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24–879 PDF 2006

LEGISLATIVE SUPPORT TO OUR SMALL BUSINESS

OWNERS IN UNIFORM

HEARING

BEFORE THE

SUBCOMMITTEE ON REGULATORY REFORM AND 

OVERSIGHT

OF THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

WASHINGTON, DC, SEPTEMBER 29, 2005

Serial No. 109–33

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

COMMITTEE ON SMALL BUSINESS 

DONALD A. MANZULLO, Illinois, Chairman 

ROSCOE BARTLETT, Maryland, Vice 

Chairman 

SUE KELLY, New York 

STEVE CHABOT, Ohio 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

JEB BRADLEY, New Hampshire 

STEVE KING, Iowa 

THADDEUS MCCOTTER, Michigan 

RIC KELLER, Florida 

TED POE, Texas 

MICHAEL SODREL, Indiana 

JEFF FORTENBERRY, Nebraska 

MICHAEL FITZPATRICK, Pennsylvania 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

NYDIA VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

TOM UDALL, New Mexico 

DANIEL LIPINSKI, Illinois 

ENI FALEOMAVAEGA, American Samoa 

DONNA CHRISTENSEN, Virgin Islands 

DANNY DAVIS, Illinois 

ED CASE, Hawaii 

MADELEINE BORDALLO, Guam 

RAU ́ L GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

LINDA SA ́ NCHEZ, California 

JOHN BARROW, Georgia 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

J. MATTHEW SZYMANSKI, Chief of Staff 

PHIL ESKELAND, Deputy Chief of Staff/Policy Director 

MICHAEL DAY, Minority Staff Director

SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT 

W. TODD AKIN, Missouri Chairman 

MICHAEL SODREL, Indiana 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

SUE KELLY, New York 

STEVE KING, Iowa 

TED POE, Texas 

MADELEINE BORDALLO, Guam 

ENI F. H. FALEOMAVAEGA, American 

Samoa 

DONNA CHRISTENSEN, Virgin Islands 

ED CASE, Hawaii 

LINDA SA ́ NCHEZ, California 

GWEN MOORE, Wisconsin

TOM BEZAS, Professional Staff

(II) 

C O N T E N T S 

WITNESSES

Page 

Elmore, Mr. Bill, Associate Administrator, Veterans Business Development, 

Office of Veterans Affairs, US Small Business Administration ....................... 3

Winkler, Dr. John, Manpower and Personnel, Office of the Secretary of Defense, Department of Defense ............................................................................. 5

Holtz-Eakin, Dr. Douglas, Director, Congressional Budget Office ...................... 6

APPENDIX

Opening statements: 

Akin, Hon. W. Todd .......................................................................................... 17

Prepared statements: 

Elmore, Mr. Bill, Associate Administrator, Veterans Business Development, Office of Veterans Affairs, US Small Business Administration ..... 19

Winkler, Dr. John, Manpower and Personnel, Office of the Secretary 

of Defense, Department of Defense ............................................................. 22

Holtz-Eakin, Dr. Douglas, Director, Congressional Budget Office ............... 30

(III) 

(1)

LEGISLATIVE SUPPORT TO OUR SMALL 

BUSINESS OWNERS IN UNIFORM 

THURSDAY, SEPTEMBER 29, 2005

HOUSE OF REPRESENTATIVES

SUBCOMMITTEE ON REGULATORY REFORM AND

OVERSIGHT

COMMITTEE ON SMALL BUSINESS

Washington, DC 

The Subcommittee met, pursuant to call, at 10:36 a.m. in Room 

2360, Rayburn House Office Building, Hon. Todd Akin [Chairman] 

presiding. 

Present: Representatives Akin, Bordallo, Sodrel, Poe

Chairman AKIN. The hearing will come to order. I just wanted 

to say officially welcome, everybody, and thank you for taking time 

out this morning to join us, and with that, I will go ahead and get 

started with an opening statement, and then also I will recognize 

the Ranking Member for an opening statement as well. 

I would like to extend a warm welcome to those of you who have 

taken time. I have already done that. That is important. As you 

know, this past June, we held a hearing to discuss the current obstacles that prevent veterans’ access to capital, as well as the barriers that self-employed reservists and Guardsmen face in maintaining financially solvent businesses during deployment. 

As we had learned at the previous hearing, small businesses employee approximately 18 percent of all reservists who hold civilian 

jobs. Moreover, the Congressional Budget Office estimates that out 

of the 860,000 reservists in the selected reserves, approximately 9 

percent are self-employed. Many reservists and guard members experience economic hardship, both during deployment and after 

their tour of duty. According to one Department of Defense survey, 

22 percent of reservists who had recently been activated said that 

the damage done to their business was a serious or very serious 

problem. 

While there are several federal programs that have been set up 

to assist these small businesses, on Tuesday, I introduced a bill 

called the Entrepreneur Soldiers Empowerment Act, which is H.R. 

3898, which I hope will further help these brave men and women 

and their families back home obtain the assistance they need for 

their continued professional success. 

This piece of legislation will eventually do two things. It will codify in law the establishment of veteran business outreach centers 

in each SBA regional office, as well as technical mentoring assistance Committees in each SBA regional district. 

2

Mr. Elmore, it is very nice to see you again. I appreciate the time 

all of you have taken to participate in our numerous events on this 

issue. 

Dr. Holtz-Eakin, I appreciate your taking time out of your schedule as well to join us. I am excited to hear what you are here to 

discuss, this year’s CBO report on the effects of Reserve call-ups on 

civilian employees. 

Dr. Winkler, thank you for joining us. I know the welfare of our 

nation’s guard and reservists is a top priority for both you and the 

secretary. 

Witnesses, I thank you for coming. 

And last, but certainly not least, I would like to greet my distinguished colleague from Guam, Ranking Member Congresswoman 

Bordallo, and invite her to say a few words. 

[Chairman Akin’s opening statement may be found in the appendix.] 

Ms. BORDALLO. Thank you very much, Mr. Chairman, and good 

morning, gentlemen. I want to thank you, Mr. Chairman, for holding today’s hearing on providing business assistance when our reservists and National Guardsmen are called up to active duty. 

So often these service members have answered the call to protect 

our nations in time of need and are ready to deploy whenever and 

wherever they are needed. They have served their communities 

and countries with great honor, with the flexibility of being able to 

attend college, own businesses, and pursue full-time careers. But 

success does not always come easy. This group of entrepreneurs 

faces a myriad of challenges in starting and running their businesses, including access to capital, providing health care, and securing federal contracts, coupled with the fact that many veteran 

small business owners are either being deployed themselves, or 

their employees are being sent overseas. The challenges of running 

a small business only multiply when a small business owner or his 

or her employees received orders to deploy. 

Today, our service members are asked to make great sacrifices, 

whether it is fighting in Iraq or Afghanistan or providing relief in 

the wake of natural disasters, such as Hurricanes Katrina and 

Rita. These brave Americans always meet the challenge. Clearly, 

given the sacrifice that these men and women continue to make, 

it only makes sense to provide our nation’s soldier entrepreneurs 

with the resources they need to keep their businesses successful 

while they are serving us at home or abroad. 

Over the years, a number of programs have been designed to promote entrepreneurship and provide assistance to our nation’s reservists and guardsmen, including the Small Business Development Centers [SBDC]. These centers provide critical, one-stop services to small firms by providing a wide variety of information and 

resources. In concert with the national SBA and the SBDC network, Veterans’ Benefits Outreach Centers [VBOC] provide still another source of business and technical assistance for this important 

community of small business owners. This Committee also created 

the Veterans Corporation that was designed to exclusively cater to 

the needs of veteran entrepreneurs. 

It is my understanding, then, that the legislation we are reviewing today, the Entrepreneur Soldiers Empowerment Act, will exVerDate 0ct 09 2002 16:34 Jan 12, 2006 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 G:\HEARINGS\24879.TXT MIKE
3

pand this network and solidify the work of the VBOCs. I am interested in learning how the proposed program will work, and, additionally, I want to ensure that we are maximizing the use of resources to serve these businessmen and women. As our economy 

continues to experience challenges, it is important to provide substantial assistance to veteran entrepreneurs and all sectors of the 

small business community. America’s small businesses are capable 

of pulling us out of this period of economic uncertainty and creating the jobs that we so desperately need. 

So I look forward, gentlemen, to hearing your testimonies today. 

Your thoughts and concerns are very important to us as we review 

this proposed legislation. Thank you. 

I would also like to recognize Mr. Sodrel. He has possibly a comment or two here, just that we do not have that many congressmen 

here. So, Mike, if you want to run for a minute or two, we will get 

started right after that with the witnesses. 

Mr. SODREL. I would like to thank you all for coming this morning. I have more than a passing interest in the subject, being a 

former noncommissioned officer in the First Battalion, 151st Infantry, of the Indiana Army National Guard and being a former small 

business person, and I have stayed pretty close to the unit. 

Lieutenant Colonel Paul Grube is the current commanding officer 

of the One of the 151. They were deployed to Afghanistan. In between the training prior to departing the country or being deployed 

and the one-year deployment,—he was gone for about 15 months—

he was a small business person, had a restaurant, and found that 

the strain of being deployed in Afghanistan and having a restaurant back home was really too much for him, so he had to sell 

the restaurant basically while he was still deployed in Afghanistan. 

So I really look forward to the testimony here this morning, and 

I thank you for coming. 

Chairman AKIN. Thank you, Mike. 

Our first witness is going to be Bill Elmore,— Bill, you have been 

with us before—Office of Veterans Affairs, Small Business Administration. We are going to try and stick with the lights. Remember 

the light drill here. Green means go, and yellow means you have 

got one minute left, and then red means you are supposed to wrap 

it up. Thank you. 

STATEMENT OF BILL ELMORE, VETERANS BUSINESS DEVELOPMENT, OFFICE OF VETERANS AFFAIRS, U.S. SMALL BUSINESS ADMINISTRATION 

Mr. ELMORE. Thank you. Chairman Akin, distinguished members 

of the Subcommittee, I am Bill Elmore, the associate administrator 

for Veterans Business Development at the SBA. Thank you for the 

opportunity to testify here today to express SBA’s views on the Entrepreneur Soldiers Empowerment Act. SBA is grateful for your 

continued support, and we appreciate the opportunity to share our 

views. Let me begin with a brief overview of SBA’s present outreach activities for veterans of the U.S. military and reserves. 

S.B.A. opened four Veterans Business Outreach Centers in 1999 

to expand SBA outreach and assistance to veterans. In the first 

five years of operation, we have refined this program by, among 

other things, increasing outreach to Reserve component members of 

4

the U.S. military. Last year, legislation enabled the SBA to include 

reservists in our definition of ‘‘veterans,’’ assuring them access to 

our programs and services. This resulted in significant steps to enhance outreach and assistance to reservists through our Vet Business Outreach Centers, SBA’s two primary technical assistance 

programs, SCORE and SBDCs, and SBA’s district offices. 

SBA recently recompeted the VBOC grants. We expressly included Reserve component members as part of the target for service delivery and evaluated proposals for the VBOC program grants 

based on the applicant’s ability to reach reservists. SBA has also 

enhanced the SCORE and SBDC programs through outreach to reservists who are self-employed or small business owners. SBA’s intake and data collection and reporting firms in the district offices 

were updated to include questions on veterans, service-disabled 

veterans, and Reserve and National Guard status of program participants. Data collection helps us measure our success in reaching 

our veterans’ outreach goals. 

I would now like to discuss the proposed legislation. While SBA 

is supportive of the underlying goals of these proposals, i.e., increased outreach to veterans, the agency cannot support this legislation, which redirects resources from existing programs which are 

designed to reach similar objectives. 

The Entrepreneur Soldiers Empowerment Act would require SBA 

to expand the VBOC program to a minimum of one center per geographic region. SBA does not believe this is the most efficient 

method to provide the required assistance to veteran entrepreneurs. SBA’s current VBOC locations are based on the population of veterans and reservists in the host state. Our current centers are in the four most populous states for veterans: California, 

Florida, Texas, and New York, with a fifth center due in Pennsylvania. Establishing VBOCs based on geography instead of population may result in states with smaller veterans populations receiving centers before states with more significant veteran populations. Furthermore, SBA believes the chain of new VBOCs will 

disperse small business expertise and dilute SBA resources. 

The underlying intent of the bill to provide additional information and outreach to businesses affected by mobilization is worthwhile; however, we are not supportive of the means sought to 

achieve that end. Utilizing preexisting resources to achieve the objectives of this legislation would be a better use of taxpayer dollars 

and a faster, more efficient method of providing the services needed. SBDCs and SCORE already provide these essential programs 

and services. Our VBOCs provide supplemental assistance in the 

most veteran-population-heavy states. Establishing new VBOCs is 

unnecessary and will create a competing redundant organization. 

The legislation also requires SBA to establish technical and mentoring assistance Committees that would be responsible for recruiting local volunteers to serve as veteran business mentors. SBA supports the involvement of volunteer business counselors and mentors for veterans and reservists and their families, but this proposal is problematic from a budgetary perspective. SBA would be 

required to establish TMACs in each district and allocate $20,000 

per Committee, costing more than $1 million annually. 

5

This proposal is unnecessary. Presently, SBA’s district offices are 

authorized to establish local veterans’ business mentors, and this 

is an effective service-delivery approach. To mandate private and 

public volunteers would be duplicative. 

S.B.A. previously managed a plan called the Veterans Business 

Resource Councils. That approach was more flexible and depended 

on the local veterans’ business community to organize their own 

community-based Committees. Using those Committees to assist 

and support outreach, training, and seminars for veterans, they 

served as a basis for our district office outreach program that is 

voluntary and relies on coordination between our district offices 

and the SBA’s local resource partners like SBDC and SCORE. This 

is a better model, based on the resources and commitment of local 

veteran business owners. 

This concludes my testimony. I welcome any questions you may 

have. 

[Mr. Elmore’s testimony may be found in the appendix.] 

Chairman AKIN. Thank you, Bill, for your testimony. We will 

proceed with our second witness here. John, would you please proceed? 

STATEMENT OF JOHN D. WINKLER, Ph.D., OFFICE OF THE 

SECRETARY OF DEFENSE, U.S. DEPARTMENT OF DEFENSE 

Dr. WINKLER. Good morning. Mr. Chairman and distinguished 

members of the Subcommittee, I would like to thank you for allowing me to testify before this Committee on a very important topic. 

We know that small business owners face significant challenges 

when a reservist is called to active duty for an extended period. We 

are working to understand their needs and develop policies and 

programs that meet them. 

We must have the support of employers if we are to sustain a 

strong, viable Reserve force. Recognizing the important role of employers, the Department has implemented a number of policies 

aimed at encouraging employer support and helping mitigate some 

of the challenges that employers face. 

First is the policy of judicious and prudent use of the Guard and 

reserve, using reservists only when needed or as short as needed, 

and to perform meaningful work. 

Second is to limit frequency and duration of mobilization. Under 

the current mobilization authority, we limit the period of involuntary service to a total of 24 cumulative months, and we have established a one-year-in-six planning factor for involuntary activations. 

Finally, we strive to provide employers with as much advance notice of pending mobilization as possible. The goal is at least 30 

days’ notice. 

These policies are intended to provide employers with as much 

predictability as possible so they can better plan for the absence of 

a reservist employee. We all want to help employers, but we also 

need to understand better who employs Guard and Reserve members and what will really help them. I am familiar with the CBO 

study that addresses the effects of Reserve call-ups on civilian employers and identifies several possible courses of action: employer 

tax credits, subsidized loans, business insurance, and exempting 

certain reservists from mobilization. 

6

Their findings parallel an Institute for Defense Analysis study, 

which the Department sponsored, on small businesses and the selfemployed. One of the recommendations in that study was for the 

Department to conduct a survey of employers to gain further insights into impacts of activation on employers and policy options 

for addressing problems they may experience. We are currently 

working with the Office of Management and Budget to field a 

large-scale employer survey. 

We also now require reservists to provide information about their 

civilian employer. As of this date, 77 percent of reservists, amounting to approximately 570,000 service members, have provided employer information to the Department of Defense, and we are beginning our analysis of these data. This will provide a more detailed understanding of reservists’ civilian occupations and the 

makeup of their employers. The information that we derive from 

these initiatives will help us focus our efforts where they will have 

the most impact. 

Finally, we are developing a much closer working relationship 

with the Small Business Administration. The Military Reservists 

Economic Injury Disaster Loan program, passed by Congress in 

1999 and administered by the SBA, was the first financial-assistance program targeted at small business owners affected by the 

military service of an employee and self-employed reservists. We 

are working with the SBA to determine what more may be done. 

Again, I would like to thank the Committee for holding this hearing, and I look forward to answering any questions. 

[Dr. Winkler’s testimony may be found in the appendix.] 

Chairman AKIN. Thank you, Doctor. I did not give you the proper 

title, but just for information, you are manpower and personnel 

under the Office of the Secretary of Defense, Department of Defense. So we will get that down for the record. Thank you very 

much, John. 

And let us go ahead, then. Dr. Douglas Holtz-Eakin, director of 

the Congressional Budget Office. Please proceed, Doug. 

STATEMENT OF DOUGLAS HOLTZ-EAKIN, Ph.D., 

CONGRESSIONAL BUDGET OFFICE 

Mr. HOLTZ-EAKIN. Mr. Chairman, Ranking Member Bordallo, 

and members of the Subcommittee, CBO is very pleased for the opportunity to be here today, and I want to also take this opportunity 

to thank both of the gentlemen to my right who provided extensive 

assistance to the CBO in producing the report that will be the focus 

of my oral remarks. 

I really want to make three points. The first is that Reserve mobilizations and deployments are large and unusually long at the 

moment; that the costs of such mobilizations are concentrated on 

a very few, and for that reason, they are not a significant impact 

on the national economy as a whole but have notable impacts on 

some small businesses and self-employed reservists; and, finally, 

that, in thinking about policy options, including the legislation that 

is under consideration, it is important to distinguish the importance of minimizing the overall costs of these mobilizations upon 

small businesses and the self-employed and then, for whatever 

7

costs are incurred, striking the right balance between employers, 

employees, and taxpayers as a whole, so let me do that. 

The first is simply to remind everyone that mobilizations are 

substantial and quite extended. A great many of the reservists 

have been mobilized through July of 2005. About 455,000 reservists 

have been mobilized in the past four years, and, at present, about 

36 percent of those forces in Iraq and Afghanistan are reservists. 

Their tours are much longer than in the past and likely longer 

than they anticipated when they joined the reserves. Prior to 9/11, 

a tour of over 180 days was somewhat unusual. Only about 15 percent of reservists experienced this length of mobilization, whereas 

since that time, the average tour has been over 300 days. 

These tours impose costs. There are a large number of reservists, 

either self-employed or employed in small businesses. I have a bit 

of information about these folks. There are 50,000 self-employed reservists and about 120,000 reservists who are employed in small 

businesses, which, for this purpose, we define to be those private 

firms with fewer than 100 employees. Perhaps as not well appreciated is the fact that a large fraction, 36 percent, are employees 

of federal, state, or local governments. So there are significant impacts in the call-ups on both very small firms as well as the larger 

private firms, and, indeed, there are impacts on the government 

sector as well. 

In scaling the size of the problem, it is important to recognize 

that this is a small fraction of our national labor force, that there 

are about 5 million small businesses overall and about 15 million 

self-employed, with the result that only about 6 percent of employers are affected by call-ups, and only about half of 1 percent of the 

self-employed are affected in this way. 

Nevertheless, for those who are affected, there are important 

costs. Those costs take the form of uncertainty about when call-ups 

will take place and thus impose an extra layer of planning requirements on small businesses. They are the costs of vacancies or the 

costs of hiring replacements for those employees who are not available while they are away. There is a loss of skills, in some cases, 

quite significant skills. One of the focuses of the report was trying 

to document the degree to which those reservists who are employed 

by small businesses might be the highly skilled reservists who are 

necessary for the conduct of those businesses. Using a variety of 

judgments, we guessed it was on the order of eight to 30,000 such 

individuals. 

There is also just the loss of business income, and the scale of 

that loss is hard to know. CBO did its own survey, a far-from-representative survey, that we tried to use to shed some light on the 

problem, and I look forward to the results of the larger survey that 

is going to be available as a result. 

The last point I will make before closing is that, in thinking 

about the policy options, there really are the two steps. Step 1 is 

what are the costs of these mobilizations? Assuming that DoD does 

not change its use of reservists extensively, those costs can be 

minimized either by additional planning on the part of small businesses, and the CBO survey suggested many had not planned for 

the loss of their key employees, or by providing targeted exemptions for hardship cases, and that raises issues of fairness in conVerDate 0ct 09 2002 16:34 Jan 12, 2006 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 G:\HEARINGS\24879.TXT MIKE
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ducting that; and then, for whatever costs are present, what is the 

right balance among the various stakeholders involved? In some 

cases, for example, with the existing law, the employer is asked to 

bear the cost of continuing to pay pension and health benefits, 

holding the job, and providing the employment. Is that the right 

balance? Is that a policy question? Or could those costs, in part, be 

shifted to taxpayers through tax credits, loans, or insurance vehicles which would take the costs out of the employer-employee relationship? 

These are important questions, and we are pleased to have the 

chance to be here today, and I look forward to your discussion. 

[Mr. Holtz-Eakin’s testimony may be found in the appendix.] 

Chairman AKIN. Thank you very much, Doug. It sounded like 

your analysis, from the questions, is very crisp and does raise some 

interesting questions. Who is really paying for some of these 

things? If you take a look at somebody that runs their own business, and they are going to be gone for 300 days, how many small 

businesses could take that kind of a hit, and who is really paying 

for that, then? Where does that put a lot of the load, and how do 

we absorb that as a society? Good questions, indeed. 

Let us see. I guess I will start with you, Bill. It seemed like, from 

what you were saying, your bottom-line concern is cost. Is that 

probably accurate to say? 

Mr. ELMORE. I think it is a combination of cost and maximizing 

our already available, perhaps helping to focus even more intently 

the broader range of services we have through our Small Business 

Development Centers and through our SCORE counselors and 

chapters. 

Chairman AKIN. So the concern is one of cost. In other words, are 

you saying that this makes you too specialized to deal with this one 

problem, too much resources in just one particular area where 

there are a lot of other things you are trying to do with those offices? 

Mr. ELMORE. It is not so much that. As I read the draft of the 

legislation, there were sort of two parts of it. One was targeted to 

the self-employed Reserve and Guard members themselves. The 

second was targeted to the much broader issue of the small businesses that employ Reserve and Guard members, that 35 percent 

number. It is much bigger than the 6 or 9 percent number, depending on how you look at that. 

So I think to try to take what is a pretty small focus specifically 

on veterans programs inside the agency and broaden it out into an 

area where SCORE and SBDCs already have a significant and ongoing expertise just, to us, did not make a lot of sense financially 

and from a program-planning perspective. Those programs are up 

and running. How we focus their effort into this community is, I 

think, more important perhaps than trying to create what might 

become a redundant system. 

Chairman AKIN. Let me see if I understand what you are saying. 

This bill really is doing two different, separate things. You are saying that one piece of it is probably more logical than the other 

piece. Is that what you are saying? 

Mr. ELMORE. Well, the other part of the question, I think, goes 

back to the district offices and the idea of these volunteer menVerDate 0ct 09 2002 16:34 Jan 12, 2006 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 G:\HEARINGS\24879.TXT MIKE
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toring Committees, which is an idea we do support, but trying to 

fund volunteer Committees, we think, is problematic. Questions 

about everything from FACA to how do we create and ask volunteers to then help us design plans that would require approval, 

that would require allocation of resources that, at this point, we 

have not budgeted for is part of the problem. 

So there are really kind of two sides of it. One is the expansion 

of the VBOCs into additional areas and into additional service beyond specifically the veterans that presently we focus on. The other 

is the idea of mandating required local volunteer Committees when 

we have that authority to do that now, and most of the work I have 

done through our district office outreach effort has focused on developing not essentially official Committees but local collaborative 

approaches that approximate Committee work that do not have 

mandated resources allocated to them that have to flow through 

our district office. 

Chairman AKIN. There are four Veterans Business Outreach 

Centers currently. Is that right? 

Mr. ELMORE. Yes, sir. And there is a fifth being created in Pennsylvania right now. 

Chairman AKIN. Do you think that is sufficient to provide services for the nation’s veteran population, both mathematically and 

geographically? 

Mr. ELMORE. Good questions. I can tell you that what we have 

tried to do with our centers, realizing all along that we had a limited number of locations that we could operate in, is we have tried 

to focus them into targeted services where they operate but also 

Internet-based services, and we have tried to promote the availability of all of our centers so that veterans across America, including reservists, will know about, hopefully, where these centers are, 

contact them, and then they do what I call ‘‘directed referrals.’’ 

So if someone from Oklahoma contacts our Texas vet business 

center, the Texas center will direct that veteran back to a localized 

resource in Oklahoma, be it an SBDC, a district office, a SCORE 

counselor, a chapter, a women’s business center, the full range of 

SBA services. 

Chairman AKIN. Okay. I think, in November 2004, as I recall, in 

the SBA Office of Advocacy report, it was reported that the existence of useful government and private programs for entrepreneurs 

ranked second and third on the problem list of both service-disabled and nonservice-disabled veteran entrepreneurs, a high priority currently. If the services provided by SBA are currently sufficient for the veterans’ population, how do you explain the fact that 

they projected this tremendous need? 

Mr. ELMORE. Well, I think there are probably two parts, at least 

how I would think of that. The first is, obviously, not every veteran 

knows of SBA services and programs; hence, why we continue to 

conduct what I think is pretty aggressive and comprehensive outreach. 

The second is every year we are creating another 200,000-plus 

veterans who discharge out of active service, and the other part of 

it would be, with the definitional change that you enabled us with 

with our reauthorization last fall, we do now include reservists in 

10

our internal definition of ‘‘veterans’’ for purposes of all of our programs. 

So through that and through, for example, strengthening the 

Small Business Development Center program announcement, we 

are directing those Small Business Development Centers now to include outreach to Reserve and Guard members and Reserve and 

Guard units for purposes of business assistance, business planning, 

business preplanning, and also for post-mobilization planning after 

they have returned. 

Chairman AKIN. Okay. I think I have probably used up my five 

minutes. Thank you very much, Bill. And the Ranking Member. 

Ms. BORDALLO. Thank you very much, Mr. Chairman. 

Mr. Elmore, just a little aside here. The last time you appeared 

before this Subcommittee, you may recall that I was concerned that 

the military reservists economic injury disaster loans, the loans 

that we, in Congress, created to help returning reservists with 

their businesses, were not really before used to their fullest extent. 

In fact, at that time, you had made about 280 such loans in five 

years. That would be about one loan per state per year, and as long 

as you are here, can you give us a progress report on that program? 

You were going to make an effort, you said, if I recall, to publicize 

its availability, and we have heard testimony today that these reservists do need help. Have you increased the use of that important 

loan program during the summer? Could you give me some statistics, numbers? 

Mr. ELMORE. Yes, ma’am. Actually, when we were up here in 

June at the hearing, it was 228 loans, as I recall, that we had approved at that point. 

Ms. BORDALLO. Oh, I have inflated it a little. Okay. 

Mr. ELMORE. What we have now, through August 31, 2005, and 

this is the latest report I have, we have had 400 applications, and 

we have approved 243 loans. 

Ms. BORDALLO. In addition to the— 

Mr. ELMORE. No, no. In total over four years— 

Ms. BORDALLO. So that is just a few more, then. Right? 

Mr. ELMORE. Yes, ma’am. The program was implemented August 

24, 2001. 

Ms. BORDALLO. If there are that many applications, why so few, 

because you did say you were going to make it available? 

Mr. ELMORE. Yes. There are two things. One is, typically, in our 

disaster loan program, only approximately 50 percent of the loan 

applications are approved. There is a whole range of reasons, everything from can the business show the ability to pay a loan back? 

That is one of the primary things that we have to look at because 

we are allocating the public’s resources. So we are approving a 

higher percent of them MRIEDL than we do our other disaster 

loans. 

Now, I can give you some rudimentary information. For example, 

of those 400 applications, 63 of the applications were withdrawn by 

the applicant, another 90 were actually declined by SBA, and we 

have four, at least of August 31, 2005, that were pending. So there 

is a whole range of issues that come into this, everything from it 

may turn out that someone has a criminal background. If they 

have a criminal background, they are not going to be eligible for 

11

some of our loan programs. So there is a range of those things that 

enter into all of our programs. 

Ms. BORDALLO. So, in your opinion, is this loan program really 

functioning as it should? 

Mr. ELMORE. I think it is functioning as designed. If you sort of 

dig into the difference between a typical business loan and a disaster loan, a disaster loan, by its design, is not designed as a business loan, per se. You cannot consolidate debt, for example, and 

that is the way the statutes were written. 

So I think I suggested, even at the June hearing, that the loan 

program is very important for those that it fits, but additional debt 

for a business that has been impacted by an activation of the owner 

may not be the best solution. I think it really goes back to what 

the gentleman from CBO has suggested, is there a range of things. 

There is not—I think I said this in June at the hearing—there is 

not a one size fits all, and MRIEDL, while it is important, does not 

meet all of the needs that I think business owners— 

Ms. BORDALLO. Mr. Elmore, how are you advertising the loan 

program, returning solders? Is it going out to everybody? 

Mr. ELMORE. There is a full range of things we have done. We 

have had hundreds of thousands of what we call ‘‘SBA Reserve and 

Guard fact sheets’’ inserted into demobilization kits that are put together by the National Committee for Employers in Support of the 

Guard and Reserve. We have sent out hundreds of thousands of 

those fact sheets in addition to that. We have also produced business-mobilization planning guides. 

We have a post-mobilization business planning guide that we 

have sent out tens of thousands of copies to all of our partners 

through DoD, through DOL, through VA, through the American 

Legion,—the VFW has just asked me for 100 more copies—through 

states, the State Department of Veterans Affairs of Missouri, for 

example; and through lots of reciprocal Web efforts as well. The 

Army Family Support Centers, for example, in DoD; we have some 

reciprocal links that advertise the availability of these programs. 

We have also, and I have not passed them out yet because we 

only just received them in the last couple of days—we have now received our premobilization business planning guide. I am having 

5,000 of these printed, and we also are having 5,000 CDs produced 

that reflect not only the contents here but also a lot of the other 

detailed program information that is in there. 

Ms. BORDALLO. Mr. Chairman, I would like to have a copy of 

some of those fliers. 

Mr. ELMORE. The only reason we have not provided them to you 

is literally, this morning, we are beginning distribution inside SBA 

to all of our program office heads so that they know of the availability, and they can ask my office for whatever number of copies 

that they need. We printed 5,000 professionally, but we also have 

the ability to print these internally. So we are going to produce as 

many of these as are necessary. They are designed for all of our 

programs, all of our program partners, and specifically designed to 

try to assist Reserve and Guard members themselves with the 

things we believe they need to do to preplan before they are called. 

Certainly, I understand that no matter how well we design these 

things, no matter how good a job we do at putting the information 

12

out in the hands of the reservists, ultimately the work that has to 

be done rests, to a great degree, with the Reserve and Guard members themselves. If they do not take the steps to do the kinds of 

preplanning that are required, there are going to be too many instances of restaurant owners activated for 300 days that either are 

forced to be in a position where they have to sell their business, 

or they have to depend on someone else to try to manage them in 

their absence. Those are things that paper products and outreach 

can assist and support, but we cannot fix every instance. It really 

does take the Reserve and Guard members themselves to work 

with our resources. 

Ms. BORDALLO. Thank you, Mr. Elmore. I do not know which one, 

perhaps Dr. Winkler. Do you have an opinion for this Committee 

on the level of success of these other entrepreneurial development 

programs in helping reservists? How are the others? Are they 

working because I think, especially you, Mr. Elmore, you are quite 

negative at the money situation and all for another new program, 

so how are the others working? Are they, in your opinion, a success? 

Dr. WINKLER. I will really have to look into that and get back 

to you. 

Ms. BORDALLO. Well, maybe, Mr. Elmore, you might be able to 

answer that. 

Mr. ELMORE. I think what I see, and if you understand the structure of the agency, I do not manage the SBDC or the SCORE program; I work with them. They are a counterpart inside the agency. 

We have certainly seen, I think, a significant increase in activity 

out of our Small Business Development Centers into this arena. 

SCORE, for example, has increased their activity as well. They 

have created a special Web site, and they have e-counseling specifically targeted to Reserve and Guard small business owners, and 

they have asked their 12,000 volunteers, who would like to sign up 

to additionally try to work with and support small business owners 

that are in the reserves? 

So we have seen that happen, and this is an example I can share 

with you. I received this actually by e-mail that today there is a 

Veterans Small Business Resource Day in the State of New York 

that one of our district offices, with our business outreach center, 

with SCORE, with SBDC, and with a number of other partners, 

are participating in to try to offer the full range of all of the SBA 

services and programs available to veterans, including Reserve and 

Guard. So I can share that with you. 

I cannot sit here and tell you that in every instance it is working. 

Of course, not. We have to build this, and that is what we have 

been trying to do, and there is a unique expertise that is developing inside SCORE and SBDC based on this. If you go back to the 

June hearing, we talked about the sort of dual responsibility business owners have. They have the responsibility that they have 

taken on to serve us and protect us in the Reserve and Guard, but 

they also have the responsibility to try to manage, maintain, and 

grow their business. So they do face unique circumstances and 

unique things that they need to deal with that most other small 

business owners do not. 

Ms. BORDALLO. Thank you. 

13

Mr. Chairman, I have further questions on the next round. 

Chairman AKIN. Thank you. I think our next questions come 

from Mike, and also we have been joined by Ted Poe, and you are 

just about in line for questioning next, Ted, so, Mike, why don’t you 

fire away? 

Mr. SODREL. Yes. A couple of things I left off my list of what I 

was. I am also a fiscal conservative, so you are getting my attention. As I was thinking through this, maybe being a facilitator 

more than a source of funds. The financial loss is the effect, not the 

cause. The cause is the person or persons have gone to military 

service. If you can avoid the financial loss, then no harm, no foul. 

I was just sitting here making a list: the SCORE, the Service 

Corps of Retired Executives,— 

Mr. ELMORE. —of Retired Executives, yes, sir. 

Mr. SODREL. —trade associations. You know, it may be that what 

we have here is the private sector really was not prepared for longterm deployments. When I was in the Guard, Company B of our 

battalion went to Vietnam on a long term, but mostly it was going 

to a flood like Katrina, tornado, some kind of civil disorder or something, where it was a two-, three-day, week, two-week deployment; 

it was not a long-term deployment. The unit went to Bosnia for 

longer term. 

So it seems to me that the mission of the Guard is changing over 

time, and people need to be more prepared. I think there are people 

out here that would volunteer to help the small business owner if 

they were prepared in advance and some system was put together. 

Maybe the SBA needs to be a facilitator more than a financier, 

working with the ESGR, SCORE, and trade associations, and whatnot being prepared in advance. 

I personally had to make a decision between small business and 

Guard service after seven years, and I chose the small business. I 

knew I could not balance both. But we have some really good people. We do not want to discourage them from serving in the Guard 

or Reserve just because they are a micro-business. 

This is a really good piece, just a cursory look at it. Are there 

any funds available where you could be trying to facilitate, bring 

different groups together where we might prepare for this? 

Mr. ELMORE. I think the approach that we have taken through 

the agency, and this really goes back to—it began in September 

2001, we reached out to Dr. Winkler’s office, for example. My office 

did a little digging around and said, Who do we contact in DoD to 

try to begin to coordinate and collaborate? So we approached his 

office, and it was through his office and some meetings there that 

we began to engage in the broader side of DoD, the family support 

centers, for example, and ESGR. 

It was Dr. Winkler and his staff who said, Work with the National Committee for Employers in Support of the Guard and Reserve. They are, and I do not mean to speak for them, but they are 

representatives—they are a branch that engages into America’s private sector on behalf of Reserve and Guard members. So a lot of 

the work we have done nationally has been to do that, to coordinate with them, to coordinate with the Department of Labor Veterans Employment and Training Service, with the president’s National Hire Veterans Committee, for example; with the Department 

14

of Veterans Affairs through their Center for Veterans Enterprise; 

with ODEP and Department of Labor, which is a disability policy 

group focusing on those veterans that come back with disabilities. 

Those are the ones that I recall off the top of my head. At the 

same time, the district office effort and our business outreach centers have been directed to reach to these same communities locally. 

So when I work with a district office in Philadelphia, we ask that 

district office to touch base with and ask for the involvement of 

Labor, of VA, of ESGR to identify Reserve and Guard units themselves, to ask the state adjutant general to participate, to work 

with the state department of veterans affairs, to work with the 

American Legion to bring the VFW to the table, to really go out 

and try to bring what I think is sort of the veterans’ side of the 

community into the mix because quite often it is their sons and 

daughters that are serving. Again, I expect you know that as a veteran yourself. 

So we are doing that now. This is a big country, and it does take 

a lot of work to do that. Each district office has a veterans business 

development officer inside SBA, and part of their job is to reach out 

to and engage vets, including now Reserve and Guard. That is 

where the district office outreach initiative comes into play, and if 

they give us a rudimentary plan on how they are going to include 

all of these potential partners, we will provide them resources out 

of my office to help them put those seminars, those programs, those 

outreach events like the one in New York together. 

Mr. SODREL. Thank you, Mr. Chairman. 

Chairman AKIN. Thank you, and let us see. Ted, I believe you are 

next. 

Mr. POE. Thank you, Mr. Chairman. I appreciate all of you being 

here today. I was a former reservist in the United States Air Force 

Reserves and proud of it. I found, when I got to Washington, that 

everyone in Washington, D.C., outranked me and still outranks me, 

but I was proud to serve, and I am a big fan of the reserves and 

the Guard. I think that the country needs a stable Reserve and 

Guard, and we encourage young men and women to be in both as 

a national defense. 

I am concerned, over the years since when I served,—it has been 

a long time ago—the Guard and Reserve seem to be on the national 

scale and with government sort of the stepchild to the military. 

Their mission was not as important, or they were not as capable 

as the standing military. I do not know that that still is the perception or not. Be that as it may, it is very important to me that we 

do all we can here. It is better for the reservists when they go back 

home as our home Guard. 

I noticed that the SBA does not support the chairman’s legislation, and one of the reasons is it would supposedly stretch the 

SBA’s limited resources. Bottom line: How much more money 

would the SBA need to properly implement the Entrepreneur Soldiers Empowerment Act? 

Mr. ELMORE. Is that a question, sir? 

Mr. POE. Yes. 

Mr. ELMORE. Well, if you do the math, and we were required to create another five centers funded at $200,000 each, presently we 

provide, maximum, $150,000 per center, so I think the math is 

15

pretty straightforward. The number of district offices that would 

require the local mentoring Committees would be $20,000 per location per year. In 2006, as I read the legislation, that would exceed 

a million dollars. 

I do not have the number at the top of my head, but obviously 

we are talking a couple of million dollars more, I think. 

Chairman AKIN. I think the numbers that the staff provided me on that would be you have got 10 regions at $200,000 each, so that 

is $2 million, so that is one piece of it is $2 million, and the other 

piece is really $1.3 million. So, Bill, you were right when you said 

it is just north of a million. We are looking at a total of $3.3 million, and the question is, is there a sufficient problem, and is there 

enough cost being picked up by families and people whose small 

businesses have been disrupted, whether this would be a good investment or a waste of money? That is what we have to figure out. 

Mr. POE. Mr. Chairman, that is the only question I have. 

Chairman AKIN. The second round of questions. Ms. Bordallo. 

Ms. BORDALLO. Thank you very much, Mr. Chairman. I have a 

couple of questions here for Mr. Holtz-Eakin. Is that correct? 

Mr. HOLTZ-EAKIN. That is correct. 

Ms. BORDALLO. Are you familiar with the federal government’s 

spending on veterans’ programs, and if so, can you give the Subcommittee a general idea of how much money we spend on veterans’ transition programs? 

Mr. HOLTZ-EAKIN. I do not know off the top of my head. We could 

certainly get back to you with that for the record. I would be happy 

to. 

Ms. BORDALLO. You do not have anything on the top of my head, 

ball park figure, really? 

Mr. HOLTZ-EAKIN. No. 

Ms. BORDALLO. Okay. Mr. Chairman, I might note here, just for 

the record, that I am very proud to be representing a small territory in the Pacific where we have more reservists and Guardsmen 

per capita than any state in the nation, and that is a fact. 

Now, the second part of the question: What is, in your opinion, 

the most important thing the Congress and the federal government 

can do to ease the burden of difficult deployments on small business? Should the Congress allocate more funds to current programs, or should the Congress seek to improve the functions and 

the programs themselves, or is it a combination of the two? 

Mr. HOLTZ-EAKIN. I think it would be useful for the Congress to 

target solutions to particular problems, and two problems exist 

which get intermingled. One is the problem for business owners 

and the survival of those businesses while key employees are away. 

The second is income maintenance for those individuals who are 

actually deployed. Those are not necessarily the same thing. They 

get intertwined, particularly with the self-employed. 

So one set of solutions should be to do what is necessary to provide the ability to fill the economic hole with finances while the deployment is away,—that can maintain businesses—and the second 

set of problems is coming up with appropriate ability for individuals to maintain their incomes while they are deployed, and that 

raises questions which spill over into appropriate manpower policy 

for the Department of Defense. Do you want to pay people difVerDate 0ct 09 2002 16:34 Jan 12, 2006 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 G:\HEARINGS\24879.TXT MIKE
16

ferently who might have the same skills and the same job in the 

reserves because of their civilian occupations? 

So separating those, I think, is the first step, and then clearly 

one would want to make as effective a use of federal resources as 

possible. Planning would certainly be helpful in this regard so that, 

to the extent that there are disaster assistance loans available, 

there is knowledge of that, that people plan and think about the 

application in advance so that they can fill the hole the moment 

the reservist is called up. 

Those are the kinds of things that, I think, would make all of the 

existing programs more effective. 

Ms. BORDALLO. Were there any others of the witnesses that want 

to elaborate on that question? I see a couple of you writing. Is there 

anything you wanted to share with us? 

Mr. ELMORE. I was writing ‘‘plan’’ because I think it reiterates 

what we were talking about, is focusing our resources to make sure 

that the Reserve and Guard self-employed have the ability to take 

those steps to plan for what is going to happen in the event of an 

activation. I think, at its core, that is where the work, and the 

work primarily on the part of the owner, him or herself, has to take 

place. I think that is the best way to minimize whatever the damage or disruption may be. 

Ms. BORDALLO. And getting back to your answer, are any of our 

current programs targeting those priorities that you mentioned? 

Mr. HOLTZ-EAKIN. Certainly, the military reservists’ economic injury disaster loans are about that problem. They are an attempt to 

fill the financial hole left in a small business, and the success of 

that program, I think, is one of the discussions we had earlier, 

whether enough people know about it— 

Ms. BORDALLO. I do not think the numbers—I thought they 

would be much higher than they are. I am surprised. I did not 

know there were that many that withdrew that you do not approve, 

so that was kind of a disappointment to me. But I would like to 

have those figures, Mr. Chairman, for the Committee. Thank you. 

Chairman AKIN. If we could get those numbers, that would be 

helpful. I think there were a few other questions that were prepared. I am not going to take everybody’s time on those, but we 

may have a few additional questions for the witnesses. 

Any other questions? If not, the hearing is adjourned. 

[Whereupon, at 11:29 a.m., the Subcommittee was adjourned.]

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