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REGULATORY IMPEDIMENTS TO JOB CREATION IN

THE NORTHEAST—PART II

HEARING

BEFORE THE

SUBCOMMITTEE ON REGULATORY AFFAIRS,

STIMULUS OVERSIGHT AND GOVERNMENT

SPENDING

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

APRIL 20, 2011

Serial No. 112–35

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

SUBCOMMITTEE ON REGULATORY AFFAIRS, STIMULUS OVERSIGHT AND GOVERNMENT

SPENDING

JIM JORDAN, Ohio, Chairman

ANN MARIE BUERKLE, New York, Vice

Chairwoman

CONNIE MACK, Florida

RAU ́ L R. LABRADOR, Idaho

SCOTT DESJARLAIS, Tennessee

FRANK C. GUINTA, New Hampshire

MIKE KELLY, Pennsylvania

DENNIS J. KUCINICH, Ohio, Ranking

Minority Member

JIM COOPER, Tennessee

JACKIE SPEIER, California

BRUCE L. BRALEY, Iowa

(III)

C O N T E N T S

Page

Hearing held on April 20, 2011 .............................................................................. 1

Statement of:

Glazier, Travis .................................................................................................. 62

Gostin, Jud, president and chief executive officer, Sensis Corp.; and Robert Simpson, president, Centerstate CEO .................................................. 6

Gostin, Jud ................................................................................................. 6

Simpson, Robert ........................................................................................ 13

MacMurray, Orrin ............................................................................................ 56

Reeves, Andrew, owner, Reeves Farms; Nancy Hourigan, owner,

Hourigan’s Dairy Farm; and Tom DeMarree, owner, DeMarree Orchards ............................................................................................................. 22

DeMarree, Tom .......................................................................................... 45

Hourigan, Nancy ....................................................................................... 37

Reeves, Andrew ......................................................................................... 22

Squires, Thomas ............................................................................................... 66

Letters, statements, etc., submitted for the record by:

Buerkle, Hon. Ann Marie, a Representative in Congress from the State

of New York, prepared statement of ........................................................... 4

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 75

DeMarree, Tom, owner, DeMarree Orchards, prepared statement of .......... 47

Glazier, Travis, prepared statement of ........................................................... 64

Gostin, Jud, president and chief executive officer, Sensis Corp., prepared

statement of ................................................................................................... 8

Hourigan, Nancy, owner, Hourigan’s Dairy Farm, prepared statement

of ..................................................................................................................... 40

MacMurray, Orrin, prepared statement of ..................................................... 59

Reeves, Andrew, owner, Reeves Farms, prepared statement of ................... 27

Simpson, Robert, president, Centerstate CEO, prepared statement of ....... 15

Squires, Thomas, prepared statement of ........................................................ 68

(1)

REGULATORY IMPEDIMENTS TO JOB

CREATION IN THE NORTHEAST—PART II

WEDNESDAY, APRIL 20, 2011

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON REGULATORY AFFAIRS, STIMULUS

OVERSIGHT AND GOVERNMENT SPENDING, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Syracuse, NY.

The subcommittee met, pursuant to notice, at 3 p.m., at 2610

South Salina Street, South Side Innovation Center, Syracuse, NY,

Hon. Anne Marie Buerkle presiding.

Present: Representatives Buerkle and Kelly.

Staff present: Joseph A. Brazauskas, counsel; Sharon Casey, senior assistant clerk; Gwen D’Luzansky, assistant clerk; Adam P.

Fromm, director of Member services and committee operations; and

Cecelia Thomas, minority counsel.

Ms. BUERKLE. The committee hearing will come to order.

Good afternoon everyone and welcome to the hearing and we represent the Oversight and Government Reform Committee.

Today’s hearing is going to be on the Regulatory Impediments to

Job Creation in the Northeast. So I welcome all of you here today

and thank you to our panel of witnesses.

We will have three panels throughout the course of the hearing,

so this is, I think, a very exciting opportunity for my colleague, Mr.

Kelly, and myself to hear the concerns and hear the regulations

and hear what businesses in agriculture and even government municipalities are going through in order to comply with the sometimes onerous and sometimes very unrealistic government regulations.

Before we begin today, I know that many of you saw the Post

Standard this morning. I would just ask all of you to join me in

a moment of silence. As you saw the three soldiers from Fort Drum

were killed in action in Afghanistan. They were fathers and husbands and sons, and we sit here today and we enjoy the freedom

to come together to discuss the American way and American dream

and how to preserve it. And it is because of the duty and the service and sacrifice that our military provides for this Nation. So if we

could just remember them in a moment of silence.

And to all the veterans in the room today, on behalf of my colleague, Mr. Kelly, and myself, thank you for your service to this

Nation. We are a great Nation and it is because of the service and

the sacrifices of our military.

[Moment of silence.]

Ms. BUERKLE. Thank you.

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At this time I would like to introduce sitting here on the panel

with me another Member of Congress, my good friend and colleague, also a freshman this year in Congress, Mike Kelly from

Pennsylvania.

Mike’s district is about seven counties and it stretches from Erie,

in the far northwestern corner, to just north of Pittsburgh. So I’m

delighted that he is here with me today to hear your testimony.

Mike sits also on the Oversight and Government Reform Committee with me.

So it’s a pleasure to have you with me here today. Thank you

very much.

Mr. KELLY. Thank you.

Ms. BUERKLE. When we have our full committee hearings in

Washington, DC, our chairman, Darrell Issa, begins every meeting

with the reading of the mission statement of the Oversight and

Government Reform, and I’d like to read that to you all today. I’d

like you to understand what this committee is about and how—

what our goals are and what our mission statement is.

Oversight Committee Mission Statement: We exist to secure two

fundamental principles.

First, Americans have a right to know that the money Washington takes from them is well spent.

And second, Americans deserve an efficient, effective government

that works for them.

Our duty on the Oversight and Government Reform Committee

is to protect these rights. Our solemn responsibility is to hold government accountable to the taxpayers because taxpayers have a

right to know what they get from their government.

We will work tirelessly in partnership with citizen watchdogs to

deliver the facts to the American people and to bring genuine reform to the Federal bureaucracy.

This is the mission of the Oversight and Government Reform

Committee.

Thank you all for coming here today. I think that this is an exciting day for us in upstate New York. Today we will continue an effort that my subcommittee and the Oversight and Government Reform Committee have been examining since the beginning of this

year.

Our committee has focused on the regulatory impediments to job

creation. We’ve heard from job creators across the country about

how the Federal Government stifles job creation. And today we’ll

focus on the issues which affect job creation in upstate New York.

The strength of the economy and unemployment are on the

minds of most Americans. The nationwide unemployment rate hovers at about 9 percent. That unemployment figure doesn’t even reflect the millions who have given up looking for work. The rate is

approximately the same in the State of New York; 8,000 of our

neighbors received unemployment extension benefits during the

month of March. This is unacceptable and we must create more

jobs and turn this economy around for all New Yorkers.

It is only appropriate that we are holding this hearing at the

South Side Innovation Center, which is an incubator for small business job creation. Here Bob Herz and his staff help entrepreneurial

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businesses to get business off the ground and help people help

themselves.

I want to thank Bob and all his staff here for hosting this event

and for all of their efforts that they have done—thank you Bob—

to make this afternoons’s hearing happen.

This afternoon we will hear from local job creators in business

and agriculture that conduct business right here in upstate New

York. Our witnesses are construction workers, dairy, apple, berry

farmers, defense contractors and others that employ many of the

local community and provide the necessary goods and services to

our region.

As we attempt to recover our economy and put people of the region back to work, we must begin to understand that the regulations these industries face on a daily basis threaten their attempt

to survive. Industry faces an enormous amount of regulations from

many Federal agencies. This committee has heard from job creators

about regulations from the Environmental Protection Agency, the

Department of Labor, Occupational Safety and Health Administration and the Food and Drug Administration.

The cumulative impacts of regulations from all of these agencies

is particularly harmful because of the difficulty of the implementation and the tremendous cost of compliance it places on a business

or a farm. These costs negatively impact important job growth.

These regulations are a hidden tax on businesses.

Worse yet, last week the EPA testified before a different house

subcommittee and admitted that the EPA ignores the affects on

jobs of the regulations they issue.

Local governments and municipalities are struggling to deal with

the state of the economy in continuing to provide essential services

to constituents while dealing with the Federal bureaucracy. The

practice of the Federal Government pushing unfunded mandates

down to the States leaves local municipalities under intense pressure to make budgets work. These local governments already have

major budgetary constraints and struggle to provide basic services

for their constituents.

Moreover, regulations that range from health care to street sign

replacement pile on even more cost to local governments together

with those unfunded mandates. This hearing will allow businesses,

farmers and local governments from New York to provide Congress

with an opportunity to hear how Federal agencies affect their ability to create jobs and provide for their communities.

It’s important that you’re here today; it’s important that we’re

here today so we can listen to you, listen to your concerns as the

business as business and as agriculture and as municipalities. We

have said over and over again that the government cannot create

jobs. It is the private sector. The private sector is the backbone of

our economy. They are the job creators, and the role of the government should be to create an environment so businesses can succeed.

So we are delighted to be here today and we’re honored to have

all of you here today. We are looking forward to hearing the testimony and to get started with our hearing. Thank you so much.

[The prepared statement of Hon. Ann Marie Buerkle follows:]

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Ms. BUERKLE. I would now yield time to Mr. Kelly for his opening statement.

Mr. KELLY. Thanks, Ms. Buerkle. It is a pleasure to be here.

First of all, it’s really a privilege for me to be able to travel. I’m

here from northwest Pennsylvania to be here with Ms. Buerkle.

We’ve been in Congress now almost 100 days, and it’s good to be

here.

I’m especially happy to be here at South Side Innovations Center. It’s an incubator. And when Margaret Belte was showing me

through, I got to tell you, this is the place where businesses start.

And when we talk about America, we talk about businesses that

were started in a garage or in somebody’s basement, more important, somebody’s head, and they were able to move it forward.

There’s no other place in the world you can do it except for here.

One thing that we’re starting to realize, and I think that as we

go through these exercises, there was a movie out years ago called

Ground Hog Day and what it was, it was the continuing frustration

of figuring out how this all works. I got to tell you, from a guy who

comes from the private sector—I’m an automobile dealer in my real

life. I don’t know how in the world we’ve gotten to where we are.

And more importantly, if we don’t change it—and this is not about

Republicans or Democrats—this is about Americans. If we can’t get

this settled and get it backed off and make sure that the No. 1—

the competitive nature that we have isn’t some external factor, but

actually our own government that makes it impossible for us to

succeed, then we have failed mightily.

So I’m glad to be here. We do want to listen to you; we have to

hear what you have to say; and we have to take the message back

to Washington and we have to be able to articulate it the same way

you do with passion and intensity to get it fixed.

So again, I applaud you for being here.

Ms. Buerkle, thanks so much. It’s always a pleasure to be here

with you.

And we’re interested in what you have to say. Thanks so much.

Ms. BUERKLE. At this time, for the record, other Members have

7 days to submit testimony for the record and any other extraneous

material that they would like to submit.

We will now welcome our first panel of witnesses this morning.

First we have Mr. Jud Gostin, who is the chairman and CEO of

Sensis. Good afternoon and welcome.

Mr. Robert Simpson is the president for CenterState Corp. for

Economic Opportunity.

Thank you very much for being here.

It is the—pursuant to committee rules, all witnesses must be

sworn in. So if I could ask you to stand and raise your right hands.

Panel I consisting of members Jud Gostin and Robert Simpson.

[Witnesses sworn.]

Ms. BUERKLE. Let the record reflect that all witnesses have answered in the affirmative.

Thank you.

When we have our big hearings in Washington, DC, we generally

ask our panelists to limit their testimony to 5 minutes, however,

we have a little bit more leeway here today.

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So at this time I’d ask Mr. Gostin to begin with his opening

statement.

STATEMENTS OF JUD GOSTIN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, SENSIS CORP.; AND ROBERT SIMPSON,

PRESIDENT, CENTERSTATE CEO

STATEMENT OF JUD GOSTIN

Mr. GOSTIN. Thank you Vice Chairwoman Buerkle, Representative Kelly. Thank you for the opportunity to speak today. I’m Jud

Gostin, CEO of Sensis Corp., an aerospace and defense firm located

in East Syracuse, New York.

We started with five employees in 1985 and now employ 600 people, including about 450 engineers and computer scientists. Although we sell globally, approximately three-quarters of our revenues are from contracts with the U.S. Government, notably the

FAA and Department of Defense.

Air Traffic Systems is the larger of our two divisions and has a

laudable track record of deploying innovative systems and design

concepts to the FAA and NASA. We are a leading supplier of surveillance and automation products and improve the safety, efficiency and capacity of air travel.

Two of our large FAA programs ASDE-X and Runway Status

Lights, have been cited by the NTSB for their effectiveness and improving runway safety. Our Aerobahn product provides the FAA

airlines and airport authorities with a collaborative decisionmaking

tool which, by a conservative estimate, saves each airline user $5

million per year per airport in just reduced taxi time and carbon

footprint.

Defense and Security Systems, our other division, is executing

two state-of-the-art expeditionary ground-based radar development

programs for the Air Force and Marine Corps, both with a potential

to transition into significant production contracts.

We are also leveraging Federal contracts along with our own

R&D funding to develop a family of very small sensors and information-processing products to enhance the safety of our war fighters and the security of our borders.

In that most jobs in our country are created by small and medium-sized companies, from a job-creation perspective the most onerous regulations are those that slow down the activities of the

such companies.

Under Secretary of Defense, Ashton Carter, included the following guidance to defense acquisition professionals in a recent

memo: Increase dynamics in the small business role in defense

marketplace competition.

Small businesses have repeatedly demonstrated their contribution to leading the Nation in innovation and driving the economy

by their example of hiring 65 percent of all new jobs and holding

more patents than all of the Nation’s universities and large corporations combined.

The reality is that the government’s de facto acquisition practices

favor large and small companies to the disadvantage of mediumsized companies like Sensis. These are companies with annual revenues between $100 million and $1 billion.

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Large companies receive many new contracts as non-competed

follow-ons to existing ones. While small companies receive significant contract loading via SBIR, Small Business Innovation Research Grants, and have a variety of other practices that are designated in statute to promote small business.

Medium-sized companies typically do not have enough of a contract base to attract a sustaining level of follow-on awards and are

too big to be eligible for SBIR awards. And yet, these companies

are not only a primary source of job creation, they’re also an exceedingly viable, all be it underutilized contributor to the effectiveness of government procurements.

A number of medium-sized companies possess a combination of

attributes rarely exhibited by large companies. Not only exceptional development production and life cycle support competence,

but also a high degree of innovation, responsiveness and agility.

Medium-sized companies are less limited by preconceptions of

what can’t be done and are not encumbered by excess overhead

structure, bureaucracy and dated infrastructure. They are also

fully capable of leading major acquisitions. Sensis’ standout record

as a prime contractor on major FAA and DoD programs is a case

in point. By virtue of these attributes, medium-sized companies can

provide the government with significant cost and schedule savings

and it is hard to remember a time when these savings were needed

more.

Here are some recommendations for regulatory changes that

would promote job creation in medium-sized companies.

Require substantial programs to begin with a competitive prototyping phase and encourage the inclusion of medium-sized businesses as prime-contracted candidates.

Enforce regulations that reduce the acquisition redirections and

delays that have a disproportionate impact on medium-sized businesses.

Develop fast-track versions of government oversight agencies,

like DCAA, DCMA and the Earned Value Management Center that

are not well matched to the pace and scale of medium-sized companies.

Enforce small and medium-sized business set-aside goals.

Institute a Medium-Sized Business Innovation Development,

MBID, program analogous to the SBIR program to provide timely,

ample funding for high-payoff development efforts.

Review and modify source selection criteria to eliminate biases

against medium-sized firms.

Recognizing that medium-sized companies competing for large

contracts may not have an abundance of relevant past performance

data, modify proposal evaluation criteria to penalize poor past performance more than a lack of data.

Thank you for the opportunity to testify today on these very important issues. I would enjoy discussing any of my suggestions in

more detail with you.

Ms. BUERKLE. Thank you very much.

[The prepared statement of Mr. Gostin follows:]

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Ms. BUERKLE. Mr. Simpson.

STATEMENT OF ROBERT SIMPSON

Mr. SIMPSON. Thank you very much, Congresswoman and Congressman Kelly for the opportunity to be here today.

I am Rob Simpson, president of CenterState CEO.

We are the region’s leading business and economic development

organization representing over 2,000 members, ranging from sole

proprietors and consulting companies, to service-sector retail companies, to our region’s largest and finest employers like Mr. Gostin

sitting next to me.

We, in our efforts to understand how best we can serve our members, regularly poll those members of the business community and

try to gauge from them some common themes that stand out in

their ability to do business with the Federal Government. There

are three issues that seem to be coming to mind more and more

frequently over the course of the last several months. I’d like to

speak briefly to each of them.

The first is immigration; second being issues as they relate to

international trade, and third and final, relate to procurement

something that Jud was talking about a moment ago.

Let’s start with immigration, and I’ll share a couple examples.

While many border States face different immigration issues, here

in New York State, immigration issues for our business community

have really been some of the stringent immigration rules in the

United States have been a hindrance to our ability to grow and

compete as a region.

We have the third-largest concentration of higher education students in the country. We have over 140,000 students here in this

region. A number of those students, many of those students, especially at schools like Syracuse University and Cornell, are international students who come with F–1 Visas, who have the ability

to stay and work in the United States for 1 year’s time before we

send them home to compete with U.S. companies working for international businesses in their home country.

We’d love to find a way to hold onto more of those students.

Frankly, many of those students want to be here in the United

States. They bring with them unique skills and expertise that can

help New York companies and U.S. companies be competitive. And

we really believe there’s fertile ground here to loosen those regulations and allow the United States to be the destination of choice

for the smartest and brightest and most talented people all over

the world. That’s something that the business community would

benefit from a great deal.

Second, we have many institutions, health care institutions here,

in our region that are critically important employers. We have, unfortunately, a situation in the United States where J–1 graduate

medical Visas are allocated across the country on a very rigid basis.

Every State in the Nation, whether it’s North Dakota or New York,

gets 30 of these J–1 Visas. That obviously doesn’t play to the favor

of many of our larger industrial States like Pennsylvania and New

York here in the northeast. We’d love to find a new methodology

that would allow our health care institutions to find and train the

best doctors, to provide the highest-quality health care to our indiVerDate 17-JUN-2003 16:04 Oct 19, 2011 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\68219.TXT KATIE PsN: KATIE
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viduals, and also use that as a way of a jumping-off point to continue to grow our health care sector, which increasingly provides

opportunities for international health care delivery in a place

where we can grow our regional economy.

Finally, we have, on the immigration front, we have a number

of local companies who really have been impacted by their ability

to bring in workers from other countries from their other plants

around the world who have many multi-national corporations here

with headquarters. One company, INFICON, who has done a significant amount of work with a subsidiary in South Korea who’s

wanted to bring some of those partners over to the United States

in order to help them deliver on a project for a major company,

Samsung, a client of theirs, Samsung down in Texas, they’ve run

into significant obstacles bringing those folks from South Korea to

the United States and, were therefore unable to fulfill their current

obligations to their customer which put that business in jeopardy

here in the United States. This is another area where we could use

some support from the Federal Government.

I guess the second, main issue, as it relates to trade, we realize—

I think there’s an increasing awareness in this region that 87 percent of the global growth over the next 5 years will come from

international markets. Ninety-five percent of the world’s consumers

are outside of the United States.

Things like the South Korea Free Trade Agreement provide a

real and robust economic opportunity for our regional businesses,

particularly here in New York and in places like Pennsylvania

where agriculture is a really important component of our region’s

economy.

And finally, procurement. You know, the U.S. Government spends over $425 billion a year on procuring goods and services.

They are the largest procurement agency in the entire United

States. It is extremely difficult for small businesses to get listed

with the GSA as preferred providers for procurement. Anything

that can be done to ease that would be greatly appreciated by our

small business members.

Ms. BUERKLE. Thank you very much.

Mr. SIMPSON. Thank you Congresswoman.

[The prepared statement of Mr. Simpson follows:]

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Ms. BUERKLE. Did we have a third panelist? He’s not going to

join us.

OK. Thank you.

Mr. Gostin, I’m going to yield myself 5 minutes and start to ask

questions and then I’ll ask my colleague to do so.

In your testimony you talk about the non-competed follow-ons to

disadvantage the medium-sized companies. Can you expand upon

that a little bit and help us to understand what that means?

Mr. GOSTIN. Often we will describe products and services to the

government that appeals, you know, it’s a good solution to a compelling problem. And they’d love to fund the developmental production of it. It’s a good thing to do. And their response to us is, ‘‘Gosh,

I wish we had a contract vehicle. If we only had a contract vehicle,

we could add this work statement onto that.’’

Without having that, somehow we have to figure out another a

way and often there is no other easy way.

And as a small business, medium-sized business, that’s a fairly

typical response for us. You know, I don’t know of a contract vehicle you can use, but as a big business, with just a large number

of contracts, that’s not nearly so much a problem.

Now, these are not—I’m not suggesting for a minute that these

follow-on contracts are not worthwhile, they’re not cost effective.

They often are all of those things. It’s just that it is, in fact, a big

disadvantage to a small company not to have that rapid capability

to respond.

Ms. BUERKLE. And who are you dealing with? Would that be the

Department of Defense when they say——

Mr. GOSTIN. I’m thinking mostly of the Department of Defense.

It’s also the FAA, but it’s primarily the Department of Defense for

us at this point in time.

Ms. BUERKLE. Mr. Simpson, can you just explain for me a little

bit. You mentioned it, and I’m not really that familiar with it—is

it the J–1 graduate medical education and how that works.

Mr. GOSTIN. Yeah. We’ve been spending quite a bit of time talking with the folks at SUNY Upstate Medical University over this

issue recently.

Apparently what happens is there are 30 of these Visas that are

made available to each State. Those Visas—each State then distributes those available Visas to a number of the medical institutions

and health care institutions within the State that essentially allow

them to bring in a medical professional—graduate medical professional or medical professional from overseas to train and to work

in their hospital. Typically these are specialty providers and they

typically tend to be specialties for which, frankly—that are medical

institutions have a hard time filling here in the United States.

Unfortunately, when New York State and North Dakota receive

the same level of Visa, it puts States like ours at a competitive disadvantage. I wouldn’t advocate for taking a single J–1 Visa away

the State of North Dakota, but I would think that it might be in

the best interest of our country to expand the number of Visas that

are made available or at a minimum provide the States with some

additional flexibility when and where they have a critical shortage

in a specialized profession that they would like to recruit interVerDate 17-JUN-2003 16:04 Oct 19, 2011 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\68219.TXT KATIE PsN: KATIE
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nationally to give them the flexibility they need to do that recruitment.

Ms. BUERKLE. Do you know who administers the J–1 program.

Mr. SIMPSON. I believe it’s Customs and Immigration, but I will

find the answer for you, Congresswoman.

Ms. BUERKLE. And has this formula has been in place for——

Mr. SIMPSON. My understanding it’s been in place for about a

decade, that the rules prior to that were even more onerous I think

on many of the medical institutions. I think what they’re seeking

at this point is just a continued refinement to the law to make it

a little bit more workable.

Ms. BUERKLE. Thank you.

I’ll yield to Mr. Kelly.

Mr. KELLY. Mr. Gostin, I think it’s important—and one of the

things we found by holding these hearings—we’re able to expose

some of the practices of the government and how difficult it is to

get some of these contracts.

When you talk about the SBIR awards, if you could, and I know

it’s a lengthy process, but for the sake of the people that don’t go

through this every day—and I know you have to in order to survive—just kind of walk us through it as quickly as you can, the difficulty of trying to get those contracts.

Mr. GOSTIN. Well, SBIR contracts are—I think you need to have

fewer than either 450 or 500 people in order to be eligible for SBIR

contract, and they’re multi-phased contracts.

First phase is probably nowadays—I date myself if I said 50,000.

It’s probably 100,000 right now—in which you get to do some concept development. There’s a second phase which is substantially

more than that where you actually get to do some real development. And there’s a third phase where you could take it into the

commercial—into the commercial world.

That’s a very important part of the contract loading for small

businesses. And it’s a great thing, because it spurs innovation,

spurs new ideas. The government puts out a document saying,

‘‘Here are some tough problems. Anybody got a creative solutions,’’

and small businesses respond.

The problem with being above 450, 500, you’re not eligible for

that, which means that medium-sized companies, which not only

have the innovation and responsiveness and agility and entrepreneurship of small companies, but they also have the critical mass

to actually do substantial programs, much more so than small companies can do.

Can’t get those good ideas—can’t get contracts for those good

ideas. So if there was an analogous program, what I would call,

Medium-Sized Business Innovation Development as opposed to

Small Business Innovation Research, the government could get access to good ideas for medium business that they really want.

And it would benefit the war fighters. It would benefit the people

that fly. It would benefit all the users who are looking for quick

responses and innovative responses, low cost, cost-effective responses to difficult problems.

Mr. KELLY. One of the things we find is that a lot of these standards, the bar’s being set by people who’ve never actually done what

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you do, they’ve never been involved in a business or creating a

business.

So my question is they come up with exclusionary criteria, do you

ever have a chance to weigh in? Do they ever invite you to the

table to sit down and say, ‘‘You know what? Help us get through

this because obviously we’re intent on you becoming successful, or

to America being successful. What could we do to eliminate some

of this?’’

Because again, I go back to the American public, I don’t think

understands the biggest problem we have right now is not external

competition. It’s an internal problem and we limit ourselves to

what could do.

So if you could, I mean, are you ever invited to participate in any

type of a panel discussion about how that would be fixed?

Mr. GOSTIN. On occasion, yes, I am.

This particular idea, when I have described this, the senior members of the State Department, senior members of OSD, their response has been universally positive. But it’s a matter of law in

this case, because the SBIR program, it’s a U.S. law.

There’s no way that the Department of Defense could enact this

by themselves. So it just becomes more difficult.

Here’s a situation where to make this happen, Congress, the Department of Defense and contractors like myself, have to get together and agree that it’s a really good idea and try to make something happen.

None of it is easy. We’re not often asked to testify on how do we

improve the system.

Mr. KELLY. Well, I know none it is easy. But you know what?

All of us working together would get it fixed.

I don’t like the fact that there’s very little sharing of data; there’s

very little data analysis; there’s very little group think on how to

fix these things. So I find that discouraging. I know the Congresswoman and I, we’ve talked on the floor. I don’t know how we got

to where we are, but we better find a way to get out of it soon, because we’re really hurting folks like you.

Mr. GOSTIN. It’s not easy. If it were, I’d feel bad. I hear you.

Mr. KELLY. We’ll get there. We’ll get there. This is the only place

in the world we can fix it, so we’ll get that done.

Mr. Simpson, a little bit on the course agreement, and if you

could, kind of expand a little bit on the opportunities that await

American businesses if we’re able to put together, not only free, but

fair trade agreements. And the other side of that, if we’re going to

have rules, we’ve got to make sure that we are the people that enforce them. We don’t let people game us.

Mr. SIMPSON. Sure. I think that’s absolutely right. You know,

part of the challenge, specifically when you are talking about the

Koreas, a couple of major industry sectors where there’s real market opportunity for U.S. businesses are in the automotive sector,

high-technology sector and the agricultural sector. These are,

frankly, three areas that play to our region’s strengths here in upstate New York. I think they play to the strengths of the northeast

United States.

We have watched our market share with Korean trade decline

over the last of the decade. Unfortunately, what that does is it

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costs U.S. business and it has cost us jobs. Growing our, sort of

world view, and our ability to do business internationally has to be,

from our perspective, one of the fundamental strategies that we

pursue as a Nation if we want to be competitive globally in the

long-term.

So we see, you know, there are opportunities for folks here, like

our furniture manufacturers. We have a world renowned furniture

manufacturer in Stickley Co. that’s very interested in doing increased business in Korea, companies like Nixon Gear that do automotive work. Across the board a number of our dairy manufacturers and agricultural producers are also very interested in that market opportunity.

Mr. KELLY. Well, I was looking in your notes. It says, ‘‘Over the

last 10 years the United States has dropped from being a top exporter to Korea with one-fifth of Korean imports now being in third

place with less than 10 percent market share.’’

This is an observation on my own. I know there’s a—Hyundai

and Kia made substantial investments in West Point, Georgia and

Montgomery, Alabama. And in fact, half the cars sold in this country are actually—Hyundai and Kia are actually produced locally.

And I think one of the challenges we have is marketing the idea.

We no longer work within the confines of our country, the United

States. We work in the entire globe. The market is huge. And when

you said 95 percent, 95 percent, of the market is outside——

Mr. SIMPSON [continuing]. Of all the consumers in the world,

they’re outside the United States. Eighty percent of the growth

that economists predict is going to happen over the next 5 years

is outside U.S. borders.

That’s where the markets are. And from a business standpoint,

you know, we’ve been fortunate in this country to be able to sustain

ourselves on domestic consumption for a very long time. I think, as

we have seen over the course of the last 31⁄2 years, those days,

while they may not be forever behind us, those days are changing.

And I think it behooves us as a country to adapt rapidly and to encourage, as you said, fair-trade agreements with companies with

whom we should be doing increased business.

Mr. KELLY. And we do know the way out of this economic mess

we’re in right now, we can’t do it internally. We have to do it using

the whole world as our market. And we can compete. It’s not a

matter of our lack of will to compete or our lack of ability to compete or intellectually not being able to compete.

My observation from being at these meetings is we have absolutely put ourselves in such a bad place, we limit ourselves and our

ability to compete in the world. So I’m with you on this, and we

are trying to get the Korean Trade Agreement through. We also

have more with Columbia and Panama. I know there’s some concerns with Columbia and Panama, and I know there’s also some

concerns with the Korean agreement. But I think if we can get that

message out and market it the right way so people understand the

upside for the United States, where the true gains are, because we

will get people back to work doing what they do best and that is

taking care of their families and taking care of their communities.

So thank you very much.

Mr. SIMPSON. Thank you.

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Mr. KELLY. And I yield back.

Ms. BUERKLE. I just want to comment, Mr. Gostin, if you could,

you’re talking a program that would be analogous to SBIR for medium-sized businesses. Have you thought about what that looks

like or is that something you could provide us with information on.

Mr. GOSTIN. I’d be glad to do that, Congresswoman.

Ms. BUERKLE. Thank you on behalf of the Oversight and Government Reform Committee. I want thank you both for being here

today and sharing your testimony.

I know I speak for my colleague Mr. Kelly, we’d like to be partners with the job creators and with businesses. We’d like to work

with you and not put up obstacles. So although there are many

right now, many obstacles, many regulations, many situations that

businesses face in upstate New York, we’d like to work with you

to begin to solve these problems, these issues, so we can get our

economy, not just in upstate New York but across New York and

across the country, get it back on track and do what’s right for the

American people.

A lot of these hearings and the purpose of this Oversight and

Government Reform Committee is to help restore the America

dream, to give entrepreneurs who are willing to take that risk to

spend money to create a dream to empower them to be successful

and not to impede their success.

So on behalf of our committee, thank you both for being here

today and we appreciate your testimony today.

At this time we are going to welcome our second panel of witnesses.

First is Mr. Andrew Reeves who is the owner of Reeves Farms.

Welcome and thank you for being here today.

Nancy Hourigan is the owner of Hourigan’s Dairy Farm. Welcome and thank you for coming this afternoon.

Mr. Tom DeMarree is the owner of DeMarree Fruit Farm, thank

you very much for being here.

As is the custom of the committee, we’ll ask you to please stand

and be sworn in.

Panel II, consisting of three members: Andrew Reeves, Nancy

Hourigan, and Tom DeMarree.

[Witnesses sworn.]

Ms. BUERKLE. Please let the record reflect that the witnesses answered in the affirmative. Thank you.

Again, we’ll have each panelist give their opening statement and

then we’ll take some time to ask questions.

Mr. Reeves, if you would start? Thank you.

STATEMENTS OF ANDREW REEVES, OWNER, REEVES FARMS;

NANCY HOURIGAN, OWNER, HOURIGAN’S DAIRY FARM; AND

TOM DEMARREE, OWNER, DEMARREE ORCHARDS

STATEMENT OF ANDREW REEVES

Mr. REEVES. Thank you.

Distinguished members of the Committee on Oversight and Government Reform Subcommittee on Regulatory Affairs, Stimulus

Oversight and Government Spending. Thank you for the opportunity to testify at today’s hearing.

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Ms. BUERKLE. If I could interrupt. Can you just move the mic a

little closer so everyone can hear your testimony.

Mr. REEVES. Is this any better?

Ms. BUERKLE. That’s better. Thank you.

Mr. REEVES. Agriculture is the largest industry in New York. It

may be the largest industry left in the United States. In order for

agriculture to continue to thrive, there must be a stream-lined

process to bring in seasonal, temporary labor when necessary. The

H–2A program is supposed to be a tool for the American farmers

put in place by Congress to expedite a legal-temporary work force.

This program is supposed to allow farmers to develop a good business plan which ensures a plentiful supply of top-quality produce,

without having to worry about a work force. All other businesses

are able to grow and shrink markets and production depending on

demand. If a worker leaves for any reason, 10 others are always

ready to fill the void immediately. These businesses are based on

these variables.

If you hire an American recruit for temporary labor, they will be

looking for another job with benefits and full-time, not seasonal

status. Once another opportunity becomes available, they leave or

don’t show up for work 1 day. As a result, you must spend and average of $650 per worker and begin a 10–12 week process to replace them with the H–2A program. The H–2A program should extend the same freedoms to American farmers as Congress originally intended. They should be able to expedite legal foreign workers after exhausting all legal, local employment opportunities and

options in the existing State. If an H–2A certifications has been

granted in a neighboring State, this would mean the neighboring

States have a shortage of eligible farm workers.

I believe to have me advertise in these neighboring States and

continue the recruiting process throughout half the life cycle of my

contract period is ridiculous. For my farm not to be able to ask for

experience when hiring is ridiculous. For me not to be able ask for

production standards without a challenge from New York or the

USDOL is ridiculous. Any other business would not and could not

operate in the parameters now set by the present H–2A law.

The next problem that needs changing with the program is the

length of the process. We used to be able to send an application to

the State and Chicago for processing at the same time. Now we

send one out to the State first, and once they finish their process,

we then have the necessary order number to now move on to Chicago with a different form. Many times the State will approve

something which the USDOL will reject. An example is Work Production Standards. New York State will allow them but the

USDOL won’t. They get rejected and thrown back, where either an

appeal is necessary, or you remove the standards and move on. If

you appeal, you have an 82 percent success rate, but you now have

put your process behind schedule. If you choose to appeal, the

USDOL no longer has to certify your order within 30 days of your

date of need. New York State will not let me advertise asking for

a resume, but the USDOL says I can.

After we have survived everything to this point, we now have to

keep records of all applicants who have requested an interview or

job. We also must document this for future audits and accept all

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applicants throughout half the term of the work contract. Because

the job posting goes on a national site, we are bombarded with applications such as a fishing camp cook with a degree in geography

wanting to bop in and work for the month of May on his way to

Alaska in June, but he must know more about the free housing

first.

How about the family of Eastern Europeans asking if they can

move the whole family here? How about the LPN wanting a job because she lost her license and needs a job, however, she won’t work

weekends. How about the lady from Manila? How about the kid

from Auburn wanting a job loading? How about Burrell asking,

what do I mean by a resume? These are some of the examples of

resumes I deal with. How about the Ph.D. from California who lost

his job and applied? Dr. Cool is his email handle. These are all lawsuits and possible litigations looming on the horizon because our

present system encourages it.

Now, if everything is fine, we have 30 days or less to finish the

process. We now move from overnight replies from government to

snail mail. Homeland Security claims to turn your petition request

around in 3 to 4 days. This is not true. If you over-night your I–

129 to California, they stamp it on the day they receive it or the

day after. A received letter with a next-day stamp on it comes to

you after the check has cleared. Usually the process, with no problems, takes 12 to 14 days from beginning to end. We now have 15

to 18 days left. Under the old process we could block schedule

groups when the order had a WAC number. Now we must wait

until the acceptance comes.

Next we must pay for Visas before we can schedule interviews.

We must email a request to CSC in order to get permission to access a site to schedule interviews. This takes 5 days if you make

no mistakes in the requesting process. If you make a mistake, you

will be notified within 5 days of the mistake and you redo it. In

5 more days you will receive access or another problem. The site

will let you the electronically schedule or just fill out the spreadsheet and email it. I suggest email. The electronic system is on its

third spreadsheet and if there is a specific problem, you’ll receive

a specific direction back with email scheduling. With the electronic

system, you’ll receive an error list, without a clue of where to

begin. There’s no direction as to how the system works. You attempt to understand and operate it. If you fail or have a problem,

forget it. You will receive an email answer which will never answer

the question you asked.

I had a problem with an order which 18 emails were not answered and 11 calls were not returned. One day during lunch I

found another CSC branch with names and numbers. The human

resources manager from another division was able to make proper

contact to their other division for me. He was amazed how it took

four calls to resolve the issue, so he thought. When my workers

interviewed, it still required a call to the Nuevo Laredo Consulate

to inform them the order scheduled and farm names were wrong.

They, as usual, were very helpful.

The next issue I have with the H–2A program is its AEWR’s of

$10.25 per-hour wage rate. This is a 15 percent increase in the

labor cost from the program revamped during the past administraVerDate 17-JUN-2003 16:04 Oct 19, 2011 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\68219.TXT KATIE PsN: KATIE
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tion. The rate went up in these times from $10.16. This is an unrealistic wage for the workers considered unskilled and not requiring

any previous experience or work standards.

We pay for Visas, we pay for food and travel both ways. We take

workers to the store. We must guarantee at least three-quarters of

the total hours in the contract, we must provide housing and utilities at no additional cost. No taxes or Social Security are deducted.

Many portions of their jobs offer them an opportunity to earn

even more when performing piecework. When your slower workers

are guaranteed a minimum of $10.25 per hour for piecework, your

faster workers make considerably more because your production

minimum standards are based on the slower workers. This is a reason we quit growing green and yellow beans, reduced acreage of

peas, quit growing snow peas, and wouldn’t raise blueberries if

they weren’t organic and bring us a higher price.

Lack of consistency is my final complaint with the program. I can

send an I–129 with only one copy and get an acceptance. I have

had a customer do the same and he was sent an approval requested and to send another copy and $404 with another form or

they may not be able to schedule appointments at the Consulate.

I have used production standards and have had customers denied

standards. I have been told to hire Puerto Ricans and I have asked

them to interview or submit a resume. I recently talked to a large

orchard producer from Virginia. Their farm hires 178 H–2A workers. Last year they were forced to use a Puerto Rican labor force

because of problems with the H–2A in Jamaica. I have the same

labor-reporting system as this grower. My vendor verified the orchard production was half last year of other years. This farmer was

asking me if there is any way around the Puerto Rican labor situation. He said if he has to use Puerto Rican workers this year, he

will have an auction. How can you expect to tell a business owner

how he has to run his business? No other business suffers these restrictions.

Now I’ll briefly review areas I believe need change. Bullet form

is easiest.

Apply to State and USDOL at the same time.

Allow standards and experience to be included in the job requirements.

Revamp the recruitment process. Why advertise in a State which

already has been approved for H–2A workers.

Reduce the recruitment period until the time the H–2A workers

arrive on the farm.

If the number of workers on an order are reduced because of referrals, these slots should remain open so the farmer can fall back

on them if the referral workers don’t work out or leave.

Introduce a form of arbitration to resolve issues. Legal service attorneys constantly look for areas to litigate.

The 30-day rule from the U.S. Department of Labor is not adequate. It encourages farmers to lie about their need date because

the process cannot be completed within the 30-day period.

Allow a farm to select where he gets his work force. Every other

business has that freedom.

26

Speed up the Homeland Security Process or make them tell the

truth. USDOL and Department of State believe in this 3 to 4 day

turnaround.

Reduce the wage to a realistic level. The Bush order was the best

system thus far.

Repair the mess created by the new interview scheduling procedure. It was introduced before it was ready, and I guarantee it

wasn’t developed by CSC. They have always been a great company

to work with.

We must include the dairy industry. AgJobs is a deadon arrival

proposal. The changes have morphed it into a bad deal for agriculture.

Strive for more consistency across the board. State and USDOL,

State Health Department, Homeland Security and Department of

State.

Let the H–2A workers pay their own Visa fee. This is nonrefundable, and they should have some ‘‘skin in the game.’’

I have aired my grievances and hope I was able to shed light on

the problems of H–2A. AgJobs is not the answer here either. Labor

unions and legal service groups have killed the good in this bill already. I will not endorse any program with amnesty attached. The

Amnesty Act of 1987 was another example of it not working. The

workers moved up the ladder and left a vacuum which was filled

with the millions of undocumented workers in the United States.

Most of the workers I recruit once spent time illegally in the

United States. I have convinced them to go back and enter the

legal H–2A program. I have convinced not less than 10 farms to

convert to legal H–2A workers. These people should remain at the

front of the line.

What we now ask for is a program to be developed which will

partner with today’s agricultural industry and finally address the

H–2A needs of our dairy industry also.

We need to work this out together for the salvation of the industry this country was built with. Let’s once and for all do this together once and do it right. Leave the unions and the legal service

ambulance chasers on the sidelines.

We owe this to an industry already bombarded with new EPA

and DEC regulations every year. We also have the Traceback and

Food Safety Requirements whose costs are all the burden of the

farmers presently. We are at a point of losing our producers if

something isn’t done.

Washington needs to become proactive with this issue. Four different programs in 3 years are confusing the lack of continuity necessary for Agribusiness to develop and maintain a long-term business plan.

Thank you very much for your time and the invitation.

Ms. BUERKLE. Thank you, Mr. Reeves.

[The prepared statement of Mr. Reeves follows:]

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Ms. BUERKLE. Ms. Hourigan.

STATEMENT OF NANCY HOURIGAN

Ms. HOURIGAN. Thank you for inviting me to testify before you

today.

My name is Nancy Hourigan and I’m a member of the Onondaga

County Farm Bureau and on the board of directors of the New

York Agricultural Land Trust. My husband John and I and my son

Matt work about 8,000 acres of land in Onondaga County and operate a dairy farm.

My family and I are proud of our farm and the time and hard

work that we have put into the operation to make it successful and

to keep it growing.

Our heritage and our roots are in the community and our farm,

and we want to see this business succeed at what is our core mission—producing healthy, local milk for our neighbors and fellow

citizens of New York State. Our milk is sold to Byrne Dairy;

doesn’t get much more local than that.

But the family farm has changed significantly over the years. As

we have had to grow in order to keep up with ever escalating regulatory burdens and a price we receive for our milk is at the mercy

of global market conditions, even though our cost factors are particularly influenced by being in a State like New York, where all

businesses face an unreasonable high cost of taxes, energy and

labor and regulatory compliance.

While I can and will expand upon some specific topics that are

of concern to me, the single biggest point I want to make at this

hearing is that the amount of actual time that I and my family

have to spend complying with various Federal regulations and that

has escalated to the point where I spend more time in an office and

on a computer and filing paperwork than I ever did working with

the cows, the crops and the personnel on the farm.

Each and every day I spend filing paperwork to comply with various Federal regulations, and each and every new piece of paper I

have to put up on my central-posting area on the farm has a cost

to it that is profound and can never be recouped. The cost is my

time and my husband’s time. No amount of cows or cropland added

to the farm to ensure our financial stability will enable us to recoup that time that we have to spend filing ever increasing paperwork with various agencies.

I do not believe that each Federal agency that we deal with has

a comprehensive understanding of what it is like to try to farm in

this environment. I have to meet mandates from the U.S. Department of Labor, wage and hour paperwork, the Homeland Security

Office, I–9 Forms, U.S. Department of Agriculture, conservation

and sanitation issues, the U.S. Department of Transportation, DOT

truck numbers, hours of service regulations, the EPA for nutrient

management issues, as well as a various State compliance issues.

While President Obama discussed this issue in his State of the

Union speech in January, I can tell you that on the farm itself, we

have not felt much, if any, impact from a lessoning of governmental

regulations and paperwork.

Clearly we need to have government engaged in ensuring safety

for consumers in the food they purchase, the roads they travel on

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and the environment. However, the current emphasis on simply

putting more and more regulations and paperwork on farms and

small businesses like mine, is out of control. I will never regain the

time I lost and continue to lose in making sure that I’m complying

with everything that I have to file.

So how can the Federal Government help New York State farm

families like myself? First and foremost, just stop imposing new

mandates. Follow the spirit of the Regulatory Review Commission

that President Obama discussed and actually implement the recommendation to reduce the amount of time that I spend filing paperwork.

Second, I would also like to suggest that the Federal Government

wrap up its activity in redirecting farmland protection dollars to

New York State. As stated, I serve on the board of directors of the

New York Agricultural Land Trust. It is clear to me that with the

vulnerability of New York’s farmland to development made more

acute by the barriers placed on farmers by the cost of complying

with regulatory mandates, the existing funds from U.S. Department of Agriculture have not been directed to New York State as

they have been to other States where farmland is not so acutely

in danger of being lost to parking lots and housing developments.

When farmland is conserved in the local community not only

does the land provide wildlife, habitat and improved water quality,

it also ensures that a locally produced food supply is secured and

a family farm can remain with the land.

I would strongly suggest that the formula that drives the allocation of funds to the various States be reviewed with an eye toward

ensuring that farm land that is particularly vulnerable, especially

on Long Island, in the city of Syracuse and the Hudson River receive a priority.

Third, I would like to discuss one issue with the EPA that has

me very concerned because of the precedent-setting nature of the

agency’s actions.

A section of Onondaga County is located in the Chesapeake Bay

watershed. My farm is not located within that watershed, but the

issue is very important to me as my family is connected to other

farm families who are in the watershed and rely on our farm to

provide cow feed and to do custom work and planting for them that

allows their farms to prosper and grow.

While I’m certainly not opposed to improving water quality in the

Chesapeake Bay, it strikes me as odd that all the environmental

stewardship practices that I have put in place on my farm and

other neighbors have put on their farm were not originally recognized in the EPA’s overly zealous desire to clean up the bay by imposing strict regulations on agriculture.

On my farm alone we have spent tens of thousands of dollars

constructing a nutrient management storage facility and we are a

partner in a community digester whereby waste from our farm and

several other farms will help generate energy for county facilities.

As a family farmer, I and my neighbors care about the environment that we leave for our children. We are not going to tolerate

sloppy behavior, nor are we going to fail to do what’s right on our

farms to protect the environment even when such practices are expensive to implement and are not paid for by the consumer dollar.

39

However, the EPA’s overreach on this issue is frightening to me

and my fellow farmers as with one single regulation originally proposed in the draft TMDL, the EPA was willing to sacrifice over 900

farms in the Chesapeake Bay watershed.

I am pleased that the State DEC and EPA, in consultation with

New York farm bureaus and others, came to an agreement to accept New York’s watershed implementation plan, but I realize this

plan may still impose significant regulatory burdens on some

smaller family farms. So I need to urge you to continue to work for

conservation dollars in the next farm bill cycle for the on-the-farm

environmental stewardship measures.

But the main point I want to make is that knowing that the Federal Government can act this precipitously and unfairly and jeopardize my own and my neighbor’s farm operation by issuing one

poorly thought out regulation, makes me lose sleep at night and

question long-term ability of my family to keep our farm in operation for the next generation.

The last issue I want to discuss is the need for realistic and not

clogged with paperwork guestworker program that you have already heard about from Mr. Reeves.

Thank you for the opportunity to speak with you today and

present testimony from the farmers perspective of the serious and

ever increasing Federal barriers to growth.

I appreciate you taking the time to listen to me and your consideration of my own time as a farm family business in New York

State to try to reduce the time I spend in compliance costs.

Ms. BUERKLE. Thank you very much.

[The prepared statement of Ms. Hourigan follows:]

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Ms. BUERKLE. Mr. DeMarree.

STATEMENT OF TOM DEMARREE

Mr. DEMARREE. Good afternoon. I appreciate being given the opportunity to discuss apple industry labor concerns. Thank you for

your attention.

I’m Tom DeMarree and I own and operate a 200-acre fruit farm

in the Town of Williamson, Wayne County. I’m also the current

president of the New York State Horticultural Society and past

board member of the New York Apple Association.

We grow over 100,000 bushels of apples as well as processing

peaches and a few other stone fruits. We also own and operate cold

storages on our farm. Six people work full-time or part-time on our

farm and an additional 29 people depend on the seasonal work

available through our farm to support their families.

According to the New York State orchard survey, over 42,000

commercial acres of apples in the State, and in the past 20 years

growers have renewed this acreage of 3 to 4 percent per year. More

than 65 percent of the New York apple acreage is in the seven

counties of the south shore of Lake Ontario. In the past 4 years

most of the fresh apple growers in these counties have been replanting it at a rate of 500 to 1,300 trees per acre which costs between $6,500 and $13,000 an acre.

This means that apple growers in these counties over the past

4 years have invested around $46 million in new apple orchards

alone. Twice this amount is likely to have been invested on farm

machinery, equipment, labor, housing and other real estate improvements as well as apple storages, packing lines and other cooperative marketing facilities over the same period.

Our own operation has invested hundreds of thousand of dollars

in capital improvements over the past 4 years. We spend over

$5,000 an acre annually growing, harvesting and delivering our

fruit, 80 percent of which benefits the local economy.

This is our sixth year using H–2A program. Securing H–2A labor

is expensive and increasingly fraught with government red tape

and stress. The U.S. Department of Labor and New York State Department of Labor in Albany are attempting to make this program

so difficult that no one will choose to use it. Growers, however,

have almost no choice but to use this program if they wish to secure legal employees skilled enough to perform the required work

efficiently and on time.

The Labor Department tells growers what they must put on the

work orders, limiting the experience requirements requiring employers to tolerate employees missing up to 5 consecutive days of

work without notifying the employer in advance. How are growers

supposed to harvest each apple variety at an optimum quality

when the workers can miss work without notifying the employer.

The Department of Labor in Albany has also been requiring referrals to Puerto Ricans to be interviewed within 10 days when

these referred persons often have no experience working on a fruit

farm. Growers should not have to argue with or petition DOL employees with no practical experience in operating a fruit farm about

the experience required for fruit farm employees in a business producing perishable crops.

46

Thousands of dollars were lost in New York fruit farms in our

local economies last year because of delays in securing farm labor.

Fruit was picked late and had a lower quality plus a lower value.

The failures to secure labor or the loss of skilled labor during critical planting, crop protection or harvesting operation results in financial losses that are not only jeopardizing the farm business but

also the local economy. Losses in apple quality jeopardize both

year-round and part-time employees’ income.

Fruit growers need employees familiar with their particular varieties and the market requirements those farms are attempting to

meet to secure the best possible price for each variety of fruit. Fruit

growers do not want to train new employees annually. They want

to retain trained employees. Untrained employees make expensive

mistakes that today’s businesses cannot afford. Workers also prefer

to work with the same farm year after year.

As time goes on there are fewer skilled people who are willing

to move from place to place every 6 to 10 weeks to harvest crops

as they mature. Given a choice, most people would prefer to earn

a living in one place in a clean, dry environment that does not require continuous physical labor.

I know that these issues are difficult and controversial at times,

but growers must have some assurance that they will have a consistent, skilled labor work force available to them that will be willing to retain trained workers.

Congresswoman Slaughter has been recently working as a strong

advocate on behalf of growers in contacting the Labor Department

to solve some of these problems. I would urge you to contact her

office to work with her to get the H–2A program to be more responsive to their needs.

Thank you very much for your time.

Ms. BUERKLE. Thank you very much.

[The prepared statement of Mr. DeMarree follows:]

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Ms. BUERKLE. And thank you to all of our panelists.

I sit here and I listen to your testimonies and I shake my head

and wonder how did we get to this point where you’re subject to

both the State as well as the Federal regulations. And I want you

to know that we were sympathetic here, and we would like to work

with you.

The issue that is recurring and recurring, and I hear from both

the agricultural as well as the dairy industry, is this H–2A program. And I would like to ask all of you if you could imagine what

the perfect H–2A program would look like, if you could tell us what

that would mean to you and what would an ideal H–2A program

look like.

Mr. REEVES. Well, to me it would be able to, at the same time,

apply to the State and the Federal Government, same form. They

virtually ask for the same information. It’s a Federal program, so

I think the Federal Department of Labor, U.S. Department of

Labor, should supercede anything regulated by New York State.

And at the same time, Homeland Security would be your next step.

If the process takes 12 to 14 days, then let’s give more than 30

days to process from beginning to end and not lie about it.

What I have to do—I shouldn’t say this—but I’ll tell you what

I have to do. If I need workers on the first of March, I have to turn

around and say I need them on the middle of February, first of

February, because if everything goes well, there’s no way with the

new system from the time I get a certification out of Chicago to the

time I interview my workers, that I can do it in 30 days. And in

my presentation you’ll see a day breakdown on it: It’s going to take

12, 14 days for Homeland Security. I’m going to spend the next 5

days—this is if I’m sitting in my chair. And as soon as I get a notification, I’m on the computer and going to work with scheduling

appointments. You know, there’s no day in between. It’s overnight

stuff, everything else.

Next thing I do is go to CSE say, ‘‘Hey, I want to be on scheduled

appointments.’’

So what do they do? Five days later, if I ask them properly—you

know, if I miss one number or something like that, in 5 days they’ll

tell me, ‘‘Hey, you missed a number.’’

So then I redo it again with the number, then again in 5 days

they’ll say, ‘‘OK now you can schedule.’’

What I need top to bottom is a program developed with the farmer’s input. The people that have to work with it, that have to make

it work, we’re left away from the table. I went to seminar in December in Atlanta on the new program. The guy that developed

this new program for the Department of State didn’t want to hear

anything from anyone. This was his deal; he knew what he was

doing; and this is the way all the concepts are going be.

To sit there in the room, we had State, we had Homeland Security there, we had Department of Labor there. The representatives

of the Consulates and the Department of State and the Department

of Labor couldn’t believe it when I sat up and said, ‘‘What do you

mean it takes 3, 4 days for Homeland Security to process? It takes

12 days to 2 weeks.’’

Here’s two Federal branches that said, ‘‘No, it doesn’t. It’s 3 to

4 days.’’

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I said, ‘‘They cheat on their stamp on the form. That’s how it’s

3 to 4 days. But it’s a 12 to 14-day process.’’

And you’ve got two Federal agencies that are all working together with this that are unaware of it.

Ms. BUERKLE. You mentioned in your testimony about the Bush

administration. Was there a different set of standards and now it’s

changed? You mentioned you were in a conference about the

change.

Mr. REEVES. The changes. Three days before President Bush left

office, he did an executive order that changed H–2A. He rolled back

the wage. There were some pluses or minuses to it but it was still

best program yet. He streamlined the referrals.

When you have to advertise State applications, he made it where

when they hit your farm, you don’t have to take any more applications and keep a record of them, because all this period of time,

like 75 days up to that point, his administration felt was adequate

time to look for referrals in U.S. workers. And that was changed—

actually, that was changed 3 days before he left office and there’s

been three other changes back and forth since that one. So in 3

years we’ve had four changes.

And the funny thing is, if you’re a farmer, how do you turn

around and say, ‘‘Well, I’m going to H–2A this year. But what’s the

law going to be?’’

When I was down in Atlanta in December, the only thing we

were handed out was the agenda for the meeting. There was not

any handout—the program south of the border had changed; the

forms north of the border had changed; not one agent or farmer

was given anything but agenda for the meeting because here it was

December 6th and they didn’t have this program ready to launch

January 1st, but yet January 10th it took effect. I mean, that’s just

ridiculous.

Ms. BUERKLE. Have you received any specifics since the January

10th implementation?

Mr. REEVES. My brothers will tell you that I’ve lived in my living

room on the computer trying to find rules and regulations on where

do I get the spreadsheet; how do I get the spreadsheet.

The spreadsheet had—it’s on it’s third copy now—the first one I

wanted to schedule 22 workers, and I called CSC and said, ‘‘Your

spreadsheet won’t work. It’s not formatted properly to take more

than 17 workers, because 5 of the 22 that it would take, were formatted properly.’’

They told me, ‘‘You don’t know what you’re talking about. Cut

and paste and come right down through the country names,’’ that

they had there.

So I cut and paste 33 on there, and did it electronically, and it

crashed in the system. And it took—it took 18 emails, 11 calls, and

the problem was, they said, ‘‘Well, once the system ate them up,

we can’t sort them out.’’

And so this was a 21⁄2 week process that should have been 3

days. But at least now they have a spreadsheet that is pretty much

working. But it’s the third one since January.

Ms. BUERKLE. Thank you. I’m way over my 5 minutes.

Mr. Kelly, I’ll yield to you. Thank you.

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Mr. KELLY. Thank you. You can take as much time as you want.

Really we need to hear you for as long as you want to go because

I know how frustrating it is.

I’m trying to understand. I’m going to ask Ms. Hourigan, what’s

the reason for the EPA? Is there anybody finding anything that the

EPA does that makes sense to any of us?

Now, we all have State DEPs that should have the primacy over

how—I would like to think that the local folks know a lot more

about what the local issues are than somebody in Washington, DC,

that’s never been here and doesn’t understand what it is that you

do, that any of you do.

So if you can, this EPA issue is huge. It is huge, and it’s shutting

down America as we go across the board. I just wish—listen, I wish

we could tell you it’s only in agriculture. I spent 2 days with health

care providers. Their problem is they can’t see any reason to stay

in the business. You talk to people in the banking business, their

regulations are so onerous, they’re afraid to lend money to anyone

because they don’t know who’s going to come in and shut them

down.

If this is the United States of America and we’re more worried

about internal conflict and internal regulation than outside? I

mean, we’ve got a real problem. Tell me on this EPA thing, this

is absolutely incredible, and I don’t think the American public has

any idea. You know, they ride down the interstate and see these

beautiful farms and say, ‘‘God, I’d love to do that. That’s got to be

fun.’’

Just from listening to you folks, I mean, at some point there’s an

old saying, don’t worry about the mule, just load the wagon. I think

the mule is about ready to unhitch itself.

Ms. HOURIGAN. The only thing I can say, is all three of us here

we do what we do because we just like to be farmers. Bottom line.

And we’ve all been pulled away from what we like to do because

of these regulations and the paperwork.

And I’m sure his brothers are ticked at him a little bit because

he’s not out there with them physically with the people that are

working. I’m sure hoping you’re listening and you can find answers

for us, because I certainly don’t understand it all. It’s just evolved

in the last 10 to 20 years to such a critical mass of paperwork and

regulations, and we just can’t farm anymore.

Mr. KELLY. Let me ask you something. Because Ms. Buerkle asks

this question all the time. If you knew then what you knew now,

would you be doing what you’re doing?

Ms. HOURIGAN. Well, you can see I’m not the youngest one here.

Mr. KELLY. Me either.

Ms. HOURIGAN. We’re starting to question if this is any fun anymore. And when my husband says it’s not any fun anymore to

farm, that’s serious.

Mr. REEVES. That’s a key phrase that I’ve heard from more farmers in the last 2 or 3 years. My brothers and I say the same thing.

The fun is out of agriculture. I mean it used to be with seasonal

business you could go on vacation in the winter. There is none of

this any longer. You’re just bogged down with regulations. We had

DEC the other day, going through the DEC audit—that’s another

deal that’s necessary. You know, it’s an absolute necessary thing,

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but also a lot of the regulations that they are requiring of you, are

absolutely absurd.

You know, on your sprayer you’ve got to have a label in a bag,

on the sprayer, not only in the cab, because if you drive across the

road and a car or something hits you, they have to be able to see

what’s in that tank. And—but every time they’re telling you about

these regulations and these changes, they’re also reminding you

what the fine is going to be if you don’t do it. They seem more fine

oriented than they are production oriented.

That’s difficult for the agricultural mind to understand. We’re

not into, ‘‘Do this or you’re going to get fined.’’ We’re into, ‘‘Let’s

take the proactive approach and let’s get this done.’’

Mr. DEMARREE. I think there’s an awful lot of regulation coming

both from Washington and New York State combined. It doesn’t

matter which government you’re referring to.

I’ve been in the business 30 years. Thirty years ago we could

farm and not necessarily do anything that we are doing differently

than what we are today, but we have to certify; we have to fill out

forms; we have to follow regulations. It isn’t changing anything

that we’re really, truly doing other than we’re spending time filling

out forms to tell somebody else in Albany or Washington what it

is that we’re doing. It’s the same practices. The same thing we are

doing. We’re not doing anything different. We aren’t improving

anything. There’s no improvements to our fruit, or dairy, or vegetables or whatever. But we’re just having to spend more and more

and more of my time, my wife’s time, in following paperwork, following rules, doing things, doing things that somebody else says

that we have to do that isn’t changing anything. It isn’t improving

how the fruit is grown, how the vegetables are grown or how the

milk is produced. It isn’t different. It hasn’t changed in 30 years.

It’s the same, but yet we’re spending—I’m spending 10 hours a

week just doing forms and reading new rules and regulations.

Albany just came down with a new set of rules that you have to

follow a new form every time that there’s a change in an employee

status. If an employee works—has a work agreement with us, it

says they’re going to work 45 hours. We worked 48 hours last

week. I have to get new paperwork and fill out a new form because

his hours changed. That’s how crazy the system has gotten to be

because somewhere along the line somebody got taken advantage

of. Probably.

I won’t say that isn’t the way that it should be, but when you

start making everybody try to solve problems because of one incident, the world is going to come to a stop because you can’t regulate everything—every problem, every issue out of reality. So——

Mr. KELLY. I appreciate your testimony, because I find it absolutely intriguing that a business that runs somewhere between a

trillion three and a trillion five a year in the red has the audacity

to come in and tell you how to run your business.

My question really comes down to have any of these people that

come in and set the bar—I asked the last group this—the people

that set the standards, have any of them actually ever done anything in agricultural, actually been in farming?

Mr. DEMARREE. Absolutely not.

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Mr. KELLY. So this is a software program that somebody puts on

their laptop and tells you what you are going to do.

Mr. DEMARREE. Absolutely. As was said a few minutes ago, the

H–2A that we’re using to have labor that’s legal and that I can

sleep at night knowing I’ll have a work force there tomorrow, that

ISSA isn’t going to come in and take them away because I thought

they were legal. They showed me documents that I determined to

be legal, but they weren’t, they can come in and take my work force

away and my crop will fall on the ground and I’ll have no recourse.

This is the program that I am using so I can sleep at night knowing that I can get a cropped picked of apples, and yet we have all

kinds of problems trying to secure a legal work force.

And nobody wants to hear when you try to talk to somebody, as

what’s been said, nobody wants to hear what your problem is. Absolutely nobody wants to hear what your problem is. They know

better in the agencies that you’re dealing with than what I do

when I’m trying to do my job. That’s a very frustrating thing.

And we spend more time right now on organizations, as you can

tell from the people sitting here, we spend a lot of time in organizations trying to just to keep a toe in the door in trying to keep some

of this regulation at bay and nobody wants to hear us.

Mr. KELLY. Do you ever have an audience with any of these

folks, this alphabet soup of people that show up, whether it’s EPA,

DEP, whoever it is, any of them ever give you the audience to sit

down and discuss with you what your problems are and what the

comment fixes would be from the people that actually do it? No.

So other than seeing Ms. Buerkle and myself, you really wouldn’t

have a chance to talk to a government that pretty much dictates

how you’re going to run your business.

Mr. DEMARREE. I’ve been to Washington in the last Congress,

and the organization that I’m president of has been to Washington

this year. And I’ve been there last year and talked about these

same issues. And it’s just the same thing over and over and over

again. We keep asking for relief and don’t get anywhere.

Every time—virtually every time they make a program different,

they make it more difficult. They don’t make it easier. They make

it more difficult, because the mindset is that we’re going to put—

we’re going to reduce the unemployment rate so we’re not going to

allow foreign nationals to come in and work in this country. That’s

the mindset of what’s going on with this program. That’s where the

whole problem with this program is, that the mindset is we don’t

want that program because we want to put U.S. citizens to work.

My business, and everybody’s business, is a short window of time

that we need people. I can’t hire somebody for 6 to 8 weeks or 10

weeks, put on 30 employees for 8 to 10 weeks, and then tell them

that they can’t work anymore because I don’t have anything else

for them to do. Who’s going to come to work for me 10 weeks, work

40 to 50 hours a week depending on how the week goes, and then

tell them at the end of 8 to 10 weeks, ‘‘I’m sorry. I don’t have any

work for you.’’

How do I hire somebody that’s only going to work for me 8 to 10

weeks a year. That’s my business; that’s what I’m in; that’s what

I have to face. That’s why this program gives me that opportunity

to try to bring somebody in that isn’t out of a country—that has

54

people that are willing to work. And yet nobody wants to seem to

help us make that system work, at least reasonably well for us.

Thank you.

Mr. REEVES. Food safety is a big issue. And we’re deep into the

food safety with daily deliveries, fresh produce all the while. Fortunately this year, we’re able get 100 percent return workers from

Mexico. What this does, and people don’t understand it, the U.S.

Department of Labor, State doesn’t, this is critical because our

food-safety program has standards. Everything we harvest in the

field has a written standard that has to be followed and inspected

twice a year. Our workers return, they know the standard. It’s the

same thing. They follow the procedure. We go through the inspections. We do a great job of food safety.

This is why it’s critical to have continuity in your work force and

not have to—imagine having the same workers as last year and

have to jump through all these hoops to try to get them back and

hope you get them back, and it’s all tied in with everything else.

The food safety issue—wildlife. I have to monitor wildlife in our

fields on a daily basis and keep a log. If I see a goose, I have to

document where I saw it and how I chased it off. Same with the

deer. These are the food safety requirements that Wal-Mart, Price

Chopper and Wegmans—it’s good. They’re looking out for the consumer. And we don’t mind that, but there has to be somewhere,

someone on our side.

And a lot of it is our own fault. I think laborer—myself is the

biggest issue in agriculture. No. 2 is perception. And, you know, the

news media is as guilty as anyone else. Look at an agricultural

commercial on television. Green Giant and here’s five guys picking

sweet corn in peach boxes. Here’s a Stouffer’s commercial—I think

it’s Stouffers. Here’s a guy growing peppers on the other side of the

fence is a dairy farm. Now, isn’t that ridiculous? You can’t have

anywhere near anything. And we tolerate it.

Pick Right, here’s a company that’s owned by a farmer. He’s got

an old John Deer 430 cultivating in the field and says, ‘‘That’s my

business manager as soon as he gets finished plowing.’’

I wrote him a letter stating, ‘‘This is bad for agriculture. We’re

high tech. We’re an industry to be reckoned with. We’ve got to stop

this.’’

He sent me a certificate for a 12-ounce bag of frozen veggies. But

we’re our own worst enemy. We are high tech. I’m proud of what

I do for a living.

I’ve worked in industry. Nothing is as challenging as agriculture

is. You do all this and deal with the weather besides. We need to

do a better job of advertising the technology in our business, the

education it takes to run a business like this, and run it successfully, and we need to pound it into the media also. Get out there

on the farm and do a story. Follow through one of these audits in

the field on food safety. Look at what we’re doing in agriculture

and we should not any longer tolerate these commercials that degrade agriculture and farmers and make us look like a bunch of

country hicks, because no one is going to be successful in farming

any longer if they don’t have an education and they don’t have the

ability to put two and two together and take a proactive approach

for the future.

55

Mr. DEMARREE. I would just say ditto. I mean, it’s exactly how

so many of us feel in agriculture today, that we’re the Green Acres

generation back with the pitch forks and bib overhauls and riding

around. You know, that’s the perception that we work against—

well, in the media, but also in the regulatory agencies that we deal

with—is that the mindset is that agriculture in this country is run

by a bunch of hillbillies. Pardon me to the reference for anybody

who takes offense to it. But that’s exactly how it’s felt, that when,

as I said in my statement, when somebody else sitting at a desk

in Albany or in Washington can tell me how to fill out and what

I have to put in my work order and what a work order can and

cannot have in it, and is telling me that my business will operate

because of what this work order has in it, how am I going to survive?

I can tell you the generation working my farm is the last generation that’s going to work that farm.

Ms. HOURIGAN. I’ll end by saying—and I told you our milk is sold

to a Byrne Dairy, which is a local business—I’m really glad these

two guys are still in business because I appreciate local food. And

I’m glad to know where it’s coming from and how it’s produced.

And I hope all the rest of you do the same.

Mr. KELLY. I’m going to finish up and turn it back over.

Keep your passion and don’t give it up because I’m telling you,

the way we’ll fix it is by staying on message and not getting distracted. I know it’s hard to do and I know that every day you wonder why I keep doing this and how much longer can I do it. Just

keep in mind, if we don’t get it fixed here, there’s no other place

in the world it can be fixed. Let’s just make sure we stay on target.

We’ll get this fixed. It’s going to take a lot of fight from all of us.

Thank you for being here. I appreciate your bravery for being

here and taking the time out of what you do every day to spend

it with us. Thank you.

Ms. BUERKLE. Thank you, Mr. Kelly.

And I would like to thank all of you as well. I, too, would like

to echo Mr. Kelly’s comments. If you quit, they win. And so this

is about preserving all that you’ve worked for.

We want you to know how much we appreciate your efforts and

for you to be here today and take time off your busy schedules.

We’d like to work with you and continue this dialog, we would like

to take your message to Washington, which we will.

I failed to introduce—we have members from the Oversight Government Reform Staff, so they’re listening and working with us as

well. So we will take this message to Washington. It won’t stop

here in this room. We want to encourage you, and please work with

us and dialog with us, and let’s continue to get this job done.

Thank you all very much for being here.

At this time we are going to welcome our third panel of witnesses.

First we have Orrin MacMurray of C&S Companies. Welcome

and thank you for being here.

Mr. Travis Glazier is the director of Intergovernmental Relations

of Onondaga County. Thank you for being here.

And Mr. Thomas Squires is the administrator of Cayuga County.

Thank you very much for being here.

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As is complying with the rules of the committee, I would ask you

all to stand and be sworn in before your testimony.

Panel III, Orrin MacMurray, Travis Glazier and Thomas Squires.

[Witnesses sworn.]

Ms. BUERKLE. Please let the record reflect that the witnesses

have all answered in the affirmative.

Thank you very much. Please be seated.

At this time we will open up our hearing to all of you to give

your opening remarks, and I will start with Mr. MacMurray.

STATEMENT OF ORRIN MACMURRAY

Mr. MACMURRAY. Thank you very much, Vice Chairwoman

Buerkle and Representative Kelly. Appreciate this opportunity.

I’m Orrin MacMurray. I’m the chairman of the C&S Companies.

We’re a 500-person architectural, engineering and construction

company. We have 14 offices around the United States.

And the activities of the Federal Government, as it relates to

both legislation and regulation, have a significant impact on our

business and our ability to create jobs here and elsewhere.

I’d like to give you about six examples of things that do have a

direct impact on our ability to grow business.

The first relates to government competition with the private sector. Various Presidential memoranda and Federal agency guidance

documents over the last year or so have indicated a preference on

the part of the Federal Government to begin to remove commercially available services that have historically been performed by

private industries creating jobs in the private sector into the government sector. This is harmful to the private sector, especially to

firms such as the C&S Companies and it places a heavy and needless burden on the taxpayers who are looking for ways, in fact, to

reduce the size and the expense of government much more so than

to expand and increase it.

It’s a threat to our economy a couple other ways, specifically as

it relates to professional services. The specialized and innovative

design capabilities that are available in the private sector are important to meeting government’s needs. Life-cycle costs can be

higher when work is performed entirely in-house by the government. A recent study performed in the State of New York comparing the services of private design professionals to government

professionals showed a 15 percent savings in using private professionals for that purpose.

And it certainly can be argued strongly that designing and constructing the infrastructure that we need to support our economy

in this country and maintain the standard of living that we have,

is certainly not inherently governmental such as other functions of

the Federal Government are.

Another example is the way overhead is calculated. The Federal

Government promulgates Federal regulations under the Federal

Acquisitions Regulation, specifically FAR, and that’s used by individuals that provide services to the government for calculating fees

that could potentially cost—that could be potentially charged to

government.

Unfortunately, these regulations, although they are national in

nature and scope, they’re interpreted differently by different

57

States, and what this creates is a situation where firms like C&S

that operate in most of the States across the country are required

to go through multiple audits in order to satisfy each individual

State government that we’re complying with the Federal Acquisition Regulations, as opposed to having one cognizant audit, one calculation and one audible amount for our company that would be accepted across the country for work performed that is either performed directly for the Federal Government or for States and local

government with Federal funds.

This creates extra work for the government, it creates extra work

for business and it consumes dollars that we could be putting toward hiring people and putting them to work and being more productive.

The third example is the 3 percent withholding mandate that

was put into place under Public Law 109–222. This creates a new

requirement that will be effective in January 2012 where 3 percent

of the gross amount of billings to any government that contracts

out $100 million or more for goods and services on an annual basis

will be withheld as effectively as a withholding tax or a withholding against an income tax obligation.

First of all, in our business 3 percent is frequently our total profit, if that, not to mention the amount that we owe in taxes. It creates a tremendous unfair burden on business.

First of all, we will lose the use of those funds and provide the

Federal Government with an interest-free loan for between a year

and 2 years while we go through the reimbursement process.

And second, it will create tremendous infrastructure cost, and I

mean, government infrastructure cost to maintain and to administer this system.

This bill was scored, I am told, at about an $11 billion savings

in 1 year. The Department of Defense has indicated that in the

first 5 years of implementing this legislation it will cost that department alone $17 billion in order to implement it. I find it very

difficult to see the logic in a 1-year savings of $11 billion being justified by then spending $17 billion in just one department and that

doesn’t include the costs that will be required in the State of Pennsylvania or in the State of New York in order to collect all this

money and forward it on to the Federal Government. Who’s going

to pay to hire those staff? Who’s going to pay for the computer programs that will be necessary to track this? Who’s going to develop

the paperwork and administrative infrastructure that’s necessary

to save $11 billion in 1 year so that we can all spend hundreds of

billions of dollars in the future years. It just baffles.

Another area that we could use some relief is in the Securities

and Exchange Commission area, the Dodd-Frank Wall Street Reform and Consumer Protection Act created a need or established a

requirement for municipal advisors to register. Engineers were

carved out of this requirement, consulting engineers that work for

government. Now the SEC is writing regulations that will reapply

this regulation to consulting engineering businesses that provide

services to counties and cities and towns throughout our country.

Effectively it’s part of any consulting engineer’s job to cost out alternatives, to do cash-flow analysis, to provide financial analysis of

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those things that they design and oversee the construction of—and

construction contractors do the same.

Improving the environment is another area. There have been numerous commissions, the latest of which was authorized under

SAFETEA LU, the previous surface transportation legislation that

has come back and recommended streamlining of environmental

permitting processes. So you were talking earlier about the EPA,

the EPA has a very valid mission and needs to make sure that

we’re paying attention to natural resources nationwide. But the reality is that when we have to do a draft Environmental Impact

Statement, a final Environmental Impact Statement where you

have to have State regulatory review, city regulatory, town regulatory review, national review, we are superimposing review on review on review to the point where we’re so buried in review that

it takes 7 to 10 years to build a bridge over a creek out in the country that should take us 18 months to 2 years to design and construct and simultaneously go through the permitting process. We

are burying ourselves in administrative costs and in delays that

drive the cost up as well.

The last item I wanted to mention is immigration reform. You

have already heard other speakers so I will be brief. We have

65,000 H1-Bs authorized nationally. C&S employs hundreds of engineers and scientists. We need access to those that graduate from

colleges with engineering and scientific degrees in this country that

are not necessarily U.S. residents and citizens. We need the availability of those people so that we can create additional jobs, more

economic activity and compete in a global marketplace, which is

definitely what we have in the world we have today.

So thanks for conducting these hearings and thank you for listening to my comments. I’d be happy to answer any questions that

you have.

Ms. BUERKLE. Thank you very much.

[The prepared statement of Mr. MacMurray follows:]

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Ms. BUERKLE. Mr. Glazier.

STATEMENT OF TRAVIS GLAZIER

Mr. GLAZIER. Madam Chair, Representative Kelly, thank you

very much.

Thank you for the opportunity—sorry. By the way, I’m speaking

on behalf of Deputy County Executive Matt Millea, who was not

able to be here. He’s the Deputy County Executive in charge of fiscal services for Onondaga County.

Thank you for the opportunity to appear before you, the committee, today. I thought this would be a good opportunity to discuss

the impacts of Federal mandates in our municipality, specifically

how Federal mandates that provide a one-size-fits-all approach

have created waste and inefficiency in the use of tax dollars and

drives up property taxes.

Onondaga County has strived to provide a clean, healthy, safe

place to live. As with many historic urban areas, our county and

city have had to deal with the challenges of environmental cleanup,

aging infrastructure and a decreased population base to support

these needs. Despite these challenges, we have made monumental

strides toward cleaning up our lakes and modernizing our infrastructure for wastewater treatment. However, despite all of these

efforts, Onondaga County continues to fight an uphill battle. This

is due, in part, because of Federal mandates that fail to take into

account an analysis of costs and benefits tied to mandatory regulatory actions, and that can result in scarce tax dollars being spent

on compliance measures that are neither effective nor equitable.

One example of this concerns the Federal Government’s apparent

efforts to pursue uniform national nutrient control standards for

surface waters across the county. Reliance on approaches that do

not account for varying ecological conditions on nutrient pollution

in different water bodies, and the use of one-size-fits-all technology

approaches to address nutrient pollution problems can result in

major public expenditures with little or no improvement in water

quality.

Site-specific factors, the cost of controls and current economic

conditions call for approaches other than mechanical application of

outdated command and control methods. Onondaga County and the

city of Syracuse, like many communities across the country, support an aging infrastructure system. The combined sewer system

that leads to sewer overflows here in Syracuse has been in place

for over a century, and as a result, would be excessively costly to

completely replace.

To address this challenge Onondaga County has taken a lead

role in implementing an innovative and balanced approach to combined sewer overflows that combines elements of traditional gray

infrastructure, as well as a more practical and cost effective green

technology, or green infrastructure, that captures the rain wastewater where it falls, rather than constructing large treatment

plants that cost a lot to build and operate.

The challenges we face in applying this innovative and cost-effective approach to combine sewer overflows is that the regulatory

community is geared toward decades old, traditional technology approaches, and can be somewhat inflexible and resistant to inteVerDate 17-JUN-2003 16:04 Oct 19, 2011 Jkt 000000 PO 00000 Frm 00066 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\68219.TXT KATIE PsN: KATIE
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grating these new innovative approaches into practical compliance

schedules, design approvals and compliance monitoring methods.

Regulatory guidance documents and compliance criteria haven’t

been written for the new green technologies, and this inhibits the

pursuit of more cost-effective approaches to these widespread challenges.

Another example is the EPA needs to establish a National Sanitary Sewer Overflow wet-weather policy that incorporates cost effective and realistic wet-weather related standards. SSOs are overflows of sanitary sewers resulting from a number of factors, including significant wet weather events such as heavy rains and rapid

melting snow pack or a combination of the two. Currently, there

are no EPA approved national wet-weather SSO standards. This

has left wastewater collection systems such as the county’s vulnerable to enforcement actions following record setting wet-weather

events that exceed approved design standards, even after the district has expended millions of dollars to construct the projects,

whose design has been approved by the permitting authority.

In Onondaga County, wastewater treatment is supported by usages fees. The costs of penalties for noncompliance and infrastructure improvements drive up these user fees. These user fees, combined with the excessive property tax burden in our region, have

created an unfriendly business environment.

From the perspective of a local municipality there is no local control over these mandates. While in Onondaga County there has

been in a monumental effort to mitigate the issues around CSOs

and ensuring clean water, the residents are still penalized for situations that are the result of circumstances out of their control.

In closing, there are significant benefits to Federal regulation.

However, instituting more practical assessment of the cost effectiveness of regulatory measures would relieve some of the unnecessary burdens that are the result of outcomes which are far beyond

the scope of fiscal possibility. Proper recognition of the fiscal limitations that exist in the goals set forth in these mandates, coupled

with greater flexibility in the implementation of solutions by local

stakeholders, will promote a more competitive business environment.

Thank you very much for the opportunity to speak before the

committee.

Ms. BUERKLE. Thank you very much, Mr. Glazier.

[The prepared statement of Mr. Glazier follows:]

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Ms. BUERKLE. Mr. Squires.

STATEMENT OF THOMAS SQUIRES

Mr. SQUIRES. Madam Chair, Representative Kelly. Thank you for

the opportunity to appear before you today, and I’d like to especially thank you for conducting this hearing in Central New York

here locally. That’s a great honor certainly for all our community

here in Central New York. So thank you.

I’d like to take a few minutes and give you some examples of how

Federal action, regulation and inaction hinder Cayuga County in

hiring employees, cost us revenue and increase our costs.

We receive millions of dollars in Federal aid, primarily in the

area of health and human services. All of these grants come with

specific accountability and reporting requirements, requirements

that cause staff to take time away from the core program to fulfill.

The Temporary Assistance for Needy Families [TANF] program is

a good poster child of this phenomenon.

Due to Federal regulation, the district staff spends a huge

amount of their time on meeting Federal requirements for employability reporting. To be eligible for Federal TANF dollars, we must

count, track and report for every TANF adult the time spent in

countable work activity. We have coding requirements and monthly

work verification reporting. This is labor intensive and could result

in State and local penalties if not done. These requirements take

away from work we could be doing with the clients, it eats up valuable staff time, takes resources away from the community for no

more than reporting to the government.

The Federal Government also has strict requirements in place to

entitle counties to be eligible for Title IV-E reimbursement for child

welfare costs. There’s a complex set of eligibility criteria that must

be met. If all criteria and documents are not found, there is loss

of funding based on Federal audits.

Costs associated with child welfare are huge expenses for the

county. Due to the complexity of the requirements, we had to dedicate staff to function as our eligibility team. Again, a lessening of

the requirements will enable counties to dedicate much needed resources to the clients.

To be sure, requirements are needed to protect the taxpayers. We

respectfully ask that your committee look at decreasing the requirements for all Federal programs so their staff may spend more

time delivering the program services that the taxpayers pay for.

Many times the Federal Government pushes mandates down to

the States and in turn down to the counties. Many times these

mandates aren’t as applicable and should not apply to the counties

because we’re much smaller than cities and States. Along these

lines is the Prison Rape Elimination Act. While noble in title, this

act is filtered down to local jails and requires additional documentation, investigation and reporting that, frankly, is not necessary at the county level. It may be appropriate for larger facilities, but in our case will probably require adding an additional

staff position to fulfill requirements that we don’t believe should

apply to us anyway.

In some counties, Indian Nations have been allowed to sell tobacco products and gasoline exempt from sales taxes. In our county

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the cost is measured in the millions of dollars, as well as lost jobs

and commerce to businesses that comply with the sales tax law.

The Cayuga Indian Nation has applied to the Bureau of Indian Affairs for land in Seneca and Cayuga counties to be taken into Federal trust. These counties and the State of New York have repeatedly and vehemently opposed these trust applications, because

their approval would impose a sovereign Indian reservation on the

counties, which would mean not only land coming off the school,

town and county tax rolls, but the uncontestable opening of Class

II electronic bingo parlors thus bringing gambling to counties that

do not want it. It would also totally remove local jurisdiction over

the lands placed in trust. House bill H.R. 1231 would allow any

federally recognized Indian tribes to be granted land in trust. The

Cayuga Indian Nation was not federally recognized in 1934 and

would not be eligible to have land placed into trust, except for a

provision in the bill called the Carcieri Fix. We strongly urge all

Members of the House to oppose this Carcieri Fix provision in the

bill.

I’d like to mention briefly unemployment. Somewhat regularly,

Cayuga County decides to not hire when the position may be temporary or seasonal in nature. There is a local cost to unemployment. The decision to not hire is always driven by our desire to

avoid the cost of unemployment. In some of these cases, the position may have the potential to turn into a permanent position. Unfortunately, too many times we aren’t able to go down that road to

explore that option. I would urge the committee to change the eligibility requirement for unemployment, or decrease the local share to

allow us to put more people to work.

In closing, I would like to thank again the committee for giving

me the opportunity to be here today. On behalf of Cayuga County,

I thank you for all the support from the Federal Government and

ask that you continue your hard work in finding ways to reduce the

Federal impediments to the efficient operation of local government.

Thank you and I will be happy to answer any questions.

[The prepared statement of Mr. Squires follows:]

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Ms. BUERKLE. Thank you all very much, and thank you for your

testimony this afternoon.

It’s interesting, because this morning we had a hearing over in

Monroe County, in Irondequoit, and we heard from Monroe County

and the county executive and we also heard from the sheriff of

Wayne County who many of their issues were very similar to

yours.

But the interesting part—and we even heard it from the panel

that preceded you—these rules and these regulations are made

without the players being at the table. And these unfunded mandates create such a burden on the counties and the local governments and the taxpayers without them having any say in how

those programs are going to be executed. We got onto the topic of

Medicaid in Monroe County this morning, which is a separate hearing.

My first question is to Mr. MacMurray. I’d like to have you explain to us this SEC registration municipal advisors. Are you saying pursuant to Dodd-Frank that engineering firms are now going

to be treated as if they were financial advisors?

Mr. MACMURRAY. The Dodd-Frank indicated in Section 975 that

they were exempting engineers providing engineering advice. That

was because Congress recognized in the preparation of legislation

that what was targeted here were financial advisors, people that

are advising on bank financing, people that are advising municipalities on bonding, on what types of financial structured deals

should be used for public infrastructure. That, of course, is not the

practice of engineering and construction companies. That’s the

practice of banks; that’s the practice of financial folks.

So Congress specifically carved out the engineering and construction industry. What’s happening is that in the rulemaking that’s

going on now, that the SEC is putting in place, is they’re kind of

expanding the definition or redefining much of what consulting engineers do for municipalities all over the country. They’re redefining that now in terms that would require that we all—we in the

consulting engineering business—obtain these municipal advisor

staff certifications.

So it’s just another example of—I think it’s an example of two

things: One of the Congress being wise and carving it out, but it’s

also an example of how, even when Congress is wise and makes

sure that something is appropriate, that when it comes to rulemaking, it can get bifurcated.

Ms. BUERKLE. And I think that illustrates the issue that we’ve

had with the Health Care Bill, as well as with Dodd-Frank, is the

legislation was then handed over to the regulators and regulators

came up with their interpretation of the law.

Mr. MACMURRAY. It may not always be consistent. It’s like another example is the 1099 situation, which I’d like to thank both

of you for your vote in support of appeal of that requirement. In

fact, while we’re on that, I would hope that you would sign onto

H.R. 674, that’s to repeal legislation for the 3 percent issue that I

mentioned earlier too.

Yes. There are situations that need to be addressed after legislation has been passed. Sometimes there’s things that come to light

and we need to deal with that.

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Ms. BUERKLE. Thank you. I yield 5 minutes to Mr. Kelly.

Mr. KELLY. Mr. MacMurray, tell me about this 3 percent and

why you don’t get paid interest on it? The government holds it and

you don’t get paid interest? How long do they hold it?

Mr. MACMURRAY. Effectively it’s analogous to having withholding

out of my paycheck for my income tax in the following year. So effectively it’s the same sort of thing. What’s being proposed here,

though, is unfair on a number of levels.

First of all, if we provide services to the Federal Government and it costs about $100,000, the Federal Government says, well, about

20 to 30 percent of that has to be subcontracted to minority disadvantaged business or to service connected disabled business.

There are a number of programs. So right off the bat, we might take, say, $20,000 or $30,000 off

of that amount that a company like C&S is actually going to self

perform.

Then there are some services that can’t be performed by our com- pany, so we turn around and possibly subcontract another $5,000

or $10,000 of work. So the actual work that we would do might be

in the neighborhood of $60,000 or $70,000, in my example, out of

a $100,000 contract.

Now, if we are lucky, and we make the average profit on this

type of work nationally, that’s going to be someplace in the 5 to 10

percent range. So if we take, say, $60,000 and suppose we made

5 percent on that, that’s $3,000. That’s $3,000 in profit. Our income

tax obligation for that $3,000 might be 20 percent, 30 percent, depending on what corporate rate we’re paying. So it could conceivably be $1,000 in my example.

Well, what the Federal Government—this law will require us to have $3,000 deducted right off the top and the Federal Government

will then hold those $3,000 until we file our income tax and get

that refund, which will be at least a year, and depending on when

the services were provided, if they were provided at the end of tax

year—you follow me? Or at the beginning of a tax year, it could almost be 2 years before you get the money back.

And, of course, under the Federal Acquisition Regulations, to

make things even worse, if we do go out and borrow that money

so we can meet payroll and pay our light bill, the Federal Acquisition Act [FAR], does not allow us to calculate interest as an eligible

overhead expense, so there’s no way we can recover that interest

on that money. So effectively that comes out of our pocket. So in

order to meet payroll and pay our employees and potentially add

additional jobs, it’s just another rock being thrown under the

wheel.

Mr. KELLY. So your cost of operation is affected by this. So is this

something when you do a government contract, you have to actually bid it higher than you would normally bid it to a normal entity

to cover that 3 percent, because effectively your cost of operation,

you know, the gross versus the net—I understand completely—you

have to somehow recoup that.

Mr. MACMURRAY. We have to try.

Mr. KELLY. Or you walk away from the business.

Mr. MACMURRAY. We have to try or we have to make a decision

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ernment. And that’s going to hurt the government, hurt our taxpayers because there’s going to be less competition and that’s not

an attractive alternative either.

Mr. KELLY. Mr. Glazier, I want to ask you real quick, because

I come from a community that’s aging also. And when we talk

about this problem that we have with storm and we have wastewater and everything else.

Look it, is there any type of remedial program? Because what I

see is that the property transfer from people who own those

houses—usually they’re seniors. In order for them—there’s some

point in their life where they’re going to sell where they live and

they’re going to move into another lifestyle. That has to be fixed,

usually, before they can sell the house, does it not, if there’s a problem where the downspouts are tied in?

Mr. GLAZIER. Yeah. In fact, in Onondaga County we’ve just

begun a proactive downspout program, and I’m coming up short

with the name of the program, but the program is going to go deal

specifically with that. We have added a local law that when houses

are sold, there’s an inspection to ensure for specifically that purpose.

Mr. KELLY. In my community, it averages somewhere between

$12,000 and $15,000 to fix this. These are homes that are being

sold for $30,000, $35,000. So a senior, really, someone who’s

worked all their life, paid their taxes, lived within their means,

have been good stewards of the community, are put in a position

they really can’t get out of the homes they live in because of this

regulation.

What bothers me is I know we have these ideas that we think

are going to be really great, but the unintended consequences really put people in a position where they can’t, at this point in their

life, actually move from where they’ve been because some of this

over regulation. And I know it’s important. I know. But it makes

me scratch my head. Why are we doing this to the people that are

most vulnerable that can’t make the adjustment?

Mr. GLAZIER. Well, I think from our perspective, one of the main

criticisms we have is that—there’s—everything is regulation and

measurement as opposed to helping to try and find ways as we’re

trying to proactively attempting to do, which is try and mitigate

the issue where it begins.

Because of the stringency of the current Federal regulations

there isn’t real recognition of that effort. You know, they just sit

at the end of the spout and measure and because of that we are,

you know, we’re making leaps and bounds as far as the situation

we’re in and the dates and the age of our physical infrastructure

that deals with this, but we’re still measured by the antiquated

system.

Mr. KELLY. I know, it is. It’s frustrating.

And just final, Mr. Squires, because I see this only in government. Is the cost of running a program have—it’s totally irrelevant

as to what the cost-benefit analysis is.

Have you seen any of these programs that make sense to you

from a cost-benefit analysis, because in private business if the end

product doesn’t justify what you’re doing, you either don’t do it or

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you just go out of business. So I’m trying to understand the cost

overruns of these, and it’s always absorbed by the taxpayer.

Do you have any input into any of these programs?

Mr. SQUIRES. We don’t. We don’t have a lot of input as far as the

regulations, requirements and accountability and reporting and all

that sort of stuff. I think you’re right with the point you’re driving

at is that the cost of the program becomes so enormously expensive

compared to the actual benefit that it flows to the intended beneficiaries of the program.

It’s frustrating for us when we have a whole pile of regulation

reporting and tracking and so forth and information that needs to

be given, and it costs us employees, it costs dedicated staff to do

that.

Chair Buerkle referenced earlier that government should not be

the driver of jobs, and I absolutely agree with that. That being

said, there are going to be jobs that are paid for and come from the

government. It’s frustrating when we have to increase the number

of jobs that government pays for that we tax people for, for things

that—we wonder if it’s just jobs that put together a bunch of data

that sit on someone else’s desk and they check off on their checklist

and say, ‘‘OK, we got it. Things must be fine.’’ That’s not the reality

of the situation.

What we wonder sometimes is if we got less money from the Federal Government, the State government, passed through the State

government, if we got a little less for the program and were relieved of a lot of the reporting requirements and a lot of the tracking and a lot of the administrative requirements, I think we would

be further ahead because we would have fewer people on our payroll that we’re taxing the taxpayers for and we would end up giving

more benefit to the intended beneficiaries.

Mr. KELLY. Thank you.

Ms. BUERKLE. Just to give an illustration of your cost-benefit

analysis, we spoke recently to a school superintendent and he received a Federal grant of $40,000 and he said in order to comply

with all of the strings attached of the $40,000, it was going to cost

him close to $200,000 to administer that regulation—or that grant.

So the cost-benefit analysis is certainly something that needs to be

done more.

I have one last question because it came up this morning in

Irondequoit, Mr. Squires. The Prison Rape Elimination Act. I asked

Sheriff Virts over in Wayne County if it was his understanding

that there was any way for the county jails, the smaller entities,

to opt out of this law. He did not think so.

Mr. SQUIRES. I don’t think so. I spoke to our sheriff, Sheriff Dave

Gould in Cayuga County and this is something that he’s looking at.

Our interpretation is it absolutely applies to us. We’re a small facility. We’re not a State facility.

Incidents happen in jails, you know, violence and so forth. We

think the staff that we have and the procedures and processes in

place to address those issues are sufficient for our facility. They’re

appropriate. We’re a well-run facility. So this is another layer of

bureaucracy and administration that we have to pay for and we estimate it’s going to be a position that will be dedicated almost fulltime to these kinds of regulations.

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Again, taxing people for positions that, in our view, aren’t productive and give no benefit to the taxpayers we have been taxing.

Ms. BUERKLE. Have you been able to affix any cost to this law

when it goes into effect?

Mr. SQUIRES. We think it’s more work that can be absorbed by

current staff, and we’re talking about adding a staff position to do

that. So the total cost including fringes would be somewhere in the

ballpark I’m going to guess $50,000, $60,000. There may be other

work that staff person could take on, but that’s the additional cost

that comes from this act.

Ms. BUERKLE. Thank you.

Do you have any further questions?

Mr. KELLY. No.

Ms. BUERKLE. I want to thank all of you for being here this afternoon and sharing your testimony with us.

Your input is so important to us as were the two previous panels

and the three earlier today. It’s so important that Congress hears

from you all. And I want you to know that we will take your testimony, take the information that you have given to us, and bring

it back to the full Oversight and Government Reform Committee

and let them know. We’ll share with them the concerns and the

regulations and even the impediments that the Federal Government puts up.

So thank you all very much for being here today.

Thank you to those who sat through this hearing and participated today. I think it’s good for us to hear from the community,

from the job creators.

At this time we will adjourn the meeting. The committee is adjourned. Thank you all very much.

[Whereupon, at 5:15 p.m., the subcommittee was adjourned.]

[The prepared statement of Hon. Elijah E. Cummings follows:]

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