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[Senate Report 114-241]
[From the U.S. Government Publishing Office]

                                                     Calendar No. 109
                                                       
114th Congress }                                           { Report
                                 SENATE
 2d Session    }                                           { 114-241

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     THE SMALL BUSINESS DEVELOPMENT CENTERS IMPROVEMENT ACT OF 2015

                                _______
                                

                 April 21, 2016.--Ordered to be printed

                                _______
                                

Mr. Vitter, from the Committee on Small Business and Entrepreneurship, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 999]

    The Committee on Small Business and Entrepreneurship, to 
which was referred the bill (S. 999) to amend the Small 
Business Act to provide for improvements to small business 
development centers, having considered the same, reports 
favorably thereon with an amendment (in the nature of a 
substitute) and recommends that the bill, as amended, do pass.

                            I. INTRODUCTION

    The Small Business Development Centers Improvement Act of 
2015 (S. 999) was introduced by the Committee's Chair, Senator 
David Vitter, on April 16, 2015.
    The purpose of the Small Business Development Centers 
Improvement Act of 2015 is to improve the Small Business 
Development Centers (SBDCs) program and ensure SBDCs continue 
successful delivery of entrepreneurial development services to 
small businesses. SBDCs represent a key component of the Small 
Business Administration's (SBA) counseling and training 
programs for small businesses. In order to continue these 
services, the Small Business Development Centers Improvement 
Act of 2015 (by amending the Small Business Act\1\ requires 
limitations on the creation and funding of SBA initiatives 
outside those mandated by Congress. The legislation also 
strengthens the quality, scope, and performance of SBDCs 
through enhanced SBDC marketing and data privacy, allowance for 
accepting participation fees from community partners, 
responsible spending, broader servicing areas, and improved 
grant distribution.
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    \1\Originally, title II of the Act of July 30, 1953, c. 282, 67 
Stat. 232 was designated as the Small Business Act of 1953. A plethora 
of amendments in subsequent Congresses led to a rewrite in 1958. Pub. 
L. No. 85-536, Sec. 1, 72 Stat. 384 (1958). The Act is codified at 15 
U.S.C. 631-657s.
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    During the markup of the bill, the Vitter amendment to the 
bill was approved by voice vote. The Vitter amendment removes 
the requirement for an annual report on all entrepreneurial 
development activities undertaken in the current fiscal year. 
The bill, as amended, was also approved unanimously by voice 
vote.

              II. HISTORY (PURPOSE & NEED FOR LEGISLATION)

    The United States has consistently recognized the need to 
encourage entrepreneurship as a means to combat unemployment 
and promote economic development. Therefore, the SBA's mission, 
as evinced in the Small Business Act, 15 U.S.C. Sec. 631-57p, 
is to ``aid, counsel, assist, and protect, insofar as is 
possible, the interests of small business concerns . . .''\2\ 
In carrying out its mission to provide small businesses with 
assistance, the SBA oversees a number of programs that offer 
counseling to potential entrepreneurs and extant small business 
owners. The SBA itself does not generally carry out this 
training; in most circumstances, the agency enters into a 
cooperative agreement with another organization to offer such 
services. These parties are termed as resource partners by the 
SBA and are required to obtain a significant portion of their 
operating budgets from non-federal sources (be they private 
donors or state funds).
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    \2\Id. at 631(a)
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    The largest such program is set out in Sec. 21 of the Small 
Business Act, 15 U.S.C. 648. The program is denominated as the 
SBDC Program because the resource partners--SBDC grantees--
operate service centers where small business owners and 
potential entrepreneurs can receive free counseling. Typically, 
the grantee is an institution of higher education (but not 
always) and the grantee agrees to offer these services 
throughout a state or through a portion of the state.\3\ Since 
its inception, the SBDC program has been extremely successful 
in training and counseling small firms. For example, in fiscal 
year (FY) 2013, SBDCs trained over 330,000 clients and 
counseled over 201,000 clients. Further, in FY 2013 SBDCs 
assisted small business clients in obtaining $4.5 billion in 
financing.
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    \3\The grantee agrees to provide services throughout a state. For 
reasons not relevant to H.R. 4121, two states--California and Texas--do 
not have statewide grantees.
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    While the SBDC program has achieved many notable results, 
the program has not received a comprehensive modernization in 
several years. The Committee also has learned of certain 
operational challenges faced by SBDC grantees that hinder their 
ability to offer services to small business owners. The 
Committee has determined that these operational issues should 
be rectified legislatively. The majority of necessary 
legislative changes would be minor, such as statutorily 
prescribing that SBDCs may market their services and collect 
fees at partnership events, as well as eliminating the 
Administrator's ability to reimburse the SBA for administrative 
expenses associated with the SBDC program. In this case, as 
federal funding becomes scarcer, it is necessary to update the 
Small Business Act to ensure that SBDCs receive all funding 
allocated in the budget, and are able to obtain matching funds 
through self-promotion of the benefits of their program and 
fostering a fruitful relationship with local community 
partners.
    The SBA has three other resource partners focused on 
entrepreneurial training. Although their missions and scope of 
service territories also vary, the Women's Business Centers 
(WBCs) and Veteran Business Outreach Centers (VBOCs) operate in 
a fashion akin to that of the SBDCs. The other major 
entrepreneurial outreach program, SCORE, operates somewhat 
differently. Although SCORE also offers free advice (from 
volunteer active and retired business executives), SCORE is 
provided almost all of its funds from those appropriated by 
Congress. The SBA also is required to provide offices and other 
ancillary services to SCORE at no charge to SCORE or its 
clients.

                      III. HEARINGS & ROUNDTABLES

    In the 112th Congress:
    The Committee held a number of hearings during the 112th 
Congress related to the SBDCs and oversight of entrepreneurial 
development programs at the SBA. On July 21, 2011, the 
Committee held a hearing titled, ``Entrepreneurial Development: 
Obstacles and Opportunities for Supporting, Sustaining and 
Growing America's Entrepreneurs,'' which heard from relevant 
trade associations, small business owners, and the SBA 
regarding SBA's entrepreneurial development programs and 
possible legislative proposals to improve/reauthorize these 
programs. On November 29, 2012, the Committee held a hearing 
titled, ``Creating Jobs and Growing the Economy: Legislative 
Proposals to Strengthen the Entrepreneurial Ecosystem.'' This 
hearing was held to consider S. 3442, the SUCCESS Act, which 
included provisions limiting grant distribution to higher 
education institutions and eliminating the geographical 
restrictions for SBDC assistance after a presidentially-
declared natural disaster.
    In the 113th Congress:
    In the 113th Congress, the House Committee on Small 
Business held hearings relevant to the SBDCs and other 
entrepreneurial development programs at the SBA. One hearing, 
entitled `Entrepreneurial Assistance: Examining Inefficiencies 
and Duplication Across Federal Programs' on March 20, 2013, 
specifically examined inefficiencies, redundancies and other 
challenges to in the SBA entrepreneurial assistance programs. A 
witness from the Government Accountability Office (GAO) 
discussed a recent GAO report that addressed particular 
challenges to the SBDC program, including missed opportunities 
for more collaboration with other public and private programs 
as well as difficulties in obtaining data on the progress of 
SBDCs.
    On April 18, 2013, the Committee held a hearing entitled 
``The Budget Outlook for the Small Business Administration'' at 
which members, on a bipartisan basis, raised concerns with the 
then- administrator about the impact that these new initiatives 
would have on existing resource partners. Some members 
expressed concerns that creating new programs, rather than 
utilizing existing programs and resources, would cause 
confusion and result in less aid being delivered overall. 
Several members thought that the services provided under the 
new SBA initiatives could be provided under existing programs.
    On March 5, 2014, the House Committee on Small Business 
approved the Small Business Development Centers Improvement Act 
of 2014 (H.R. 4121). H.R. 4121 would have banned the SBA from 
prohibiting applicants receiving grants under the SBDC program 
from marketing and advertising their services. Additionally, 
the legislation would have revised privacy requirements, 
directed the SBA to consult with SBDC associations to develop 
documents governing data collection activities, would have 
prohibited the SBA from awarding grants under the SBDC program 
to entities other than not-for-profit institutions of higher 
education, and would have removed the geographic proximity 
requirement in situations involving a presidentially-declared 
disaster area. The Committee passed the bill, as amended, by 
voice vote.

                        IV. DESCRIPTION OF BILL

    S. 999 would require that all SBA-created initiatives be 
delivered through those authorized programs specifically cross-
referenced in this subsection. The exceptions to this overall 
prohibition, in subsections (a)(2)(A)-(E), relate to assistance 
offered to: small business concerns owned by an Indian tribe; 
activities and programs in support of a member of the Armed 
Forces, including the Reserves and National Guard, a veteran, 
or a spouse of a service member or a veteran; the PRIME, STEP, 
and FAST programs; and other initiatives in operation at the 
time the Committee considered this bill.
    The Small Business Act is silent on the question of whether 
SBDCs can market and advertise its products and services. This 
bill amends Section 21 of the Act to ensure the SBDCs are able 
to market and advertise their products and services. Greater 
awareness of the services available through the SBDCs will 
allow more small businesses to receive entrepreneurial 
assistance without imposing any more financial burdens on 
SBDCs, the SBA, or the taxpayer.
    In order for the SBA to provide Congress with information 
to properly evaluate entrepreneurial development programs, the 
SBA has attempted to gather better performance data. Some of 
the newly required information would force SBDCs to capture and 
report data that small businesses are reluctant to share. In 
cases where this information is of little value to the 
government, these requirements place an unnecessary burden on 
the SBDCs and will dissuade some small businesses from seeking 
SBDC assistance. This bill requires the Administrator to 
consult with the Association of Small Business Development 
Centers on the creation of documents governing data collection 
activities related to SBDCs.
    In order to obtain funding, SBDC grantees must match funds 
provided by the federal government with non-federal sources, 
such as private donations or state funds. Therefore, SBDCs 
often work alongside other community partners--such as a local 
chamber of commerce--to host events as a partnership or a co-
sponsor. In these instances, a participation fee may be charged 
to businesses by the partnership or cosponsoring party. 
However, under current law SBDCs are not allowed to collect the 
necessary fee. Therefore, this bill permits SBDCs to collect 
fees or other income related to the operation of partnerships 
or co-sponsorships. This authorization does not alter the no-
cost counseling provided by SBDCs to individual small 
businesses.
    Under current law, up to $500,000 of authorized funding to 
SBDCs could be utilized by the Administrator to pay for 
examination expenses associated with reviewing SBDCs. No other 
entrepreneurial development program has an allocation of funds 
to reimburse the SBA for the agency's administrative expenses. 
This section eliminates the award of $500,000 of SBDC grant 
monies to reimburse the SBA for program administration.
    This bill enables SBDCs to operate in other states, 
regardless of geographical proximity to the SBDC. Currently, 
SBDCs can only operate out-of-state if such activities are in a 
bordering state or otherwise ``in close geographical proximity 
to the SBDC.'' By allowing SBDCs to work within any state, 
SDBCs with extensive experience in particular natural disasters 
can assist other states which have significantly less 
experience during a disaster.
    A majority of SBDC grantees are partnered with higher 
education institutions which bolster SBDCs ability to obtain 
private matching funding as required under law. This bill 
prohibits entities other than institutions of higher education 
from becoming grantees under Sec. 21. An exception is provided 
for current SBDC grantees that are not institutions of higher 
education. These institutions may continue to renew their 
status as a grantee until they no longer wish to do so or the 
SBA determines that these grandfathered grantees are incapable 
of providing such services.
    The amendment removes the annual report on entrepreneurial 
development programs.

                           V. COMMITTEE VOTE

    In compliance with rule XXVI (7)(b) of the Standing Rules 
of the Senate, the following vote was recorded on April 23, 
2015.
    A motion to adopt the Small Business Development Centers 
Improvement Act of 2015, a bill to amend the Small Business Act 
to provide for improvements to small business development 
centers, as amended by the Vitter amendment, was approved 
unanimously by voice vote with the following Senators present: 
Senators Vitter, Risch, Fischer, Gardner, Ernst, Ayotte, Enzi, 
Shaheen, Cantwell, Cardin, Heitkamp, Booker, Coons, Hirono, and 
Peters.

                           VI. COST ESTIMATE

    In compliance with rule XXVI (11)(a)(1) of the Standing 
Rules of the Senate, the Committee estimates the cost of the 
legislation will be equal to the amounts discussed in the 
following letter from the Congressional Budget Office:

                                                      May 29, 2015.
Hon. David Vitter,
Chairman, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 999, the Small 
Business Development Centers Improvement Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

S. 999--Small Business Development Centers Improvement Act of 2015

    S. 999 would direct the Small Business Administration (SBA) 
to develop procedures to collect data about Small Business 
Development Centers (SBDCs) that receive grants from the 
agency. The bill also would amend rules affecting SBDCs by, for 
instance, allowing them to market their services.
    Based on information from the SBA, CBO estimates that 
implementing S. 999 would cost less than $500,000 per year over 
the 2016-2020 period, assuming availability of appropriated 
funds, for additional data collection and monitoring 
activities. Enacting S. 999 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    S. 999 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Susan Willie. 
The estimate was approved by Theresa Gullo, Assistant Director 
for Budget Analysis.

                  VII. EVALUATION OF REGULATORY IMPACT

    In compliance with rule XXVI (11)(b) of the Standing Rules 
of the Senate, it is the opinion of the Committee that no 
significant additional regulatory impact will be incurred in 
carrying out the provisions of this legislation. There will be 
no additional impact on the personal privacy of companies or 
individuals who utilize the services provided.

                   VIII. SECTION-BY-SECTION ANALYSIS

Section 1. Short title

    This section provides for the title, ``Small Business 
Development Centers Improvement Act of 2015''.

Section 2. Use of authorized entrepreneurial development programs

    Currently, the Administrator is creating and separately 
funding initiatives developed by the agency. This section 
provides that all SBA-created initiatives must be delivered 
through the programs authorized in sections 7(j), 7(m), 8(a), 
8(b)(1), 21, 22, 29, and 32 of the Small Business Act. The 
exceptions to this restriction, in subsections (a)(2)(A)-(E), 
are as follows: small business concerns owned by an Indian 
tribe; activities and programs in support of a member of the 
Armed Forces, including the Reserves and National Guard, a 
veteran, or a spouse of a service member or a veteran; the 
PRIME, STEP, and FAST programs; and other initiatives in 
operation at the time the Committee considered this bill.

Section 3. Marketing of services

    The Small Business Act is currently silent on the question 
of whether SBDCs can market and advertise their products and 
services. Greater awareness of the services available through 
the SBDCs will allow more small businesses to receive 
entrepreneurial assistance without imposing any more financial 
burdens on SBDCs, the SBA, or the taxpayer. This section amends 
Section 21 of the Small Business Act by adding a new subsection 
(o), which restricts the Administrator from prohibiting 
applicants receiving grants under Section 21 of the Small 
Business Act from marketing and advertising their services to 
individuals and small businesses. This ensures the SBDCs are 
able to market and advertise their products and services.

Section 4. Data collection

    In order for the SBA to provide Congress with information 
to properly evaluate entrepreneurial development programs, the 
SBA has attempted to gather better performance data. Some of 
the new required information would force SBDCs to capture and 
report data that small businesses are reluctant to share. In 
cases where this information is of little value to the 
government, these requirements place an unnecessary burden on 
the SBDCs and will dissuade small businesses from seeking SBDC 
assistance. This section requires the Administrator to consult 
with the Association of Small Business Development Centers on 
the creation of documents governing data collection activities 
related to SBDCs.

Section 5. Fees from private partnerships and co-sponsorships

    In order to obtain funding, SBDC grantees must match funds 
provided by the federal government with non-federal sources, 
such as private donations or state funds. Therefore, SBDCs 
often work alongside other community partners, such as a local 
chamber of commerce, to host events as a partnership or a co-
sponsor. In these instances, a participation fee may be charged 
to businesses by the partnership or cosponsoring party. 
However, under current law SBDCs are not allowed to collect the 
necessary fee. Therefore, this bill permits SBDCs to collect 
fees or other income related to the operation of partnerships 
or co-sponsorships. This authorization does not alter the no-
cost counseling provided by SBDCs to individual small 
businesses.

Section 6. Equity for Small Business Development Centers

    Under current law, up to $500,000 of authorized funding to 
SBDCs could be utilized by the Administrator to pay for 
examination expenses associated with reviewing SBDCs. No other 
entrepreneurial development program has an allocation of funds 
to reimburse the SBA for the agency's administrative expenses. 
This section eliminates the award of $500,000 of SBDC grant 
monies to reimburse the SBA for program administration, 
consistent with other entrepreneurial development programs.

Section 7. Assistance to out-of-state small businesses

    Currently, SBDCs can only operate out-of-state if such 
activities are in a bordering state or otherwise ``in close 
geographical proximity to the SBDC.'' This restricts SBDCs that 
have specialized experience dealing with certain natural 
disasters from assisting SBDCs in other regions outside of the 
current statutory limitations that are inexperienced with said 
natural disaster. For example, during Hurricane Sandy SBDCs in 
the affected and neighboring states had relatively little 
experience responding to major hurricane disasters compared to 
Gulf state SBDCs. Affected states during Hurricane Sandy could 
have greatly benefited from the Gulf states' SBDC assistance; 
however, current statutory law restricts their aid. 
Consequently, this provision enables SBDCs to operate in other 
states, regardless of geographical proximity to the SBDC, which 
follows the precedent of WBCs and SCORE, neither of which have 
territorial limitations.

Section 8. Confidentiality requirements

    The SBA's current operational guidelines for the SBDC 
program require that SBDCs collect certain information on the 
businesses they counsel. This information is the basis for some 
of the performance metrics the agency uses to determine the 
effectiveness of the SBDCs in fulfilling their mission. Some of 
the information collected for this purpose, while relevant and 
necessary for the SBA and SBDCs, is sensitive information that 
small businesses wish to have treated as confidential. This 
sensitive information--such as the name of business--is not 
necessary to develop performance metrics. However, its forced 
disclosure could dissuade businesses from seeking assistance 
through the SBDCs, thereby undermining the intent of Congress 
when it created the SBDCs. Therefore, this section amends 
Section 21(a)(7)(A) of the Small Business Act to prohibit the 
SBA from distributing and sharing SBDC client information with 
other parties. This reinforces longstanding efforts to ensure 
the confidentiality of information that small businesses 
provide to SBDCs.

Section 9. Limitation on awards of grants to Small Business 
             Development Centers

    A majority of SBDC grantees are partnered with higher 
education institutions which bolster SBDCs ability to obtain 
private matching funding as required under law. This section 
prohibits entities other than institutions of higher education 
from becoming grantees under Section 21. An exception is 
provided for current SBDC grantees who are not institutions of 
higher education. These institutions may continue to renew 
their status as a grantee until they no longer wish to do so or 
the SBA determines that these grandfathered grantees are 
incapable of providing such services. Additionally, this 
provision also clarifies that this new limitation should not 
prohibit grant recipients from entering into grants, contracts, 
or cooperative agreements with any other entity.

                                  [all]
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