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23–765 2017

STRUGGLING TO GROW: ASSESSING THE 

CHALLENGES FOR SMALL BUSINESSES IN 

RURAL AMERICA 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ECONOMIC GROWTH, TAX AND 

CAPITAL ACCESS 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

SEPTEMBER 8, 2016 

Small Business Committee Document Number 114–070 

Available via the GPO Website: www.fdsys.gov 

SBREP-219A with DISTILLER


Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

STEVE CHABOT, Ohio, Chairman 

STEVE KING, Iowa 

BLAINE LUETKEMEYER, Missouri 

RICHARD HANNA, New York 

TIM HUELSKAMP, Kansas 

CHRIS GIBSON, New York 

DAVE BRAT, Virginia 

AUMUA AMATA COLEMAN RADEWAGEN, American Samoa 

STEVE KNIGHT, California 

CARLOS CURBELO, Florida 

CRESENT HARDY, Nevada 

WARREN DAVIDSON, Ohio 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

YVETTE CLARK, New York 

JUDY CHU, California 

JANICE HAHN, California 

DONALD PAYNE, JR., New Jersey 

GRACE MENG, New York 

BRENDA LAWRENCE, Michigan 

ALMA ADAMS, North Carolina 

SETH MOULTON, Massachusetts 

KEVIN FITZPATRICK, Staff Director 

JAN OLIVER, Chief Counsel 

ADAM MINEHARDT, Minority Staff Director 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Tim Huelskamp .............................................................................................. 1 

Hon. Judy Chu ......................................................................................................... 2 

WITNESSES 

Mr. John Dearie, Author, ‘‘Where the Job Are: Entrepreneurship and the 

Soul of the American Economy’’, Washington, DC ............................................ 3 

Mr. Robert Boyd, County Commissioner, Riley County, Manhattan, KS, testifying on behalf of the National Association of Counties ................................... 5 

Mr. Hugh Middleton, Co-Founder, Kopis Mobile LLC, Flowood, MS .................. 7 

Ms. Linsley Kinkade, Deputy Director, U.S. Programs, Winrock International, 

Little Rock, AR ..................................................................................................... 9 

APPENDIX 

Prepared Statements: 

Mr. John Dearie, Author, ‘‘Where the Job Are: Entrepreneurship and 

the Soul of the American Economy’’, Washington, DC .............................. 18 

Mr. Robert Boyd, County Commissioner, Riley County, Manhattan, KS, 

testifying on behalf of the National Association of Counties .................... 26 

Mr. Hugh Middleton, Co-Founder, Kopis Mobile LLC, Flowood, MS .......... 34 

Ms. Linsley Kinkade, Deputy Director, U.S. Programs, Winrock International, Little Rock, AR .............................................................................. 38 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

None. 

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SBREP-219A with DISTILLER

(1) 

STRUGGLING TO GROW: ASSESSING THE 

CHALLENGES FOR SMALL BUSINESSES IN 

RURAL AMERICA 

THURSDAY, SEPTEMBER 8, 2016 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON ECONOMIC GROWTH, 

TAX AND CAPITAL ACCESS, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:00 a.m., in Room 

2360, Rayburn House Office Building, Hon. Tim Huelskamp [chairman of the Subcommittee] presiding. 

Present: Representatives Huelskamp, Brad, Radewagen, Kelly, 

and Chu. 

Chairman HUELSKAMP. It has been about 8 years since the 

2008 financial crisis, and yet for many Americans it still feels like 

the economy has yet to recover. Just last year, 36 percent of counties in the United States had a negative GDP growth rate. Much 

of this poor economic growth can be traced back to a lack of new 

business creation in rural America. When businesses cannot create 

jobs in rural America, economic growth suffers nationwide. 

From 2010 to 2014, half of all new businesses were started in 

just 20 of our nation’s counties, all near large metropolitan centers. 

For these major coastal metro areas, small business growth is fairly strong. Cities like San Francisco and Miami are major hubs for 

business creation, and the population in these areas has reached 

record highs. 

Meanwhile, from 2010 to 2014, more Americans left nonmetropolitan counties than ever before. Rural counties have also seen a 

net decrease in business establishment. These two forces have combined to create a lost generation of entrepreneurs in a significant 

portion of the United States. 

If the United States is to remain economically vibrant in the 

near future, there needs to be economic growth, not in just major 

coastal cities, but all across America. As we stress time and time 

again in this Committee, the engine of economic growth and job 

creation and opportunity in this country comes from small businesses. 

While there are several reasons for this decline in entrepreneurship in rural America, many of the initiatives this Committee has 

focused on this Congress, including reducing regulatory burdens 

and improving avenues for small businesses to acquire capital, still 

remain at the forefront. The loss of community banks in this counSBREP-219A with DISTILLER

2 

try due to regulatory challenges like Dodd-Frank have also hurt 

the rural communities served by these banks very hard. 

Today’s hearing will be an opportunity for a distinguished panel 

from across the country to discuss how to promote small business 

growth in America’s heartland. By understanding how small businesses can be successful in rural areas like my district in Kansas, 

we can not only improve the economic growth of the entire country 

but create the businesses and the products of the future right at 

home. 

I thank the witnesses for being here this morning and we look 

forward to your testimony. 

I now yield to Ranking Member Chu for opening remarks. 

Ms. CHU. Thank you, Mr. Chairman. 

Six years ago, the nation was in the early stages of recovery from 

one of the worst economic downturns in history. We lost 4 million 

jobs, 7 million people faced foreclosure, and families saw over $16 

trillion in wealth disappear as the housing and stock market 

crashed. Now, as a nation, we have rebounded. Unemployment is 

below 5 percent, over 10 million new jobs have been created. We 

have reached record highs in stock market and retirement portfolios. New consumer protection laws have been implemented and 

consumers are confident that the United States is recovering. 

But we must acknowledge that this recovery has not been perfect. In fact, it is unlike any recovery that we have seen before. For 

example, the smallest rural counties saw more business establishments close than open, resulting in a negative growth rate. 

As a result, the U.S. economy is becoming more reliant on a 

small number of super performing counties for new institutions. As 

a matter of fact, only 20 counties were responsible for half of the 

net national increase in business establishments from 2010 to 

2014. In contrast, the economic expansion of the 1990s was driven 

by more rural economic development wherein counties under 

100,000 people averaged 16 percent job growth, while counties over 

1 million averaged just 7.7 percent. 

A look at why rural America is struggling shows a number of 

causes. Over the last 2 decades, there have been massive manufacturing job loss in areas that were once the epicenter for manufacturing in America. The U.S. lost 5 million manufacturing jobs between January 2000 and December 2014. The North American 

Free Trade Agreement, or NAFTA, also resulted in a $181 billion 

trade deficit with Mexico and Canada, and experts estimate it has 

cost us approximately 1 million American jobs. 

Furthermore, studies have shown that the rural population is increasing while jobs are decreasing, forcing, young talented workers 

to leave for urban areas with better job opportunities. These factors 

have created an atmosphere that is not attractive to entrepreneurs 

and one that we in Congress must work to turn around. 

While the problem and its many causes are clear, we must assess 

what solutions are possible. Fortunately, congressional Democrats 

have taken steps to address these conditions. For instance, Congressman Hoyer’s Made in America plan includes enhancing vocational training, expanding entrepreneurship and innovation, and 

matching worker skills with job opportunities. These ideals are accomplished by investing in education, providing access to capital 

SBREP-219A with DISTILLER

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for small institutions, as well as alleviating tax and regulatory burdens. 

Another area of great importance is access to capital. During the 

recession, many entrepreneurs have struggled to receive the funding necessary to open a new business or expand an existing one. 

As shown in research, young firms are where most new jobs are 

created, and the lack of capital has directly lead to a slower recovery in rural areas. 

Congress has put forth solutions to rectify these issues. For example, I spearheaded changes to the SBA’s 504 loan program 

which freed up more capital for small firms. The 504 program is 

a useful financing tool for economic growth that provides small 

business with long-term fixed rate loans. By making the 504 refinancing program permanent, more small businesses will be able to 

reduce debt, increase liquidity, and ultimately create new jobs. 

Looking ahead, we need to gain an even better understanding of 

the extent of the problem and its root causes. Bringing new and innovative ideas to Congress will help us shape public policy to revitalize rural America. 

I thank the witnesses for being here today and I look forward to 

your comments. 

I yield back. 

Chairman HUELSKAMP. I thank the Ranking Member for her 

opening comments. 

Now I would like to introduce our first witness this morning, 

John Dearie, author of Where the Jobs Are: Entrepreneurship and 

the Soul of the American Economy. His book was published in 2013 

and focuses on the fact that job creation and economic growth in 

this country are largely dependent on new business formation. Mr. 

Dearie is also the acting CEO of the Financial Services Forum in 

Washington, D.C., and is a member of the Policy Council at the 

Economic Innovation Group. 

Mr. Dearie, you have 5 minutes, and you may begin. Thank you 

for being here. 

STATEMENTS OF JOHN DEARIE, AUTHOR, WHERE THE JOBS 

ARE: ENTREPRENEURSHIP AND THE SOUL OF THE AMERICAN ECONOMY; ROBERT BOYD, COUNTY COMMISSIONER, 

RILEY COUNTY; HUGH MIDDLETON, COFOUNDER, KOPIS MOBILE LLC; AND LINSLEY KINKADE, DEPUTY DIRECTOR, U.S. 

PROGRAMS, WINROCK INTERNATIONAL 

STATEMENT OF JOHN DEARIE 

Mr. DEARIE. Thank you, Chairman Huelskamp and Ranking 

Member Chu. The views I will be expressing today are my own, of 

course. 

Since emerging from the Great Recession more than 7 years ago, 

the U.S. economy has grown at an average annual rate of just 2.2 

percent, more than a full percentage point slower than the postWorld War II average of 3.4 percent. Indeed, the U.S. economy has 

not grown at 3 percent or better since 2005. 

In an economy the size of the U.S. economy, percentage points 

matter. Had the U.S. economy grown at 3.5 percent since emerging 

from the Great Recession in 2009, the GDP last year alone would 

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have been more than $1 trillion greater. Over a 25-year period, the 

difference between a U.S. economy growing at 2.2 percent versus 

3.5 percent is more than $100 trillion in additional economic output. 

Weak economic growth experienced since 2005 is the principal 

cause, in my view, of America’s most serious challenges, including 

persistently high unemployment and underemployment, high and 

rising long-term debt, stagnant wages, wide and worsening income 

wealth and opportunity inequality, the highest poverty rate since 

the mid-1960s and record numbers of Americans reliant on government programs like food stamps and disability insurance. 

To meaningfully address these challenges and the anger, cynicism, and populism they inspire, we must accelerate economic 

growth back to the historical average of 3.5 percent on a sustained 

basis. 

In 1957, American economist Robert Solow demonstrated that 

most of economic growth cannot be attributed to increases in capital and labor, as most economists have previously believed, but 

rather only to gains in productivity driven by innovation. The great 

significance of Solow’s work is that it not only defined the nature 

of economic growth, it also identified its principal source. That is 

because economists have long understood that innovation, a particularly major or disruptive innovation comes disproportionately 

from new businesses or startups. 

Unfortunately, us scholars at the Kauffman Foundation, the 

Brookings Institution and elsewhere have documented, entrepreneurship in America is in trouble. After remaining remarkably consistent for decades, the number of new businesses launched in the 

United States peaked in 2006 and then began a precipitous decline, 

a decline accelerated by the Great Recession. Perhaps most alarming, the number of new firms as a percentage of all firms has fallen 

near a 30-year low and this decline is occurring across a broad 

range of industry sectors, including high tech and in all 50 States. 

Circumstances in rural areas of America, as you alluded to in 

your opening statements, are particularly worrisome. A recent report by the Economic Innovation Group shows that most of the new 

business formation that has occurred since the Great Recession has 

been concentrated in high density urban or suburban areas. Indeed, since 2009, small counties have experienced net negative 

growth in the number of business establishments in their area. 

Such circumstances amount to nothing short of a national emergency. 

To find out why startup rates are falling, a colleague and I conducted roundtables with entrepreneurs in 12 cities across the 

United States asking them quite simply, what’s in your way? Here 

is what they told us: We have the jobs and we need to fill them 

in order to survive and grow. We cannot find enough people that 

have the skills that we need. Our immigration policies don’t effectively attract and retain the world’s best and most innovative talent. Access to startup capital is even more tough in the wake of the 

financial crisis. Overregulation is killing us. Tax complexity and 

uncertainty is diverting far too much of our time and attention 

away from our new businesses, our products, and services. 

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Finally, there is too much economic uncertainty and it is Washington’s fault. It is the bickering and partisanship, the fiscal cliff, 

the debt ceiling, the government shutdowns, the inability to 

achieve tax reform or immigration reform, or to effectively deal 

with the national debt. Washington, they told us at roundtable 

after roundtable, is a generator of problems not solutions and it is 

killing the economy. 

With those insights in mind, my colleague and I developed a 30- 

point policy plan for unleashing the growth and job-creating capacity of the entrepreneurial economy, based on what American entrepreneurs told us they need. The complete list of those proposals are 

in the appendix to my written testimony and I am happy to answer 

any questions about them. 

Economic growth is driven by gains in productivity, which are 

driven by innovation, which comes disproportionately from new 

businesses. Revitalization of American entrepreneurship, therefore, 

is the essential pathway to faster economic growth and the Nation’s ability to meaningfully address its most serious socioeconomic problems. 

Thank you for the invitation to be here. 

Chairman HUELSKAMP. Thank you, Mr. Dearie. We appreciate 

your testimony. 

Our next witness is Robert Boyd, a Riley County commissioner 

from my district in Manhattan, Kansas. This morning he will be 

testifying on behalf of the National Association of Counties. Mr. 

Boyd’s first term as county commissioner was elected in November 

of 2012. He also owns a dry cleaning business in the district. 

Mr. Boyd, I thank you for being here today, and I also thank you 

for service as a combat veteran on behalf of our country, and you 

may begin your testimony. 

STATEMENT OF ROBERT BOYD 

Mr. BOYD. Mr. Chairman, thank you very much. 

Chairman Huelskamp, Ranking Member Chu, and members of 

the Subcommittee, my name is Robert Boyd, and I serve on the 

Board of County Commissioners for Riley County, Kansas. I am 

here today representing the National Association of Counties. As 

both a county-elected official and small business owner, I am honored to participate in today’s hearing. 

Located in northeast Kansas, Riley County has a mix of both 

rural and urban areas. Manhattan is our largest city and county 

seat. We have over 75,000 residents and are home to Fort Riley 

and Kansas State University, two major economic engines for our 

region. 

We often hear that the U.S. economy is recovering from the 

Great Recession, but it is hard to feel this recovery on the ground 

in our State and counties. National and statewide economic data do 

not always paint an accurate picture of the local situation, because 

every county has its own unique challenges and opportunities. To 

provide a national perspective on the state of county economic conditions, National Association of Counties releases County Economies, an annual report on economic recovery and growth patterns 

across the nation’s 3,069 county economies. 

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The report looks at annual changes in four economic performance 

indicators in each county: Economic output or GDP, employment, 

unemployment rates, and median home prices. 

In 2015, counties across the country showed some signs of economic recovery, particularly on unemployment and home prices. 

For instance, more than 400 county economies closed their unemployment gaps and saw their home prices reach prerecession levels. 

On the other hand, only 7 percent of county economies have fully 

recovered to prerecession levels, on all four indicators, and 16 percent have yet to recover on any of the four economic indicators. In 

other words, many counties are still experiencing the recession. 

The outlook for our nation’s small and rural counties is even 

more challenging. 70 percent of counties are considered small with 

populations of less than 50,000. Of those, only about 300 small 

county economies closed their unemployment gaps in 2015. Furthermore, almost half small county economies saw a decline in 

GDP, particularly those in the South and the Midwest. 

In Kansas, 100 out of 105 county economies saw job losses or flat 

employment. Let me repeat that, 100 out of 105 counties saw job 

losses or flat employment. Only one of the county economies in the 

State saw higher job growth. Additionally, over 60 percent experienced a decline in GDP. In Riley County, we have only recovered 

in GDP and home prices but are still struggling with jobs and unemployment rates. 

Many of our surrounding counties are experiencing an even slower recovery. None of our six neighboring counties have recovered all 

four indicators. Most of them saw declines in GDP and jobs, and 

we are not alone. Many rural counties faced similar headwinds. At 

the same time, small county governments must provide mandatory 

service and comply with the same regulations as our suburban and 

urban counterparts, and we have to do it all with limited ability 

to generate revenue and without economies to scale. 

While we face serious challenges, we are addressing these issues 

and strengthening our communities. We are supporting small business incubators and training programs, facilitating access to capital, and making major investment in critical local infrastructure. 

All of our efforts are aimed at fostering conditions for economic 

growth and improving the quality of life. 

In Riley County, we have partnered with Fort Riley, Kansas 

State University, the Kansas Department of Transportation, the 

U.S. Department of Transportation, and other local governments in 

the region to develop the Flint Hills Area Transportation Agency. 

This collaboration helps to connect our people to jobs, education, 

and health care. Programs like this help small businesses like mine 

to tap into regional workforce and positions for future growth. 

In conclusion, while some county economies have seen improvements, there is still a long way to go, especially for small rural 

counties. With improved collaboration and flexibility from our 

intergovernmental partners at the Federal and State levels, we can 

continue to provide the public services and basic infrastructure 

needed for economic growth and prosperity. 

Thank you for the opportunity to testify and I look forward to 

your questions. 

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7 

Chairman HUELSKAMP. Commissioner Boyd, I appreciate your 

testimony. Thank you for being with us here today. 

I now yield to Congressman Trent Kelly for the introduction of 

our third witness. 

Mr. KELLY. Thank you, Mr. Chairman. Our third witness this 

morning is Hugh Middleton, cofounder of Kopis Mobile in Flowood, 

Mississippi. Although Kopis Mobile is located in my colleague Mr. 

Harper’s district, one of the cofounders, Henry Jones, is a fellow 

graduate of my alma mater Ole Miss, which is in my district also. 

Started in 2009, Kopis Mobile designs apps and app-enabled 

equipment for Department of Defense, law enforcement, and private security markets. They are represented today by cofounder 

Mr. Hugh Middleton, a former Navy SEAL officer. 

Thank you for your service to our country and for being here this 

morning, Mr. Middleton, and you may begin. 

STATEMENT OF HUGH MIDDLETON 

Mr. MIDDLETON. Thank you. I appreciate it. 

Good morning, Chairman Huelskamp, Ranking Member Chu, 

and members of the Committee. Thank you for hosting this hearing 

on the challenges that small businesses face in rural America and 

for your invitation to provide remarks at this hearing. 

My name is Hugh Middleton. I am cofounder of Kopis Mobile, a 

small startup tech company headquartered in Flowood, Mississippi. 

Flowood is located just outside of Jackson, Mississippi. Before I get 

into what Kopis Mobile does, I would like to provide a little background about myself that I feel is pertinent to the work that we 

do. 

I am a former Navy SEAL officer. While on the SEAL teams, I 

was assigned to SEAL Teams 1, 3, 5, 6, and spent times in various 

overseas assignments, including Special Operations Joint Staffs. I 

have also worked in several U.S. embassies and consulates. I separated from the Navy in 2005, taking a management position in a 

large defense contracting company that supported then ongoing operations in Afghanistan and Iraq. Following that, I moved on to another defense company where I managed a staff of highly skilled 

intelligence analysts conducting intelligence and data exploitation 

focused on improvised explosive devices threat characterization. 

In January 2013, I cofounded Kopis Mobile with three super 

smart engineers who all worked at the same company that I did 

at the time. It may seem like an odd paring of backgrounds, and 

you are correct it is. We often can’t understand what the other is 

saying, but we have made it work to develop some very leading 

edge products that didn’t exist prior to us starting the company. 

Kopis Mobile is in a unique position as a provider of advanced 

mobile technology and products for the Department of Defense, law 

enforcement agencies, and the private security industry. We develop mobile technology to minimize the weight and enhance the 

equipment of soldiers, first responders, and law enforcement officers. This technology saves lives, saves time, and saves money. 

What we do is vitally important, especially to me, because I was 

on the other side of the fence at one time. I witnessed how long 

it takes to get the right equipment because of the overburdened bureaucracy of the procurement process. For a small company like us 

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it really is a killer. We have equipment quotes sitting in the hands 

of military units for over 6 months before they are able to obligate 

funds for critically needed items. The problem is the same for first 

responders. The process equates to birthing a baby. It takes 9 

months often to get through the grant process for them to obligate 

funds to buy, again, critically needed items. 

As with any startup business, it has been a struggle for us. I will 

go out on a limb and say it has been harder for us, given the industry that we are in. Not only are we a tech company from rural Mississippi, but we also have been trying to gain access into an industry dominated by the likes of Northrop Grumman, Raytheon, and 

Lockheed Martin. We have spent over 3 years just trying to educate people on who we are and what we do. We obviously don’t 

have any buildings with Kopis Mobile on the top of them across 

from the Pentagon. 

Most senior leaders think that because of digitization that they 

are more productive because of less paperwork. Actually, the opposite is happening. They have more paperwork than ever, and this 

translates to a 3 percent decrease in annual productivity within the 

military. Bureaucracy is increasing faster than automation, which 

means that over the past 20 years, nearly half the military’s productivity has been sucked dry by the time vampires of administrative tasks. 

The Federal Government spends about $20 billion a year on development of later stage technology for commercialization. Majority 

of this money is spent in large acquisition programs that incorporate technology that is not proven, which means the equipment 

takes way too long to get to the warfighter. This results in huge 

cost overruns, frustrated operators, and projects that are way behind schedule. 

The reason for this, most new technology dies on the vine because of the bureaucracy of the military. The GAO said technologies do not leave the lab because their potential has not been 

adequately demonstrated. The DOD is simply unwilling to fund 

final stages of development of a promising technology, preferring to 

invest in other aspects of the program that are viewed as more 

vital to success. The DOD’s budgeting process requires investments 

to be targeted at least 2 years in advance of their activation, which 

makes it difficult for DOD to seize opportunities to introduce technological advances into acquisition programs. 

The problem is that only 5.71 percent of new technology ever 

gets into the hands of those that really need it. That is 4 out of 

every 70 projects. When you realize that small business accounts 

for 99.7 percent of all new technology introduced, it becomes incredibly important for small businesses to be involved in technology 

development and transfer. 

The Under Secretary of Defense for Acquisition, Technology, Logistics reported the Federal Government has missed its small business goals for the last 16 years, despite the fact that buying from 

small businesses is far less painful. Frankly, buying from small 

guys like us eliminates red tape, shortens the technology transfer, 

speeds the time to get the operator equipment they really need, 

and makes life for the contracting officer easier. 

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What this really means is that it is vitally important to partner 

with small businesses who talk directly to operators in order to cocreate useful technology. I am sure you are already aware small 

businesses are the backbone of the country. We create opportunity, 

generate jobs, invent new technology, and keep the economy going. 

We do all of this while being overregulated, overtaxed, and undersupported by the Federal Government. Everything from 

ObamaCare to mountains of paperwork are hindrances to the 

growth and health of a small business. With lower taxes and 

healthcare costs, we could hire more people, increase salaries, and 

bring better talent to Mississippi. 

Thank you. I look forward to your questions. 

Chairman HUELSKAMP. Thank you, Mr. Middleton. We appreciate your testimony. 

I next yield to Ms. Chu for introduction of our next witness. 

Ms. CHU. It is my pleasure to introduce Ms. Linsley Kinkade, 

Deputy Director of U.S. programs at Winrock International. In this 

role, Ms. Kinkade is responsible for developing and implementing 

entrepreneurship, community and workforce development projects 

in underserved areas. These projects work directly with disadvantaged population seeking training and support to enter the workforce and have lead to the employment of more than 200 previously 

unemployed or underemployed Arkansans to date. 

She is a certified professional community and economic developer 

and also chairs the Central Advisory Board at the Community Development Institute. Prior to joining Winrock, Ms. Kinkade spent 

a number of years on Capitol Hill working for Representative Vic 

Snyder and Senator Blanche Lincoln. She has a bachelor’s degree 

in journalism and political science degree from the University of 

Arkansas. 

STATEMENT OF LINSLEY KINKADE 

Ms. KINKADE. Chairman Huelskamp, Ranking Member Chu, 

distinguished members of the Committee, thank you for inviting 

me here today. My name is Linsley Kinkade, and I am the Deputy 

Director of U.S. programs at Winrock International. Winrock is a 

nonprofit organization that works with people in the United States 

and around the world to empower the disadvantaged, increase economic opportunity, and sustain natural resources. 

Winrock is based in Little Rock, Arkansas, the home state of our 

namesake, former governor, and Arkansas’ original economic developer, Winthrop Rockefeller. I am pleased to be here today to discuss innovative and sustainable economic and community development models taking a place across rural America. 

Winrock’s U.S. Programs is extensively involved in developing solutions for the challenges facing rural communities. Our on-theground technical assistance to community leaders, local organizations has been funded by grants and cooperative agreements from 

agencies and partners such as the United States Department of Agriculture, the Delta Regional Authority, the United States Department of Labor, the State of Arkansas, the Kellogg Foundation, and 

the Walton Family Foundation. 

Winrock is based in Little Rock, Arkansas, the heart of a sixcounty metropolitan region, which accounts for fewer than 720,000 

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people. Compared to large counties in Florida, New York, or Texas, 

our metro area is certainly rural. However, Arkansas is home to 

more than 500 cities, with only 22 having a population above 

20,000 and only 60 cities with a population above 5,000, thereby 

making the Little Rock metro area one of Arkansas’ most urban environments. 

Winrock has seen successful economic and community development models blossom in both our urban and rural areas. The Arkansas Women’s Business Center based in El Dorado, Arkansas, 

which is a city of a population of about 18,000, provides technical 

assistance and training tailored to meet the needs of women business owners across the state. Funded in part through a cooperative 

agreement with the Small Business Administration, since 2011, the 

Women’s Business Center has provided training to more than 700 

clients, helped 35 new businesses start, and assisted companies 

that have created 65 jobs. 

The Innovate Arkansas initiative, funded by the State of Arkansas through its economic development commission, convened startup technology entrepreneurs in Arkansas and works with them as 

they become mature companies. Since 2008, Innovate Arkansas clients have launched more that 150 startups, created more than 600 

jobs, and received more than $295 million in public and private investment. 

Entrepreneurs and business owners in these programs are to 

provide quality training, counseling, access to capital, and other resources needed to empower and equip them to ensure business success, with the ultimate goal of creating a sustainable entrepreneurial ecosystem. 

The Innovation Hub at Winrock is a perfect example of an innovative and broad-based approach to talent and enterprise development that can be applied to rural and urban communities alike. 

The Innovation Hub provides facilities and programs that support 

education and entrepreneurship for all age groups across a wide 

range of disciplines. 

The Innovation Hub has planned, developed, and administered a 

broad array of entrepreneurial programs, including HubXLifeSciences, a privately funded, world-class healthcare accelerator 

program that recently completed its initial cohort with seven highly 

accomplished companies from across the world. Those seven companies leveraged approximately $2 million of private capital from Arkansas-based investors. 

Economic development occurs in communities where people can 

live, work, and grow. The revitalization of main streets and courthouse squares across rural America can be the catalyst for new 

community investment. For example, municipal leaders in Lake 

Village, Arkansas, a community of about 2,500, recently realized 

that to compete and grow, the redevelopment of downtown was 

critical. By combining more than $2 million in funding from various Federal and State agencies and the city’s own coffers, the city 

renovated a dilapidated downtown historic structure on its Main 

Street into a LEED-certified municipal building housing all city 

services. The project increased downtown foot traffic and convinced 

investors to renovate nearby buildings to house new small businesses interested in a downtown location. 

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Our rural communities remain hopeful for the future. Coupling 

innovative entrepreneurship programs with quality of life and 

place-making revitalization efforts can bring increased economic 

development in urban and rural areas alike. 

Chairman Huelskamp, Ranking Member Chu, distinguished 

members of the Committee, thank you for having me here today. 

I appreciate the opportunity to speak with you and I am happy to 

answer any questions you may have. 

Chairman HUELSKAMP. Thank you, Ms. Kinkade. I appreciate 

your testimony. 

We will now begin our questioning, and I recognize myself for 5 

minutes. 

First, Commissioner Boyd, representing a rural county, at least 

rural by definition nationally, could you provide some insight, particularly from yourself as a small businessman, of the challenges 

of operating a rural county in light of some of the difficulties we 

have discussed here today? 

Mr. BOYD. Yes, sir. Thank you very much, that is a very good 

question. We do struggle operating a small county today. We have 

partnerships, economic partnerships with private enterprises. We 

do economic development with our Chamber of Commerce, the 

Manhattan Area Chamber of Commerce. They provide our economic development guidance and activities. 

We also struggle with things such as labor. The recent labor legislation that takes effect here in December is going to be a burden 

on us. It is a burden on the small business. It is going to change 

how I do business, it is going to change how my people do it. It 

will change the county’s employment. 

We also struggle with regulations. In the dry cleaning business, 

we are seeing huge increases in disposal fees that we are required 

to maintain. We are seeing things, in the county, such as waters 

of the U.S. that are impacting us as we go forward. So it is a struggle. 

What we need is partnerships, things such as working with us 

in formulating some of these challenges as you go forward. Each 

one of these people that have addressed us today are known to 

their local governments. We can help you partner, as we go forward, creating legislation that helps us to be the economic engines 

that we are. 

Chairman HUELSKAMP. Thank you. 

Mr. Dearie, a question. As you point out in your testimony, 

across America, there are more deaths than births of new businesses. If you had to pick one particular category amongst the litany of complaints, and most of them are centered around our problems in Washington, if you had to pick one, if we could change one, 

that would have the most impact, what would it be? 

Mr. DEARIE. It is a very good question and a very hard one to 

answer. I would start by answering, it is very important to keep 

in mind the simple things that startups need to thrive, entrepreneurs need to thrive. They need great new ideas. They need the 

talent and the capital to pursue those ideas and they need as few 

distractions, particularly unnecessary distractions, with regard to 

regulatory and tax burden complexity, uncertainty, et cetera. 

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Because as new businesses, they simply don’t have the resources 

or the time that existing businesses, even existing small businesses 

might have. Things my colleague just described, can be significant 

headaches to existing small businesses, can kill new businesses, 

even viable new businesses, simply because very often it is three 

or four folks around a conference room table and they are trying 

to focus on their new product, their new service and to penetrate 

the market. Anything that takes their eye off the ball dramatically 

increases the chances that they can fail. 

If there was one thing, if I were forced to mention one thing, 

which is the nature of your question, and I appreciate that, I would 

create a dual category, and that is this unnecessary distraction 

that I was just mentioning, and its regulatory and tax-related burden, uncertainty and complexity. 

The other categories of needs in terms of new ideas and the talent and capital to pursue them are incredibly important, of course. 

But if we had to focus on one thing that I think would provide 

enormous relief and increase the chances of new business formation, survival, and growth, it would be to pursue the idea that we 

put forward, my colleague and I, in our list of proposals, and that 

is to create a preferential, if you will, regulatory and tax framework treatment for new businesses during the critical first 5 years. 

Research shows that if new businesses can survive those first 5 

years, the chances of them surviving long term go way up. You 

don’t want to kill new businesses in the cradle, as it were, by burdening them with unnecessary regulatory and tax burden complexity, uncertainty. So, we propose a streamline, strip down, an 

on-ramp to viability. If I were forced to pick one thing, I think that 

is what it would be. 

Chairman HUELSKAMP. Thank you. I appreciate that testimony. 

Next, I recognize Ms. Chu for her 5 minutes of questions. 

Ms. CHU. Ms. Kinkade, today, the largest counties in the U.S. 

have produced 58 percent of the country’s new businesses. The 

largest counties also produced more than twice as many jobs during the 2010 recovery as they did in past recoveries. Are there any 

economic philosophies that you believe can be taken from urban 

areas and implemented in rural areas to spur growth? 

Ms. KINKADE. Yes, absolutely. One thing we have seen quite 

successful across the State of Arkansas is focusing on industry 

clusters in regions. Whether that be an urban area or a rural area, 

working with industry that is already existing in a community and 

discovering what businesses are needed and suppliers are needed 

to continue to have that business in your community. 

When you look at it that way, you are not only creating new 

small business opportunities, but you are also providing business 

retention and expansion programs for industries that already exist 

by creating a community where that industry can stay and thrive 

and grow. 

Ms. CHU. Access to capital, of course, is extremely important for 

these small businesses to grow and to be maintained. In your opinion, what can be done to improve rural small businesses’ access to 

capital? 

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Ms. KINKADE. Access to capital is obviously a critical component of all small business development, and in rural areas it can 

be a challenge. We have seen microlending programs work in 

smaller areas where small businesses that don’t need large loans 

or may not yet be bankable are receiving smaller funds from organizations that are able to provide the need for the startup capital 

to get a business going. 

I would also say developing venture capital in rural communities, 

angel investors, is extremely important as we get out into our rural 

areas. Arkansas is overall a rural state, so you could have venture 

capital funds across the state that may also provide funding into 

more urban and rural areas alike. 

Ms. CHU. Now, there are several programs that have been created at the state level that help to finance small businesses. For 

example, the rural entrepreneurship assistance program, REAP, 

has provided services to numerous small businesses throughout Nebraska. REAP has placed over $10 million in loans and leveraged 

over $17 million in additional funds from other sources. 

Can you describe this model in more detail? In your opinion, does 

this program provide a realistic and effective model for other States 

to emulate? 

Ms. KINKADE. Absolutely. Access to capital in any form, whether from the state, federal, or local, or private investors, is critical 

to small business development. I find those programs to be extremely successful across the state, across the South in particular. 

I would say yes, that is a model that could very well be addressed 

in states and across the Federal and State Governments. 

Ms. CHU. Mr. Middleton, because of their capital intensive needs 

and the cost of new technology, small manufacturers frequently encounter what economists call the valley of death, and that is a period in the early stages of development where it becomes difficult 

to move past initial startup phase and enter into the mass production phase. As a technology company outside of Silicon Valley, what 

was your experience with growth and expansion? 

Mr. MIDDLETON. As I said in my testimony, it has been quite 

a struggle for us, again, because of the industry that we are in. It 

is dominated by very, very large companies that have lobby up here 

in D.C. We don’t have any of that. The fact that we are literally 

inventing new technology for soldiers and first responders, again, 

we spend a great deal of time just traveling around trying to educate people on who we are and what we do. 

The battle of that new technology and trying to introduce it into 

the DOD and side step the large acquisition programs—because 

what we do revolves around smartphones and tablets, and you 

know new phones come out every 6 months. By the time a soldier 

tells us what a requirement is, one of their pain points, we develop 

a product that will fix that, make them more efficient, and save 

them money. By the time it gets to them, it is already out of date 

and it is useless to them. 

So for us, it would be great to eliminate some of the roadblocks 

to get this new technology to first responders and to DOD members, especially the folks out on the pointy end of the spear that 

are out there running around in some pretty bad places of the 

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world. We ought to get them these critically needed technology 

pieces of gear to them as fast as possible. 

Ms. CHU. Thank you. My time is up, I appreciate it. 

Chairman HUELSKAMP. Next, I recognize Congressman Trent 

Kelly for his 5 minutes of questions. 

Mr. KELLY. I wanted to first thank you, Mr. Chairman. I want 

to thank the staff and members of the Small Business Committee 

for reaching out to rural America and specifically to witnesses like 

these who represent most of our districts and our small business 

owners, so I wanted to thank y’all. 

We regularly hear from small business that testify before us 

about how the bureaucracy is such a great impediment to small 

businesses working with the Federal Government. Mr. Middleton, 

I will summarize, but you note in your testimony an interesting observation, that in an ever increasing digitized world, there is actually more paperwork than ever before. Your quote, ‘‘bureaucracy is 

increasing faster than automation.’’ 

I would imagine that the bureaucracy plays a large part of DOD, 

as you mention in your testimony, being unwilling to fund final 

stages of development of a promising technology. What specific improvements would businesses like yours like to see with technology 

development programs to encourage more small businesses to do 

business with the Federal Government? 

Mr. MIDDLETON. There really has to be an incentive for doing 

business with the Federal Government. We are in the business that 

we do because of my background, and our goal is to increase the 

survivability of soldiers and first responders, again, to make them 

more efficient and try to make them save more money. There are 

so many roadblocks that impede a small company like us, that a 

lot of them, and there has been all kinds of things in the press, 

small tech companies refuse to do business with the Federal Government because of these hurdles. 

It is far easier in the commercial world to develop a product and 

get it out quickly. There is funding, there is less bureaucracy, less 

roadblocks, and there is a need there. We know there is a need 

within the military and first responder environments. The roadblocks that we face, we fortunately have been able to side step 

somewhat and be able to get around just, frankly, because of the 

people that I know, and being allowed to get in and talk to folks 

that I used to serve with, that have helped us out significantly. But 

if a company the size of ours doesn’t have a person like me, their 

chances of survivability are significantly decreased. 

Mr. KELLY. This question is to all of you. If you can just briefly 

give maybe one or two or three examples very briefly so each of you 

get to respond. What are some of the largest barriers to entry for 

new businesses, and are rural businesses more affected by these 

barriers than urban counterparts? So, just one or two examples 

from each of you. 

We can start with you, Ms. Kinkade. 

Ms. KINKADE. One of the largest barriers is one of the things 

we have already addressed today, which is access to capital. Small 

businesses are growing. Finding the resources to get that business 

started, as my colleagues have mentioned today, is one of the most 

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critical components and one of the hardest things to address in 

rural America. 

Mr. MIDDLETON. We were super fortunate that we had some 

investors, we raised a little bit of money, and we were able to take 

advantage of a small loan from the State of Mississippi, again, because of our background and folks willing to take a chance on a 

small company like us, a tech company. But with a company like 

ours in Mississippi, it is exceptionally hard to bring talent. There 

is a preconceived notion about Mississippi, you know, country, back 

woods, and it is absolutely not the case. 

There are exceptionally smart people we hire. We are currently 

hiring folks out of Ole Miss and Mississippi State that are brilliant 

young folks, and we are fortunate that we have access to that type 

of thing. But again, if you don’t have that, you are really way behind the power curve. 

Mr. KELLY. Mr. Middleton, just to your point, I tell people all 

the time my area in north Mississippi is one of the fastest growing, 

industry and tech companies are coming all the time and we can’t 

get people to come. They come down kicking and screaming, and 

the problem is once they come there, we can’t get them to leave, 

they want to retire there and stay there forever. The press has a 

tendency to show things that are negative towards Mississippi, but 

the people who come there love the people, love the place, love the 

environment, and they stay there. So thank you for that comment. 

Mr. Boyd. 

Mr. BOYD. Thank you, sir. That is a very good question. I agree 

with Ms. Kinkade that financing is the number one hurdle that 

small business has to overcome. 

Second is creating a business plan. In our region, what we are 

seeing is a lack of workforce, and that is where we can come in and 

help partner developing the workforce people that we need, getting 

the community that we need to support that kind of business. 

Mr. DEARIE. As I said a minute ago, what entrepreneurs—and 

my focus is on entrepreneurs, not so much on small business, but 

I think there are overlapping priorities here. What entrepreneurs 

need to thrive is great new ideas and the talent and capital to pursue them. So echoing what my colleagues have said, it is workforce 

readiness and it is access to capital. Great new ideas stay in entrepreneurs’ heads if they don’t have those two resources. 

With regard to funding of new businesses, obviously, with regard 

to small business, community banks and their ability to thrive and 

do what they do best is incredibly important, and there has been 

a lot of conversation about the implications of Dodd-Frank on 

smaller community banks. It is my recollection, off the top of my 

head, that the launching of new banks has fallen to an 85 year low. 

There has only been about 3 new banks launched since 2010. It is 

absolutely unprecedented in this country. The numbers of banks 

who are either failing or merging, more merging with other banks 

to achieve some heft, which makes it easier to deal with regulation 

like Dodd-Frank, means that there are fewer and fewer community 

banks, and therefore fewer options for small businesses to go to. 

In the context of angel investment and venture capital, which are 

incredibly important for new businesses, it tends to be very lumpy. 

Venture capital rates, in terms of the amount of capital being 

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raised and invested in recent years, is at record levels. But something like 80 percent is spent in either Silicon Valley; Cambridge, 

Massachusetts; or New York City, and everywhere in between it is 

a desert. 

Mr. KELLY. Thank you, Mr. Chairman. I yield back. 

Chairman HUELSKAMP. Next, I recognize Representative 

Radewagen for her 5 minutes of questions. 

Mrs. RADEWAGEN. Thank you, Chairman Huelskamp and 

Ranking Member Chu. I too would like to welcome the panel. 

Thank you for being here today. 

Almost all businesses in my home district in American Samoa 

are small businesses. Ms. Kinkade mentioned the microlending 

programs that could work very well, I think, in American Samoa. 

There are some of them that are starting up. 

I have a question for you, Mr. Dearie. Why has there been such 

a large number of startups in places like California, Florida, New 

York, and Texas? How can Washington promote similar growth in 

the rest of the country? 

Mr. DEARIE. Again, at the risk of repeating myself, what entrepreneurs and new business formation requires is new ideas and the 

capital and the talent to pursue those ideas. There are certain 

parts of the country, and you know what they are, it is Silicon Valley; it is New York City; it is Cambridge, Massachusetts; it is Austin, Texas; Boulder, Colorado. There are certain areas of the city 

that have extremely effective and efficient ecosystems for entrepreneurship. They tend to be characterized by having one or more top 

universities that are generators, not only of great new research, 

but great new talent. Because they are generators of new talent 

and new, ideas they tend to attract capital, so you have another 

element of success there. 

The question of what constitutes a really effective entrepreneurship ecosystem is one that is the subject of great debate, and what 

government can do to try to promote those kinds of circumstances 

elsewhere around the country is a very important one. It can be 

very tough for government to simply create ecosystems around the 

country. But I think what they can do, government public policymakers both here in Washington and at the state and local level 

across the country, they can promote the circumstances by which 

talent and capital and ideas find each other. If you look at the proposals that I submitted in the appendix to my written testimony, 

there are 30 specific policy ideas there that I think taken together 

can go a long way to promote the kind of ecosystems that you are 

talking about elsewhere outside of these traditional areas of entrepreneurship. 

Mrs. RADEWAGEN. Thank you, Mr. Dearie. Nothing wrong with 

repeating. As you may know, the United States territories, particularly my home district of American Samoa, are both geographically 

and economically isolated, so thank you. 

Mr. Boyd, please describe some of the challenges associated with 

making infrastructure investments with the limited resources of a 

smaller county. Do challenges keeping technology infrastructure up 

to date make it hard to attract businesses in rural areas? 

Mr. BOYD. Very good question, ma’am, thank you very much. It 

is a challenge. We would like to have high-speed Internet for all 

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our citizens; we can’t. We struggle with that. That because of how 

the State and the Federal Government have regulated the disbursement of those rights and certain entities do not want to participate. The communities aren’t populous enough for them to 

render a profit. 

We also work with economic development groups in our county, 

such as the Manhattan Area Chamber of Commerce, to develop 

these innovative programs. I myself invest in an angel investment 

group with the chamber. 

Infrastructure. The hard infrastructure, roads and bridges, are 

always a struggle because it links into the national transportation 

system. We need help with those things. Counties have 54 percent 

of all the bridges in the United States and they are in terrible repair. We know that more than half are beyond their useful life. We 

have to address those. The FAST Act was a great program coming 

down to us, but it is only one step. We have a lot farther to go. 

So there are significant challenges. 

Mrs. RADEWAGEN. I yield back, Mr. Chairman. 

Chairman HUELSKAMP. Thank you for participation and series 

of questions from my colleagues. I appreciate the opportunity to 

discuss something very critical to many of our districts and indeed 

the entire country. 

I ask unanimous consent that members have 5 legislative days 

to submit statements and supporting materials for the record. 

Without objection, so ordered. 

This hearing is now adjourned. 

[Whereupon, at 10:52 a.m., the Subcommittee was adjourned.] 

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Introduction 

Chairman Huelskamp, Ranking Member Chu and Members of 

the Subcommittee, thank you for the opportunity to testify today 

on both the challenges and opportunities that small and rural 

economies and small businesses are facing in our current economic 

climate. 

My name is Robert Boyd and I serve on the board of county commissioners for Riley County, Kansas. I am also here today representing the National Association of Counties (NACo). 

In addition to serving as a county commissioner, I am a military 

veteran and small business owner. I hail from a military family 

and served in the U.S. Army from 1968 to 1988. After retiring as 

an Army Aviator, I worked for Northwest Airlines as a commercial 

pilot. Prior to retiring as a commercial pilot in 2008, I started a 

local dry-cleaning business, which I still own and operate today. 

Our small company has grown into partnerships of dry cleaners 

and laundromats in our area, along with business consulting services, aviation management services and franchise restaurants in 

the Midwest. 

In 2012, my desire to help others thrive in the local marketplace 

led me to run for office and I was elected to serve on the Riley 

County Board of Commissioners. As a county commissioner, I carry 

with me that same commitment to developing entrepreneurs and 

small businesses in an effort to strengthen our local economy which 

is why I am honored to participate in this hearing today. 

Stronger Counties, Stronger America 

Founded in 1935, NACo is the only national organization that 

represents our nation’s 3,069 counties and brings together county 

officials from across the country to advocate with a collective voice 

on national policy, exchange ideas and build new leadership skills, 

pursue transformational county solutions, enrich the public’s understanding of county government and exercise exemplary leadership in public service. 

As key intergovernmental partners with the states and federal 

government, counties are responsible for delivering a broad array 

of programs and services that provide a foundation for prosperous 

communities with strong and stable economies. To achieve this 

foundation, counties make significant investments in our nation’s 

essential infrastructure; maintain our nation’s justice and public 

safety system; and invest in public health, including hospitals, 

nursing homes and mental health programs. And in an election 

year such as this, counties are responsible for administering fair 

and transparent federal, state and local elections. 

County government provides these vital services to more than 

308 million residents, collectively investing over $554.5 billion annually and employing over 3.6 million people to serve the public. 

Specifically, as it relates to this hearing, counties also make significant contributions to economic development at the regional and 

local levels and take a leadership role in coordinating local workSBREP-219A with DISTILLER

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1 U.S. Small Business Administration, 2016 Small Business Profiles for the States and Territories. Available at https://www.sba.gov/sites/default/files/advocacy/Kansas.pdf 

force development and job training programs. Nationally, counties 

invest close to $11 billion in housing and community development 

annually. 

Although we have various governmental structures, authorities 

and responsibilities under state law, all county governments are on 

the front lines working to build healthy, vibrant and safe communities across America. 

About Riley County, Kansas 

Counties are highly diverse, not only in my home state of Kansas, but across the nation, and vary immensely in size, natural resources, social and political systems, and cultural, economic, public 

health and environmental responsibilities. 

My county, Riley County, Kansas, is a small to mid-sized county 

with a mix of both rural and urban components. We currently have 

75,247 residents across 622 square miles and are blessed to be the 

home of the Fort Riley military base and Kansas State University 

which are major economic engines for our local economy and our 

surrounding communities. 

Located right in the middle of the country, Kansas has long been 

known for our agriculture, transportation and energy industries. 

Since much of the state is rural, small businesses are also a critical 

component of our local economy. In fact, in the state of Kansas, 

there are over 246,000 small businesses that employ almost 

600,000 workers.1

While we hear on the news almost daily that the national economy has recovered after the Great Recession, it has been more 

challenging to see those positive effects in our state and county— 

and in rural counties across America. National or state economic 

data do not tell what is happening on the ground, where every 

county and local communities also has its own unique set of circumstances and its own challenges and opportunities. 

Although the national economy has recovered, many county economies are still struggling 

To help provide a national perspective on how county economies 

are faring from year to year, NACo releases County Economies, an 

annual report examining economic recovery and growth patterns 

across the nation’s 3,069 county economies. The report is developed 

from an analysis of data from Moody’s Analytics and focuses on the 

annual changes in four economic performance indicators in each 

county: economic output (GDP), employment, unemployment rates 

and median home prices. For the 2015 edition, the report also has 

an analysis of wage growth for county economies, based on U.S. 

Bureau of Labor Statistics (BLS) data. 

Nationally, counties across the country showed signs of economic 

recovery in 2015, particularly on unemployment rates and home 

prices. For instance, 462 county economies closed their unemploySBREP-219A with DISTILLER

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2 Istrate, Emilia, Brian Knudsen, County Economies 2015: Opportunities and Challenges, 

Washington, D.C.: National Association of Counties. Available at http://www.naco.org/sites/default/files/documents/2016%2OCET-report—01.08.pdf 3Menzie Chinn, Kansas in (Technical) Recession. Available at http://econbrowser.com/archives/ 

2016/06/kansas-in-technical-recession 

ment gaps and 448 counties saw their median home prices reach 

pre-recession peaks. 

But the outlook specifically for our nation’s rural and small counties is more challenging. Only 306 small county economies closed 

their unemployment gap in 2015—up from 150 in 2014—and just 

over 100 small county economies closed their economic output 

(GDP) gap in 2015. Further, almost half of our nation’s small counties saw a decline in economic output (GDP) for 2015—particularly 

rural and small counties in Southern and Midwestern states such 

as Georgia, Illinois, Kansas, Kentucky, Mississippi, Missouri, Nebraska and Texas. 

In total, only 214 county economies have fully recovered 

to their pre-recession levels by 2015 and 16 percent, or 478 

counties, have yet to recover on any of the four economic 

indicators. Many counties are still experiencing the severe 

impacts of the latest recession.2

My home state of Kansas has also struggled to recover. Prior to 

the Great Recession, Kansas’ economic output was actually growing 

at a must faster rate than the rest of the country. However, when 

the recession hit in 2008, our statewide economic output (GDP) fell 

further and continues to grow slower than the rest of the nation, 

particularly slower since 2011.3

The overwhelming majority of Kansas county economies (100 of 

105) have seen job losses or flat employment levels. Sixty-four of 

the 105 Kansas counties have seen declines in their economic output. 

Further, only one of the 105 county economies in the state has 

seen higher job growth in 2015 relative to the previous year. 

Riley County has only recovered to pre-recession levels in two of 

the four economic indicators NACo examines. While we have seen 

progress in economic output (GDP) and home prices, we are still 

struggling with jobs and unemployment rates which have not returned to pre-recession levels. As a result, we observe that young 

people graduating from Kansas State University do not seem as inclined to stay here to establish new businesses as they once were. 

Today’s graduates are largely moving to other states and communities with greater employment opportunities. 

Many of the surrounding rural counties in my area are experiencing an even slower economic recovery than ours. None of the six 

counties around Riley County have recovered on all four economic 

indicators. While some have recovered on economic output (GDP), 

four of the six surrounding counties saw a fall in their GDP within 

the last year. In addition, five of the six neighboring counties saw 

job losses in 2015. 

Wabaunsee County, Kansas has experienced the hardest time recovering to levels seen before the recession. This a small county 

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4 Competitive Enterprise Institute, Ten Thousand Commandments: An Annual Snapshot of 

the Federal Regulatory State (2016 Edition) 5Office of Management and Budget, Office of Information and Regulatory Affairs, Executive 

Office of the White House, 2015 Draft Report to Congress on the Benefits and Costs of Federal 

Regulations and Agency Compliance with the Unfunded Mandates Reform Act, (2015) 

with about 7,000 residents. The county economy has not closed its 

recession gaps on any of the four indicators analyzed. For example, 

for five consecutive years, the economy lost jobs between 2004 and 

2009. This is much longer than the national rate, as the job gap 

for an average county economy lasted only three years (between 

2007 and 2010). Its unemployment rate almost doubled between 

2006 and 2009, soaring from 3.7 percent to 7.2 percent. 

Our nation’s small and rural counties face unique challenges 

Unfortunately, many rural counties across the country face similar headwinds. Small counties have to provide the same mandatory 

services and comply with the same regulations as our suburban 

and urban counterparts do. And we must do so with limited ability 

to raise revenue. 

Local property taxes remain the major source of revenue for 

small counties like Riley County—accounting for 56 percent of total 

revenue for Kansas counties in 2014. Thus, trends in property values can significantly impact county revenues and expenditures. Declining property values push tax rates up and force counties to either find alternate revenue sources or cut spending. In addition, 43 

states impose some type of limitation on counties’ ability to increase property taxes, further limiting our options. 

Moreover, we also confront complex and costly regulatory mandates that can limit local recovery and economic growth. Federal 

agencies have issued an increasing number of regulations in recent 

years. In 2015, only 114 laws were enacted by Congress, compared 

to the 3,140 rules issued by federal agencies.4 According to the 

White House Office of Management and Budget (OMB), unfunded 

mandates from federal rules and regulations cost local governments, our citizens and businesses between $57 billion and $85 billion a year.5

In fulfilling our mission to deliver public services to our residents, we are not only subject to state and federal regulations, but 

also help to implement them at the local level. Therefore, as both 

regulated entities and regulators, it is critical that counties are 

fully engaged as intergovernmental partners throughout the entire 

federal regulatory process. 

This growing number of regulations comes at a time when counties—regardless of size—are experiencing significant fiscal constraints and our capacity to fund compliance activities is often limited. 

We thank this Committee for its ongoing work to examine the 

impacts of proposed federal regulations on small jurisdictions and 

small businesses, and we will continue to work with our federal 

partners to ensure that the challenges facing small jurisdictions 

are fully considered. 

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Despite these challenges, small and rural counties play an 

important role in strengthening our local communities and 

economic opportunity 

The vitality of rural county economies can be as unique as the 

county itself. While small and rural economies face distinctive challenges, we also possess unique opportunities. Today, rural counties 

must work together to leverage our assets to ensure the stability 

and strength of our local and regulation economies. 

Together with partners, we find solutions to the most pressing 

economic development problems facing our communities. Each initiative is unique, aimed at solving an economic problem within the 

framework of specific local resources and constraints. State authority, county capacity and resources, and the convening power of 

counties, all shape our response to local challenges. 

Counties work to strengthen their local economies in several 

ways. 

First, we are increasingly collaborating regionally. We work with 

our neighboring counties to look at not only our individual assets, 

but our combined assets and market this greater regional economy. 

Effective marketing for economic development involves not only 

identifying a region’s unique competitive advantage, but also communicating the value of that advantage to companies both inside 

and outside the region. The marketing effort must rely on tangible 

assets that create comparative advantages for the region. 

Second, counties are also engaging in a range of entrepreneurship and small business development programs from financing to 

training in order to help businesses create jobs in the community. 

Business accelerators exchange small amounts of equity for capital and mentorship, while business incubators support start-up 

companies through subsidized or free office space or an ongoing 

mentorship program with established businesses. This support system may take a variety of organizational formats, including county 

economic development programs or initiatives delivered through 

non-profit organizations or universities. 

Counties also participate in developing training programs for entrepreneurs and small-business owners to help them grow their 

businesses and in the process generate more jobs, greater revenues 

for the business and increased tax revenues for the county. Training programs can take many different forms, but most emphasize 

the importance of equipping trainees with skills in creative thinking, best business practices and problem-solving. 

We also provide financing to small businesses by facilitating 

their access to federal or state loan programs or by leveraging private lenders through matching funds for capital access programs. 

Some counties have their own loan programs, such as revolving 

loan funds, to target business owners who might not otherwise 

qualify for a traditional bank loans. These programs can be capitalized by a county’s own revenue, bonds and state appropriations. 

For example, Renville County, Minn. operates a revolving loan 

fund to help local businesses create and retain jobs, with a goal of 

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securing one job for each $10,000 of loans. NACo’s 2014 report Cultivating a Competitive Advantage, highlights how Yellowstone 

County, Montana is using a multi-pronged approach to economic 

development. Through the Big Sky Economic Development organization (BSED), the Billings-Yellowstone County Metropolitan Planning Organization (MPO) and the City College at Montana State 

University Billings (MSU Billings), Yellowstone County is able to 

leverage regional assets to attract businesses and pursue various 

economic development goals. This public private partnership has 

highlighted the region’s high quality of life and economic opportunities to attract existing and expanding businesses while creating 

hundreds of new jobs in Yellowstone County alone. 

Fourth, we make substantial investments in infrastructure. Investments in infrastructure systems—roadways, bridges, transit, 

railroads, water, sewer, intermodal connectors and telecommunications systems—result in higher property values and quality-oflife improvements, affect business decisions and connect communities into thriving regional economies. Telecommunication infrastructure is especially helpful in rural or technologically underserved counties. Specifically, investment in broadband access helps 

counties to attract a skilled workforce or overcome issues of geographic isolation. Due to high capital costs associated with public 

infrastructure, counties frequently collaborate with regional public 

or private partners to finance, build and maintain infrastructure 

projects of all sizes and levels of complexity. 

Many counties also engage in long-term planning for disaster 

preparedness and industry diversification to stay resilient in the 

face of disruptive events. Such events can range from immediateimpact incidents including natural disasters, closings of a main 

plant in a county to more long-term processes—the decline of a 

major industry and slowing demand in internal markets. Some federal policy decisions such as the U.S. Department of Defense or 

U.S. Department of Energy facilities realignment or specific environmental regulations can also have a disruptive effect on some 

counties. Diverse local economies, with employment, sales and tax 

revenue distributed broadly across a number of sectors, are more 

resilient to economic shocks. This leads to more certainly in county 

budgeting and planning and better quality of life for residents. 

These examples are just a snapshot of the ways that counties are 

working to help our local economies. Regardless of the economic 

uncertainty faced by many counties throughout the country, we 

must continue to deliver critical services to our residents in order 

to provide the basic building blocks for future growth. 

Conclusion 

In conclusion, Chairman Huelskamp, Ranking Member Chu and 

members of the committee, while some county economies have seen 

improvement, there is still a long way to go, especially in rural 

America. With improved collaboration and flexibility from our 

intergovernmental partners at the federal and state levels, counties 

can provide the public services and basic infrastructure needed for 

economic growth and opportunity. 

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NACo will continue to monitor the progress of our national economy through the lens of our nation’s counties. Small businesses are 

a critical to the local economy and even drive some of our nation’s 

largest corporations. As intergovernmental partners, it is our 

shared responsibility to ensure the strength and stability at all levels of our economic portfolio. It is imperative that we move forward 

together for our families and children, businesses, large and small 

and all our communities. Stronger counties mean a stronger America. 

We thank you once again for holding this important hearing and 

I look forward to your questions. 

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‘‘Struggling to Grow: Assessing the Challenges for Small 

Businesses in Rural America.’’ 

Testimony of: 

Hugh Middleton 

Co-Founder 

Kopis Mobile 

Flowood, MS 

Before the 

Committee on Small Business 

United States House of Representatives 

September 08, 2016 

The Honorable Tim Huelskamp (R-KS), Chairman 

The Honorable Judy Chu, (D-CA), Ranking Member 

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Good morning Chairman Huelskamp, Ranking Member Chu, and 

members of the Committee. Thank you for hosting this hearing on 

the challenges small businesses face in rural America and for your 

invitation to provide remarks at this hearing. My name is Hugh 

Middleton and I am the Co-Founder of Kopis Mobile, a small start 

up, Tech Company headquartered in Flowood, MS. Flowood is located just outside of Jackson, MS. 

Before I get into what we do at Kopis Mobile, I would like to provide a little background about myself that I feel is pertinent to the 

work we do. I am former Navy SEAL Officer. While in the SEAL 

Teams, I was assigned to SEAL Teams One, Three, Five, Six and 

spent time in various overseas assignments including a Special Operations Joint Staff. I have also worked in several U.S. Embassies 

and Consulates. I separated from the Navy in 2005, taking a management position with a large defense contracting company that 

supported then ongoing operations in Afghanistan and Iraq. Following that, I then moved on to another defense company where I 

managed a staff of highly skilled intelligence analysts conducting 

intelligence and data exploitation focused on Improvised Explosive 

Device threat characterization. 

In January 2013, I Co-Founded Kopis Mobile with three super 

smart engineers, who all worked at the same company I did at the 

time. It may seem like an odd pairing of backgrounds and you are 

correct, it is. We often can’t understand what the other is saying, 

but we have made it work to develop some very leading edge products that didn’t exist prior to us starting the business. Kopis Mobile is in the unique position as a provider of advanced mobile technology and products for the Department of Defense, Law Enforcement Agencies, and the Private Security industry. We develop mobile technology to minimize the weight and enhance the equipment 

of soldiers, first responders, and law enforcement officers. This 

technology saves lives, saves time, and saves money. It also improves training and reduces SWaP (size weight and power). Just 

about everything we do revolves something you use everyday, 

smartphones and tablets. We get every ounce of computing power 

out of these wonders of technology. We actually refer to some of our 

products as time machines. Our customers typically have plenty of 

equipment, food, weapons and ammunition. What they don’t have 

enough of is time. We try to give them some of that time back. 

What we do is vitally important especially to me since I was on 

the other side of the fence at one time. I witnessed how long it 

takes to get the right equipment because of the over burdened bureaucracy of the procurement process. For a small company like us, 

it is a killer. We have equipment quotes sitting in the hands of 

military units for over 6 months before they are able to obligate the 

funds for critically needed items. The problem is the same for first 

responders. The process is like birthing a baby. It often takes 9 

months to go through the grant process. Internally, we joke about 

it, but it isn’t funny. 

As with any start up business, it has been a struggle for us. I 

will go out on a limb and say it has been harder for us given the 

industry we are in. Not only are we a tech company from rural 

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Mississippi, but also we have been trying to gain access into an industry dominated by the likes of Northrup Grumman, Raytheon, 

and Lockheed Martin. 

We have spent over three years just trying to educate people on 

who we are and what we do. We obviously don’t have any buildings 

with Kopis Mobile on the top of them across from the Pentagon. 

General Officers and senior level decision makers of all ranks 

that are in today’s military are without doubt some of the best 

leaders this country have ever seen. Several years of fighting wars 

on two fronts have positively molded the lives of many in uniform 

and shaped them into formidable leaders. 

Those at that level are super educated, motivated, and strive to 

do the best they can to improve the lives of those under their command. However, those at the top of the leadership pyramid are 

often bogged down by administrative tasks, countless meetings and 

unending travel. They have little time to really dig into alternative 

ways to simplify entrenched, long standing ways of doing business. 

Many rely on, ‘‘This is the way we are doing it because this is how 

it’s always been done.’’ In many ways, tried and true methods work 

just fine. It is easier to do ‘‘what we have been doing’’ rather to 

look for ways to do things better. 

Most senior leaders think that because of digitization, they are 

more productive because of less paperwork. Actually, the opposite 

is happening. Despite all of this digitization, you have more paperwork than ever. This translates to a 3% decrease in annual productivity. 

Bureaucracy is increasing faster than automation. Which means 

that over the past 20 years, nearly half of the military’s productivity has been sucked dry by the time vampires of administrative 

tasks. 

The federal government spends about $20B per year on development of later stage technology for commercialization. Majority of 

this money is spent in the large acquisition programs that incorporate technology that is not proven which means the equipment 

takes way too long to get the warfighter. This results in huge cost 

overruns, frustrated operators, and projects that are way behind 

schedule. 

The reason for this, most new technology dies on the vine because the bureaucracy of the military. The GAO said ‘‘technologies 

don’t leave the lab because their potential has not been adequately 

demonstrated’’ and ‘‘the DoD is simply unwilling to fund final 

stages of development of a promising technology, preferring to invest in other aspects of the program that are viewed as more vital 

to success.’’ 

And ‘‘DoD’s budgeting process, which requires investments to be 

targeted at least two years in advance of their activation, makes 

it difficult for DoD to seize opportunities to introduce technological 

advances into acquisition programs.’’ 

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The problem is only 5.71% of new technology ever gets into the 

hands of those that really need it. That is 4 out of every 70 

projects! 

When you realize that small business accounts for 99.7% of all 

new technology introduced, it becomes incredibly important for 

small businesses to be involved in technology development and 

transfer. 

The Undersecretary of Defense, Acquisition, Technology and Logistics reported the Federal Government has missed its small business goals for the last 16 years despite the fact that buying from 

small businesses is far less painful. Frankly, buying from small 

guys like us eliminates red tape, shortens the technology transfer, 

speeds the time to get the operator the equipment they really need, 

and makes life for a contracting officer easier. 

There are really only two types of new technology product development, that being ‘‘Top Down’’ and ‘‘Bottom Up’’. In ‘‘Top Down’’ 

tech development, academics invent something big and hopes it 

gets good in DoD. In ‘‘Bottom Up’’ tech development, small business 

invents something good and hopes it big in DoD. The big problem 

is 95% of it is ‘‘Top Down’’ and rarely includes the folks at the 

pointy end of the spear in the development process. 

As stated in the GAO Report to Congress (GAO-05-480), the best 

approach to new technology is a, ‘‘least structured process and criteria, believing that a high degree on flexibility is needed in order 

to get technology prototypes quickly out to the field, where they 

can immediately impact military operations.’’ 

What this really means is it is vitally important to partner with 

small businesses who talk directly to the operators in order to cocreate useful technology. This is the holy grail of warfighter improvement. 

As I am sure you are already aware, small businesses are the 

backbone of America. We create opportunity, generate jobs, invent 

new technology and keep the economy going. We do all of this 

while being over regulated, over taxed and under supported by the 

Federal Government. Everything from Obama Care to mountains 

of paperwork are hindrances to the growth and health of a small 

business. With lower taxes and healthcare costs, we could hire 

more people, increase salaries and bring better talent to Mississippi. 

Thank you and I look forward to your questions. 

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Chairman Huelskamp, Ranking Member Chu, distinguished 

members of the committee, thank you for inviting me here today. 

My name is Linsley Kinkade. I am the Deputy Director of U.S. Programs at Winrock International. 

Winrock International is a nonprofit organization that works 

with people in the United States and around the world to empower 

the disadvantaged, increase economic opportunity, and sustain natural resources. Winrock is based in Little Rock, Arkansas, the 

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39 

home state of our namesake, former Governor and Arkansas’s original economic developer, Winthrop Rockefeller. 

I am pleased to be here today to discuss innovative and sustainable economic and community development models taking place 

across rural America. 

Winrock’s U.S. Programs is extensively involved in developing solutions for the challenges facing rural communities. Our on-theground technical assistance to community leaders and local organizations has been funded by grants and cooperative agreements 

from agencies and partners such as the United States Department 

of Agriculture, the Delta Regional Authority, the United states Department of Labor, the State of Arkansas, Kellogg Foundation and 

the Walton Family Foundation. 

Winrock is based in Little Rock, the heart of a six-county metropolitan region which accounts for fewer than 720,000 people. Compared to large counties in California, Florida, New York or Texas, 

our metro area is certainly rural. However, Arkansas is home to 

more than 500 cities, with only 22 having a population more than 

20,000 and only 60 cities with a population above 5,000; thereby 

making the Little Rock metro area one of Arkansas’s most urban 

environments. Winrock has seen successful economic and community development models blossom in both our urban and rural 

areas. 

The Arkansas Women’s Business Center located in El Dorado, 

Arkansas, a city with a population of 18,000, provides technical assistance and training tailored to meet the needs of women business 

owners across the state of Arkansas. Funded in part through a cooperative agreement with the U.S. Small Business Administration, 

since 2011 the Women’s Business Center has provided training to 

more than 700 clients, counseled more than 350 clients, helped 35 

new businesses start, and assisted companies that have created 65 

jobs. 

The Innovate Arkansas initiative, funded by the State of Arkansas through its Economic Development Commission, convenes 

startup technology entrepreneurs in Arkansas and works with 

them as they become mature companies. Since 2008, Innovate Arkansas clients have launched more than 150 startups, created more 

than 600 jobs, and received more than $295 million from public 

and private sources. 

Entrepreneurs and business owners in these programs are provided quality training, counseling, talent, access to capital, and 

other resources to empower and equip them to ensure business success with the ultimate goal of creating a sustainable entrepreneurial ecosystem. 

The Innovation Hub at Winrock is a perfect example of an innovative and broad-based approach to talent and enterprise development that can be applied to rural and urban communities of any 

size. The Innovation Hub provides facilities and programs that support education and entrepreneurship for all age groups across a 

wide range of disciplines. 

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The Innovation Hub has planned, developed, and administered a 

broad array of entrepreneurial programs, including HubXLifeSciences, a privately-funded world-class healthcare accelerator 

program that recently completed its initial cohort with seven highly 

accomplished companies from across the world. Those seven companies leveraged approximately $2 million of private capital from Arkansas-based investors. 

Economic development occurs in communities where people can 

live, work, and grow. The revitalization of Main Streets and courthouse squares across rural America can be the catalyst for new 

community investment. 

For example, municipal leaders in Lake Village, Arkansas, a 

community of approximately 2,500 realized that to compete and 

grow the redevelopment of downtown was critical. By combining 

more than $2 million in funding from various federal and state 

agencies and the city’s own coffers, the city renovated a dilapidated 

historic structure on its Main Street into a LEED-certified municipal building housing all city services. The project increased downtown foot traffic and convinced investors to renovate nearby buildings to house new small businesses interested in a downtown location. 

Our rural communities remain hopeful for the future. Coupling 

innovative entrepreneurship programs with quality of life and 

place-making revitalization efforts can bring increased economic 

development in urban and rural areas alike. 

Chairman Huelskamp, Ranking Member Chu, distinguished 

members of the committee, thank you for inviting me here today. 

I appreciate the opportunity to speak with you, and am happy to 

answer any questions you may have. 

Æ 

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