for small businesses and bring the limit more in line with limits of other small business programs, such as the 8(a) Minority Small Business and Capital Ownership Development Program and the Historically Underutilized Business Zone (HUBZone) Program. Opponents argued that raising the limit could lead to higher amounts being guaranteed by the SBA and, as a result, increase the risk of program losses. This report examines the program's origin and development, including (1) the decision to supplement the original Prior Approval Program with the Preferred Surety Bond Guarantee Program that initially provided a lower guarantee rate (not to exceed 70%) than the Prior Approval Program (not to exceed 80% or 90%, depending on the size of the contract and the type of small business) in exchange for allowing preferred sureties to issue SBA-guaranteed surety bonds without the SBA's prior approval; (2) P.L. 114-92, the National Defense Authorization Act for Fiscal Year 2016, which increased the Preferred Surety Bond Guarantee Program's guarantee rate from not to exceed 70% to not to exceed 90% of losses; and (3) the decision to increase the program's bond limit.