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65–326 2011

HEARING ON THE SMALL BUSINESS 

ADMINISTRATION FISCAL YEAR 2012 BUDGET 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

HEARING HELD 

March 2, 2011 

Small Business Committee Document Number 111–059 

Available via the GPO Website: http://www.access.gpo.gov/congress/house 


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(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

ROSCOE BARTLETT, Maryland 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

CHUCK FLEISCHMANN, Tennessee 

JEFF LANDRY, Louisiana 

JAIME HERRERA BEUTLER, Washington 

ALLEN WEST, Florida 

RENEE ELLMERS, North Carolina 

JOE WALSH, Illinois 

LOU BARLETTA, Pennsylvania 

RICHARD HANNA, New York 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

MARK CRITZ, Pennsylvania 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

JUDY CHU, California 

DAVID CICILLINE, Rhode Island 

CEDRIC RICHMOND, Louisiana 

GARY PETERS, Michigan 

BILL OWENS, New York 

BILL KEATING, Massachusetts 

LORI SALLEY, Staff Director 

PAUL SASS, Staff Director 

BARRY PINELES, General Counsel 

MICHAEL DAY, Minority Staff Director 


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C O N T E N T S 

Page 

OPENING STATEMENTS 

Graves, Hon. Sam .................................................................................................... 1 

Vela ́zquez, Hon. Nydia M ........................................................................................ 2 

WITNESSES 

Mills, Hon. Karen G., Administrator, United States Small Business Administration, Washington, DC ...................................................................................... 3 

APPENDIX 

Prepared Statements: 

Mills, Hon. Karen G., Administrator, United States Small Business Administration, Washington, DC ...................................................................................... 5 


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HEARING ON THE SMALL BUSINESS 

ADMINISTRATION FISCAL YEAR 2012 BUDGET 

WEDNESDAY, MARCH 2, 2011 

HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, DC. 

The Committee met, pursuant to call, at 1:00 p.m., in room 2360, 

Rayburn House Office Building. Hon. Sam Graves (chairman of the 

Committee) presiding. 

Present: Representatives Graves, Chabot, Coffman, Ellmers, Herrera Beutler, Fleischmann, Landry, West, Vela ́zquez, Schrader, 

Critz, Altmire, Clarke, Chu, Cicilline, Richmond, Owens, and 

Keating. 

Chairman GRAVES. I will call this hearing to order, and I want 

to welcome everybody today. 

At today’s hearing we’re going to hear about the President’s proposed fiscal year 2012 budget for the Small Business Administration. I would like to welcome Administrator Karen Mills back to 

the Committee. 

The mission of the SBA is to promote the growth of small businesses throughout the United States and in doing so, the agency 

tries to be all things to all small businesses, from a start-up in the 

inner city to a mature business in remote areas of rural America. 

Given the importance of the small business to the American 

economy, the breadth of the mission is laudable. In a different 

time, we might be able to afford funding for this broad mission but 

unfortunately we do not have that luxury. The government’s fiscal 

situation is dire. Even agencies and programs that we view as valuable will need to do their part in reducing unsustainable federal 

expenditures. 

The fiscal situation requires that the mission of the SBA be 

pared back to core objectives, enabling small businesses to obtain 

capital in credit so they can create jobs, assisting small businesses 

and penetrating the federal procurement arena, and counseling 

America’s entrepreneurs. In assessing these core functions, we 

must focus on those programs that are most efficient in helping 

small businesses create jobs while reducing the financial risk to the 

federal taxpayers. Programs that do not meet these objectives are 

going to have to be cut, and programs that meet these standards 

should be strengthened. 

I look forward to hearing the Administrator’s testimony and explanation of the President’s budget and how it meets these core 

missions of the SBA while recognizing the current fiscal constraints 

facing the Federal Government today. And again, I welcome you 


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and I will now turn to Ranking Member Vela ́zquez for her opening 

statement. 

Ms. VELA ́ ZQUEZ. Thank you, Chairman Graves. And welcome Administrator Mills. 

As we begin our consideration of SBA’s budget request, it is critical that we do so with one eye on the small business economy. Due 

to the financial crisis beginning in 2007 and ensuing recession, 

small firms have faced challenges on several fronts. However, it 

now appears that small firms are poised to turn the corner. Importantly, credit conditions have eased and optimism concerning revenue growth and the general economy has improved. This result in 

increased business confidence suggests small firms will increase 

employment within the next year. Ten years ago, in fiscal year 

2002, small businesses were facing extremely similar challenges 

during a period of fiscal restraint. As the country began to emerge 

from the recession that began in early 2001 the SBA stood by ready 

to help. At that time the agency spent $973 million, only one percent less than its request of $985 million for fiscal year 2012. 

Today we find ourselves in a familiar position trying to make 

sure that small businesses have the tools they need to succeed and 

create jobs, but also doing so in a manner that is responsible to the 

taxpayer. With this in mind I am troubled by the agency’s continued use of limited budget authority to fund unauthorized pilot programs. For fiscal year 2012, the SBA proposes to operate seven 

such initiatives. This includes the Small Loan Advantage Program, 

the Community Advantage Program, the Impact Investing Fund, 

the Early Stage Innovation Fund, Regional Clusters, the Distance 

Learning Program and the Emerging Leader Programs. The cost of 

the last three alone makes up nearly 10 percent of the SBA’s noncredit programs’ budget submission. 

Most worrying is that these programs were launched without the 

public hearings and legislative record that accompanies statutorily 

authorized programs. Therefore, it is impossible to understand why 

these programs were created and whether or not they are a good 

investment for the taxpayer. In addition, several of these programs 

are clearly duplicative of other agency offerings. 

The reality is that these are lean times. Everyone has to tighten 

their belt and this includes the SBA. Instead of using these resources for pet projects, the agency should instead be focusing on 

addressing the priorities raised by its own inspector general. The 

first two programs the IG raises in its own budget submission are 

especially critical and if addressed properly will save taxpayers’ 

money by reducing waste, fraud, and abuse. 

The first program the IG identifies is regarding the SBA loan 

programs. It finds that the agency faces a heightened risk of loss 

due to expedited loan processing initiatives and its considerable reliance on outside financial institutions. It further notes the majority of loans made under the 7(a) program are made with little or 

no review by the SBA prior to loan approval because SBA has delegated most of the credit decisions to lenders. 

Numerous IG criminal investigations have identified fraud by 

borrowers, loan agents, lenders, and other participants in SBA’s 

business loan programs. In addition, the IG raises concern about 

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lion in prime contracts were awarded through these programs. 

However, IG audits, as well as GAO investigations, have identified 

numerous instances where firms that do not meet this program’s 

eligibility criteria were improperly given contracts anyway. 

These two issues are of such significant magnitude that instead 

of being buried in the back of the budget submission they should 

be front and center. I intend to work with members of this committee to change this. 

As part of the budget process, this committee is required to submit its views and estimates to the Budget Committee. Per tradition, the minority will be submitting its own letter, and in it we 

will be recommending that the funding requests for all pilot 

projects be either denied outright or made available to reduce fraud 

and waste in the SBA programs. Doing so is but a small step, but 

it is essential as we try to balance the objective of being fiscally responsible while ensuring that small businesses have the resources 

they need. This is a challenge but it is imperative that we overcome it. If we can, small firms will have the tools they need to succeed and create jobs, while taxpayers can be assured that their 

money is being managed responsibly. 

In advance of her testimony, I want to thank Administrator Mills 

for appearing here today and providing her insight into the agency’s funding for fiscal year 2012. 

Thank you. And I yield back. 

Chairman GRAVES. Thank you very much, Ms. Vela ́zquez. And 

now I will turn it to Administrator Mills, who is here as—I talked 

to her about I guess it was a month ago or so about coming in and 

talking to us, the committee, about what is working, what is not 

working. And Administrator Mills, I will turn it over to you and 

you have all the time you need. 

STATEMENT OF KAREN MILLS, ADMINISTRATOR, UNITED 

STATES SMALL BUSINESS ADMINISTRATION 

Ms. MILLS. Well, Thank you very much. Chairman Graves, Ranking Member Vela ́zquez, and members of the committee, I am very 

pleased to testify before you. 

Small businesses are the backbone of our economy. They create 

nearly two out of three new jobs and more than half of working 

Americans either own or work for a small business. The SBA is a 

small agency but we have a big mission. We put the maximum possible resources directly into the hands of small businesses, focusing 

on the three Cs of capital, contracting, and counseling. Last year 

we helped over 50,000 small businesses get the capital to grow and 

hire. We helped put about 100 billion in federal contracts in the 

hands of small businesses, and we counseled more than a million 

small businesses across your districts and throughout the country. 

We put these resources in their hands while providing taxpayers 

a big bang for their buck. For example, after credit froze in 2008, 

the Recovery Act and the Small Business Jobs Act supported more 

than 42 billion in SBA loans at a cost of just 1.2 billion in subsidy. 

Many small businesses suffered greatly during the recession. Our 

job is to support them as they grow and create jobs and that job 

is not done. 


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The President’s proposed fiscal year 2012 budget for the SBA of $985 million will support up to 27 billion in loan guarantees, as 

well as many other tools and resources to help them do just that. 

At the same time this budget reflects a commitment to tighten our 

belts, streamline our processes, and eliminate duplication. This includes some of your ideas. For example, we looked hard at our 

technical assistance programs and as a result we proposed eliminating the Prime Program. With the work of our micro lenders and 

new efforts to recruit community-based lenders, we can continue to 

provide this important technical assistance but in a more cost effective way. 

In addition, due to process reengineering, our disaster loan operations are now much more efficient. We can preserve our level of 

preparedness with a steady stayed core staff level of 850 instead 

of 1,000 along with our 2,000 reservists. The largest increase in 

this budget reflects the fact that we have reached the statutory 

limit for fees that we can assess. We request additional subsidy because losses, including those from loans approved when collateral 

such as real estate was inflated, have pushed up subsidy costs. We 

also request a legislative fix to return to near zero subsidy. We also 

request incremental increases for the new women’s contracting program and continued efforts to remove waste, fraud, and abuse in 

contracting. 

Overall our priorities are twofold. Our focus is on SBA programs 

that put money and support directly into the hands of small business owners in the places they live, and we will continue to invest 

in oversight to preserve the integrity of these programs and to protect the interests of taxpayers. 

I look forward to working with all of you to continue to ensure 

that small businesses are succeeding because as you know, when 

they succeed, America succeeds. Thank you very much. 

[The statement of Ms. Mills follows:] 


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Chairman GRAVES. We will now obviously move into questions, 

and in fact, I am going to go ahead and start with the ranking 

member and then move through the members because I know a lot 

of times they are trying to get out of here. I have budgeted the 

afternoon so I can ask my questions at the end. So ranking member. 

Ms. VELA ́ ZQUEZ. Ms. Mills, Administrator, the SBA budget proposes spending $161 million more than it did in fiscal year 2010. 

However, while the overall budget is increasing, it proposes to reduce core SBDC funding and microloan technical assistance, while 

also eliminating the PRIME program. At the same time it is flat 

funding the Women’s business center and veterans’ business development programs. These cuts make it all the more strange that the 

agency has found millions of dollars to spend on seven programs 

that are unauthorized and untested. To me it sounds like this is 

capricious. Why cut programs that we know work and instead put 

the money in initiatives that are unproven and lack any performance measures to even know if they actually work? 

Ms. MILLS. Thank you, Ranking Member Vela ́zquez, for this 

question. 

Let me start with our cutting the PRIME program. As you know, 

it is very hard for us right now in this fiscal era. Everyone has to 

tighten their belts. And so we are looking across all of our technical 

assistance programs and our counseling programs and looking for 

where we can identify programs that are duplicative. 

Ms. VELA ́ ZQUEZ. My question is not for you to come and justify 

these programs or not justify those programs. My question is why 

are you cutting programs that we have measured metrics and it 

tells us that they work. Every member of this committee can talk 

to us about the role that small business development centers, the 

women’s business development centers play in their district, and 

yet, you are cutting those programs that are working and creating 

seven new programs that have not been authorized by this committee, by the Congress, that are untested. So what is your rationale to cut those that have a proven record versus those pilot 

projects that you are creating? 

Ms. MILLS. Right. On an incremental cost basis we are looking 

at all the places where we can tighten our belts. 

Ms. VELA ́ ZQUEZ. Well, we, too. We are looking. And I will strongly recommend to the Chairman and I will do my part on my end 

that we recommend to cut all those new programs that are untested, that do not have any proven record since we have to act in a 

fiscally responsible way. My question to you—— 

Ms. MILLS. Can we just come back to—go ahead. 

Ms. VELA ́ ZQUEZ. In the grant announcement for the Jobs Act, 

SBDC grants, the SBA states that this funding has the primary objective of supporting job creation and retention. Based on your testimony, however, you suggest that the Jobs Act funding will be 

used to make up for the $10 million reduction to the SBDC funding 

in fiscal year 2012. So my question is, is this now the position of 

the agency that SBDCs can use the Jobs Act funding to pay for 

core SBDC operations and in doing so satisfy the job creation requirements? 


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Ms. MILLS. As you point out, small business development centers 

are a critical and important and valued part of our activity at the 

SBA. And as you know, counseling is one of our critical activities. 

We have many other places that we do counseling, also as you 

point out, that are supported in this budget, including the women’s 

business centers. It is a very hard decision where to tighten our 

belts. After much thought and analysis we have lots of great programs. We note that the $50 million that was given to the SBDCs 

in the Jobs Act was for job creation. 

Ms. VELA ́ ZQUEZ. I just need a yes or no answer. My question to 

you is—— 

Ms. MILLS. It is not—— 

Ms. VELA ́ ZQUEZ. Is it now the position of the agency that the 

SBDC can use the Jobs Act funding to pay for core SBDC operations? 

Ms. MILLS. It is not the position of the agency to change anything in the Small Business Jobs Act direction for that $50 million. 

Ms. VELA ́ ZQUEZ. In a release yesterday by GAO, they found that 

the SBA has not yet developed outcome measures that directly link 

to the mission of the HUBZone program. Nor has the agency implemented its plan to conduct an evaluation of the program based on 

variables tied to its goal. Furthermore, when GAO inquired about 

the effectiveness of the program, SBA provided a copy of an Office 

of Advocacy Report from May 2008 that stated that the program 

has had limited effect. So what outcome measures and data can 

you provide us that will show that this program is accomplishing 

its mission? 

Ms. MILLS. As you know, we have focused very hard on the 

HUBZone program in a number of ways. The first focus, and I 

think it was something that this Committee raised with me from 

the beginning, was on eliminating fraud, waste, and abuse in that 

program. And that we have attacked with great vigor. We have reengineered the upfront criteria for that program to make sure it 

goes to the intended recipients. We have increased our oversight of 

the program on an ongoing basis. We used to, the year before I 

came, do seven visits. This year we will do over 1,000 and we are 

implementing, as you know, enforcement. So we are cleaning up 

that program. 

Ms. VELA ́ ZQUEZ. And so what are the bases for the GAO report 

yesterday? So are you telling me that their conclusions are wrong? 

Ms. MILLS. We are in ongoing evaluation of all programs. We 

track all kinds of metrics about the HUBZone program which we 

are pleased to share with you and GAO. But the priority when we 

came in, and I think this was shared by a number of members in 

this committee, was to get after the fraud, waste, and abuse. And 

that has been our first priority. 

Ms. VELA ́ ZQUEZ. When do you think you will be able to come before this committee—and you have been here before, specifically 

and particularly about the HUBZone program—when do you think 

you will be able to provide reliable information as to whether or not 

this program is effective? 

Ms. MILLS. Happy to take that back and come back to you with 

a proposed timing for exactly that. 


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Ms. VELA ́ ZQUEZ. Well, last year you were here before us and if 

we could go back to the congressional record of this committee we 

will find the same question with the same answers. 

With that, Mr. Chairman, I yield back. 

Chairman GRAVES. Mr. Fleischmann. 

Mr. FLEISCHMANN. Thank you, Mr. Chairman. Ms. Mills, thank 

you. I am Chuck Fleischmann. I represent Chattanooga, Tennessee 

3 and was privileged yesterday to speak on the House floor about 

our great job creation and small business in Chattanooga. And I 

thank you for being here today. 

I just have one question. What additional resources, if any, does 

the SBA need to root out potential fraud in the SBIR program? 

Ms. MILLS. The SBIR program, as you know, is something that 

we oversee with 11 agencies participating. We have just instituted 

what we call SBIR 2.0, where we have done a number of things to 

improve the technical information gathering on that program and 

also to improve the websites and the accessibility of information on 

that. And we are engaged in I think bringing the SBIR program 

forward in a more coordinated way across the 11 agencies because 

each one implements it slightly differently. And we believe that 

small businesses with ideas to commercialize have really had a 

very strong record from the SBIR program. About a quarter of 

R&D Magazine’s top 100 innovations were actually funded by 

SBIR. So we are looking at and continuously right now on an improvement track for that entire program, particularly the data aspects of it. 

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

Chairman GRAVES. Mr. Cicilline. 

Mr. CICILLINE. Thank you, Mr. Chairman. And thank you, Administrator Mills. Welcome to the committee. It is great to see you. 

I am a new member of this committee and very interested in 

doing everything that we can to work with you and the agency in 

supporting small businesses. As you know, I am from Rhode Island 

and we estimate there are 96,000 small businesses in Rhode Island 

and it really is the backbone of our economy. And I want to compliment your staff in Rhode Island. The SBA office has been a terrific partner in the work that I have done as mayor of the capital 

city. And I have worked very closely with Mark Hayward and others and I just want to compliment you on the staff in Rhode Island. 

I am particularly interested to know about the Small Loan Advantage program and the New Markets Venture Capital program. 

I recognize there is some interest in continuing existing programs 

that our ranking member has discussed but I am also interested 

in the SBA’s ability to respond to kind of the new economy and to 

particularly this venture capital approach. I think as we are trying 

to build the knowledge economy and be a state and a country of 

entrepreneurs and innovators, access to capital in those early 

stages is very difficult and not an area I think that government has 

traditionally been involved and certainly the SBA. So it sounds as 

if you are responding to that kind of new part of our knowledge 

economy. And I would like you to know that in Rhode Island there 

is a very active and thriving small business effort in a number of 

places that our office interacts with. 


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Ms. MILLS. We have announced, as part of a government-wide 

program called Start Up America, several initiatives around high 

growth, high impact, innovative companies. And we know that job 

creation is really centered in a relatively small number of very high 

growth companies. We also are serving Main Street companies. You 

know, when a restaurant opens and a restaurant closes on Main 

Street, we will be there for them. But these high growth companies, we have a capital gap and our SBIC program has traditionally been in that area. Now, this is a zero subsidy program so it 

does not increase taxpayer cost, but we have announced two funds 

focused on having an impact in this area. One in early stages 

where there is a capital gap. I think that this Committee has 

talked about this capital gap. And the other in areas that are regions in transformation or particular sectors in transformation. So 

there will be $2 billion of SBIC funds, which is within the existing 

authority limits at zero cost to taxpayers going—available for public-private partnerships to address these small businesses. 

Mr. CICILLINE. Thank you. In addition, I am particularly interested in whether or not there are any initiatives underway that are 

focused specifically on manufacturing. I think the issue of both tax 

and trade policies obviously have a huge impact, but we have a 

very robust manufacturing cluster in Rhode Island and I am really 

committed to figuring out how we help small businesses that are 

doing manufacturing. How do we strengthen the manufacturing 

sector in our economy? And I don’t know if there is anything specific that the SBA is doing in the area of manufacturing, but if 

there is I would love to know more about that as well. 

Ms. MILLS. Well, we would be happy to come and talk to you 

about an array of things that we do across our SBA programs. I 

come from a manufacturing background. Manufacturing in this 

country is not dead and we have many, many small businesses 

doing innovative manufacturing in every single state. I visited lots 

of them, you know, from metal steel slitting in Cleveland, which we 

still—we just supported with a machinery loan. So we are very actively engaged in supporting our manufacturers. In addition, many 

of them have export potential, so our export programs also give 

them the opportunity to get more sales and create more jobs here. 

Mr. CICILLINE. Thank you so much. I yield back the balance of 

my time. 

Chairman GRAVES. Ms. Ellmers. 

Mrs. ELLMERS. Thank you, Mr. Chairman. And thank you, Ms. 

Mills, for being with us today. It was a pleasure seeing you in our 

office a couple of weeks back. And as a small business owner I 

know what a vitally important piece to the puzzle you are contributing to us here in this economy today and getting things back on 

track. So thank you. 

And I have a kind of a specific question for you in the area along 

the fraud, waste, and abuse side, one that some of my constituents 

have brought to me who are in the business of getting government 

contracts. Basically, my understanding, and maybe you can help 

me with this, as far as reaching out to the certain percentage of 

Small Business Administration efforts, grants and whatnot to 

women, minorities, in helping them to gain some of the government 

contract positions, and then having another entity actually, almost 


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as a front and then another entity coming forward and actually 

taking over the work section of that, can you shed a little light on 

that and maybe what the Small Business Administration is able to 

do to alleviate this bit of fraud and abuse? 

Ms. MILLS. Fraud, waste, and abuse has been a primary focus for 

the SBA since I took over because of exactly the reason that you 

mention. These programs are intended for the small businesses; 

they are not intended for the big business masquerading as small 

businesses or for some pass through. We have gone after that quite 

aggressively. We have a three-prong strategy. We look at every single program, and what we do is we try to strengthen the upfront 

criteria that they have to meet. Then we are looking after the ongoing evaluations, the audits, to make sure that they are small businesses performing the tasks that are supposed to be performed. 

And the third is we enforce against bad actors. And you have seen 

us act aggressively on all three of those activities. 

In addition, the President’s task force on procurement addressed 

this specific issue and it was further addressed in the Small Business Jobs Act. We have also clarified in the new 8(a) Regulations, 

the first redo of the regulations in 10 years, exactly what—and 

closed loopholes so that when a small business gets the contract 

they are performing the anticipated amount of the work. 

Mrs. ELLMERS. Thank you so much, Ms. Mills. And Mr. Chairman, I yield back the rest of my time. Thank you. 

Chairman GRAVES. Mr. Critz. 

Mr. CRITZ. Thank you, Mr. Chairman. Ms. Mills, it is good to see 

you. Thanks for coming in. 

I do have some concerns, and I think the ranking member 

brought up some of the concerns that I have. Being based in rural 

Pennsylvania, rural America, is that with reducing or leveling 

funding for programs like SBDCs, WBCs, Veterans Assistance, 

these are programs that have worked very well, I believe, in our 

part of the world. And I have three SBDCs that aren’t actually in 

my district but they are just outside and I know scores of people 

that go to them. And as we are leveling or reducing funding for 

these, we are increasing funding for programs that are actually unauthorized programs or programs that are not authorized by this 

committee. So I am reading them to see, because I am a reasonable 

human being, what a regional innovation cluster is, which I see 

that is one of the programs that is receiving funding. And, you 

know, what is unfortunate for my area of the world is that when 

you talk about clusters, rural America is not usually a place where 

you are going to have a cluster. It is not someplace that unless 

something major happens like the discovery of a natural gas deposit, that you are going to see things like this. So it is hit or miss 

for us. 

And then I also read another program which is called the Emerging Leaders program, which is a great program training executives 

in inner city urban areas, Native American, but let me tell you. In 

rural America we have poor people, too. And we have people that 

could use help and that are underserved. And you are pulling 

money out of programs that help folks in my neck of the woods to 

go to other programs. I am just curious what the rationale is for 

that. 


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Ms. MILLS. Well, let me clarify, number one, that clusters exist 

absolutely in rural America. My first involvement with clusters was 

in rural Maine, which is my home state. And the cluster was the 

Maine Boat Builders. And there is probably nobody less likely to 

cluster than Maine Boat Builders but in fact they did. And the 

Maine economy, which had been relying on textiles and shoes and 

pulp, is now—— 

Mr. CRITZ. If I may interrupt one second. So you had the Boat 

Builders already there. So there already was a cluster of companies 

that were trying to form together. See, in my area there is nothing 

like that. It is a very diverse group of people who are really just 

scraping by sometimes to get the work. So I am sorry to interrupt 

but I think there is, like I said, there is something there already 

that provided the impetus for the cluster. 

Ms. MILLS. But once again, across rural America, and I just did 

a call yesterday with Secretary Vilsack and we are very strongly 

partnered with USDA in a number of areas. We just did a MOU 

with them on exactly the kind of activities you talk about, which 

is to engage in rural America with our joint programs and activities. But I will tell you that one of the clusters that we awarded 

with the funding that we just did a competition on is in the agriculture area. Do not make the mistake of thinking that these are 

urban cluster activities. They go everywhere from Akron, Ohio. 

They go from the Gulf Coast in Louisiana. They are in the smart 

grid. They are in upper Michigan. There is a Green Aviation Coalition. They are everywhere. They are everywhere, including rural 

America. The reason why they are important is that they use the 

assets on the ground of the small businesses and the small business development centers who are generally at the heart of these 

cluster activities. And they link, leverage, and align resources 

around collections of small businesses. Small businesses do not 

have the power to access research and development, community 

college curriculum in the way that big businesses do. They don’t 

have the market power until they cluster together. That is what we 

learned in rural areas, as with the Boat Builders. And they may 

have existed but they were not part of the economy in an active 

way. When they cluster together we got research on composites 

from the university driven to that cluster. That is how you access 

resources in a region and develop a transforming economy. So these 

are critical programs. 

We used to do our programs, our fabulous programs in silos. Now 

to get more bang for the buck you need to link, leverage, and align 

all the things that are happening on the ground. That is what happens in a cluster for very, very small investments. 

Mr. CRITZ. And before I run out of time I want to bring up one 

item that is very near and dear to my heart is the veterans of our 

country. And President Obama authored or had the Military, Reservists and Veterans Small Business Reauthorization Opportunity 

Act, and I noticed in the budget that there is no request for funding 

to help our veterans who are experiencing, especially from Iraq and 

Afghanistan an inordinate amount of unemployment. And we have 

a lot of smart people in our military and I want to just get that 

out there. I am out of time. I yield back but it seems that we are 

missing an opportunity here. 


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Chairman GRAVES. Mr. Coffman. 

Mr. COFFMAN. Thank you, Mr. Chairman. 

My question is what programs that you have right now do you 

think are most effective in terms of job creation that the SBA does? 

Give me a single program that you think is the most effective right 

now. 

Ms. MILLS. We have a three-pronged approach we call our three 

Cs. Capital, contracts, and counseling. And they go together. Our 

most, largest program is actually making sure $100 billion of government contracts go into the hands of small business. Our most 

known program I think is the 41 billion that we put in the hands 

of small business at a time when they could not get credit at a cost 

of only 1.2 billion. But in fact, counseling pulls it all together, and 

sometimes if you give a small business the money and you do not 

give them the advice and the counseling that they need it is not 

a complete formula. 

Mr. COFFMAN. And let me just say, Madam Secretary, these people who do counseling, when I was in small business I noticed that 

some of them really did not have the kind of business background 

that were helpful to me. Are all the people that do this kind of 

work former small business entrepreneurs? 

Ms. MILLS. We have a series of activities that help small business in all different kinds of counseling. They range from our small 

business development centers to our retired executives who are in 

our SCORE activity who generally have come out of entrepreneurship or business, to our microloan technical assistance intermediaries who help and counsel and advise and provide technical 

assistance to those in our women’s business centers and our veterans centers. And in the large part they are day-to-day very well 

versed not only in how business operates but in what is available. 

Mr. COFFMAN. What percentage would you say that, let us take 

the SBDC, what percentage of those folks would you say were 

former small business owners? 

Ms. MILLS. I am happy to provide that to you. 

Mr. COFFMAN. Could you? Thank you very much. 

And then I have a question about the 8(a) program. And I think 

it was raised by Congresswoman Ellmers about the fraud issues in 

the program. And I think you said, and I am happy to hear it, that 

since you have been Administrator of the SBA, that in fact you 

have been very focused on these issues of fraud where you have 

these shell entities come in and engage in fraud. Can you give me, 

you might not be able to do it today; but I would like to know how 

many successful investigations there have been on fraud? Once 

these 8(a) designations are made, how many successful entities 

have been investigated? Because I think that this is rampant. And 

I know when I had competitors in small business going for government contracts, some of the things that they did. So I am wondering if you could get back to the committee on some specifics on 

that. 

Ms. MILLS. I will be happy to get back to you, and I will be 

happy to tell you that the number of investigations is going up. 

Mr. COFFMAN. Mr. Chairman, I yield back. 

Chairman GRAVES. Mr. Schrader. 


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Mr. SCHRADER. Thank you, Mr. Chairman. Just appreciate all 

the work that Director Mills has done particularly in the fraud 

area. It has been a breath of fresh air compared to what had been 

going on, I guess, in previous administrations. So I appreciate all 

the heavy lifting in that area. 

I would, however, also reiterate the ranking member’s concern 

about the SBDC program being reduced and new programs coming 

on. And maybe there is an opportunity in the future for you to line 

out the comparative advantages and disadvantages that led the Department and you to that decision because they are a big source 

of advocacy and a good source of knowledge for a lot of people who 

have lost their jobs who are now out there creating their new businesses. And so we want to make sure the SBDCs are still out there 

able to do their good work. 

A question I guess I have is one of the changes that we had made 

in the 7(a) program last time. We increased the loan subsidy 

amount available, go up to $5 million. And a little concerned. We 

had talked about that at the time. There was concern from my part 

and others about, you know, these bigger loans squeezing out lots 

of loans for smaller small businesses. And my information would 

indicate almost two-thirds of the loans went to businesses, you 

know, wanting between a million and $5 million worth of revenue 

or loan. And wondered, you know, if you had figured on that 

amount when you raised the loan ceilings for the program. 

Ms. MILLS. Yes. We pay a lot of attention to the small loan size. 

And in fact, as we look at the numbers what we see is that small 

loans, prior to any raising of the loan limits, but small loans are 

the last to recover because they are more expensive to deliver from 

the banks. And that is why we introduced two programs under the 

7(a) rubric so that they live and are authorized as 7(a) programs. 

But the first is called Small Loan Advantage and the second is 

called Community Advantage. Small Loan Advantage is designed 

to make sure that banks give small loans. And it streamlines our 

paperwork. And as you and I have discussed before, streamlining 

our paperwork is good for borrowers, it is good for processing, and 

it keeps the same underwriting standards so that we can deliver 

a more streamlined product but more cost effective in the small 

loan size. So we have taken Community Advantage, as well as the 

program for small loans. That is designed to make sure that institutions that are in underserved markets, community development 

financial institutions (CDFIs), CDCs, can have access to SBA’s 7(a) 

program. And a limited number of experienced CDFIs will come 

into the program, providing more points of access for small loans. 

Those are critical programs to give access and opportunity on the 

small loan size while still preserving the ability for a large manufacturer to get a larger loan. 

Mr. SCHRADER. All right. Is it possible at some point to get for 

the current budget that you are proposing subsidy breakouts, the 

fee portion versus the increased loan portion versus the defaulted 

loan portion? Is that possible at some point in the future? 

Ms. MILLS. We would be happy to answer any of your questions. 

Mr. SCHRADER. Good. We also passed a bill last session on performance-based budgeting and wondered what actions the SBA has 


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taken to implement performance-based budgeting along all its different program areas. 

Ms. MILLS. As you know, we are very metrics-oriented and we 

track the outcomes of all of the budget areas. And you will see 

some of them in your budget book. But the focus is on a higher 

level to put as much money in places where it is delivering value 

into the hands of small business. So overall that is the first line 

of assessment. 

Mr. SCHRADER. I just would encourage you to set targets, you 

know, for the various programs, whether it is the fraud, waste, and 

abuse or a certain amount of loans, not just counting loans out but 

jobs created and that sort of thing. I think that helps sell the programs to at least this group here and hopefully to the American 

public. 

With that I yield back, Mr. Chairman. 

Chairman GRAVES. Mr. West. 

Mr. WEST. Thank you, Mr. Chairman and Madam Ranking Member. Ms. Mills, good to see you again. 

In light of the GAO report, the 345 page report yesterday that 

came out with the duplicitous programs, on page 103 of the budget 

submission the SBA lists a variety of programs in which the agency 

is attempting to improve coordination of services. My question is 

has the SBA considered whether these programs are duplicative, 

and if so, are you seeking to eliminate any of them? Thank you. 

Ms. MILLS. Overall, as I said earlier, this is a time where everybody has to tighten their belts, streamline as much as possible, and 

eliminate duplication. We are on continuous watch for that. And we 

have taken some programs that we like and we care about to a 

lower level because we find that we think we can find a more costeffective way of delivering those services and we are working very, 

very closely across all our programs with everybody from the U.S. 

Department of Agriculture and their operations and Department of 

Commerce, the export operations, the import-export bank, to make 

sure if somebody else can do it better and we can pull back, that 

is what we are going to do. 

Mr. WEST. Mr. Chairman, I yield back the balance of my time. 

Thank you. 

Chairman GRAVES. Ms. Chu. 

Ms. CHU. Ms. Mills, I am from Los Angeles. It is a port city and 

there are many who are interested in exports. And I am glad to see 

that according to a U.S. Commerce Department report, California’s 

exports climbed 19.3 percent in 2010 to 143 billion. And these are 

levels that are close to pre-recession levels. But most of California’s 

exporters are small and do not venture too far. They go to Mexico 

and Canada. These are the top two countries for the state’s exports. 

So in order to grow these industries even more the businesses will 

have to start looking towards other markets beyond North America 

and they will have to find trusted overseas partners to handle distribution and sort out complicated shipping logistics and import duties. There are multiple agencies involved with the National Export 

Initiative, including the SBA, but of course, Commerce International Trade Administration, the Minority Business Development 

Agency. But which is the lead agency and what is the exact role 


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that SBA will play in this initiative? And how will you monitor and 

assess its progress? 

Ms. MILLS. Thank you, Congresswoman. 

We lead the small business working group for the Combined 

Trade Promotion Coordinating Committee of the federal government around exports. And that is an interagency effort to make 

sure small businesses’ share of exports grow. Right now small businesses are about 30 percent of exports. There is only about 250,000 

small businesses who export out of the six million that have employees and the two million who potentially could. So there is much 

room for growth. Small businesses are the fastest piece of growing 

piece of it, and we have a goal of doubling exports as you know 

over the next five years. 

So we have initiated a series of activities around this coordinated 

small business approach which involve our major role in the 

frontend which is we try to get more small businesses into the funnel and then we try to direct them to some of the resources that 

are available everywhere, including the commercial service and the 

import-export bank, our loan programs. We are counseling a very, 

very high number and increasing number of small businesses on 

just entry into export right now. 

Ms. CHU. I notice that in SBA’s budget your agency is, in fact, 

stating that it is committed to enhancing the ability of those small 

businesses to export. How does your new budget structure, how is 

it structured to help the business person? For instance, I have 

many business persons that come and ask for help and assistance 

in navigating export regulations. How exactly would your budget 

help them? 

Ms. MILLS. Right. In addition to our budget, which funds the core 

operations, it is not visible here that the Small Business Jobs Act 

added significant resources around exports, including $30 million 

annually for something called step grants which are state-based 

grants that we will give out, we just announced them, that will 

help support small business activity in state export organizations. 

Generally, they would also be coordinated with our export people 

and our small business development centers. So most of the activity in the funding for the incremental efforts actually is in the 

Small Business Jobs Act. 

Ms. CHU. Some business groups have also voiced some fear that 

their intellectual property will be stolen if they sell a product overseas. Does the SBA’s budget have some means of handling this or 

at least to strengthen relationships between the Department of 

Justice and the U.S. Trade Representatives’ Office so that these 

businesses can feel more confident about exporting? 

Ms. MILLS. This is a very big issue for small businesses who are 

exporting, and we have a coordinated effort with Commerce who 

runs the intellectual property and the patent issues to make sure 

that these things are very, very, very strongly addressed. 

Ms. CHU. Okay. Thank you. I yield back the balance of my time. 

Chairman GRAVES. Mr. Landry. 

Mr. LANDRY. Thank you, Mr. Chairman. Ma’am, in looking 

through your budget I noticed that some of the cost savings you are 

calculating is in a decrease of about 150 employees in a disaster 

program. And being that my district seems to be the epicenter of 


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disaster over the last five years I am concerned about the sacrifice 

the employees who are on the ground working with my constituents after a disaster will be limited while there may be too many 

bureaucrats here in Washington. The Department of Agriculture 

employs more than 90,000 people and its secretary has just 13 people in his office. Secretary Gates is running two wars in Afghanistan and has a mere 15 people in his office. The Department of Energy has both a deputy secretary and a chief operating officer serving in a dual capacity. You all employ about 3,400 people if I am 

correct, but you all have two separate people serving as a deputy 

secretary and a chief operating officer. Is that correct? 

Ms. MILLS. No, sir. We eliminated the chief operating officer position. 

Mr. LANDRY. Oh, good for you. I hadn’t gotten that far. Thank 

you. 

Do you know how many currently are in your personal staff? 

Ms. MILLS. I don’t have a particular number for you on that but 

I would be happy to follow up. 

Mr. LANDRY. Okay. Well, my point is just I want to make sure 

that we are examining how heavy we are up here before we start 

sacrificing people on the ground. 

Ms. MILLS. Well, I totally agree with the principle that the most 

important priority is to get people on the ground who are actually 

helping small businesses one by one by one. And that is one of the 

two critical priorities for the budget. Making sure the resources 

that are most effective that are on the ground are the number one 

priority. And the second priority is going after fraud, waste, and 

abuse and making sure our programs have integrity. 

Mr. LANDRY. Are you going to go back and make sure that if we 

have some problems and disasters, it might not even be in my district but others, that do you have a way to increase those number 

of field agents in an emergency? 

Ms. MILLS. Yes, we do. And I just want to assure you that the 

reduction that I described is in the steady state of readiness. We 

fluctuate up and down depending on how many disasters there are 

and how severe. And sometimes we are in as many as 40 areas of 

the country so we employ a ready reserve staff of 2,000 who are 

not on the payroll but they are ready to go on the payroll and get 

on a plane and get down to the area when necessary. So the reason 

we believe we can make a reduction in our average steady state 

and maintain the same level of preparedness is that we worked 

very hard to reengineer our disaster processing centers so that we 

were more efficient on average. But you should expect us to deliver 

and be ready to deliver what you need in those times of disaster 

and to maintain the new level of preparedness that we have come 

to post-2005. 

Mr. LANDRY. Thank you, ma’am. Mr. Chairman, I yield the balance of my time. 

Chairman GRAVES. Ms. Clarke. Sorry for the delay. 

Ms. CLARKE. Thank you, Mr. Chairman. And thank you, Ranking 

Member. Administrator Mills, I would like to warmly welcome you 

back to the committee today and I would like to just let you know 

that I, too, share a lot of the concerns that were raised by Ranking 

Member Vela ́zquez with respect to SBDCs and HUBZones. 


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I hope that you will revisit your thinking with regard to your 

support for the SBDCs. It appears to me that perhaps there are 

places where these SBDCs have been much more effective than 

maybe other places in the nation, and perhaps there needs to be 

some level of comparative analysis so that we can focus the resources where they, you know, you get the best bang for the buck. 

And I hope that you will also dedicate some of your staff time to 

the reform of the HUBZone program so that you can report back 

to the committee sooner rather than later. 

But I would also like to take this opportunity to express my appreciation to you and the Small Business Administration for your 

willingness to work on issues relating to economic development in 

underserved communities, as well as minority, women, and veteran-owned businesses. In the 111th Congress, I introduced H.R. 

3771, which would have established mentorship and assistance programs for minority, women, and veteran-owned businesses, and I 

appreciate President Obama’s budget request for the SBA to promote investment in these people-based entrepreneurial initiatives. 

I have applauded your announcement of the implementation of 

Women-owned Small Business Federal Contract program, which increases access for women-owned businesses to federal contracts, 

and I was also encouraged by your announcement of the Community Advantage program, which provides community development 

financial institutions as an avenue to participate in 7(a) loan programs. As I understand it, the transition from the ineffective Community Express program to Community Advantage also saves $10 

million. 

During my time in Congress I have been a champion for the 

CDFI program at the Treasury Department. And when the longterm CR revealed a $200 million cut to that program, I, along with 

16 of my colleagues, sent a letter to the majority leadership requesting that they restore that funding. As we all understand, our 

economy will not fully recover unless there is a robust recovery 

amongst all of our small businesses. So given the strides that we 

have made thus far, can you say that the, or make comments on 

whether the agency feels that it has taken the right steps in ensuring that the cuts to the budget will not come at the expense of the 

economic development of these disadvantaged areas that I have 

been so concerned about? 

Ms. MILLS. We, too, are very focused. I want to thank you for 

your leadership in this area. We are very, very focused on underserved markets. And as you know from the data, these areas were 

very, very hard hit in the recession. Small businesses in these 

areas have not yet recovered and we felt it was very critical to get 

as many points of access into these communities to our main programs as possible. That is why we are opening up our program to 

selected CDFIs and CDCs who are operating in that community, 

who provide not just capital but often technical assistance and 

other support, and we are looking forward to I think some better 

penetration of these communities with these numbers because the 

small businesses in these communities create the jobs in these communities and we need to be there to support them. 

Ms. CLARKE. Again, I would like to emphasize perhaps another 

glance at the SBDC infrastructure because certainly in a place like 


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New York City that has become almost a brand for small business. 

With the challenges that we are facing with the banks and the 

lending for small business, the access to capital, the lines of credit, 

those SBDCs help those business owners to really navigate this 

very choppy water that we find ourselves in financially. And it becomes very difficult for individuals to sort of reorient themselves 

once they become accustomed to a particular brand. I stick with 

Crest; I don’t move to Colgate. 

Thank you, Madam Chair, and I yield back the balance of my 

time. 

Chairman GRAVES. Mr. Keating. 

Mr. KEATING. Thank you, Mr. Chair. And thank you to the Ranking Member, Madam. And thank you, Administrator Mills for being 

here. 

I have one question I would like to focus on. In Massachusetts, 

there are 400,000 veterans in the state. My district happens to 

have the largest number of those veterans, and according to the 

U.S. Department of Veterans Affairs, there are more than a million 

unemployed veterans in our country and as many as one-third of 

them want to start their own businesses. I would like to know, you 

know, your views on what SBA is doing, what success they are 

having, to assist these unemployed entrepreneurs. 

Ms. MILLS. Well, veterans are a very big focus actually at the 

SBA because as you just mentioned, veterans over index in wanting to start their own business or in having their own business. So 

we have, from the beginning over the last two years, developed 

very strong relationships with the Veterans Administration so that 

we can cross-educate our people and our small businesses as to all 

the programs and the resources that are available to them. Our notion is that every single point of access, whether it is a district office or an SBDC or a SCORE representative, should be able to 

point a veteran to some of the particular counseling and contracting programs. 

We also did incremental programs. One was the service disabled 

veteran and women veteran entrepreneurial boot camp through the 

Syracuse University. It is just a fabulous program. The stories are 

really strong. But we are focused on this day-to-day. We have a 

joint task force with General Shinseki that he and I run, which is 

focused on making sure that we keep these veterans’ interests understood and a priority throughout both of our organizations and 

make all the changes that we can to provide access and opportunity. 

Mr. KEATING. Do you happen to know, too, that among those 

other veterans organizations, whether vet centers, I know they’re 

usually, you know, for counseling and other purposes, but are they 

included too as an access point? Are you aware of that? 

Ms. MILLS. Yes. We have veteran centers, a limited number. And 

we also believe that we want to have that expertise in every center, 

our 900 small business development centers, our district offices as 

well. 

Mr. KEATING. Great. Thank you, Administrator. And Mr. Chairman, I yield my time back. 

Chairman GRAVES. Mr. Richmond. 


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Mr. RICHMOND. Thank you, Mr. Chairman and Ranking Member. 

Madam Administrator, I would just echo the concerns that my colleague, Congressman Landry, talked about in terms of making sure 

that as we cut personnel and we streamline our disaster department that we do not sacrifice timeliness in terms of the response 

to people who need that assistance when the time comes. 

One thing I would like to do is in conversations with at least two 

of my local entities convey to you what they expressed to me in 

both instances. They were very positive and they wanted to thank 

you. One was Vaughn Fauria, who runs NewCorp CDFI business 

development center in Louisiana who bragged about how accessible 

your office is and the fact that they can give you ideas and that 

you all understand how important it is for them to get money to 

small businesses in a time of need, but also the technical assistance and those other things that you provide so that their customers and their client base can succeed. 

And the other one would be Zena Tech, which is a Baton Rougebased company who your export express loan allowed them to expand their business and trade, really to sell their product overseas 

which while the recession was hitting here and their clientele 

dropped in the United States, they were able to expand to a new 

market that kept them afloat. And both of those companies wanted 

to—wanted me to do that so I thought I would take this opportunity to do it. 

One quick question. When you talk about, and a lot of the initiatives that I see including the New Market Tax Credit program and 

others in the state legislature, a lot of times we would get a detailed analysis back even on New Markets, although it was a federal program we had a state piggybank, the return on investment 

that we receive from each of those programs in terms of every dollar that we invest in it what we’re getting back in terms of tax dollars created, jobs created and so forth. Do you have reports like 

that on different programs within your department? 

Ms. MILLS. Yes. In fact, we have a number of metrics about jobs 

created, about activity created. And some of them are in the budget 

book and I would be happy to provide any others you might wish. 

I appreciate your comments, and as you know, I have been to 

Louisiana a number of times in a number of circumstances. And it 

is good to see the small businesses flourishing there. We have a 

terrific cluster we funded in Geospatial, right in the area which I 

think will provide some interesting new job opportunities and create some innovation and small business success. 

Mr. RICHMOND. The other thing I would like to talk about is just 

a better coordination between departments. And I will give you an 

example. Because you mentioned just as the President mentioned 

in the State of the Union, that he would like to double exports over 

the next five years. If you look at the mouth of the Mississippi, 

which exports in terms of agriculture and grain, 60 percent of all 

products in the country come through the mouth of the Mississippi 

when we export, when we are trading. However, if we do not 

dredge the mouth of the Mississippi it significantly impacts the 

ability to load ships to an economic level. So if we are not dredging 

and the Corp is not dredging the mouth of the Mississippi, then we 

are really tying our hands behind our backs in terms of trade. And 


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we have a trust fund, which is the Harbor Maintenance Trust 

Fund. So as you continue to help us create products so that we can 

trade overseas and trade around the world, we have to make sure 

that the Corp is dredging our waterways because that is our superhighway and how we are going to get our goods to market. So I 

don’t know if you can help me there but I can tell you that we can 

create the product, but if we cannot be competitive in terms of 

shipping then we are still tying the hands of our American businesses. 

And I will yield back. Thank you, Mr. Chair. 

Chairman GRAVES. Thank you. I have a couple of questions. One 

of them deals with the Office of Advocacy, which falls under—and 

I am curious. I want you to explain to me how that relationship 

works. Because I was talking to them this morning and they said 

some of the number one things that they do is dealing with the 

Regulatory Flexibility Act which you all do not really have anything—any part of. 

Now, explain to me why they are under your budget. And, I am 

just looking for places to find some savings. And talk to me, too, 

about the fact, you requested an additional $10 million, I think, for 

overhead and costs for them and I think your overhead is $56 million, which is 20 percent of your total overhead. Well, my question 

is how much of Office of Advocacy do you actually have a part of? 

And why are they under your budget if you do not have a part of 

them? And let us go through that for a little bit. 

Ms. MILLS. So under the first there is no additional request for $10 million of additional overhead. 

Chairman GRAVES. I think it just suggested that. But regardless, 

talk to me about, because I am having trouble figuring out, exactly, 

who they answer to. 

Ms. MILLS. The Office of Advocacy is independent and it operates 

under our umbrella. And this year, because of a provision in the 

Small Business Jobs Act, it has a separate budget line item. But 

the amounts are relatively the same. So they are just broken out 

as per the mandate in the Small Business Jobs Act. They do have 

a very strong role in regulatory fairness. We also are extremely active in making sure that the excess costs of regulations do not unduly affect small businesses. We have our ombudsman activity, 

which deals with that issue on a one-on-one basis as well. 

Chairman GRAVES. Okay. Because it is frustrating to me. If one 

of their biggest focuses, and they like to talk about the Regulatory 

Flexibility Act, but it does not seem to me like they are doing it 

or doing a very good job at least of pointing those things out. But 

it is frustrating to me. And we can come back to that, too. 

I also want to talk just a little bit about when we changed the 

amount of fees you all can recover, which I think is essentially zero 

now, is not it? Did not we zero out the fee structure for anyone, 

at least on some of the loan programs? Or at least we reduced them 

to almost nothing. How much is that costing you now? Because I 

don’t think you can cover—are you covering your costs when it 

comes to administering these loans and stuff? I mean, that has got 

to be a big problem right now. 

Ms. MILLS. The program that you refer to where we took the fees 

down to zero in many places has terminated. It was $41 billion we 


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were able to do under that program. It was part of the Recovery 

Act, the extensions and the Small Business Jobs Act. A request to 

continue to do that is not included. Now we are back to charging 

fees. You know, it is a difficult fiscal time and we are determined 

to bring these programs as close to zero subsidy as we can so it will 

not be a cost to taxpayers. 

Chairman GRAVES. Which is perfect. And that is what I asked 

you for. In fact, I am very happy that I asked you to bring us some 

suggestions on cuts, which you have, and I appreciate that very 

much. 

I am concerned though about and this is another issue all together, and Mr. Keating brought up. I am just going to use the veterans’ programs for a minute. I mean, how much duplication is 

there with that? I know they have got counseling programs and 

then you all have counseling programs. In fact, there is a lot of 

counseling programs out there with different agencies. And how 

much of that is duplicated? How much of that could we shrink 

down or transfer? Let them do it. If they are doing a better job of 

it, let them do it; if you guys are doing a better job of it then let 

us get them out of the business of doing it. I am not saying we take 

away these programs; I am saying why do we have two agencies 

doing counseling for the same thing? And that would be an area 

that has been brought to my attention that we should be looking 

at for instance. I mean, how much duplication is out there? We can 

just talk about the veterans’ programs. 

Ms. MILLS. We are in continuous look for duplication and what 

we have done in our coordination with the Veterans Administration 

is, you know, share back and forth where we can, you know, get 

more bang for the buck. And we are trying to take on the small 

business aspect of veterans because they really do when they come 

back have a very, very high interest in starting small businesses. 

So we provide a lot of the entrepreneurship training. It is just our 

core counseling program. So if we can bring them into our structures as they are and they feel comfortable and have access and opportunity under our core counseling programs, that is a very good 

effective use of money. 

Chairman GRAVES. Well, I think that I would love—just have to 

figure out how to figure this out because there is no reason to have 

all this duplication. I just assumed you all were doing it as have 

it spread out over every other agency. I cannot believe that they 

would not be interested in transferring that out, which is one area 

that again I want to take a look at. 

And I do worry a little bit, too. I know you talked a little bit 

about streamlining some of the programs and you specifically mentioned, somebody asked the question under some of the micro loan 

programs when you streamline. I am a little concerned because it 

seems like every time you streamline a program then the default 

rate tends to go up and we do not want to see that. I am just voicing that as a concern overall. What is your default rate, what is 

it running approximately overall? Just percentage-wise? 

Ms. MILLS. The default rates, as you mentioned, in our credit 

programs are up, as they are in actually all. The cohorts that are 

defaulting you should know are the 2005, 2006, 2007, and some of 

the 2008 cohorts. And the issue there is that those loans were done 


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at a very frothy time with very high real estate collateral. High 

real estate values used as collateral, and that value does no longer 

exist in some of that real estate and that is causing losses. 

Chairman GRAVES. What is the percentage? Do you know just 

overall? 

Ms. MILLS. We have it by cohort and by activities and by program as you please. 

Chairman GRAVES. Just overall by, I mean, you know, what is 

your percentage? 

Ms. MILLS. We do not have one percentage so I can—— 

Chairman GRAVES. 7(a). 

Ms. MILLS. 7(a)? I would really rather give you the correct number because there is—— 

Chairman GRAVES. Why don’t you give me that because I would 

like to see it. 

Ms. MILLS [continuing]. Because we have it by cohort. We have 

it by everything. I am happy to give it to you. We have more 

than—— 

Chairman GRAVES. Because that is obviously very important. 

And to be quite honest with you, I have seen some of those numbers and I was surprised that it was not higher, which is—— 

Ms. MILLS. Yes. 

Chairman GRAVES. And I understand. You are working with 

these banks and the banks have to make the decision obviously but 

keeping that default rate down is obviously a big part of this. We 

have got to make good loans out there making bad loans. And I 

also understand, too, that the real estate value in a lot of cases is 

much lower now than it was before, which brings me to another 

question. When it comes to liquidation of these assets when there 

is a foreclosure, I know in some cases the banks handle that. In 

some cases the SBA handles that. Do you have any suggestions on 

that on what we could do different there? Is it better in the private 

sector or is it better through you all just out of curiosity from your 

point of view? 

Ms. MILLS. Well, once again, this is something that we spend a 

lot of time on. And we are pushing very hard because, as I said, 

a lot of these collateral values that were higher, you know, in the 

high real estate times are not there. Are not there. So we are looking at ways that we can get the most back. 

Chairman GRAVES. Well, that is, I mean, again, it comes back to 

we have got to figure out if we are better off just doing it all 

through the private sector or if unless I have a compelling argument to tell me that you all would do it better. But we obviously 

have to do the best we can recovering those. 

Ms. MILLS. We have to do the best we can and I do not think 

that there has been one single answer to that question but we are 

working hard on it. 

Chairman GRAVES. I hate to dominate the time. I have got more 

questions but I know we have got a vote and I will lose everybody 

once the vote is over. 

So Ms. Herrera Beutler, if you have a question. Do not have one? 

UNIDENTIFIED SPEAKER. Thank you, Mr. Chairman. As to the 

veterans’ benefits assistance, Lieutenant Colonel Allen West, Retired United States Army just left the room but I know that he 


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28 

would agree with me that members of the United States Army 

leaving need substantial help where members of the United States 

Marine Corps leaving are highly self-sufficient. And if you take 

that into account I would really appreciate it. Thank you. 

Ms. MILLS. Thank you. 

Chairman GRAVES. We need to work that out because we are 

showing an increased request for the Office of Advocacy. And 

again, I have a real problem with the Office of Advocacy and just 

exactly what they do and who they answer to. And I am frustrated 

by where they are falling underneath your budget because I would 

much rather see that money going to business startups and loan 

programs, things that work. And we are going to be pouring over 

that. I will be working with the Ranking Member and the rest of 

the Committee to go over the budget requests and all. And I do appreciate you coming in and giving us your suggestion with the 

PRIME program. I do not know what we are going to suggest when 

it comes to the Budget Committee yet but I am afraid that if we 

come back we are going to lose all the committee so I will probably 

adjourn at this point. But again, I do appreciate you coming. We 

will ask you back. I promise you that. We will ask you back and 

ranking member, I appreciate your questions. 

So with that the hearing is adjourned and I ask that each of the 

members have five legislative days to correct the record if they so 

like. This hearing is adjourned. 

[Whereupon, at 2:16 p.m., the committee was adjourned.] 


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