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S. HRG. 112–833 

PRESIDENT’S FY2012 BUDGET REQUEST FOR THE 

U.S. SMALL BUSINESS ADMINISTRATION AND 

THE OFFICE OF ADVOCACY 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS AND 

ENTREPRENEURSHIP 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MARCH 31, 2011 

Printed for the Committee on Small Business and Entrepreneurship 

( 

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

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

ONE HUNDRED TWELFTH CONGRESS 

MARY L. LANDRIEU, Louisiana, Chair 

OLYMPIA J. SNOWE, Maine, Ranking Member 

CARL LEVIN, Michigan 

TOM HARKIN, Iowa 

JOHN F. KERRY, Massachusetts 

JOSEPH I. LIEBERMAN, Connecticut 

MARIA CANTWELL, Washington 

MARK L. PRYOR, Arkansas 

BENJAMIN L. CARDIN, Maryland 

JEANNE SHAHEEN, New Hampshire 

KAY R. HAGAN, North Carolina 

DAVID VITTER, Louisiana 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RAND PAUL, Kentucky 

KELLY AYOTTE, New Hampshire 

MICHAEL B. ENZI, Wyoming 

SCOTT P. BROWN, Massachusetts 

JERRY MORAN, Kansas 

DONALD R. CRAVINS, JR., Democratic Staff Director and Chief Counsel 

WALLACE K. HSUEH, Republican Staff Director 
(III) 

C O N T E N T S 

OPENING STATEMENTS

Page 

Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana .................. 1 

Brown, Hon. Scott P., a U.S. Senator from Massachusetts .................................. 18 

Snowe, Hon. Olympia J., Ranking Member, and a U.S. Senator from Maine .... 18 

WITNESSES

PANEL I 

Gordon Mills, Hon. Karen, Administrator, U.S. Small Business Administration ........................................................................................................................ 23

PANEL II 

Sargeant, Hon. Winslow, Chief Counsel for Advocacy, U.S. Small Business 

Administration ..................................................................................................... 40 

ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Brown, Hon. Scott P. 

Testimony .......................................................................................................... 18 

Evans, Connie 

Letter dated March 14, 2011, to Chair Landrieu .......................................... 96 

Gordon Mills, Hon. Karen 

Testimony .......................................................................................................... 23 

Prepared statement .......................................................................................... 25 

Responses to post-hearing questions from Senator Carl Levin .................... 79 

Kasoff, Barbara 

Letter dated March 30, 2011, to Chair Landrieu .......................................... 99 

Sargeant, Hon. Winslow 

Testimony .......................................................................................................... 40 

Prepared statement .......................................................................................... 42 

Landrieu, Hon. Mary L. 

Testimony .......................................................................................................... 1 

Chart titled ‘‘Rebuilding the SBA: Administration Requests vs. Enacted 

Appropriations’’ ............................................................................................. 3 

Chart titled ‘‘Grow Businesses and Create Jobs—Capital Weekly 7(a) 

and 504 Loan Volume: As of December 17, 2010’’ ...................................... 5 

Chart titled ‘‘Jobs Created by Small Businesses Since May 2010’’ .............. 6 

Prepared statement .......................................................................................... 9 

Chart titled ‘‘SBA Resource Partner Map’’ ..................................................... 30 

Post-hearing questions posed to Hon. Winslow Sargeant and subsequent 

responses ....................................................................................................... 80 

Levin, Hon. Carl 

Prepared statement .......................................................................................... 78 

Snowe, Hon. Olympia J. 

Testimony .......................................................................................................... 18 

Chart titled ‘‘FY12 SBA Misplaced Funding Priorities’’ ................................ 21 

Chart titled ‘‘Rising Operating Costs at the SBA FY’08–FY’12’’ .................. 33 

Post-hearing questions posed to Hon. Winslow Sargeant and subsequent 

responses ....................................................................................................... 89 

(1) 

PRESIDENT’S FY2012 BUDGET REQUEST FOR 

THE U.S. SMALL BUSINESS ADMINISTRATION AND THE OFFICE OF ADVOCACY 

THURSDAY, MARCH 31, 2011 

UNITED STATES SENATE, 

COMMITTEE ON SMALL BUSINESS

AND ENTREPRENEURSHIP, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:10 a.m., in Room 

SR–428A, Russell Senate Office Building, Hon. Mary L. Landrieu, 

Chair of the Committee, presiding. 

Present: Senator Landrieu, Snowe, Brown, and Moran. 

OPENING STATEMENT OF HON. MARY L. LANDRIEU, CHAIR, 

AND A U.S. SENATOR FROM LOUISIANA 

Chair LANDRIEU. Good morning, everyone. Let me call our Small 

Business meeting to order. This is our meeting to discuss the 2012 

budget request for the Small Business Administration, and I thank 

all of you for joining me and for Senator Snowe, particularly for her 

help, in this effort. I would like to thank Administrator Karen Mills 

and Dr. Winslow Sergeant, Chief Counsel of the SBA, Office of Advocacy, for coming before our Committee today. 

Each day, more than half of America’s work force goes to work 

for a small business. These entrepreneurs pump almost one trillion 

dollars into our economy, creating 13 times more patents per employee than larger firms, and have traditionally created more than 

two-thirds of our nation’s new jobs. Many of these risk-taking small 

business owners rely on SBA capital, counseling, and contracting 

programs to succeed, meet their payrolls, and compete in an increasingly competitive global economy. 

In this fiscal year 2012 request for the SBA, the President has 

once again signaled his commitment to our nation’s nearly 28 million small businesses, submitting a strong and fiscally responsible 

budget of $985 million. While a decrease from the 2011 request, 

conscious of our efforts to streamline where we can, this budget is 

one of the strongest submitted since the Clinton Administration, 

making investments in SBA programs that will enable the agency 

to successfully fulfill its core mission. 

Most importantly, it will enable the SBA to continue the impressive work it has done in assisting our entrepreneurs and small 

business owners as they struggle to recover and rebuild in the 

wake of the worst economic recession since the Great Depression. 
2 

Since taking office in 2009, the Administration and this Committee signaled a strong commitment to the small business community, reversing the downward trend in funding for the SBA, and 

submitting a budget request for fiscal year 2010 that was higher 

than any previous, in the five years previously. 

The Administration’s fiscal year 2011 request for the SBA 

furthered this progress, making necessary investments in the agency’s core capital, counseling, and contracting programs. I would like 

to show the chart here. Of course, in the Stimulus Act, there was 

a one-time boost of funding which has been very effective. I hope 

the Administrator will talk a bit about that this morning, but you 

can see the investments made in the last two years. 

[The information folllows:] 
3 
4 

In addition to efforts to strengthen the core programs, the Administration and Congress took bold steps to improve small business access to capital by addressing the financial crisis that hastened the start of the recession. Thanks to the passage of the Recovery Act in 2009, the SBA was able to waive loan fees on both 

borrowers and lenders, and temporarily raised the maximum guarantee of the 7(a) and 504 programs to 90 percent. These provisions 

proved remarkably successful, jump-starting lending in all parts of 

the country. 

In fact, since their implementation in 2009, 7(a) and 504 lending 

increased from $13 billion in 2009 to $16.8 billion in 2010, helping 

to create thousands of jobs. You can see the charts here. 

[The information folllows:] 
5 

::!! ::!! ::!! ::!! ::!! ::!! 0 0 0 0 0 0 0 0 0 0 "<1", N, q <Xl (0 

~ ,,- ~ '<"" ""'" ""'" ""'" ""'" ""'" Eh 
6 
7 

The Recovery Act, and even more recently the Small Business 

Jobs Act, which this Committee spearheaded, has had an overwhelmingly positive effect on the small business community. Bank 

lending and retail sales have risen steadily for the last eight 

months. The GDP, an important indicator of our nation’s economic 

health, has grown for six consecutive quarters. 

There is much more that needs to be done, but there are signals 

that things are moving in the right direction, and I believe the 

work of this Committee and some of the efforts that we have made 

have been a part of that recovery. According to the latest job creation data published by the Automatic Data Processing, Inc., small 

businesses have been responsible for 93 percent of all jobs created 

in the last ten months—that is pretty startling—and to help drive 

the national unemployment rate below 9 percent. Still too high, but 

moving at least in the right direction. 

Let me quickly highlight a few things in this budget and then 

turn it over to Ranking Member Snowe and acknowledge the Senator from Massachusetts, Senator Brown, who left a meeting to be 

with us this morning. I appreciate him making that effort. 

First, the $210 million to support $16 billion in 7(a) loans and 

$7.5 billion in 504 lending is a good investment. The $167 million 

in this budget to administer the SBA’s Disaster Loan Program is 

also important, as we found out in Louisiana only a few years ago 

when Hurricane Katrina hit and the agency was not prepared to 

respond and people’s pain and suffering was increased, not decreased, by the lack of support from this agency. We have successfully, I think, turned around that program and are proud of the investments we are making in the Disaster Loan Program. 

Third, following the enactment of the Small Business Jobs bill 

last year, for the first time, the Office of Advocacy now has independent budget authority. This is a very special agency supported 

by both Republicans and Democrats. 

Its job is to prevent unnecessary regulations from burdening 

small business in America, to reduce the current regulatory burden 

and administrative burdens faced by our nation’s small business, 

and to be a real advocate for them, not an advocate for President 

Obama or President Bush or President Clinton, not an advocate for 

the Administrator, but an advocate for the small businesses themselves. 

I want to say how pleased I am to pursue independent budget 

authority for them. This is a solid budget, a strong foundation for 

the agency, but I have recommended a few additional dollars for 

investment. One is the expansion of the SCORE program, which is 

really not a government program. It really is a government partnership with the private sector. 

SCORE is a not-for-profit, private sector, private sector driven 

program that taps into the great brains and expertise and ability 

of private sector business leaders to help other budding and promising entrepreneurs. I think with a small investment, we can expand that reach, not expanding government programs, but expanding the non-profit and getting a return. By some estimates, for 

every dollar we invest in SCORE, the Federal taxpayer gets an investment of $107 in return. I think that is a very good investment. 
8 

We also hope that our Women’s Business Centers and Veteran’s 

Business Centers will continue to receive the funding necessary for 

them to do the good work that we need to do. So I will end with 

just saying this Committee will continue to work to trim or eliminate inefficient duplicative programs and to root out fraud where 

it may exist. We are going to soon have a whole hearing on fraud, 

inefficiency and duplication. 

We have already eliminated two programs. We have identified at 

least two that were not working and have eliminated them. We will 

continue to do that, but we want to support those programs that 

are working. I do believe as Chair this is an important agency of 

the Federal Government, and I do believe in strengthening partnerships with banks, with credit unions, with any non-profit that 

wants to step up, or for-profit agency for that matter, for-profit 

business to step up to counsel and train the future entrepreneurs 

of America. 

It is a great strength of our nation’s small business and we want 

to do everything in this budget to strengthen and to grow this economy and put the recession in our rear-view mirror. Let me turn 

now to Senator Snowe. I really apologize for my hoarseness. I have 

been fighting a cold for a week now and it is hopefully on the 

mend. Senator Snowe. 

[The prepared statement of Chair Landrieu follows:] 
9 

Chair Mary L. Landrieu 

Opening Statement for March 31,2011 

"President's FY2012 Budget Request for the U.S. Small Business 

Administration and the Office of Advocacy" 

INTRODUCTION 

Good Morning. Thank you all for joining us today to discuss the 

Small Business Administration's (SBA) FY2012 budget request. I would 

like to especially thank SBA Administrator Karen Mills and Dr. 

Winslow Sargeant, Chief Counsel of the SBA' s Office of Advocacy, for 

coming before the Small Business Committee to testifY today. 

More than half America's workforce goes to work for a small 

business every day and these entrepreneurs pump almost $1 trillion 

dol1ars into the economy, create 13 times more patents per employee 

than large firms, and have traditionally created more than two-thirds of 

our nation's new jobs. Many of these hardworking small business 

owners rely on the SBA's capital, counseling, and contracting programs 

to keep their doors open, meet their payrolls and compete in an 

increasingly competitive global marketplace. 

1 
10 

In his Fiscal Year 2012 request for the SBA, the President has 

once again signaled his commitment to our nation's nearly 28 

million small businesses, submitting a strong and fiscally responsible 

budget of $985 million in funding for the Agency. While a decrease 

from his Fiscal Year 2011 request, this budget is of the strongest 

submitted since the Clinton Administration, making investments in key 

SBA programs that will enable the Agency to successfully fulfill its core 

mission. Most importantly, it will enable the SBA to continue the great 

work it has done in assisting our entrepreneurs and small businesses 

owners as they continue to recover and rebuild in the wake of the worst 

economic recession since the Great Depression. 

PRESENT: ECONOMIC RECOVERY & REBUILDING THE SBA 

Since taking office in 2009, the Administration and this Committee 

signaled a strong commitment to the small business community, 

reversing the downward trend in funding for the SBA and submitting a 

budget request for Fiscal Year 2010 that was higher than any submitted 

2 
11 

during the previous five years. The Administration's Fiscal Year 2011 

request for the SBA furthered this progress, making necessary 

investments in the Agency's core capital, counseling and contracting 

programs. Working with the Democratic Congress, the Administration 

was able to secure the highest level of funding for the Agency in at least 

10 years, restoring the SBA's valuable role as both a partner to and a 

source of stability for our small businesses during a troubled economy. 

[CHART I: REBUILDING THE SBA] 

In addition to efforts to strengthen the Agency's core programs, the 

Administration and the Democratic Congress also took bold steps to 

improve small business access to capital by addressing the financial 

crisis that hastened the start of the recession. Thanks to the passage of 

3 
12 

the Recovery Act in February of 2009, the SBA was able to waive the 

loan fees on both borrowers and lenders and temporarily raise the 

maximum guarantee percentage of 7(a) and 504 loans to 90 percent. 

These provisions proved remarkably successful, jump starting lending to 

the small business community. In fact, since their implementation in 

2009, 7(a) and 504 lending increased from $13 billion in 2009 to $16.8 

billion in 2010, helping to create or save thousands of jobs. [CHART II: 

SBA LENDING VOLUME AFTER RECOVERY ACT] 

The Recovery Act and, even more recently, the Small Business 

Jobs Act, which this Committee spearheaded, has had an 

overwhelmingly positive effect on the small business community. Bank 

lending and retail sales have risen steadily for the last 8 months. The 

GDP-an important indicator of our nation's economic health-has 

grown for 6 consecutive quarters. But perhaps more importantly, 

small businesses have begun to expand and create jobs once again. 

According to the latest job creation data published by the firm 

4 
13 

Automatic Data Processing Inc. (ADP), small businesses have been 

responsible for 93 percent of all jobs created in the last 10 months, 

helping to drive the national unemployment rate below 9 percent for 

the first time in almost two years. 

BUDGET HIGHLIGHTS 

Let me quickly talk about a few of the many good things in this budget: 

• First, the $2lO million to support $16.5 billion in 7(a) loans and 

$7.5 billion in 504 lending. Both of these programs have proved 

enormously successful over the course of their lifetimes and are 

key to the Agency's ability to serve the small business community 

by providing access to capital that would be otherwise unavailable. 

Second, the $167 million to administer the SBA's disaster loan 

program. This funding is critical to ensuring that we have 

sufficient staff to process disaster loans quickly as well as an 

adequate amount of loan money to get into the hands of the 

families and businesses that need it. As Louisianans know all too 

5 
14 

well, when a disaster hits, the last thing anyone needs is more 

frustration and delay preventing businesses from reopening and 

families from returning to their homes. 

• Third, following the enactment of the Small Business Jobs Bill last 

year, for the first time the Office of Advocacy now has 

independent budget authority. This office plays a critical role in 

reducing the regulatory and administrative burdens faced by our 

nation's small businesses. 

GOOD BUDGET, BUT MORE SUPPORT IS NEEDED 

This is a good budget, a strong foundation for the agency. 

However, after hearing from small business owners, SBA resource 

partners and small business advocates, I have recommended an 

additional funding for the SBA in the 'Views and Estimates' letter I 

submitted to the Budget Committee. If we provided solid funding when 

6 
15 

the economy was good, it should serve as our baseline when the 

economy is down and we have an unemployment crisis. 

This additional funding would support programs that have 

remained in high demand but have been underfunded for years. For 

example, it would help successful public-private partnerships like 

SCORE, to expand and increase its reach within the small business 

community. 

(CHART III: MAP OF SBA NATIONWIDE NETWORK) 

As we can see from the map behind me, the SBA has an 

impressive infrastructure-over 1,350 counseling and outreach centers 

including Small Business Development Center, Women's Business 

Centers and Veterans Business Centers, as well as 350 SCORE 

7 
16 

Chapters-that must be adequately funded. These centers have a proven 

track record--creating or saving hundreds of thousands of jobs annually. 

FISCAL RESPONSIBILITY 

The President's request also acknowledges the current fiscal 

climate, with an emphasis on the real concerns over the mounting U.S. 

deficit. I too believe that the ever-increasing deficit is a significant and 

dangerous problem and one that, if not dealt with, could undermine the 

tremendous progress made over the past two years. For our part, during 

the 1 12th Congress the Committee will continue to closely monitor and 

evaluate programs operated by the SBA to ensure they are performing as 

intended. This Committee will continue its work to trim or eliminate 

inefficient, duplicative programs and to root out fraud where it may 

exist. But in doing so, we must never fail to adequately support those 

programs that have a demonstrated track record of success and 

encourage our businesses to innovate, grow and create new jobs. 

8 
17 

CLOSING 

Looking at this request, I am glad to see that the Administration 

has once again made small business a top priority, not just with words, 

but with actions. By adequately funding the SBA's programs, we can 

mitigate the economic damage caused by the recession and help our 

entrepreneurs to not only recover, but to innovate, create jobs and 

strengthen the U.S. economy. I look forward to hearing from both 

Administrator Mills and Dr. Sargeant regarding the SBA's priorities for 

the next fiscal year. With that, I now turn to Ranking Member Snowe 

and any other members present for opening statements. 

9 
18 

Senator SNOWE. Thank you, Chair Landrieu, and I am going to 

yield to Senator Brown because he has to return to the Senate 

Armed Services Committee. 

OPENING STATEMENT OF HON. SCOTT P. BROWN, A U.S. 

SENATOR FROM MASSACHUSETTS 

Senator BROWN. Thank you, Ranking Member Snowe. I appreciate it and hope the Chair feels better. 

Chair LANDRIEU. Thank you. 

Senator BROWN. You are a trooper. I want to thank our witnesses, Administrator Mills and Chief Counsel Sergeant for participating. I am going to go back and forth, as I seem to do every single day. But I just wanted to say two things, one of which is, I am 

concerned about making every agency lean and mean, and I know 

the President has a budget, obviously you have submitted a budget. 

I am hopeful that you will look at every aspect of the Administration’s budget and eliminate any duplication, streamline, consolidate, and really weed out every last dollar, because as we are cutting $100 billion in the military and we are cutting here and cutting there, I am hopeful that you will address those issues as well. 

I know we are meeting anyway, so I did not want to take the rest 

of the panels’ time, so we can speak privately about a lot of my concerns. But I do have some questions for the record and I may hold 

them or submit them, but I will be speaking one-on-one anyway. 

So thank you for allowing me to go out of order. 

Chair LANDRIEU. Thank you, Senator. 

OPENING STATEMENT OF HON. OLYMPIA J. SNOWE, RANKING 

MEMBER, AND A U.S. SENATOR FROM MAINE 

Senator SNOWE. Thank you, Senator Brown. Thank you, Chair 

Landrieu as well, for calling this hearing today—I know it has been 

difficult with time constraints because of being on the floor for the 

last two weeks on the SBIR and the STTR program—to discuss the 

fiscal year 2012 budget, and I echo the Chair’s remark in welcoming the SBA Administrator, Karen Mills, to our first panel. 

For the past two years, Administrator Mills has been at the helm 

of the SBA through what can be only described as an extremely 

turbulent economy. During her tenure, the agency has been bolstered by her dedication, her steadfast leadership to the small business community, and certainly on that score, when it comes to job 

creation, her understanding of the challenges in creating jobs, and 

how it needs to get done and what are the policies that drive it. 

I am also pleased to have the SBA Chief Counsel for Advocacy, 

Dr. Winslow Sergeant, here with us today to testify on our second 

panel. For the first time in SBA’s history, the Office of Advocacy 

has a budget independent from the agency’s total fiscal request, 

and I hope this new autonomous budget sends a clear signal that 

regardless of the Administration, Advocacy will remain independent and fully equipped to handle the myriad of challenges that 

lie ahead. 

So I want to thank both of you for being here this morning, for 

suggesting what kinds of approaches we can take to streamline the 

SBA’s budget as we weather this fiscal crisis, and also your views 

on the state of the small business economy. 
19 

When we met to discuss the SBA’s budget last year, access to 

capital was a pressing concern for entrepreneurs in America which 

was in the midst of a jobless recovery. Small business owners felt 

an overwhelming sense of uncertainty. The unemployment rate was 

a staggering 9.9 percent. At that time, Chair Landrieu and I were 

well-aware that the Federal Government does not put people to 

work. Entrepreneurs put people to work. 

So we worked to achieve programs through a determined pace of 

hearings and mark-ups that encouraged an environment more conducive for our nation’s true job generators. And while I am proud 

of many of the bipartisan small business provisions that I advanced 

with the Chair and the members of this Committee on a bipartisan 

basis, which sometimes is unique in the political process, I am still 

concerned about the lack of job creation in America, particularly 

among our small businesses. 

So all that we have done, certainly, has bolstered us to where we 

are today, but we realize we have far to go. So as we examine the 

SBA’s budget for 2012, we cannot fail to pay deference to the larger 

economic landscape this budget fits into. January marked the 21st 

consecutive month of 9 percent or greater unemployment; February 

came close at 8.9 percent. We will see what the numbers are tomorrow as well, if they hold fast, or if it could be reduced at all. It is 

likely to reflect fewer new jobs that were created in February, 

bringing us to two years of close to 9 percent unemployment. 

The bottom line is, we have lost 7.3 million jobs in this recession 

and have experienced a net gain of 70,000 jobs between June 2009 

and December 2010, which is less than 4,500 new jobs per month 

for 18 months, according to the Congressional Budget Office. Our 

debt is $14.3 trillion. A vote on raising the debt ceiling looms in 

our near future. 

Our national debt will be 100 percent of the GDP by the end of 2011. The Government currently spends $3.8 trillion; yet we only 

collect $2.2 trillion. So clearly, the bottom line is our nation’s revenues and spending are vastly misaligned. It is under these circumstances that we must strike the difficult balance of preserving 

the SBA’s job creation potential while simultaneously working to 

rein in costs, cut duplication and bureaucracy, and postpone the inadvertent growth programs, some of which lack detailed performance metrics. 

After subtracting the Administration’s request for loan subsidies, 

in addition to earmarks and disaster funding, the SBA’s 2012 budget request is still 18 percent above the level provided in fiscal year 

2008. This fails to account for the tremendous surge of funding, including the $1.2 billion for fee reductions on the SBA’s loan portfolio, an additional $240 million for its operation and core programs 

provided under the stimulus, supplemental appropriations, and the 

Small Business Jobs Act. 

This funding has bolstered the agency’s capabilities and will continue to have an impact long after it expires at the end of this year; 

for one, it resulted in the recruitment of over 1,300 new lenders to 

participate in the SBA’s loan programs. I want to congratulate the 

Administrator on that score because I think that is truly important 

for access and outreach to the small business community in having 

access to capital—as well as making necessary investments in tech-
20 

nology that will continue to improve the SBA’s efficiency and effectiveness for years to come. 

I have a chart here to display the concerns that I have and to 

underscore the SBA’s 2012 budget compared to the fiscal year 

2008. The fact is, of the $94 million, or 18 percent increase in the 

core SBA funding, 80 percent can be attributed to higher administrative and operating costs in the agency, as opposed to benefitting 

the SBA’s flagship non-credit programs such as micro-loans, small 

business development centers, women’s business centers, veteran’s 

programs, and SCORE. 

[The information follows:] 
21 
22 

Further, only 4.5 percent of the increase in funding since 2008 

has been dedicated to these vital programs, when also subtracting 

the Administration’s new unauthorized initiatives. Going forward, 

the SBA can and must reduce its operating costs and find savings 

in the administrative expenses while eliminating or reducing funding to programs that are inefficient, repetitive, and ineffective. 

That is why I am inclined to agree with a number of the cuts 

in the SBA’s fiscal year 2012 budget request, including the elimination of the Prime Technical Assistance Program, the Drug-Free 

Workplace Program, and a number of the special purpose counseling grants for the small business development centers. I have 

also identified the 7(j) technical assistance programs. Cumulatively, 

they would save $18.1 million. It is possible to cut even further. 

But that is a start. 

It is critical that we identify other areas to cut and we have to 

do so wisely. I think we understand that, given the atmosphere of 

the economy and also the struggle of small businesses, the Office 

of Advocacy is the regulatory watchdog for small business guarding 

against over-regulation. So not only do I support full funding for 

this office, I strongly recommend reinforced appropriations for additional staffing. I do so because of the potential this independent 

voice for small businesses possesses to cut down the torrent of regulations stifling job creation. 

Between the months of September 2009 and September 2010 alone, the Office of Advocacy achieved $14.9 billion—that is a billion with a B—in the first year of cost savings and $5.5 billion in 

annually reoccurring savings for small businesses and foregone regulatory costs. Operating with a $9.3 million budget, that means for 

every dollar the American taxpayer spends to run this office, small 

businesses reap nearly $1,600 in regulatory cost savings. I further 

believe that with additional resources, Advocacy could achieve even 

greater results. 

Finally, I would like to call your attention to a letter that the 

SBA Inspector General, Peggy Gustafson, sent to Chair Landrieu 

and me dated March 15th, 2011. This letter was in response to our 

request that the Inspector General provide input regarding the reduction or elimination of wasteful, duplicative, or ineffective operations at the SBA without undermining the agency’s ability to 

serve the needs of small business owners. 

The Inspector General made a number of strategic recommendations that I encourage everyone here to consider, and I look forward to working with the Chair to vet these thoughtful proposals 

for savings in the coming months. 

So again, I reiterate that we have some very difficult choices that 

have to be made at SBA, here in the United States Senate, and 

throughout the Federal Government, as we work to extricate ourselves from this fiscal quagmire. At the same time, we know we 

have to build the small business community, but we are going to 

have to have a very lean and efficient operation for the programs 

that we underwrite given the current fiscal constraints. Thank you, 

Chair Landrieu. 

Chair LANDRIEU. Thank you, Senator Snowe. Senator Moran, 

thank you for joining us. Do you want to give a short opening and 

then we will get right to our testimony? 
23 

Senator MORAN. That is not necessary, Madam Chairman. I am 

pleased to join you and the ranking member, and I am here with 

great anticipation to hear what the Administrator has to say. So 

thank you very much. 

Chair LANDRIEU. Thank you so much. We will turn it over to you, 

Ms. Mills. 

STATEMENT OF HON. KAREN GORDON MILLS, 

ADMINISTRATOR, U.S. SMALL BUSINESS ADMINISTRATION 

Ms. MILLS. Thank you very much, Chair Landrieu, Ranking 

Member Snowe, members of the Committee, Senators. I am very 

pleased to be testifying here before you. Small businesses are the 

backbone of our economy. They create nearly two out of every three 

new jobs, and more than half of working Americans own or work 

for a small business. 

The SBA is a small agency, but we have a big mission. We put 

the maximum amount of possible resources directly into the hands 

of small businesses, focusing on the three C’s of capital, contracts, 

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 business, 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 subsidy cost of $1.2 billion. 

Many small businesses suffered greatly from the recession. Our job 

is to support them as they grow and create jobs, and this job, as 

the Senator said, the Ranking Member said, this job is not done. 

The President’s proposed 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 our country’s small businesses. At the same time, this budget reflects a commitment to 

tighten our belts, streamline our processes, and eliminate duplication. 

These include ideas from Congress. For example, we looked hard 

at our technical assistance programs. As a result, we propose eliminating the PRIME Program. With the work of our Microlenders 

and new efforts to recruit community-based lenders, we can continue to provide technical assistance in a more cost efficient way. 

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

preparedness with a steady state core staff 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. 

This budget reflects the need for additional subsidy because 

losses, including those from loans approved on collateral such as 

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

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

The budget also builds on our strong efforts over the past two years 

to remove fraud, waste, and abuse in Federal contracting, and it 
24 

supports the new Women’s Contracting Program. I know that both 

of these issues are a high priority for this Committee. 

Finally, I want to be clear about our Executive Direction request. 

This budget does not reflect an increase in bureaucratic overhead 

or salaries. Instead, it reflects three things. First, it reflects a 

transfer of procurement operations from the Management and Administration Office to our chief financial officer, which falls under 

executive direction. One line went up and the other line went 

down. 

Second, it reflects Phase 1 spending for the new loan computer 

system. I should note that this project has been redesigned to actually be $20 million lower in 2012 than initially projected. Third, it 

reflects the transfer of our redesigned Web site development and 

maintenance from our chief information officer to the Office of 

Communications, which falls under executive direction. This has 

been a priority of this Committee and the new site has been very 

well received by small businesses. 

Overall, our priorities are twofold. We have placed a focus on 

SBA programs that put money and support directly into the hands 

of small business owners, and we will continue to invest in oversight to preserve the integrity of these programs and to protect the 

interest of taxpayers. I look forward to working with all of you to 

ensure that small businesses can continue to grow, create jobs, and 

lead us to a full recovery. Thank you very much and I am pleased 

to take your questions. 

[The statement of Ms. Mills follows:] 
25 

U.S SMALL BUSINESS ADMINISTRATION 

WASHINGTON, D.C. 20416 

TESTIMONY OF KAREN G. MILLS 

ADMINISTRATOR 

U.S. SMALL BUSINESS ADMINISTRATION 

BEFORE THE 

UNITED STATES SENATE 

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

THE PRESIDENT'S FY 2012 BUDGET REQUEST 

MARCH 31,2011 

Chair Landrieu, Ranking Member Snowe, and members of the Committee. It's an honor to testify 

before you today. I look forward to working with each of you to ensure that America's small businesses 

can continue to grow and create jobs. 

The Small Business Administration (SBA) is a small agency but we have a big mission. We focus on 

providing access and opportunity through the three "Cs" of capital, contracts and counseling. 

Last fiscal year, we helped over 50,000 small businesses get the capital they need 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 entrepreneurs and small business owners in your states and 

throughout the country. 

Over the past two years, we provided taxpayers with a big bang for their buck. One example: Since 

credit markets froze in 2008, we supported more than $42 billion in small business lending. We still 

have work to do to help small businesses create the jobs we need, and the President's proposed FY12 

budget for SBA is $985 million. 

Our top priority remains to support programs that put resources directly in the hands of small business 

owners. 

At the same time, we will tighten our belts, streamline our processes, and eliminate duplication. This 

budget reflects some of your ideas to help us do just that. For example, we looked hard at our technical 

assistance programs. 

As a result, we propose eliminating the PRIME Program. With the work of our Microlenders and new 

efforts to recruit community·based lenders into our Community Advantage initiative, we can continue to 

provide technical assistance in a cost-effective way. 

Also as part of our look at technical assistance programs, we reduced the request to support Small 

Business Development Centers by $10 million. This was a tough choice, but we believe it is reasonable 

due to additional SBDC funding in the Small Business Jobs Act. 

I For more information about SBA's credit programs, see the 2012 Budget's Credit Supplement. 
26 

In addition, we request a reduction in the core staffing level for our disaster program from 1,000 to 850. 

We currently have an additional 2,000 reservists as well as a very efficient and effective disaster 

operation that will preserve our level of readiness. 

The two largest increases requested in this budget focus on programs that deliver direct help to small 

businesses. 

First, we have reached the statutory limit for fees we can assess to borrowers and lenders for our 

business loans. We request $132 million in additional subsidy above our FY 2010 enacted levels and 

carryover balances because the estimated losses are higher than proposed fee collections. 

Second, unlike previous years, carryover funds to support administrative costs of the disaster loan 

program no longer substantially exist. An additional $91 million above our FY 2010 enacted level is the 

funding necessary to sustain our core disaster operations. 

In addition, we request support for important efforts such as implementing the women-owned business 

contracting rule and for continued oversight and enforcement efforts to reduce waste, fraud and abuse in 

contracting programs. 

Overall, this Administration is making it a priority to strengthen and fund SBA programs that put these 

budget resources directly into the hands of small business so they can grow and create jobs. And, we 

will continue to invest in oversight to preserve the integrity of these programs and to protect the interest 

of taxpayers. 

I look forward to working with all of you to continue to ensure that the strongest engine of our 

economy-small businesses-are succeeding. Because as the President has said, when they succeed, 

America succeeds. 
27 

Chair LANDRIEU. Thank you very much, Administrator. Let me 

begin by asking you for an update, if you will, on the Small Business Jobs Act of 2010 signed into law by the President this last 

September. Many claim that this is a landmark law, a very significant piece of legislation, some say the most significant piece in the 

last ten years. Due to the timing of the enactment of the law, the 

additional funding allocated to the SBA is not reflected in the 2012 

budget request. 

I know you have been working closely with the Administration 

to implement the various provisions of this Jobs Act, particularly 

the new lending program. Can you give us a brief update on the 

implementation of this law, and are you seeing any specific benefits 

from some portions of it? 

Ms. MILLS. Well, I want to thank this Committee very much. The 

Small Business Jobs Act is the single most important piece of small 

business legislation over the last ten years, and it provided highly 

valuable tools for small business. We have aggressively been implementing this program. 

For example, all of the funding that helped us increase the 90 

percent guarantee and reduce the fees was put out into the hands 

of small business in the first quarter of this fiscal year. That was 

$11 billion in one quarter. It was the highest quarter for SBA lending in history. And so, we know that that money—I was just at a 

business, actually, yesterday in Warwick, Rhode Island, which got 

one of those loans and bought new equipment. So we know that 

that money is helping the economy and helping those small businesses already create jobs. 

There were other important pieces of that. As we speak, the implementation of the procurement rule changes that were put in 

that statute have been written up, put into rule-making, and are 

in the process of public comment. We have people in the field today 

and this week and in the next month taking public comment on the 

new rule-making, which is designed to close loopholes; reduce 

fraud, waste, and abuse; make sure that small businesses get the 

benefits of the Government contracts, not big businesses 

masquerading as small businesses or partnering with them and 

taking too much of the contract. So that is all well into implementation. 

Another piece of it that we are very pleased about that was created in this Committee are the STEP grants, the export grants 

which support small business exports. Those are grants to state 

agencies to make sure they are reaching out to help our small businesses work to export more product. 

Right now, small businesses are only 30 percent of total exports. 

If we are going to reach the President’s export objective, which is 

to double exports over the next five years, small businesses have 

to lead the way, and we do have those opportunities. So those 

grants are competitive and the request for the competition has 

gone out and states are preparing their proposals. Finally, $50 million for the Small Business Development Centers 

is being allocated, and once again, we have asked each of those 

Small Business Development Centers, rather than to just take the 

money, to describe exactly what incremental benefit, particularly in 

terms of job creation and small business activity, they are going to 
28 

deliver with that money, and those requests have come in and that 

money has substantially started to roll out. 

Chair LANDRIEU. Now, another portion of this Act that was more 

controversial—I was supportive of it, but there were some that 

were not, but we managed to move through this new lending provision. But that is really under Treasury, not under SBA, and I am 

going to call the Treasury officials to come and testify because it 

is a new effort and hopefully it will work. We are not 100 percent 

sure, but I felt like we should try to do everything we possibly 

could to get capital to small business and Main Street, and this is 

a new initiative. 

Do you have any information, though, that you would like to 

share about it—I know you are working with Treasury on that program—just to add something to the record about how it is being 

implemented? Are you generally pleased with what you are seeing 

or do we have to expedite that program? 

Ms. MILLS. We are working with Treasury on the Small Business 

Lending Fund, and also on the state programs which were funded 

in this Act which were also extremely valuable. In both cases, we 

have evidence that banks are coming back to lending because there 

is an incentive, a carrot, in the Small Business Lending Fund for 

them to take in more capital and then push it out. So we know that 

there is bank interest. It is in its early stages and we are encouraging banks, through our network, to know about this program and 

to apply for those activities as it fits their profile. 

The second piece, the state funds, have also begun to roll out, 

and those are programs that we work very much in conjunction 

with state-by-state, because very often SBA guarantees are given 

in conjunction to a company that has also received benefit from 

some of these state lending programs. 

Chair LANDRIEU. One more question and then I will turn it over 

to Senator Snowe. Could you just repeat for the record how many 

new—two questions—how many new banks have come into the 

SBA, Administrator Mills, since you took over in our regular 504 

and 7(a) programs? We have substantially increased the number of 

banks, have we not? 

Ms. MILLS. Yes, we have. We have increased the number of 

banks, particularly community banks and credit unions, that have 

come into the SBA lending programs through, particularly, our Recovery Act 90 percent guarantees and fee reductions, and an effective outreach through our district offices to train new lenders, 

streamline our own processes, and have quick turn-around. The 

number in that first period of time in the Recovery Act was over 

1,200 new lenders. 

Chair LANDRIEU. That is very impressive. And let me ask you 

this one last question and then I will turn it over to Senator 

Snowe. I know that I sound like a broken record on this SCORE 

Initiative, but this program was started some years ago—and I am 

getting my staff to get me the details now—but to me, it makes so 

much sense, instead of the Federal Government creating another 

layer of Federal bureaucracy or government bureaucracy, to simply 

leverage a relatively small amount of money into a national nonprofit that is effective. 
29 

We had a hearing on SCORE chapters around the country. Now, 

some are better than others, but it is fairly impressive how widespread—if we can put up the chart? These are not only the SCORE 

chapters, but I want you to put up this chart. Senator, this is what 

encourages me and our members. 

I had the staff put up this resource partner map because what 

I want to show is, this is not just the offices of the SBA. I mean, 

that would be pretty impressive if that was how much we were 

able to do with a small amount of money. But this is for resource 

partners. This is our women’s business centers that take the money 

that we give them and leverage it up substantially. 

[The information follows:] 
30 
31 

These have the SCORE chapters, which are 350 chapters, where 

any small business can walk into a SCORE office for free and get 

counseling and support. We had a woman sitting right here at our 

last round table that said literally, she would not be in business 

today if it had not been for the counseling and advice, free, that 

she got from the SCORE chapter, and she was a very powerful witness. 

So I want the Committee to really consider the advantage of increasing a small amount of money to SCORE, and if there is another organization out there that I am not aware of, I am open to 

that as well, but to work in partnership, have the SBA work in 

partnership with these 350 SCORE chapters. We do not have the 

chart of the SCORE chapters only, do we, where they are? 

You know, to work with SCORE because I think free is good. I 

mean, I think free is great. I think when people go in to get help, 

they go because they do not have a whole lot of money to start with 

and they can get good support from this non-profit organization. I 

think it would be worth our investment to help strengthen that organization and be a partner with them. 

So let me turn it over to Senator Snowe. I have a few more questions. Well, let me ask you, what is your feeling about SCORE and 

have you visited some of their chapters? 

Ms. MILLS. I have traveled all around the country, and I think 

I have been to 31 states as of yesterday, and each time we go we 

have a round table with SCORE, and I have also met with all of 

their 350 chapter heads. It is absolutely clear that the counseling 

that is provided adds value to our small businesses. We know that 

our counseling network, because we track it, creates businesses 

with better outcomes, more longevity, more profit. 

We track our extended client visits and our Small Business Development Centers, and it is not enough just to give money and 

loans to small businesses. You have to give them help and advice, 

work with them on business plans. We rely on SCORE for an enormous amount of our reach. 

Most of our activity is in some kind of partnership: public/private 

partnership, partnerships with community colleges and other universities, and our SBDCs, and that is how we can leverage our 

small budget and activity to have a counselor within 45 minutes 

of most small businesses across this country. 

This is of enormous value and, like you, when I sit with somebody and they say, This person—and they will put their arm 

around this person—this person saved my business, I would not be 

here today if I did not have this relationship. We are making a difference with those entrepreneurs. 

Chair LANDRIEU. Thank you. Let me just submit for the record 

that there has been—I have this chart—a 24 percent increase in 

the number of banks participating in the SBA programs in the last 

two years. So I want to submit that to the record. Senator Snowe. 

Senator SNOWE. Thank you, Madam Chair. Administrator Mills. 

I would like to get to the heart of these administrative costs. I 

know you made reference to the Executive Direction account, but 

what I was referring to is that and every other account where there 

has been a notable increase over time. 
32 

Obviously, I am comparing between 2008, which was not your 

budget, or 2009, but we are talking about 2010 and 2011, and obviously the proposed request for 2012. The differences that exist, percentage-wise, in virtually every account, concerns me. When you 

compare it to the CORE Non-Credit Programs where it is basically 

a split between 80/20 in terms of where the increases are going, it 

is basically for overhead and administrative costs. 

So I guess the question is, where is there the possibility for reductions? What is the justification for the increases in nearly every 

single category as far as operating costs are concerned? You should 

take out the Executive Directions you had mentioned as a transfer 

to the CFO. Even if that were taken out in nearly every other category, as this chart illustrates, there are significant increases. So 

if we are looking to streamline programs, obviously we are going 

to be looking at administrative costs as well. 

[The information follows:] 
33 
34 

Ms. MILLS. I would not like this Committee to be left with the 

impression, as I think I have mentioned to you before, that the 

SBA has added bureaucratic overhead. The costs that you described there we have looked at very closely according to two principles. The first is, does it get money down into the hands of small 

businesses? 

And I just want to point out that it is not just our Non-Credit 

Program that drives operating activity with small businesses. They 

happen to be broken out as line items. But it is not the only place 

in the agency where things are happening that drive activity into 

the hands of small business. So the first criteria is, is it getting 

value to a small business? 

And the second criteria is, is it helping in our oversight activities? Is it reducing fraud, waste, and abuse? Is it protecting taxpayer interests? So those are our two principles by which we have 

gone through our budget and viewed these expenses. 

I do note that you are looking at the 2008 budget. I just wanted 

to make a comment about the comparison between 2008 and 2012. 

When the 2008 budget was created, this agency was in a very different economic environment. The robust levels of lending in 2007 

and early 2008 made credit very accessible in the general marketplace to small businesses. 

But as you know, in October 2008, the credit markets froze and 

our activities in the agency became extremely relevant to fill this 

market gap. Therefore, we were able to take the Recovery Act dollars and drive a tremendous amount of value, $42 billion, into the 

hands of small business. And as I said, it was at a cost, but it was 

a subsidy cost of $1.2 billion. 

That does not take into account the efforts made by our team, 

who went out and recruited the additional 1,200 lenders, and also 

our team partnered with our partners who were counseling a much 

higher number of small businesses who, of course, in that period 

of time were experiencing difficulty. 

All of those loans that we put on the books, all of that bump-back 

in loans remain on the books. So when we do a loan activity, that 

cost to us for monitoring and oversight does not go away. So we actually have, in this period of time that you describe, taken on not 

only the implementation, but now the continued monitoring of a 

substantial set of activities which were included in supplemental 

budgets. 

And that activity has been very effective and we are very pleased 

with it. It has put money in the hands of small businesses directly. 

It has been very successful, but it requires us to continue to make 

great efforts to monitor those loans because they stay on our books. 

Senator SNOWE. Well, can you tell me how many new employees 

have been added as a result of this? I guess that is the question. 

I can understand how running government contracting—and the 

agency proposes for next year to add 24 new employees to help 

with fraud within the contracting program. So that is an example. 

Do you have a list that we could have to see where these increases are occurring in terms of the number of employees supervising fraud, abuse, oversight of these programs? Obviously the 

SBA, over time, has gotten significant increases, if you think about 

the disaster loans, the stimulus program. 
35 

So there have been an awful lot of programs that have been 

bumped up significantly over the last few years. So those were one 

time events. Certainly that is the case with stimulus. So where is 

it that you would identify in these categories that would suggest 

that you would require additional employees? I mean, did you hire 

new people? 

Ms. MILLS. So once again, I think the point is the stimulus activity and when we do disasters, for us they are actually not one-time 

events. They are an ongoing stream of costs. We put something on 

our books in the stimulus, we have to continue to monitor it. We 

add a new program in the stimulus or in contracting, we continue 

to oversee it. They have very, very long lives, each of these new 

loans, for example. 

We have a request in for 24 new people. Those are the only new 

people we are requesting in the 2012 budget request, for fraud, 

waste, and abuse oversight. That is because we have taken the 

fraud, waste, and abuse issue head-on. In 2008, this was not an 

area that was robustly attended to, and we have, I think, joined 

with this Committee in seeing that we cannot have a program that 

delivers $100 billion into the hands of small business, creates that 

much value, that does not have integrity. 

And we had a lot of work to do. Luckily, we got some help from 

this Committee, from the Small Business Jobs Act, and followed a 

template that I think you saw in the GAO report, and created a 

structure, a three-pronged structure to go after fraud, waste, and 

abuse. We look at up-front criteria. 

We have focused on ongoing monitoring, and we have begun a robust effort to punish the bad actors, to bring up our enforcement 

efforts. Those are the areas where you will see our request for incremental people. We have already put substantial resources in the 

past few years as we realigned our priorities to focus on this. 

Senator SNOWE. Well, would it be travel? What would justify the 

costs? Is it overtime, travel? What is it if it is not additional employees, other than, as I mentioned, the government contracting 

arena. So where is it—— 

Ms. MILLS. In each of these places—— 

Senator SNOWE [continuing]. That these increases are occurring? 

Ms. MILLS [continuing]. There is—and these do not include employees, I believe, in the operating costs that you have up there. 

But as you look at those, there are structural things, for instance, 

in information technology systems, in tracking systems that we 

have invested in, and particularly in government contracting so 

that we have done analytics now to understand, to be able to track 

our businesses. We know. 

We have broken down silos so that if there is a fraud in the Hub 

Zone Program, that information can be transferred over to the 8(a) 

program because that person may be in both programs. So we have 

invested both in structural, and now we have a request for some 

incremental personnel on the fraud, waste, and abuse side. 

Senator SNOWE. Okay, thank you. 

Chair LANDRIEU. Thank you. Senator Moran. 

Senator MORAN. Thank you, Madam Chairman. Administrator 

Mills, thank you very much for reaching out to me in the conversation that we had by phone last week. I am grateful for that con-
36 

versation. One of the things I wanted to explore with you, it was 

indicated that the number of partnering financial institutions, 

banks and credit unions, has increased. 

One of the things that I see, and certainly one of the things that 

I continually hear by small business and entrepreneurs who are interested in expanding their business or starting a business is the 

lack of access to credit. As we look at where we are in job creation, 

the recession that we are in, in my view, there are a number of 

reasons that we are slow to recover, but one of the them is the inability for small business to access capital. 

I am interested in knowing whether you have a sense of why the 

businesses are—I am sorry—why the banks are entering into the 

partnership with the SBA at these new levels. In my view, we have 

a regulatory scheme that is being increased on community banks 

across the country that make it much more difficult for them to 

lend money, even to credit-worthy borrowers. One of the responses, 

my guess is, by bankers is to then figure out how do we partner 

with the SBA in order to be able to make these loans. 

So in your—one, my question is—several questions—is my sense 

correct, that a reason that there is a greater partnership is because 

banks are having to come to you in order to better satisfy the regulators? 

Do you have a sense that our community banks, financial institutions, are—the regulatory environment, the scheme, is increasing 

and there is a consequence to the ability to borrow money by those 

who are credit-worthy and want to expand their business? 

And three, does the SBA have an advocacy role within the Federal Government to try to rein in this ever-expanding regulatory 

scheme that again, in my view, is reducing the chances that a worthy borrower can find money at their hometown bank? 

Ms. MILLS. Well, thank you very much. I did enjoy our conversation as well, and I know that you are quite knowledgeable about 

the small business and banking environment, particularly in Kansas, and in a broader perspective. So I appreciate your bringing 

this up. 

We have seen, in this credit crunch, more banks turn to the SBA 

because they had credit-worthy borrowers, but they did not have 

the capital on their books, perhaps because they had extended in 

real estate, and in the crunch their capital stock had gone down. 

If they went to the SBA and used one of our guarantees for a credit-worthy borrower, they might be able to help a client that they 

want to help, that they know very well, but that at that moment 

did not match the bank’s credit criteria. 

When the guarantee was at 90 percent, they only had to put up 

capital for the unguaranteed portion. So once again, that allowed 

them to do ten loans where before they might have only been able 

to do one. We were very happy with that partnership because our 

job was to get money out into this credit-starved market and help 

those small businesses who went back to their bank and said, We 

have been banking together a long time, why can you not help me? 

To your second question, in that time period and continuing 

today, we work very closely with the regulators to make sure that 

the regulatory guidance is clear on some of these small business 

loans down in the field. We were also getting the feedback from 
37 

banks which said they were concerned that there was not clarity 

about whether they could make certain loans. 

I was very happy to work with the Fed and with the FDIC and 

Ms. Sheila Bair in a number of circumstances where we worked together, we spoke together, and we helped send clarity and directives down that helped open those doors of the bank to some of this 

small business lending by providing more clarity on the guidance 

of what was acceptable and what the regulatory criteria was for 

different loans. And then that would help them both work with the 

SBA and also make loans on their own. 

Senator MORAN. My time expires in 13 seconds and this is my 

first Committee hearing that I have been to as a member of the 

Small Business Committee so I am not certain how strict the 

Chairperson is. 

Chair LANDRIEU. Not very strict. 

Senator MORAN. Madam Chairman, I chaired a committee in the 

House of Representatives and one of my colleagues was always 

yielding back his time after he had gone on more than 10 or 15 

minutes beyond the time allotted him. It struck me as odd. 

[Laughter.] 

Chair LANDRIEU. We are very friendly in this Committee. 

Senator MORAN. Thank you so much. I just would reiterate and 

kind of strengthen the case I am trying to make with you. The SBA 

has a great network of contacts with small business and with lenders, and I believe there is a real problem for community lenders in 

being able to make loans that they firmly believe are credit worthy. 

And that comes from the regulatory environment that they are 

finding themselves in from the FDIC, as you mentioned, the OCC, 

the Fed, and we need the SBA, in my view, to be an advocate for 

common sense regulations that allow our banks to continue to 

make loans, with or without the SBA guarantee. 

I also would say that in that same environment that you operate 

in, which you are dealing with small business, the regulatory environment that we find ourselves in just generally needs an advocate 

within the Administration, and to us in Congress as well, to come 

tell us the regulatory environment in which small business is trying to succeed is so onerous that their ability to do so is greatly 

limited. 

And so, while you advocate for small business, I would ask you 

to advocate for small business within the Administration, here in 

Congress, by giving us the examples with the circumstances that 

you see and hear and view about, here are the things that are impeding the opportunity for a small business person or an entrepreneur to either begin a business or to expand that business. 

In my view, a lot of the fault lies here in Washington, D.C. You 

ought to be the advocate for expressing those things you see out 

in the field. I thank the Chairman. 

Chair LANDRIEU. And Senator, let me follow up because that will 

transition beautifully into my next and last question to the Administrator and then ask each of you if you want an additional question. Then we are going to move to our second panel. 

But I want to support what the Senator is saying. We are hearing horror stories, actually, from the field, from community banks 

that are having a great deal of difficulty navigating through these 
38 

uncertain waters of regulation from a variety of different Federal 

agencies, most of it coming from Treasury and sort of out of the 

banking oversight sector. 

The Small Business Administration is here for a purpose, and it 

is to advocate on behalf of small business, and not just for our own 

programs, but generally advocating for them. In fact, we feel so 

strongly about this, Senator, that an advocacy position was created 

and we are going to hear from that advocate in just a moment. 

On that subject, let me ask you, one of the concerns that I have 

in reviewing the specifics of the budget, Senator Snowe mentioned 

a few, but it is the Office of Advocacy itself has asked for $9 million, which is a reasonable amount of money, for their small staff, 

their ten regional directors. But in addition, there is an additional 

$10 million for administrative costs on top of that. 

And so, it is a total of—they have only asked for $9.1 million, but 

I understand the total line item is $19 million. Could you please 

explain that, Administrator, because it does not really make any 

sense to me? And how can an administrative cost of $10 million on 

top of the $9 million that is really required to run their office? 

Ms. MILLS. Well, thanks for the question, Senator, and it is a 

question actually that we asked as well. You are referring to Table 

9, which has a $19 million cost for the Advocacy, versus Table 1, 

which has a $9 million cost. What is the extra $10 million? The answer is that Table 9 is a table which reflects cost allocations, and 

that means that it is an apportionment. There is not an additional 

$10 million to cover their overhead. It is an apportionment of jointly used costs like real estate. 

The methodology for doing that has rules. There are cost accounting rules. I happen to be—have an interest in cost accounting, 

but this is a complicated subject. The cost accounting rules change 

depending on various things. When the Office of Advocacy was broken out to be a separate line item in our budget through the Small 

Business Jobs Act, the rules that apply to the cost accounting 

changed. 

So things that were not allocated when it was not a separate line 

item are now required to be allocated. That said, $10 million seems 

like a lot of allocation, so I have asked my team to go back and 

look at the methodology. It was the first time it was used and we 

are happy to come back to you and—— 

Chair LANDRIEU. Well, I would appreciate a more detailed explanation because it is a little concerning to me. Both Senator Snowe 

and I have an interest in making sure this office is well-staffed, 

well-led, well-directed, because we think there is a great need out 

there right now in this regulatory climate, both of us believe, and 

this is just a little disconcerting that we have jumped from 9 to 19. 

So if you could provide that in writing in very specific terms to us, 

or to me and I will share it with the members of the Committee, 

I would appreciate it. 

Ms. MILLS. I do want to make sure it is clear that the extra $10 

million is not additional money. 

Chair LANDRIEU. Well, it looks that way on paper. So let me turn 

it over to Senator Snowe for a final question and then Senator 

Moran. 
39 

Senator SNOWE. One question that I had was about recovery 

costs and debt collection. Under current law, many agencies are assigned by the Treasury Department the ability to go out and collect 

debt on defaults and so on, failure to repay loans. The SBA, obviously, does that through the Treasury Department but at an additional cost. 

Have you ever considered doing this recovery within the agency? 

Because right now, the SBA gives more than $28 million back to 

Treasury, whereas it could be utilized within SBA for additional 

savings, and to offset additional costs. Is that something that the 

SBA has considered or you have considered during your tenure? 

Ms. MILLS. Well, I have some notes on this because I know that 

you asked the question, but I will say that it is not something that 

has come up before. We have a relationship with Treasury and we 

are happy to look into it further. 

Senator SNOWE. Well, that would be great because it is another 

way. They recovered an estimated $100 million for SBA for the 7(a) 

and the 504 and Disaster Loan Programs in 2010. So $28 million 

of that went to Treasury, in addition to, I guess, the $17 for administrative costs per transaction. So that is something that could be 

done in SBA. I know some of the other departments do it in-house 

rather than assigning that responsibility to Treasury. So that may 

be something that we should look at. Thank you. 

Chair LANDRIEU. Senator. 

Senator MORAN. Thank you. 

Chair LANDRIEU. Thank you, Administrator. We appreciate your 

time before the Committee. 

Ms. MILLS. Thank you. 

Chair LANDRIEU. At this time, if Mr. Winslow Sergeant will come 

forward? 

Good morning. Thank you, Dr. Sergeant, for joining us this 

morning and we look forward to your testimony. I also want to 

make sure the Committee members know that just by coincidence, 

we happen to have all of the regional administrators for Advocacy 

in town for a training seminar, I understand, today. When I found 

out they were here, I asked them specifically if they would sit in 

on this meeting. I am going to meet with them for a few minutes 

afterwards because this is a very important office. I understand, 

Dr. Sergeant, you have the directors of each of your regions here 

with you. 

Dr. SERGEANT. Yes. 

Chair LANDRIEU. Would you all please stand? So we have all the 

regions represented? 

Dr. SERGEANT. They are all represented, yes, Senator. 

Chair LANDRIEU. Ten? 

Dr. SERGEANT. All ten. 

Chair LANDRIEU. All ten, okay. And these are the regions on the 

map. Thank you. You can be seated. These are the regions of the 

Small Business, and as you open your testimony on your budget 

and your office, it is good to have your leadership team here and, 

of course, we will have questions for you after your five-minute testimony. But please begin. 
40 

TESTIMONY OF HON. WINSLOW SERGEANT, PH.D., CHIEF 

COUNSEL FOR ADVOCACY, U.S. SMALL BUSINESS ADMINISTRATION 

Dr. SERGEANT. Chair Landrieu, Ranking Member Snowe, Senator 

Moran, good morning. Members of the Committee, good morning 

and thank you for the opportunity to appear before you today to 

discuss the Office of Advocacy’s budget request for fiscal year 2012. 

In the interest of time, I will summarize my prepared testimony 

and ask that my full statement be included in the record. 

Because Advocacy was established to provide independent counsel to policy makers, my testimony has not been circulated for comment through the Office of Management and Budget or other Federal agencies. Therefore, my views do not necessarily reflect the position of the Administration or of the SBA. 

Before I turn to the budget, I would like to briefly bring you up 

to date on our activity. I am pleased to report that we have been 

extremely busy working on behalf of small businesses. Since my 

appointment as Chief Counsel for Advocacy last August, I have 

signed 32 public comment letters to 19 different agencies on a wide 

variety of regulatory issues, and we have held more than 20 small 

business roundtables. 

We are currently participating in seven SBREFA panels on EPA 

rules. Additional panels are expected in the near future on regulations from OSHA and a new Consumer Financial Protection Bureau, CFPB. Earlier this month, my office provided you with our 

annual report on the implementation of the Regulatory Flexibility 

Act, Executive Order 13272. 

All of us here know how important it is for agencies to take their 

RFA responsibilities seriously, and I am proud to report that in fiscal year 2010, Advocacy’s involvement in rulemaking on behalf of 

small business resulted in regulatory cost savings of nearly $15 billion. But today, we are here to focus on the budget. 

Through this Committee’s leadership, the Small Business Jobs 

Act of 2010 included a provision of enormous importance to Advocacy, its independence and its budget. This provision established in 

the Treasury a new separate account for our office and the requirement that the SBA continue to provide operational support. This 

new provision gives Advocacy, for the first time, statutory line item 

funding similar to that of the SBA Inspector General. 

The President’s recent budget request for fiscal year 2012 reflects 

the establishment of this new account. The request for Advocacy in 

fiscal year 2012 is $9.12 million. This amount is sufficient for us 

to function effectively in fiscal year 2012. It includes $7.4 million 

to return us to staffing levels seen in fiscal years 2008 and 2009. 

Since coming before this Committee last November, we have now 

brought on board all ten of our regional advocates, giving a much 

stronger voice to businesses in every region of the country. 

Advocacy’s professional staff is our most valued asset, allowing us 

to effectively work for small business. 

The fiscal year 2012 budget request will also support an eco- nomic research program of $1.3 million. This level of funding allows us to produce, on average, 25 new reports or data products 

each year. The remaining $420,000 in Advocacy’s budget request 

for fiscal year 2012 will cover all expenses for travel, training, of-
41 

fice supplies, printing of publications, and other expenses that are 

directly attributed to Advocacy. 

In addition to a separate account for Advocacy, the Jobs Act also 

included a provision that SBA provide my office with operational 

support such as office space, rent and utilities, and telecommunications. Accordingly, we have a new agreement with SBA in which 

the agency will provide all of these items discussed in the new law 

without charge to our new appropriation. 

This support package includes a variety of services such as 

human resources, payroll services, and IT support. This agreement 

has been formalized in a Memorandum of Understanding signed by 

SBA Deputy Administrator Marie Johns and myself. 

In conclusion, I am pleased that the President’s fiscal year 2012 

budget request will allow Advocacy to fulfill its important mission 

of helping small business. Let me again thank the Committee and 

its staff for the tremendous support you have given Advocacy for 

so many years. It helps us immeasurably in our work to know that 

we have the support. I look forward to continuing to work with you 

on important issues to small business. I would be happy to answer 

any questions you might have. 

[The prepared statement of Dr. Sergeant follows:] 
42 

Advocacy: the voice of small business in government 

Testimony of 

The Honorable Winslow Sargeant, Ph.D. 

Chief Counsel for Advocacy 

U.S. Small Business Administration 

United States Senate 

Committee on Small Business and Entrepreneurship 

Date: 

Time: 

Location: 

Topic: 

March 31,2011 

10:00 a.m. 

Room 428 

Russell Senate Office Building 

Washington, D.C. 

Office of Advocacy Fiscal Year 2012 Budget 
43 

Created by Congress in 1976, the Office of Advocacy of the U.S. 

Small Business Administration (SBA) is an independent voice for 

small business within the federal govemment. The Chief Counsel for 

Advocacy, who is appointed by the President and confirmed by the 

U.S. Senate, directs the office. The Chief Counsel advances the 

views, concerns, and interests of small business before Congress, 

the White House, federal agencies, federal courts, and state policy 

makers. Issues are identified through economic research, policy 

analyses, and small business outreach. The Chief Counsel's efforts 

are supported by offices in Washington, D.C.,and by Regional 

Advocates. For more information about the Office of Advocacy, visit 

http://www.sba.gov/advo, or call (202) 205-6533. 
44 

Chair Landrieu, Ranking Member Snowe, and Members of the Committee, good 

morning. As Chief Counsel for Advocacy, I thank you for the opportunity to appear before the 

Committee today to discuss the Office of Advocacy's budget request for Fiscal Year 2012. That 

submission is part of the President's request for SBA and the government as a whole, and it 

accordingly has the full support of the administration. However, because Advocacy was 

established to provide independent counsel to policymakers, and its testimony is not circulated 

for comment through the Office of Management and Budget (OMB) or other federal offices, my 

views on matters other than the official budget request do not necessarily reflect the position of 

the administration or of SBA. 

Advocacy activity update 

Before I tum to the budget, I would like to bring you up to date on Advocacy activity 

generally. I am pleased to report that Advocacy has been extremely busy since my last 

appearance before you in November. As Chief Counsel, my top priority is and will continue to 

be ensuring that the voice of small business is heard in the regulatory process. We continue to 

work with agencies across government to help them mitigate the potential costs of regulation for 

small entities. Since my appointment last August, I have signed 32 public comment letters to 19 

different agencies on a wide variety of issues (Appendix A). We are currently participating in 

seven separate Small Business Advocacy Review Panels now in various stages of progress on 

EPA rules. Additional panels are expected in the near future on regulations from OSHA and the 

new Bureau of Consumer Financial Protection. 

All of us here know how important it is for agencies to take their Regulatory Flexibility 

Act (RF A) responsibilities seriously, and Advocacy continues to provide RF A compliance 

training to regulatory agencies, pursuant to Executive Order 13272. Also in furtherance of that 

order and the RF A, we continue to work closely with our colleagues in OMB's Office of 

Information and Regulatory Affairs to ensure that small business concerns are heard early in the 

regulatory development process. To help us understand those concerns, we have had more than 

20 small business roundtables since my appointment. They have explored issues as diverse as 

- 1 -
45 

taxes and pensions, government contracting, work visas, telecommunications, OSHA and EPA 

rules, financial regulations, aviation and transportation rules, and veteran entrepreneurship. 

Since the beginning ofthe current fiscal year, our economic research team has published 

twelve research or data products, including new editions of three of our most popular annual 

reports: The Small Business Economy, our state economic profiles, and our annual small business 

bank lending study. In addition, we have underway a variety of contract research projects on 

specialized issues, and these will be released as they become available. 

When I testified before you in November, I was strongly encouraged by members of this 

Committee to travel outside of Washington to hear directly from small businesses around the 

country. Since then, I have had the pleasure to do just that in Rhode Island, Massachusetts, 

Georgia, Alabama and Louisiana; and I have scheduled trips to Wisconsin, Minnesota and Maine 

in the weeks to come. Additionally, we have now brought all ten of our regional advocates on 

board, giving a much stronger voice to businesses in every region in the country. They are out 

there talking to state and local elected officials about the importance of regulatory flexibility and 

listening to small business owners about the regulatory burdens they face. 

Our information team reports that hard copies of Advocacy's monthly newsletter now go 

to more than 8,000, and almost 30,000 more subscribers receive it electronically. Advocacy's 

research listserv reaches nearly 16,000 subscribers, and our regulatory news goes to nearly 

14,000 subscribers. 

To conclude this brief overview, Advocacy recently released its annual report on 

implementation of the RF A and Executive Order 13272. I am proud to report to you today that 

in FY 2010 Advocacy's work with regulatory agencies to help them design smarter rules resulted 

in one-time regulatory cost savings for small entities of nearly $15 billion. In addition, recurring 

annual savings of $5.5 billion resulted from these efforts. These cost savings estimates are 

conservative and based in most cases on data from the rule-writing agencies themselves. (A 

listing of the rules and savings achieved is attached as Appendix B to this testimony.) Our FY 

2010 savings were led by more than $9.1 billion in savings from a single EPA rule which defers 

- 2 -
46 

greenhouse gas requirements for many small businesses by up to six years. Although our annual 

regulatory cost savings numbers can vary considerably from year to year, our five-year average 

for one-time cost savings remains an impressive $8.5 billion. 

Executive Order 13563 

Since I last appeared before the Committee, President Obama signed on January 18th 

Executive Order 13563, Improving Regulation and Regulatory Review, and two related 

memoranda to the heads of executive branch departments and agencies: one titled Regulatory 

Compliance, and the other Regulatory Flexibility, Small Business, and Job Creation. (These 

documents are attached as Appendices C, D and E.) These directives supplement existing 

regulatory review processes, particularly the Executive Order 12866 process that has been in 

place since 1993. However, the new directives also reiterate key provisions of the RFA, as well 

as emphasize the administration's commitment to: 

• public participation in the rulemaking process; 

• the coordination, simplification and harmonization of regulations that are redundant, 

inconsistent or overlapping across agencies; 

• the identification of means to achieve regulatory goals designed to promote innovation; 

• consideration of regulatory flexibility whenever possible; 

• the review of existing significant regulations and the consideration of how best to 

promote retrospective analysis of rules that may be outmoded, ineffective, insufficient or 

excessively burdensome; and 

• the modification, simplification, expansion or repeal of rules based on these analyses. 

These objectives and the new directives are very much in keeping with Advocacy's 

mission, the RF A and Executive Order 13272. In fact, both Advocacy and the RF A are 

mentioned by name in the memorandum Regulatory Flexibility, Small Business, and Job 

Creation. In it, the President emphasized the importance of compliance with the RF A and its 

purposes. The President also expanded the existing requirement for an agency to document its 

decision to reject an alternative that may reduce regulatory burdens on small entities. The RF A 

currently requires agencies to explain in the Final Regulatory Flexibility Analysis accompanying 

final rules why significant alternatives were not selected. The President has directed that a 

similar explanation be provided for proposed rules as well. 

- 3 -
47 

In FY 2012, Advocacy will be assisting regulatory agencies in meeting the requirements 

of the President's regulatory initiative. We are already working with White House officials and 

OMB's Office ofInformation and Regulatory Affairs to implement Executive Order \3563. On 

February 1 't, I sent a memorandum to the heads of executive branch departments and agencies 

concerning new RFA developments, including provisions in the President's regulatory initiative. 

I also reminded them of RF A amendments made by the Small Business Jobs Act of 20 10, Public 

Law 111-240 (September 27,2010). Through this Committee's leadership, the Jobs Act also 

included additional provisions of enormous importance to Advocacy, and it is to those provisions 

and our Fiscal Year 2012 budget request that I now tum. 

Advocacy's independence and new separate account legislation 

First, on behalf of the entire Advocacy team, let me thank the Committee for the 

tremendous support you have shown for our office over the years, through many changes in 

leadership in both the legislative and executive branches. This support was again underscored by 

inclusion in Public Law 111-240, last year's Small Business Jobs Act, a provision establishing in 

the Treasury a new separate account for Advocacy and a requirement that SBA provide an 

operating budget for our office. These provisions will enhance our independence and increase 

transparency for our many stakeholders on our costs and operations. 

There is a long legislative history supporting the Congressional intent that Advocacy is 

an independent office housed within SBA, and that its mission and activities, and the discretion 

exercised by the Chief Counsel in their implementation, are independent of the SBA and its 

management and normal chain of command. As you know, Advocacy has its own statutory 

charter, Public Law 94-305, which is not part of the Small Business Act. The RFA also 

conveyed additional duties and powers on· the Chief Counsel, as did Executive Order \3272. We 

also have special personnel authorities and a variety of other tools to help us represent the 

interests of small business within government. 

-4-
48 

Advocacy's independence allows us to take strong positions in our comment letters, 

publications, testimony and other work, without going through clearance within the executive 

branch. While such review and coordination is certainly appropriate for most agencies, in our 

case it is not. That is because it is the job of each Chief Counsel to transmit directly to 

policymakers the unfiltered views of our small entity stakeholders. 

I would like to make clear that, since my appointment by the President, Administrator 

Mills and her staff have respected Advocacy's independence, and we have a good working 

relationship. When I speak of independence, I want to emphasize that Advocacy only makes 

decisions based on what we believe is best for small business. When I send a comment letter on a 

proposed regulation, it is not cleared by the Administrator, the White House or any other office 

or official in the administration. Neither are our research findings, testimony or other work 

products reviewed for clearance by the administration. We work independently as the Congress 

intended, and the SBA Administrator has been respectful of this independence. 

Administrator Mills and other senior members of the administration understand that 

Advocacy's ability to provide the best information possible helps all of us to do our jobs better, 

whether this information consists of economic research or data products, the articulation of the 

views and concerns of small entities on policy issues affecting them, assistance to regulatory 

agencies in RF A compliance issues, or the professional judgment of our highly qualified team of 

attorneys and economists. I know from my conversations with past Chief Counsels that 

Advocacy's independence has been a constant through the years, and it remains the bedrock of 

Advocacy's ability to be effective. 

Despite Advocacy's independence, our office has in the past been fully integrated within 

SBA's internal budgetary process. We have comPeted, as it were, with all SBA program offices 

for our share of resources within SBA's total budget. There are many stages in this process, 

including coordination with OMB as SBA's budget request is integrated into the administration's 

government-wide request. Throughout the process, difficult decisions are made about the 

allocation of scarce resources, many of them by the SBA Administrator and his or her senior 

staff. I am pleased to report that Administrator Mills has been very supportive of Advocacy, but 

-5-
49 

through the years the office has had its budgetary ups and downs, and we have borne our share of 

reductions in staffing and other resources. 

Because of Advocacy's complete integration into SBA's budget in the past, the office has 

been vulnerable to the changing priorities of new administrations and within the SBA itself. 

There has not been much transparency at the individual SBA office level where Advocacy has 

resided in the budget process, and changes in accounting methods have made it even more 

difficult to compare Advocacy costs and needs from one year to another. 

The Small Business Jobs Act of 20 1 0 provides that Advocacy will have for the first time 

statutory line-item funding, to be segregated in a separate Treasury account similar to that ofthe 

SBA Inspector General. This basically means that the Congress will set the amount available for 

direct Advocacy costs, and these funds will not be commingled with other SBA funding. The 

enactment of the Advocacy budgetary provisions underscores our independence and indicates 

that Congress intended to identify clearly the resources available to Advocacy, provide a basis 

for performance measurement, and promote certainty in Advocacy budgets. 

I am pleased to report that the new statutory line-item for Advocacy will be operational in 

FY 2012, and the President's recent budget request for that year reflects the establishment of a 

new Treasury account for our office. 

Advocacy's FY 2012 budget request 

The President's budget request for Advocacy direct costs in FY 2012 is $9.12 million. 

This amount includes $7.4 million to support 46 positions, the number of staff on board during 

Fiscal Years 2008 and 2009. We are now at 45, and an additional position will be filled in the 

next few weeks. Advocacy's professional staff is our most important asset, and it is appropriate 

that the largest share of our budget goes to human resources. 

The FY 2012 budget request will also support an economic research program of $1.3 

million. This includes funding for data acquisition, specialized contract research, support of 

- 6-
50 

custom data tabulations at other agencies, and related costs. In recent years, Advocacy has 

produced an average of25 new reports or data products each year. However, there remains an 

increasing need for additional work. A number of older Advocacy studies require updating so 

that the maximum utility of investments already made can be realized. The recent update of our 

study on the cost of regulation is a good example of this. The proposed funding level for 

Advocacy research in FY 2012 will also allow for additional data acquisition from other 

government agencies and new research projects to meet the changing needs of our stakeholders. 

The remaining $420,000 in Advocacy's budget request for FY 2012 will cover all 

expenses for travel, training, office supplies, subscriptions, printing of publications, and other 

incidental expenses attributable directly to Advocacy. 

Additional support for Advocacy in the FY 2012 budget request 

In addition to a separate account for Advocacy, the Jobs Act also included a provision 

that SBA was to supply Advocacy with operational support such as office space, rent and 

utilities, telecommunications, equipment and maintenance, etc. I am pleased to announce that 

we have negotiated an agreement with SBA's Office of the Chief Financial Officer and other 

SBA support offices in which the agency has agreed to provide all of the items contemplated in 

the new law without charge to our new appropriation. Included in this support package are a 

variety of centrally managed services such as human resources/payroll services, legal counsel, 

facilities management, procurement, security and emergency planning, computer technical 

support, web services and the use of mail room and delivery services. Our agreement has been 

formalized in a Memorandum of Understanding (MOV) signed by SBA Deputy Administrator 

Marie Johns and myself. 

Although the support package for Advocacy that SBA will be providing beginning in FY 

2012 will not be charged to our new appropriation account, the costs for these services and other 

indirect overhead will appear elsewhere in SBA's budget. Because these overhead costs do not 

affect our direct costs, and because they for the most part reflect SBA accounting conventions, 

Advocacy will not be directly involved in their calculation. As we make the transition to the new 

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51 

appropriations and accounting system, questions in this area will undoubtedly arise, but I am 

confident that with the MOU between Advocacy and SBA, we will be able to implement the new 

legislation as intended by Congress. 

Next steps 

While the Congress considers the President's FY 2012 budget request, we will soon 

begin the process of formulating the FY 2013 budget request. When the Jobs Act was enacted, 

the FY 2012 budget request was already in an advanced state of preparation. I want to thank 

especially the offices of SBA' s Chief Financial Officer and General Counsel for their extra effort 

in expediting the establishment of our new Treasury account and making the many conforming 

revisions in budget documents that had already been prepared for FY 2012. There will be 

additional changes in the FY 2013 documents as we continue the transition process to our new 

accounting system. Advocacy has been assured that we will have a separate section in the next 

budget request, similar to that used for the Office of the Inspector General. I am hopeful that this 

will improve transparency and allow us to present more detail in future budget requests. In the 

meantime, the key elements we need are in place for FY 2012. 

Conclusion 

In closing, I would like to draw your attention to an important performance metric that all 

of us on the Advocacy team are very proud of, the annual calculation of the cost per $1 million in 

regulatory savings attributable to Advocacy interventions. This number is basically just the total 

of one-time regulatory cost savings achieved in a given year, divided by the total cost of 

Advocacy for that year. This metric is always impressive, but it can vary considerably because 

we do not control what fmal cost-saving actions agencies take, or when they take them. On 

average during the last five years, each $1,618 spent on Advocacy has yielded $1 million in 

regulatory cost savings. Not bad. But in FY 2010, the taxpayers paid only $625 for Advocacy 

expenses to realize $1 million in new regulatory cost say ings, the lowest amount since this metric 

has been in use. I think that this makes a pretty good case that your investment in Advocacy 

yields a good return. 

- 8 -
52 

In conclusion, let me again thank the Committee and its staff for the tremendous support 

you have given the Office of Advocacy for so many years. It helps us immeasurably in our work 

to know that we have this support. I look forward to continuing to work with you on issues of 

importance to small business. I would be happy to answer any questions that you might have. 

- 9 -
53 

Appendix A Regulatory Comment Letters 

- 10-
54 

Regulatory Comment Letters 

Regulatory comment letters concerning the Federal Government's compliance with the Regulatory Flexibility 

Act as amended by the Small Business Regulatory Enforcement Fairness Act. 

Letter dated 03{17 {11 - Department of Labor, Employment and Training 

Administration 

- Wage Methodology for the Temporary Non-agricultural Employment H-2B Program; Final Rule 

• Letter dated 03{04{11 - Department of Transportation, Federal Aviation 

Administration 

Safety Management Systems for Part 121 Certificate Holders; Proposed Rule; 75 Fed. Reg. 68224, 

November 5,2010 

Letter dated 02/25/11 - Department of Transportation 

FMCSA's proposed rule would revise its regulations for hours of service for drivers of propertycarrying commercial motor vehicles (CMV) by, among other things, reducing the daily maximum 

driving limit from 11 hours to 10, reducing the maximum on-duty time within the driving window from 

14 hours to 13, requiring the release from duty at the end of the 14-hour driving window, requiring a 

mandatory break of at least 30 minutes within seven hours of the last off-duty period, and requiring 

that the current 34-hour restart provision include at least two periods between midnight and 6:00 

a.m. 

• Letter dated 02/14{11- Department of Interior, Fish and Wildlife Service 

Designation of Critical Habitat for the Sonoma County Distinct Population Segment of the Califomia 

Tiger Salamander (Ambystoma californiense); 76 Fed. Reg. 2863, January 18, 2011 

Letter dated 02{01{11- Federal Reserve System 

Letter dated 02/01/11 - Federal Reserve System - Compliance Guide for Regulation Z; Docket No. 

R-1366, Truth in Lending 

Letter dated 01{24{11 - Department of Justice 

Nondiscrimination on the Basis of Disability; Accessibility of Web Information and Services of State 

and Local Government Entities and PubliC Accommodations; 75 Fed. Reg. 43460 (July 26,2010). 

Letter dated 01{19{11 - Environmental Protection Agency 

Proposed Settlement Agreements for Petroleum Refineries; (75 Fed. Reg. 82,390 (December 30, 

2010) and Electric Utility Generating Units (75 Fed. Reg. 82,392 (December 30, 2010) 

Letter Dated 01/13/11 - Federal Reserve Board 

Final rule on Regulation Z; Docket No R-1366, Truth in Lending 

Letter Dated 01{14/11 - Internal Revenue Service 

Notice 2011-6, Implementation of Rules Governing Tax Return Preparers 
55 

• Letter dated 01/04/11- Food and Drug Administration 

Comment Request; Restaurant Menu and Vending Machine Labeling: Recordkeeping and 

Mandatory Third Party Disclosure Under Section 4205 of the Patient Protection and Affordable Care 

ActoQ010 

Letter dated 12/23/10 - Board of Governors of the Federal Reserve System 

On December 23,2010, the U.S. Small Business Administration's Office of Advocacy (Advocacy) 

submitted comments on the Board of Governors for the Federal Reserve Board's (Board) proposed 

regulation on Regulation Z; Docket No R-1390 Truth in Lending. 

• Letter dated 12/23/10 - Federal Reserve System 

Truth in Lending; Proposed Rule; Docket R-1393 Truth in Lending/Credit Card Act 

• Letter dated 12/20/10 - Internal Revenue Service (IRS) 

Specified Tax Return Preparers Required to File Individual Income Tax Returns Using Magnetic 

Media 

Letter dated 12/13/10 - Centers for Medicare and Medicaid Services and Food and 

Drug Administration 

Parallel Review of Medical Products 

• Letter dated 12/02/10 - Environmental Protection Agency 

Reply to the notification letter regarding a Small Business Advocacy Review Panel for the 

forthcoming regulatory proposal, 'Formaldehyde Emissions from Pressed Wood Products: 

Letter dated 12/01/10 - Department of Health and Human Services 

Concerning the forthcoming listing of styrene as a 'reasonably anticipated" carcinogen in the 

National Toxicology Program (NTP) Report on Carcinogens. 

Letter dated 12/01/10 - Financial Accounting Standards Board 

Proposed Accounting Standards Update regarding Leases (TopiC 840) 

• Letter dated 11/22/10 - Department of the Interior, Bureau of Ocean Energy 

Management, Regulation and Enforcement 

Oil and Gas and Sulphur Operations in the Outer Continental Shelf--Increased Safety Measures for 

Energy Development on the Outer Continental Shelf 

Letter dated 11/19/10 - Emironmental Prote<.tion Agency 

Hazardous and Solid Waste Management System; Identification and Listing of Special Wastes; 

Disposal of Coal Combustion Residuals from ElectriC Utilities; Proposed Rule 

Letter dated 11/17/10 - Department of Labor, Office of Workers' Compensation 

Programs 

Regulations Implementing the Longshore and Harbor Workers' Compensation Act: Recreational 

Vessels 

• Letter dated 11/16/10 - Department of Commerce, National Oceanic and 

Atmospheric Administration 

Listing Endangered and Threatened Wildlife and Plants: 90-0ay Finding on a Petition to List Atlantic 

Bluefin Tuna as Threatened or Endangered under the Endangered Species Act 
56 

Letter dated 11/02/10 - Department of Labor, Occupational Safety and Health 

Administration 

Consultation Agreements: Proposed Changes to Consultation Procedures Rule 

• Letter dated 10/29/10 - Financial Accounting Standards Board 

Proposed Accounting Standards Update regarding Revenue from Contracts with Customers 

• Letter dated 10/27/10 - Department of Labor, Employment and Training 

Administration 

Wage Methodology for the Temporary Non-Agricultural Employment H-2B Program 

• Letter dated 10/15/10 - Federal Communications Commission 

Wireline Competition Bureau Seeks Comment on Business Broadband Marketplace 

Letter dated 10/12/10 - Department of Energy 

Test Procedures for Walk-In Coolers and Walk-In Freezers; Proposed Rule 

• Letter dated 10/4/10 - Department of Health and Human Services, Centers for 

Medicare and Medicaid Services 

Medicare Program; Home Health Prospective Payment System Rate Update for Calendar Year 

2011; Changes in Certification Requirements for Home Health Agencies and Hospices; Proposed 

Rule 

• Letter dated 09/14/10 - Department of Health and Human Services, Centers for 

Medicare and Medicaid Services 

Medicare Program; Home Health Prospective Payment System Rate Update for Calendar Year 

2011; Changes in Certification Requirements for Home Health Agencies and Hospices; Proposed 

Rule 

Letter dated 09/09/10 - Department of Health and Human Services, Office for Civil 

Rights 

Modifications to the HIPAA Privacy, Security, and Enforcement Rules under the Health Information 

Technology for Economic and Clinical Health Act 

Letter dated 09/08/10 - Department of Education 

Program Integrity: Gainful Employment; Proposed Rule 

Letter dated 09/01/10 - Environmental Protection Agency 

Reply to the notification letter regarding a Small Business Advocacy Review Panel for the 

forthcoming regulatory proposal, for Stormwater Regulations to Address Discharges from Developed 

Sites 

Letter dated 08/23/10 - Environmental Protection Agency 

National Emission Standards for Hazardous Air Pollutants for Major and Area Sources: Industrial, 

Commercial, and Institutional Boilers 
57 

Appendix B . Summary of Cost Savings, FY 2010 

- 11 -
Summary of Cost Savings, FY 2010 (dollars)' 

Rule I Intervention 

Hazardous Air Pollution Rule for Prepared Animal Feed Manufacturing (EPA)' 

Certification Procedures and Identification Requirements for Aviation Parts and Articles (FAA)' 

Construction and Development Final Rule (EPA), 

FAR Case 2008-015, Payments under Fixed-price Arehitect Engineer Contracts (FAR)' 

Reciprocating Internal Combustion Engines (EP At 

Clean Air Act Greenhouse Gas Regulations GHG "tailoring" (EPA) 7 

Women-owned SmaJI Businesstl 

Sarbanes-Oxley' 

TOTAL 

First-Year Costs Ann

7,000,000 

327,100,000 

1,957,000,000 1,95

335,000,000 33

291,000,000 29

9,143,099,941 

34,875,000 

2,899,500,000 2,89

14,994,574,941 5,49

1. The Office of Advocacy generally bases its cost savings estimates on agency estimates. Cost savings for a given rule are captured in the fiscal year in which the agen

changes in the rule as a result of Advocacy's intervention. Where possible. we limit the savings to those attributable to small business. These are best estimates. First-year 

consist of either capital or armual costs that would be incurred m the rule's first year of implementation. Recurring annual cost savings are listed where applicable. 

2. Source: EPA. 

3. Source: FAA. 

4. Source: EPA November 2009 Economic Analysis, Table 2-1. 

5. Source: FPDS-NG Data. 

6. Source: EPA RIA Feb 2010 Table 4-4. 

7. Source: EPA RIA Table 4-7. 

8. Source: SBA. 

9. Source: FERF Survey. 
59 

Appendix C Executive Order 13563, January 18, 2011 

- 12-
60 

Federal Register 

Vol. 76, No, 14 

Friday, January 21, 2011 

Title 3-

The President 

Presidential Documents 

Executive Order 13563 of January 18, 2011 

Improving Regulation and Regulatory Review 

3821 

By the authority vested in me as President by the Constitution and the 

laws of the United States of America, and in order to improve regulation 

and regulatory review, it is bereby ordered as follows: 

Section 1. General Principles of Regulation. (a) Our regulatory system must 

protect public health. welfare, safety, and our environment while promoting 

economic growth, innovation, competitiveness, and job creation. It must 

be based on the best available science. It must allow for public participation 

and an open exchange of ideas. It must promote predictability and reduce 

uncertainty. It must identify and use the best, most innovative, and least 

burdensome tools for achieving regulatory ends. It must take into account 

benefits and costs, both quantitative and qualitative. It must ensure that 

regulations are accessible, consistent, written in plain language. and easy 

to understand. It must measure, and seek to improve, the actual results 

of regulatory req)lirements. 

(b) This order is supplemental to and reaffirms the principles, structures, 

and definitions governing contemporary regulatory review that were 8s1abp 

lished in Executive Order 12866 of September 30, 1993. As stated in that 

Executive Order and to the extent permitted by law, each agency must. 

among other things: (1) propose or adopt a regulation only upon a reasoned 

determination that its benefits justify its costs (recognizing that some benefits 

and costs are difficult to quantify); (2) tailor its regulations to impose the 

least burden on society, consistent with obtaining regulatory objectives, taking 

into account, among other things. and to the extent practicable. the costs 

of cumnlative regulations; (3) select, in choosing among alternative regulatory 

approaches, those approaches that maximize net benefits (including potential 

economic, environmental, public health and safety, and other advantages; 

distributive impacts; and equity); (4) to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance 

that regulated entities must adopt; and (5) identify and assess available 

alternatives to direct regulation, including providing economic incentives 

to encourage the desired behavior, Buch as user fees or marketable permits, 

or providing information upon which choices can be made by the public. 

(c) In applying these principles, each agency is directed to use the best 

available techniques to quantify anticipated present and future benefits and 

costs as accurately as possible. Where appropriate and permitted by law, 

each agency may consider (and discuss qualitatively) values that are difficult 

or impossible to quantify, including equity, human dignity, fairness, and 

distributive impacts. 

Sec. 2. Public Participation. (a) Regulations shall be adopted through a 

process that involves public participation. To that end. regulations shall 

be based, to the extent feasible and consistent with law, on the open exchange 

of information and perspectives among State, local, and tribal officials, experts in relevant disciplines, affected stakeholders in the private sector, 

and the public as a whole. 

(b) To promote that open exchange, each agency, consistent with Executive 

Order 12866 and other applicable legal requirements, shall endeavor to 

provide the public with an opportunity to participate in the regulatory 

process. To the extent feasible and permitted by law, each agency shall 

afford the public a meaningful opportunity to comment through the Internet 

on any proposed regulation, with a comment period that should generally 
61 

3822 Federal Register/Vol. 76, No. 14/Friday, January 21, 2011/Presidential Documents 

be at least 60 days. To the extent feasible and permitted by law, each 

agency shall also provide, for both proposed and final rules, timely online access to the rulemaking docket on regulations.gov. including relevant scientific and technical findings. in an open format that can be easily searched 

and downloaded. For proposed rules, such access shall include, to the 

extent feasible and permitted by law, an opportunity for public comment 

on all pertinent parts of the rulemaking docket, including relevant scientific 

and technical findings. 

(c} Before issuing a notice of proposed rulamaking, each agency, where 

feasible and appropriate, shall seek the views of those who are likely to 

be affected, including those who are likely to benefit from and those who are potentially subject to such rulemaking. 

Sec. 3. Integration and Innovation. Some sectors and industries face a significant number of regulatory requirements, some of which may be redundant, 

inconsistent. or overlapping. Greater coordination across agencies could reduce these requirements, thus reducing costs and simplifying and hermonizing rules. In developing regulatory actions and identifying appropriate 

approaches, each agency shall attempt to promote such coordination. simplification, and harmonization. Each agency shall also seek to identify, as 

appropriate, means to achieve regulatory goals that are designed to promote 

innovation. 

Sec. 4. Flexible Approaches. Where relevant, feasible, and consistent with 

regulatory objectives, and to the extent permitted by law, each agency shall 

identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public. These approaches 

include warnings. appropriate default rules, and disclosure requirements 

as well as provision of information to the public in a form that is clear 

and intelligible. 

Sec. 5. Science. Consistent with the President's Memorandum for the Heads 

of Executive Departments and Agencies, "Scientific Integrity" (March 9, Z009), 

and its implementing guidance, each agency shall ensure the objectivity 

of any scientific and technological information and processes used to support 

the agency's regulatory actions .. 

Sec. 6, Retrospective Analyses of Existing Rules. (a) To facilitate the periodic 

review of existing significant regulations, agencies shall consider how best 

to promote retrospective analysis of rules that may be outrooded, ineffective, 

insufficient, or excessively burdensome, and to modify, stre~line, expand, 

or repeal them in accordance with what has been learned. Such retrospective 

analyses, including supporting data, should be released online whenever 

possible. 

(b) Within 120 days of the date of this order, each agency shall develop 

and submit to the Office of Information and Regulatory Affairs a preliminary 

plan, consisteni with law and its resources and regulatory priorities, under 

which the agency will periodically review its existing significant regulations to determine whether any such regulations should be modified, streamlined, 

expanded, or repealed so as to make the agency's regulatory program more effective or less burdensome in achieving the regulatory objectives. 

Sec. 7. General Provisions. (a) For purposes of this order, "agencylt shall 

have the meaning set forth in section 3(b} of Executive Order 12866. 

(b) Nothing in this order shall be construed to impair or otherwise affect: 

(i) authority granted by law to a departroent or agency, Or the head 

thereof; or 

(ii) functions of the Director of the Office of Management and Budget 

relating to budgetary, administrative, or legislative proposals. 

(c) This order shall be implemented consistent with applicable law and 

subject to the availability of appropriations. 
62 

Federal Register/Vol. 76, No. 14/Friday, January 21, 20ll/Presidential Documents 3823 

[FR Doc. 2011-1385 

FUsd 1-20-11; 8:4S'am} 

BiDing code 3195-WI-P 

(d) This order is not intended to, and does not, create any right or 

benefit, substantive or procedural. enforceable at law or in equity by any 

party against the United States, its departments. agencies, or entities, its 

officers, employees, or agents, or any other person. 

THE WHITE HOUSE, 

January 18, 2011. 
63 

Appendix D President's Memorandum on Regulatory Compliance, 

January 18, 2011 

- 13 -
64 

Federal Kegi.teriVol. 76, No. 14iFriday, January 21, 2011iPresidential Documents 38:15 

Presidential Documents 

Memorandum of January 18, 2011 

Regulatory Compliance 

Memorandum fur the Heads of Executive Deparbnents and Agencies 

My Administration is committed to enhanciog effectiveness and efficiency 

in Government. Pursuant to the Memorandum on Transparency end Open 

Government, issued on January 21, 2009, executive departments and agencies 

(agencies) have been working steadily to promote accountability, encourage 

collaboration, and provide information to Americans about their Government's activities. 

To that end, much progress has been made toward strengthening our democ- racy and improving how Government operates, In the regulatory area, several 

agencies, such as the Deparbnent of Labor and the Environmental Protection 

Agency, have begun to post online (at ogesdw.dol.gov and www.epaecho.goY), and to make readily accessible to the public, information concerning their regulatory compliance and enforcement activities, such as information with respect to administrative inspections. examinations. reviews. 

warnings, citations, and revocations (but excluding law enforcement or other- wise sensitive information about ongoing enforcement.actions). 

Greater disclosure of regulatory compliance information fosters fair and consistent enforcement of important regulatory obligations. Such disclosure. is a critical step in encouraging the public to hold the Government and regulated 

entities accountable. Sound regulatory enforcement promotes the welfare 

of Americans in many ways, by increasing public safety, improving workiog 

conditions, and protecting the air we breathe and the water we drink. 

Consistent regulatory enforcement also levels the playing field among regulated entities, ensuring that those that feil to comply with the law do 

not have an unfair advantage over their law-abiding competitors. Greater agency disclosure of compliance and enforcement data will provide Americans with ioformation they need to make infonned decisions. Such disclosure can lead the Government to hold itself more accountable, encouraging agencies to identify and address enforcement gaps. 

Accordingly, I direct the following: 

First, agencies with broad regulatory compliance and administrative enforcement responsibilities, within 120 days of this memorandum, to the extent 

feasible and permitted by law, shall develop plans to make public infonnation 

concerning their regulatory compliance and enforcement activities accessible, 

downloadable, and searchable online. In so doing, agencies should prioritize 

making accessible infurmation that is most useful to the general public 

and should consider the use of new technologies to allow the public to 

have access to real-time data. The independent agencies are encouraged 

to comply with this directive. 

Second, the Federal Chief Information Officer and the Chief Technology 

Officer shall work with appropriete counterparts in eech agency to make 

such data available online in searchable form, iocluding on centralized 

platforms such 35 data.gov, in a manner that facilitates easy access, encourages cross-agency comparisons. and engages the public in new and creative 

ways of using the information. 

Third, the Federal Chief Information Officer and the Chief Technology Officer, 

in coordination with the Director of the Office of Management and Budget 

(OMB) and their counterparts in each agency, shall work to explore how 
65 

3826 Federal Register I Vol. 76, No. 141 Friday, January 21, 20111 Presidential Documents 

IFR Dor:;. 2011-1386 

best to generate and share enforcement and compliance information across 

the Government. consistent with law. Such data sharing can assist with 

agencies' risk-based approaches to enforcement: A lack of compliance in 

one Slea by a regulated entity may indicate a need for examination and 

closer attention by another agency. Efforts to share data across agencies. 

where appropriate and permitted by law, may help to promote flexibJe 

and coordinated enforcement regimes. 

This memorandum is not intended to, and does not, create any right or 

benefit, substantive or procedural, enforceable at law or in equity by any 

party against the United States, its departments, agencies. or entities. its 

officers, employees, or agents, or any other person. Nothing in this memorandum shall be construed to impair or otherwise affect the functions of 

the Director of the Office of Management and Budget reJating to budgetary, 

administrative, or legislative proposals. 

The Director of OMB is authorized and directed to publish this memorandum in the Federal Register. 

THE WHITE HOUSE, 

Washington, January 1 B, 2011 
66 

Appendix E President's Memorandum on Regulatory Flexibility, 

Small Business and Job Creation, January 18, 2011 

- 14 -
67 

Federal Register IVa!. 76, No, 14 I Friday: January 21, 2011 I Presidential Documents 3827 

Presidential Documents 

Memorandum of fanuary 18, 2011 

Regulatory Flexibility, Small Business, and Job Creation 

Memorandnm for the Heads of Executive Departments and Agencies 

Small businesses play an essential role in the American economy: they 

help to fuel productivity, economic growth, and job creation, More than 

half of all Americans working in the private sector either are employed 

by a small business or own one, During a recent lS-year period, small 

businesses created more than 60 percent of all new jobs in the Nation, 

Although small businesses and new companies provide the foundations 

for economic growth and job creation, they have faced severe challenges 

as a result of the recession. One consequence has been the loss of significant 

numbers of jobs, 

The Regulatory Flexibility Act (RFA), 5 U,S,C. 601-612, establishes a deep 

national commitment to achieving statutory goals without imposing unnecessary burdens on the public. The RF A emphasizes the importance of recognizing fldifferences in the scale and resources of regulated entities'" and 

of considering "alternative regulatory approaches ... which minimize the 

significant economic impact of rules on small businesses, small organizations, 

and small governmental jurisdictions." 5 U.S.C. 601 note. 

To promote its central goals, the RF A imposes a series of requirements 

designed to ensure that agencies produce regulatory flexibility analyses that 

give careful consideration to the effects of their regulations on small businesses and explore significant alternatives in order to minimize any significant economic impact on small businesses. Among other things, the RF A 

requires that when an agency proposing a rule with such impact is required 

to provide notice of the proposed rnle, it must also produce an initial 

regulatory flexibility analysis that includes discussion of significant alternatives. Significant alternatives inclnde the use of performance rather than 

design standards; simplification of compliance and reporting requirements 

for small businesses; establishment of different timetables that take into 

account the resources of small businesses; and exemption from coverage 

for small businesses. 

Consistent with the goal of open government, the RF A also encourages 

public partiCipation in and transparency about the rulemaking process. 

Among other things, the statute requires agencies proposing rules with a 

significant economic impact on small businesses to provide an opportunity 

for public comment on any required initial regulatory flexibility analysis, 

and generally requires agencies promulgating final rules with such significant 

economic impact to respond, in a final regulatory flexibility analYSis, to 

comments filed by the Chief Counsel for Advocacy of the Small Business 

Administration. 

My Administration is firmly committed to eliminating excessive and unjustified burdens on small businesses, and to ensuring that regulations are designed with careful consideration of their effects, including their cnmulative 

effects, on small businesses. Executive Order 12B66 of September 30, 1993, 

as amended, states. "Each agency shall tailor its regulations to impose the 

least burden on society, including individuals, businesses of differing sizes, 

and other entities (including small communities and governmental entities), 

consistent with obtaining the regnlatory objectives, taking into account, 
68 

3828 Federal Register I Vol. 76, No. 14lFriday, January 21, 2011IPresidential Documents 

among othErf things, and to the extent practicable, the costs of cumulative 

regulations." 

In the current economic environment, it is especially important for agencies to design regulations in a cost-effective manner consistent with the goals 

of promoting economic growth, innovation, competitiveness, and job creation. 

Accordingly, I hereby direct executive departments and agencies and request 

independent agencies, when initiating rulemaking that will have a significant 

economic impact on a substantial number of small entities, to give serious 

consideration to whether and how it is appropriate, consistent with law 

and regulatory objectives, to reduce regulatory burdens on small businesses, 

through increased flexibility. As the RF A recognizes, such flexibility may take many forms, including: 

• extended compliance dates that take into account the resources available to small entities; 

• performance standards rather than design standards; 

• simplification of reporting and compliance requirements (as, for example, 

through streamlined forms and electronic filing options); 

• different requirements for large and small firms; and 

• partial or total exemptions. 

I further direct that whenever an executive agency chooses, for reasons 

other than legal limitations, not to provide such flexibility in a proposed 

or final rule that is likely to have a significant economic impact on a 

substantial number of small entities, it should explicitly justify its decision 

not to do so in the explanation that accompanies that proposed or final 

rule. 

Adherence to these requirements is designed to ensure that regulatory actions 

do not place unjustified economic burdens on small business owners and 

other small entities. If regulations are preceded by careful analysis, and 

subjected to public comment, they are less likely to be based on intuition 

and guesswork and more likely to be justified in light of a clear understanding 

of the likely consequences of alternative courses of action. With that understanding, agencies will be in a better position to protect the public while 

avoiding excessi VB costs and paperwork. 

This memorandum is not intended to, and does not, create any right or 

benefit, substantive or procedural, enforceable at law or in equity by any 

party against the United States, its departments, agencies, or entities, its 

officers, employees. or agents, or any other person. Nothing in this memorandum shall be constrned to impair or otherwise affect the functions of the Director of the Office of Management and Budget relating to budgetary. 

administrative, or legislative proposals. 
69 

Federal Register/Vol. 76, No. 14/Friday. January 21, 20ll/Presidential [JocuIIjents 3829 

[FR Doc. 2011-1367 

Filed 1-20-11; B:45 am] 

Billing coda 3110-01-P 

The !lirector of the Office of Management and Budget is authorized and 

directed to publish this memorandum in the Federal Register. 

THE WHITE HOUSE, 

Washington, January 18, 2011 
70 

Chair LANDRIEU. Thank you, Dr. Sergeant. I do. Can you give us 

two examples, and be as specific as you can, of actions that you or 

your office have taken to either eliminate or significantly modify 

regulations that were going to be proposed by any Federal agency—you can pick any Federal agency—and just kind of walk us 

through for a minute or a minute and a half how your office advocated and stepped up and either got the regulation eliminated or 

modified? Anything in the last two years. 

Dr. SERGEANT. Senator Landrieu, we have been active in being 

a strong voice for small business. As you know, we do not represent 

the Administration. We represent small businesses and that is an 

honor that we have, to make sure that the voice of small business 

is heard at all levels of government. 

There are two examples that come to mind. One most recently 

involved a proposed ruling by OSHA. This involved the noise rule. 

A provision was in place to address noise in small manufacturers, 

and what employees would do to mitigate noise, they would wear 

earplugs or earmuffs and that worked fine. 

What OSHA proposed to mitigate noise was to require small 

manufacturers to buy all new equipment. Now, we have a solution 

that was in place, but it was proposed to have small manufacturers 

buy all new equipment with less noise, with a reduced noise factor. 

This is a problem for small business. Their focus is to sell products, 

to grow the employees, to grow their market share, not to spend 

billions of dollars to buy new equipment. 

So what we did, we reached out to OSHA. We heard from small 

businesses that this was burdensome. And so, we had a roundtable 

and I invited representatives from OSHA to come to a roundtable 

with small businesses. I assured OSHA that we run the meeting 

and so they need not be afraid for life and limb, but we run the 

meeting. 

At the meeting, they heard that this was a problem. This solution was solved already. So what came out of the meeting is that 

OSHA pulled the rule, they withdrew the rule. 

Chair LANDRIEU. That is exactly what your office should be 

doing. Can you give us another example? Because it is encouraging 

to hear that something we are doing is working to reduce some of 

these unnecessary rules and regulations. Is there any other example that you could give? 

Dr. SERGEANT. Another example, also, not to pick on OSHA, but 

it was the MSD Rule, what is called the Multiple Skeletal Disorder 

Rule. There is a form that is filled out by small businesses which 

will track some of the injuries that take place in the work environment. So there was another column that was proposed that small 

businesses would have to fill out. 

The problem with this is that this form, it was not clear whether 

or not this injury that was—was it an injury or an illness? And we 

were not sure whether it was on the weekend, maybe there is some 

recreational sports folks who may have hurt themselves and they 

come into the workplace. So it was not very clear. 

And so, this would have created a lot of uncertainty. It would 

have also put small businesses in the position to make the determination, medical determination of whether something was an illness or an injury. 
71 

And so, we reached out once again to OSHA and to share with 

them that this was a problem. So out of that meeting, they have 

agreed to postpone the rule and to do further outreach jointly with 

Advocacy and with OSHA. I met with the head of OSHA and we 

are going forward to make sure that they include small businesses. 

Chair LANDRIEU. That is an excellent example, and I thank you. 

Do you provide an annual report to this Committee or to Congress 

about all the actions that your Advocacy group takes, just like the 

two that you just described, and basically what the outcome is? Is 

there such a report submitted to Congress? 

Dr. SERGEANT. Yes, yes, Senator. Under the RFA, we submit an 

annual report to Congress on all the actions that we have taken, 

and in that report, we cite also the cost savings as well, and that 

is where the $15 billion number came from. 

Chair LANDRIEU. That is my second question. Because according 

to that report, the most recent report, the report claims $15 billion, 

which is very substantial, in cost savings. I just want to understand a little bit better about the methodology used to basically 

reach that conclusion. Do you all do those calculations in-house or 

do you have a third party, independent third party? 

Dr. SERGEANT. Well, these cost saving numbers actually come 

from the agencies themselves. 

Chair LANDRIEU. The what themselves? 

Dr. SERGEANT. These cost saving numbers come from the agencies themselves. So we do not—we do not create these numbers out 

of thin air. These are numbers that the agencies cite that because 

of our involvement within the rulemaking process, we were able to 

save small businesses these numbers as well. So these numbers actually come from the agencies. 

Chair LANDRIEU. All right. My last question is, I understand 

there is an office in the White House that is particularly focused 

on rules and regulations elimination, et cetera, et cetera. How do 

you work or do you work in conjunction with that White House office on regulation—OIRA—the OIRA office? Could you describe 

that relationship and how you work together or not? 

Dr. SERGEANT. Senator Landrieu, we work very closely with 

OIRA. I work very closely with Cass Sunstein, who is the administrator for OIRA, and it works such that under SBREFA, we have 

three covered agencies now with CFPB. So there is a covered agency there—— 

Chair LANDRIEU. And what are those three? Remind us. 

Dr. SERGEANT. Well, those three covered agencies are OSHA, 

EPA, and now CFPB. So under SBREFA, there is a covered agency, 

and then there is OIRA, and then there is me, Chief Counsel for 

Advocacy, and we work to make sure that that process is followed 

as well. 

I also work with Cass Sunstein on the Regulatory Working 

Group under Executive Order 13563 that was recently signed by 

President Obama. I am now part of this Regulatory Working 

Group, and this was an Executive Order that mandated that agencies take a look at rules that are currently on their books and to 

seek alternatives so that those rules are not burdensome for small 

business. 
72 

But there is a close relationship with OIRA. Cass Sunstein was 

our speaker at our most recent RFA 30. He spoke at our luncheon. 

Chair LANDRIEU. This is going to be a high priority for this Committee and I know Senator Snowe shares my passion for this issue 

of eliminating all regulations that are unnecessary, burdensome, 

and harmful to small business, while, of course, we want to protect 

the environment, protect worker safety, acknowledge that there are 

important objectives to be reached, but to eliminate everything that 

we can to reduce that regulatory burden. We hear so many complaints as we travel, not only in Louisiana as I travel through my 

own state, but as I travel around the country. Senator Snowe. 

Senator SNOWE. Thank you. I could not agree with the Chair 

more on this core issue that goes to the heart of the difficulties so 

many small businesses are confronting in America. I think it has 

contributed to their hardships, the uncertainties of the regulations, 

the cost of the regulations, the effects of them. 

It truly has, I think, a deleterious effect on their ability to create 

jobs and make investments for the future. It truly places a stranglehold on their capacity to make future investments with the uncertainty of the widespread costs, the types of regulations that are 

going to be handed down. 

So your role becomes ever more important as we struggle to create jobs in this economy. I mean, it is a very difficult environment 

to create jobs and we know it is going to take multiple years to get 

back to a sense of normalcy with respect to the unemployment rate. 

So your position is pivotal because you are the bulwark against the 

regulatory hardships that are imposed on so many small businesses across the country. 

So one thing that I hear repeatedly from my own constituency 

when I conduct Main Street tours is the cost of regulations. I am 

pleased that you cited to the Chair the example about the noise 

level abatement, because I was the one who was urging a reconsideration by OSHA. So I really appreciate that. It was truly troublesome because it would have required businesses to purchase noise 

mitigation equipment of some kind. It would have been a very expensive proposition for small businesses. So in any event, I thank 

you for the role that you played. 

But that is a good example of what can go away in the regulatory 

process. So I appreciate what you are doing in that regard. We 

want to make sure we can bolster your resources and your efforts. 

I mean, that is what we are all about, to reinforce that, because 

what we do here, what we all do is claim to generate job creation. 

It is going to be a catalyst for that. 

If we can put up these barriers so that regulations do not become 

a hardship to small businesses, we could see a vast turn around 

in this economy. I think it is between taxes and regulations, frankly, the uncertainly of costs and obviously—in conjunction with that, 

you get the health care laws. 

So they are going to be in some way. Many of them are. So they 

are all calculating the cost. So you put this all together, it is a confluence of events that really does constrain job creation as we are 

seeing. 

In any event, I want to get to the heart of a couple of questions 

and how you go about what you are doing. First of all, I think it 
73 

is great that you are now in an independent capacity. I think that 

is so important. When you were here last November, you discussed 

Section 610 of the Regulatory Flexibility Act for periodic reviews of 

the rules. 

One of the things that is in the bill that I introduced with Senator Coburn on the review process is just to require agencies, if 

they do not review every ten years, that these rules are sunset, because if they are not important enough to review, then perhaps 

they are not important enough to be on the books. 

I am just wondering, to what degree—do you have an accounting 

or documentation of the agencies that conduct these periodic reviews so we can have an analysis of what agencies are doing in this 

respect? Do you have any idea? Do we have any documentation of 

departments and agencies and when they review the rules that 

they have on the books? 

Dr. SERGEANT. Senator Snowe, thank you for your support of the 

office and we are pleased that we have an independent budget because now we can speak with a stronger voice, and also, small businesses know that we are truly their voice at the Federal level. 

With regard to 610, we fully support periodic review. Under my 

legislative priorities that I have submitted to the 112th Congress, 

one of them is to take a look at 610, because under 610, agencies 

are charged every ten years to look at rules that are on their books. 

The challenge with that is that there is not a roadmap or there 

is not a flow to say, This is what you should do. It is more that 

it is left up to the discretion of the agency. But under my legislative priorities, one should actually go back and do an IRFA where 

you involve small businesses. 

Small businesses could identify rules that they feel are burdensome or that are no longer needed, and then the agency should respond and do the analysis under 610. But as far as knowing which 

agencies are actually doing the 610, I do not have a list at my disposal. 

Senator SNOWE. Well, I think it would be quite enlightening because I have a feeling that a lot of agencies do not. You make a 

vital point on where the burden belongs. It is not currently on the 

agencies, where it is properly placed. The burden is on the small 

business community, frankly. And it is a disproportionate burden. 

Frankly, we have got to reverse this because it creates a perverse 

incentive within the agencies, which is to say that they do not have 

to be responsive, and they are totally insulated from transparency 

and accountability on this question. I am glad you are talking 

about this very question and changing that, because the burden 

has to be reversed. 

Now, in talking about my provision on sunsetting, it puts the 

burden on the agency where it belongs. Agencies ought to be able 

to justify their regulations. We know they can do reinterpretations 

without going through the rulemaking process. 

There are so many hardships imposed on small business, who do 

not have that kind of wherewithal to do this every day, to monitor 

agencies and what they are doing with regulations, while they are 

handed fines. That is what we are dealing with here. 

And one person, you, would have the sole responsibility for ensuring agency compliance. Well, exactly. It is just like in a court 
74 

of law. The judge has the responsibility for issuing convictions. 

That is the way it works. And we need to vest that authority in 

you to make sure you have the resources necessary to make these 

agencies accountable. 

So the law can force these agencies to be accountable. We have 

to transfer the responsibility where it should be properly placed, 

and that is within the agency, forcing them to take a proactive role 

in this regard. I would like to work with you on this issue to make 

sure you have the resources necessary to do your job. 

Second, I think we should have an accounting of agencies, of who 

is doing what, because I have a feeling they are not doing much 

of anything. They totally ignore their review requirement. Periodic 

means what? What is the definition of periodic, frankly? 

One other question. You had a goal, I mentioned in my opening statement, about the approximately $15 billion that you saved 

small businesses with respect to regulations in 2010. But your goal 

for the next two fiscal years is at $5.5 billion. So that is $9.5 billion 

less than what you originally achieved in 2010. Is there a reason 

for lowering the bar? 

Dr. SERGEANT. Senator Snowe, that number is a goal and not a 

ceiling in terms of cost savings. But in fiscal year 2010, there was 

one rule, what is called the GHG rule. It was a Greenhouse Gas 

Rule that contributed $9.1 billion in cost savings alone. But these 

goals were set out under a five-year strategic plan, and I am reviewing that plan and the cost saving goals will be taken into account as well. 

Senator SNOWE. Have you identified specifically what resources 

you need to be a regulatory bulldog? 

Dr. SERGEANT. Well, there are a number of areas where we may 

need support if our mission changes, if Congress decides to add 

more responsibilities to our office. With the new CFPB coming online in July, we are going to need more attorneys, more staff to 

really help out with the panels. We also will need a regulatory 

economist as well to really make sure that we have proper coverage. 

Right now, many within my office, especially the attorneys, they 

staff multiple agencies as well, and it is sometimes hard to keep 

track of what is going on. And so, if there is a change, we will have 

to look at some of those areas where we would need more staff, 

more support. 

Senator SNOWE. How many regulatory attorneys do you have? Do 

you know? 

Dr. SERGEANT. Currently we have 13 to cover the entire Federal 

Government. 

Senator SNOWE. Thank you. 

Chair LANDRIEU. On that, I would like the staff to prepare for 

both Senator Snowe and myself how many lawyers do we have in 

each agency of the Federal Government promulgating rules, and 

how many lawyers we have on this staff reviewing those rules. I 

want that documentation presented to this Committee like in the 

next couple—— 

[Laughter.] 

Chair LANDRIEU [continuing]. In the next couple of weeks because it will give us a clear picture of the battle here that we are 
75 

engaged in. And again, not throwing any of our agencies under the 

bus and everybody, you have to believe they are trying to do the 

right thing. 

But having said that, having this voice be strong for small business in America and working with these agencies to help modify 

or eliminate some of the wonderful ideas that they are thinking 

about, when you can present evidence that what they are doing 

would be so detrimental and actually not accomplishing their stated goals and objectives, whether it is environmental or health or 

safety, et cetera. 

I think this is something that both Senator Snowe and I feel 

strongly about, and we are going to pursue it. I am going to submit 

the rest of my questions in writing to you. If there is not anything 

else that has to come before the Committee, we will adjourn the 

meeting. Thank you very much. 

[Whereupon, at 11:35 a.m., the Committee was adjourned.] 

(77) 

APPENDIX MATERIAL SUBMITTED 
78 

Statement of Senator Carl Levin 

President's FY2012 Budget Request for the U.S. Small Business Administration 

And the Office of Advocacy 

March 31, 2011 

I am pleased the President's budget continues to restore funding to some SBA's programs after 

eight years of Bush Administration cuts. Small businesses employ just over half of all private 

sector employees and have generated 64 percent of net new jobs over the past 15 years. 

According to NFIB, 45 percent of small businesses in America say adequate access to capital is 

their number one problem. 

The President's FY 2012 Budget request of$985 million for SBA is higher than any request 

made during the Bush administration. It is slightly less than the FY 20 II request of $994 million 

and almost 20% above the FY 2010 regular enacted level of $824 million, not counting Small 

Business Jobs Act and Recovery Act funding which brought the FY 2011 enacted appropriations 

level to $1.8 billion. The President's robust FY 2012 budget request recognizes the fact that 

small businesses are the primary job creators in our economy and that SBA plays a critical role 

in helping small businesses access affordable capital and create jobs. This is especially 

important as we emerge from the Great Recession. 

To help small businesses retain and create jobs, last Congress we enacted the Small Business 

Jobs Act which took a number of important steps to provide small businesses with new credit 

resources. The Recovery Act also provided SBA programs with much needed additional capital 

when conventional banks were not lending and adjusted SBA's programs to make them more 

effective to help small businesses survive the recession. Job creation and access to capital still 

need to be our number one focus and we must continue to provide SBA with adequate resources 

to assist small businesses boost economic growth during this fragile recovery. 

I'm particularly pleased the request provides $3.8 million to fund the Microloan program at a 

program level of nearly $25 million. However, I'm concerned the budget request only provides 

enough funding to support $10 million for the important technical assistance component that 

makes the Microloan program so successful. This is a reduction of$1O million from FY 2010. 

With Micro lenders seeing increased demand as a result of conventional financial institutions not 

lending, they now play an even greater role in helping those small businesses that have no other 

way to access credit. I hope this funding level can be increased in the FY 2012 appropriations 

process. 
79 

Questions: 

I. As SBA works to implement the Intermediary Lending Pilot Program, enacted as part of 

the Small Business Jobs Act of2010 (P.L. 111-240, I want to clarify the intent of that 

legislation. The Intermediary Lending Pilot is designed to enhance the efforts of these 

organizations by allowing up to 40 Intermediaries to apply for $1 million loans from 

SBA. These SBA loans will be used by the Intermediaries to capitalize revolving loan 

funds through which loans between $50,000 and $200,000 would be made to small 

businesses in need of flexible debt financing to sustain and create jobs. While the 

legislation limits the amount that an Intermediary can borrow under the pilot to $1 

million, it placed no overall cap on how much a participating Intermediary can borrow 

from the SBA. 

I am concerned that SBA may be interpreting the legislation in a way that would place an 

overall cap of $1 million on how much a participating Intermediary can borrow from 

SBA under all programs which would make higher volume and experienced Micro 

lenders ineligible. SBA's interpretation of section (4) (B)is that the $1 million loan 

limitation applies not only to the Intermediary Lending Pilot, but also other direct loan 

programs, most notably the micro loans. There is nothing in the legislative history to 

indicate this interpretation. Our intent was to limit an Intermediary Lending Pilot loan to 

any single Intermediary to $1 million, not to set caps for participation in other SBA 

programs. 

QuestioB: 

Administrator Mins, will you agree to review the intended purpose of the program 

so a wide range of non-profit community based lending Intermediaries, including 

Micro lenders, will be eligible to apply? 

2. I recently spent 3 days meeting with Michigan small businesses and was alarmed to learn 

that they don't seem to know about the State Small Business Credit Initiative that we had 

included in the Small Business Jobs Act. This program, if effectively utilized will 

leverage as little as $1.5 billion in federal dollars into more than $15 billion in small 

business loans. We designed this grant program to help fund state and local programs, 

such as the Michigan Supplicr Diversification Fund and the Capital Access Program, 

both of which have been extremely successful in spurring small business lending in 

Michigan. I know the State Small Business Credit Initiative is run by the Treasury 

Department but SBA is the agency that interacts with small businesses and should be 

advertising it. 

Question: 

What sort of outreach is SBA doing on behalf of the State Small Business Credit 

Initiative? Can the SBA coordinate with the Treasury Department to ensure that 

the program is effectively utilized by the small businesses that it was intended to 

help? 
80 

Post-Hearing Questions for the Record 

"President's FY2012 Budget Request/or the U.S. Small Business Administration 

and the Office 0/ Advocacy" 

March 31,2011 

Submitted to the Honorable Dr. Winslow L. Sargeant, PhD 

Chief Counsel for Advocacy 

Office of Advocacy, U.S. Small Business Administration 

From Senator Mary L. Landrieu, Chair 

1. Is the Administration's FY 2012 budget request for Advocacy sufficient for you to do 

your job? 

i. Do you have adequate staff to carry out your mission? 

Answer: 

Yes, the FY 20]2 budget request for Advocacy is sufficient for Advocacy to do its job. 

While the demands on our office our large, I have an excellent staff and we are able to do 

a tremendous amount of good for small business on a relatively small budget. In the 

current economic climate, Advocacy recognizes the need for austerity and will do its part, 

as it always has in the past, to use scarce resources wisely. 

Of the total $9.12 million, $7.4 million will support current staffing levels, the same 

number on board during Fiscal Years 2008 and 2009, and the level authorized for 

Advocacy in the current fiscal year. 

The budget request will also support $1.3 million for economic research activities, 

including data acquisition and specialized contract research. This allows us to 

commission special data tabulations using new U.S. Census Bureau data, and to update 

certain older studies in order to better realize returns on investments that we have already 

made in the past. 

The remaining $420,000 requested covers travel, training, printing, office supplies, and 

all other incidental expenses directly attributable to Advocacy. 

1 
81 

2. The $10 million in overhead that SBA attributes to the cost of your office seems high 

based on your number of employees; it equates to about $270,000 per employee, per 

year. 

i. How does the $10 million in overhead costs for the SBA's Office of Advocacy, 

compare to the overhead costs for the SBA's Office of the Inspector General, 

which is similar in size? 

Answer: 

The Office of Advocacy was not involved in the calculation of the overhead request that 

was included in the FY 2012 budget request for our office. We have expressed our 

concern about this to SBA's Office of the Chief Financial Officer, and we have been 

informed that the cost allocation model used by that office to calculate overhead may 

have been an anomaly related to the fact that FY 2012 will be the first year Advocacy 

will have its own line-item appropriations account. The SBA Administrator also 

mentioned this in her testimony and indicated that further review is underway to 

determine why Advocacy's overhead calculation is so high. The Office of Advocacy has 

no control over how overhead costs attributed to it are calculated or spent - such funds 

that are spent on Advocacy overhead will not come from Advocacy's appropriation 

account, but instead represent the amount SBA is budgeting for in its own Salary & 

Expense account to support Advocacy. 

To compare the overhead costs for SBA's Office of the Inspector General and Advocacy, 

we have created a chart using data from SBA' s current and past congressional budget 

submissions. The chart compares the percentage of costs attributable to overhead for 

SBA as a whole, the Inspector General's office, and Advocacy. As can be seen, the 

Inspector General's overhead percentages are virtually the same as those for SBA as a 

whole, while Advocacy's are significantly higher. As noted above, this anomaly is under 

review by SBA's Chief Financial Officer. 

2 
82 

ooernead Percentages for SSP!, Inspector General and Advocacy, FY 2010 • FY 2012 _." ......... , FY 201{)artuaf FY 2010 request FY 1011 request n 2012 request 

603,17S 536,875 

863,00G Sll35Sll 

~ (Totm corul6sdiT&t com) 259,818 256,705 

S6A overhead as % of direct (osts 43.1% 49.7% 

55A O\lerhead as %of rota! costs. 30.1% 33.2')."(, 

Inspecror General direct costs t 17.300 17,300 

Inspector -Generat rota! (osts 11 25,321 23.708 

Overhead (Tota! com less direct costs) 8,021 6.408 

i6 overhead as ,%, of direct costs 46.4% 37.0% 

IG overtlead as % oftorru COSts 31,7% '27.0% 

II/A N/A 

9,318 11,165 

Ovemead {Total <-:om tess direct costs, NlA N/A 

AdYocat:y ~ as % of direct costs NIA NIA 

Advocacy overhead as %uftotal rusts NIA NIA 

l.ndudesai-c.nsts. both_eel: and ~ {Sowu: Table- 9 in f'{ 2012 au and Table 1.\ in the FY 2010 and Fv 2011 Crus.} 

i:CSoumil::I~~~ 

(l5oun:.e:TabfelinfY2012:CSJ. 

571,263 542,898 

837,096 802,433 

265.833 259,5'95 

465% 47.8% 

31J30/$ 32.3% 

19.000 19,420 

26,054 28,723 

7.1l54 9.303 

37.1% 47.90/~ 

17.1% 32.4% 

Nil< 9.1W 

12.392 19.655 

"/A 10.535 

N!A 115.5% 

N/A 5.:t6% 

3. I understand from your testimony that Advocacy produces about 25 new reports or other 

data products every year. 

L Does the FY 2012 budget request provide sutlicient funding for your economic 

research? (YesINo) 

Answer: 

Yes. Advocacy can successfully maintain all aspects ofits research mission with the 

amount requested. 

As I mentioned in my testimony, the FY 2012 budget request will support an economic 

research program of$l.3 million, Funding for this vital part of Advocacy's mission has 

been limited to approximately $1.1 million since 2000. As a result, we have repeatedly 

3 
83 

deferred updating some of our older research. We believe we could derive additional 

value from the investments we have already made in these studies. 

Also, every year we must leave on the table good ideas for specialized contract research 

that addresses important questions that arise as the economy changes. For instance, we 

have upcoming studies on small business contracting, a subject on which we frequently 

get questions, but on which we have not released research for over four years. 

The U.S. Census Bureau is currently releasing new data from its most recent Survey of 

Business Owners, conducted only once every five years. We would like to commission 

special tabulations using this new data to fill information gaps on small firms and their 

owners. 

4. Please elaborate on the $15 billion in cost savings that the Office of Advocacy estimates 

it saved for small businesses in 2010. 

i. Does this estimate represent real money savings to small firms? 

ii. How does your office calculate cost savings? 

iii. Do you have a firm goal or a projection for cost savings for this year? (Y es/No) 

Answer: 

Cost savings represent real money saved. In each case, without a change to the 

regulation, small businesses would have incurred these costs. These numbers come from 

the agency's calculations or from affected entities. We do not calculate them. 

Advocacy intervenes at different stages of the rulemaking process, as dictated by the 

RFA, conveying the concerns of small entities that stand to be affected by a rule(s) under 

consideration. Changes in the costs of the rule between proposed and final, when 

quantified by the regulating agency, are entered into our report. When no estimate is 

included in the agency's analysis, an attempt is made to quantifY the changes in costs 

from Advocacy's intervention. We thus rely on third party data when agency estimates 

are unavailable. 

Advocacy has, since about 2001, formally attempted to measure the impact of its 

interventions in rulemakings, as part of its mission to minimize the impact on small 

entities. In 2004, the SBA IG audited our costs savings methodology and records, and 

concluded that they were valid. Note that Advocacy has always produced two numbers 

for each year's cost savings from rule interventions during that year: one-time savings 

that would have occurred only in the first year of the rule's implementation; and recurring 

cost savings that would have continually been incurred by small businesses annually after 

4 
84 

rule implementation. Despite calculating recurring cost savings, Advocacy resets its cost 

savings account each year and therefore only counts the costs arising from new 

regulations promulgated during the year under examination. Advocacy believes this 

accounting convention lends greater clarity to its annual cost savings reports because 

maintaining a running total of recurring cost savings as a baseline each year blurs the 

relationship between cost savings and Advocacy's intervention that caused the cost 

savings by including data from previous years. 

5. Please describe to the Committee the role of the Regional Advocates. 

i. How are they important to your office and small businesses? 

ii. What objectives does your office hope to achieve in the various regions of the 

country? 

iii. What public or private partners will these Regional Advocates reach out to in 

order to best achieve these objectives? 

Answer: 

Regional Advocates are a critical part of the Office of Advocacy. They act as my eyes 

and ears on the ground and provide a strong voice for local small businesses in the federal 

process. As you and others on the Committee know, one size does not fit all when it 

comes to how small businesses are affected by regulations. Different businesses in 

different states have very unique concerns and challenges, and it is critical that I 

understand what is happening region-by-region. 

To that end, I am happy to report that by the end of June, my team of regional advocates 

will have visited 43 states to meet with small business stakeholders. 

Outreach to business stakeholders is their top priority. Most of their time is spent 

discussing the impact of government regulations and actions, and listening to concerns 

about unfair and unnecessary burdens. Regional Advocates provide small businesses 

with a local resource on government regulations and a strong ally on efforts to address 

unfair burdens. Regional advocates help make the federal government more accessible to 

our small businesses. 

While we are hearing specific regional concerns and are working to address those on a 

case-by-case basis, I am also encouraging the advocates to work as a team in areas of 

shared concern. To this end, we are planning to hold a series of coordinated roundtables 

where all 10 Advocates hold a local meeting on a common issue the same week. This 

5 
85 

will allow Advocacy both to emphasis key national issues and also understand local 

concerns. 

Regional Advocates reach out to a wide variety of private stakeholders, including 

regional, state, local, ethnic and minority chambers of commerce, business associations, 

and, of course, individual small business owners. Advocates also work closely with state 

and local governments on regulatory reform, providing guidance and expertise on 

regulatory flexibility. 

6. OSHA recently published and then withdrew, a new "Interpretation for Feasible 

Administrative or Engineering Controls of Occupational Noise" (i.e., OSHA noise 

standard) that was very controversial. 

i. How was Advocacy involved in this particular rule-making process? 

Answer: 

The proposed changes to OSHA's noise standard, originally published in the Federal 

REgister on October 19, 20 I 0, would have required employers to implement 

"economically feasible" administrative or engineering controls, such as enclosing or 

purchasing quieter machinery, in order to reduce workplace noise to permissible levels 

before employees would be allowed to wear personal protective equipment (PPE) like ear 

plugs or earmuffs to meet the standard (as they can now). 

OSHA's proposed change drew sharp opposition from small business representatives 

who said the proposal would radically change current safety practices and be unduly 

expensive. They also objected to OSHA's characterization of the proposed change as an 

"interpretation" and not a substantive rule. 

As a result of these small business concerns, Advocacy invited representatives from 

OSHA and the Department of Labor's Solicitor's Office to attend and provide a briefing 

on the proposed "re-interpretation" at Advocacy's regular labor safety roundtable in 

November of201 O. Following the roundtable, after listening to small business input and 

at Advocacy's urging, OSHA withdrew the rule and has pledged to conduct additional 

stakeholder outreach before proceeding. 

7. There have been a number of recent bills and amendments filed in Congress that would 

add the Small Business Regulatory Enforcement Fairness Act (SBREF A) panels to the 

review process for new federal agencies. 

6 
86 

i. Can Advocacy's current budget sustain this change? 

ii. Ifnot, what additional resources would be needed in your opinion? 

Answer: 

First let me say that the panel process has been very effective for small business at EPA 

and OSHA and I believe it is a good process. I also think it will serve small business well 

at the CFPB. However, I believe the panel process should be reserved for agencies 

whose regulations impose a large disproportionate burden on small businesses and that 

release numerous regulations impacting small business across several industries/sectors. 

I do not believe panels are the most cost effective approach for every agency as they 

require a lot of resources and manpower from the agencies and Advocacy. Additionally, 

panels are very time consuming for the small business participants, who can be difficult 

to recruit because of the significant time commitment. Most importantly, the panel 

process should be reserved for agencies that have a poor track record with regard to 

conducting initial regulatory flexibility analyses, to such an extent that the review process 

would be largely enhanced by a panel. 

Advocacy would need additional staff if new agencies became subject to the SBREF A 

panel process. Based on our calculations, we believe that for every new agency that adds 

the SBREF A panel process, Advocacy would need 2 new regulatory attorneys. Some 

large departments, like HHS and and OOT, would constitute more than one agency (i.e., 

FDA, CMS, and CDC at HHS). For every 5 new agencies that are added to the SBREF A 

panel process, Advocacy would need 2 regulatory economists. As for support staff, 

Advocacy would need one new administrative/support staffer for every 10 new 

employees at Advocacy. 

8. In your testimony you point out that the Office of Advocacy has been fully integrated 

within the SBA's internal budgetary process, and we understand that you share office 

space with them as well. 

i. What challenges has this created for your office, and have you considered moving 

your location given the high cost of overhead? 

Answer: 

Advocacy has been fully integrated within the SBA' s internal budgetary process since its 

inception. Although our new line-item will greatly increase the transparency of 

7 
87 

Advocacy's budget, and Advocacy's appropriation will be segregated in a separate 

Treasury account, our office will continue to be linked to SBA in many ways. 

Importantly, the Small Business Jobs Act provided that SBA will provide us with 

substantial operational support, the cost of which will not be charged to our 

appropriation. Advocacy has concluded a Memorandum of Understanding with SBA on 

the implementation of these provisions, which is attached. 

Concerning the more specific issue of office space, this is one of the types of operational 

support that SBA provides to Advocacy without charge to our appropriation. Our current 

offices are sufficient to house the staffing level requested for FY 2012. Should workload 

or staffing demands on our office change in the future, we will work with SBA to ensure 

that we have appropriate space, in accordance with our agreement. From the standpoint 

of efficiency and convenience, co-location with SBA currently works well for us. We 

rely on SBA for many administrative and support services (e.g., printing, payroll and 

personnel services, IT support, etc.), and we work closely with many SBA program 

offices on policy issues (e.g~ government contracting and lending), so proximity to these 

program and support offices is useful for everyone involved. We do not believe that the 

high cost of Advocacy overhead found in the current budget submission has anything to 

do with our current office space - we are on the same floor of the same building as the 

Inspector General's office. We are not currently considering relocating our offices, 

though should that become necessary in the future, we will work with SBA and the 

Congress to achieve the most cost-effective results possible. 

9. Can you identifY any projects or research studies that you have identified as being either 

inefficient or duplicative? 

I. If so, have you taken any steps to restructure these projects to maximize 

efficiency, or have you considered eliminating them altogether? 

Answer: 

Advocacy goes to great lengths to ensure that the research in which its staff engages and 

that for which it contracts with third parties has utility to the small business community 

and is of high quality. We are careful not to engage in duplicative research efforts and 

when we decide to revisit a topic covered in the past it is always because we believe that 

the research needs to be updated with new available data Because ofthe uncertainty as 

to what one will find when doing new research, our products do occasionally produce 

ambiguous or even disappointing results. However, going in to any project we have 

always done our due diligence and believe that the end result will be a valuable piece of 

8 
88 

research or data that will help demonstrate the importance of small business to the 

American economy. 

10. There have also been efforts here on Capitol Hill to revise the Regulatory Flexibility Act 

(RF A) in order to account for indirect regulatory impacts on small businesses. 

i. Can you please explain how a change like this could be structured and how this 

change could potentially impact your budget if at all? 

Answer: 

One of Advocacy's three m!yor legislative priorities is the inclusion of indirect economic 

impacts on small businesses within the scope ofthe RF A. Advocacy believes that 

inclusion of indirect effects would better enable agencies to understand the broader 

economic implications of their rulernakings and fully consider ways to mitigate those 

impacts, even for entities that are not directly regulated. 

However, Advocacy is also sensitive to the concern that, without limit, a requirement to 

consider all indirect economic impacts could tax agency resources without providing a 

commensurate benefit fur small entities. For this reason, Advocacy recommends a 

limited approach to indirect effects. 

Advocacy recommends Congress amend section 601 of the RF A to define "impact" as 

including the reasonably foreseeable effects on small entities that purchase products or 

services from, sell products or services to, or otherwise conduct business with entities 

directly regulated by the rule; are directly regulated by other governmental entities as a 

result of the rule; or are not directly regulated by the agency as a result of the rule but are 

otherwise subject to other agency regulations as a result of the rule. 

At this time, Advocacy believes that it can accommodate expansion of the scope of the 

RF A in this manner within current resources. However, were such a change to be 

enacted into law, Advocacy would continuously evaluate the effect of such an 

amendment on workload and make any appropriate recommendations through 

development of the President's Budget. 

9 
89 

Post-Hearing Questions for the Record 

Submitted to Mr. Winslow Sargeant 

From Senator Olympia J. Snowe 

Ranking Member 

1. When you were testifYing here last November I noted that there has been a tidal 

wave of federal regulatory activity as evidenced by the fact that the Obama 

administration promulgated 43 new, m~or regulations at a cost the Heritage 

Foundation estimates at approximately $26.5 billion in fiscal year 2010 alone. And 

that is on top of the $1.75 trillion in annual compliance costs that your office recently 

reported. And what is worse, this increase is anticipated to accelerate rather than 

recede. The U.S. Chamber of Commerce estimates that the health reform law alone 

mandates 41 separate rulemakings and at least 100 additional regulatory guidance 

documents. 

Last November, I urged you to be a regulatory bulldog for small business - and I 

reiterate that point again today. It is vital that the Office of Advocacy is fully 

equipped to ensure American small businesses are not unduly impacted by onerous 

one-size-fits-all federal regulations. 

How many attorneys do you currently have working on regulatory issues at 

Advocacy? How aboot economists? Oftbat number, bow many are currently 

working on tbe torrent of healthcare regulations given the vast implications and 

ollCertainty they are creating for entrepreneurs? 

How many regulatory attorneys do yoo have assigned to tbe Consomer Products 

Safety Commission, OSHA. or Environmental Protection Agency's regulations? 

Simply put. what resources do you need to be the regulatory watcbdog I have 

implored you to become? 

Answer: 

Advocacy's team of twelve regulatory attorneys are experienced and highly regarded 

among the small business community. In addition, Advocacy has two regulatory 

economists who work on a daily basis with the regulatory attorneys to analyze the 

federal agencies' rulemaking efforts. At this time, three of the twelve are assigned to 

work on various aspects of regulations issued under the Affordable Care Act and other 

health care statutes. They have been working very closely with their counterparts in 

the agencies to ensure that the voice of small business can be heard on issues as they 

aris 

Page lof7 
90 

Most, if not all, regulations issued by the Consumer Product Safety Commission are 

handled by one regulatory attorney. Rules issued by the Occupational Safety and 

Health Administration are assigned to one attorney. We currently have two attorneys 

assigned to rules issued by the Environmental Protection Agency. In addition, 

however, Advocacy's Deputy Chief Counsel and Director ofInteragency Affairs are 

both attorneys and work closely with the assigned attorneys on the regulations coming 

out of these agencies. 

We are satisfied that the current configuration of our interagency staff is sufficient to 

provide America's small businesses with an effective advocate within the federal 

government for fiscal year 2012. If additional duties and issues arise which require 

Advocacy to have an increased workload, these needs will be reassessed. 

2. When last we met, Advocacy had failed to staff any of its Regional Advocate 

posts. In the four months since, you've staffed all of these positions, for which I 

sincerely congratulate you. As you know, the relationship between this nation's small 

businesses and your role as Chief Counsel for Advocacy can be reinforced by 

Regional Advocates who are your eyes and ears on the ground - meeting with small 

business owners, state and local government, and organizations that support the 

interests of small entities. 

Regional advocates further help to identify regulatory concerns of small business by 

monitoring the impact of federal and state policies at the local level. Their work is 

intended to develop programs and policies that encourage fair regulatory treatment of 

small business, and help ensure their future growth and prosperity. And these efforts 

can take on many forms, including the State Regulatory Flexibility Model Legislation 

Initiative which was so effectively championed by former Chief Counsel for 

Advocacy Tom Sullivan. 

Most Regional Advocates have only been in office for a few months - yet I am 

curious as to what they are teUing you, and what progress are they making with 

states sDch as Idaho, Wyoming, and North Carolina that have yet to implement 

Regulatory Flexibility Model Legislation? 

What benchmarks have you set for the Regional Advocates, and what directives 

have you given them in terms of directing their work and outreach? 

Answer: 

The regional advocates' initial focus has been to become integrated into the small 

business communities in their states and gain a full understanding of how federal 

Page 2of7 
91 

regulations are affecting their constituencies. In the few months they have been on 

the job, I have directed them to focus on meeting with key stakeholders and business 

leaders in their regions, including representatives of local chambers of commerce and 

business associations like NFIB. I am very focused on ensuring that their efforts 

cover the full extent of their regions, and am proud to report that by the end of June, 

the ten regional advocates will have traveled to 43 states. They are holding 

roundtables on the impact of government regulations and actions, and listening to 

concerns about unfair and unnecessary burdens. They provide small businesses with a 

local resource on government regulations and help make the federal government more 

accessible to our stakeholders. 

The State Regulatory Flexibility Model Legislation Initiative at the Office of 

Advocacy was a great success in helping states understand their role in addressing 

unfair burdens on small businesses. I commend Tom Sullivan and his team of regional 

advocates for their work. 

My staff is currently reviewing what policies have been most successful in individual 

states. I am planning to have my office conduct a state by state study on state 

regulatory fleXIbility and where it stands to help inform me on the most prudent path 

moving forward. 

In the meantime, regional advocates will continue to work closely with state 

governments that are actively engaged in implementing or improving RF A legislation 

at the state level. Recently, our Region I Advocate, Lynn Bromley, testified before the 

Maine Senate on regulatory flexibility and provided guidance on regulatory lookback. Regional Advocates have written letters in support of regulatory flexibility 

efforts in Nebraska and Delaware. Other states where we are discussing current 

efforts include Ohio, Colorado, Wisconsin, Pennsylvania and California. While 

certain states have not yet implemented any regulatory flexibility legislation, as you 

point out. there are many others, like the ones we are engaged with, where the existing 

statutes and executive orders continue to be improved. 

3. We all agree that small businesses are vital to the economy. Small businesses 

stimulate economic growth, create new jobs, generate tax revenue, and develop 

innovation technologies. Despite this, small businesses are often stifled with onerous 

federal regulations. 

Many agencies, such as the Occupational Safety and Health Administration (OSHA), 

have repeatedly subverted the rulemaking process through the use of guidance 

documents or "reinterpretations" so that they don't have to adhere to their RF A . 

obligations. Would you fmd it beneficial to explicitly be provided the authority to 

Page 3 of7 
92 

comment on these types of documents - which can often be just as burdensome 

as formal regulations? 

How would this unequivocal authority assist you in aggressively advocating for 

American small businesses? 

Answer: 

The Office of Advocacy does not require additional explicit authority to comment on 

any Federal agency policy. Advocacy does not see its role as limited to the RFA or 

rulemakings subject to the RF A. Advocacy has broad mandate under our authorizing 

statute to advise on "policies and activities" that affect small business. For this reason, 

Advocacy does not believe additional authority is necessary. 

4. Under the Proper Consideration of Small Entities in Agency Rulemaking 

(Executive Order 13272), Advocacy's Office oflnteragency Affairs is required to 

train federal regulatory agency personnel on Regulatory Flexibility Act (RF A) 

compliance. I believe this training has many benefits to small businesses, as it 

provides new or heightened awareness to federal regulatory agencies regarding their 

role under the RF A and I am pleased that Advocacy has indicated that it expects to 

exceed the FY 2012 goal of providing RF A compliance training to 100 regulatory 

officials. Yet despite this mandate fOr Advocacy to teach RF A training. Federal 

agencies are not required to accept it. 

In addition to tbe fact that Federal agencies are stiU not required to accept RF A 

training, what do you perceive as the added chanenges to RFA compliance? 

Answer: 

The Office of Advocacy has been training agencies since 2003. Over the past 8 years, 

Advocacy has trained over 2000 employees from numerous federal regulatory 

agencies. The course continues to focus on some of the typical problem areas ofRFA 

compliance: 1) proper analysis of potential impacts of a proposed regulation on small 

entities and 2) the development of significant alternatives to the regulation that would 

reduce the burden of those impacts. These intensive training sessions have led to 

improvements in RF A analysis and an increased willingness of most agencies to work 

closely with Advocacy on their RF A analysis. 

Additional challenges to RF A compliance can be seen in two other areas -

compliance with section 610 and the convening of effective SBREF A panels. Few 

agencies complete their 610 analysis of existing regulations and many agencies see 

Page 4 of7 
93 

the effort as a mere exercise that leads to reatTmnation of the need for the existing 

regulation to remain in its current form. To add to the 610 requirement, Advocacy 

believes that section 610 should be strengthened to provide for public petitions for 

review and analysis of burdensome regulations without regard for how long the rules 

have been in place. 

In addition, the SBREF A panel process should be strengthened. In order for these 

panels to work efficiently and allow maximum input from small businesses, agencies 

should be required to provide at least two months' notice of an impending panel. Over 

the years, disagreements have arisen about the amount and quality of information 

provided to the small entity representatives in the SBREF A panels. Advocacy believes 

section 609 should be amended to require more detailed notification in advance of 

convening a panel and to speci:ty information that must be provided to small entity 

representatives to the panel. 

lam curious as to what have you learned from the small business community in 

the past 8 months sinee assuming the role of Chief Counsel for Advocacy? From 

what you have beard, first band from entrepreneurs, what Federal regulations 

aft of the most concern to America's small businesses (i.e. health care, OSHA, or 

EPA compliance). 

Aaswer: 

Every time I meet with a gathering of small businesses, whether at a trade association 

meeting, a roundtable, or some other event, those small businesses tell me about their 

rising costs that are hindering their ability to invest in new equipment, to hire new 

employees, to grow their businesses. Too many of these costs are tied to federal and 

state regulations. For many small businesses, the costs of compliance with tax laws is 

paramount. For others, it is the costs of providing health care for their employees, and 

questions about how the new health care law will impact their business. Others 

mention costs associated with new environmental regulations, or new interpretations 

of workplace safety rules. Others mention the cost of credit. What they uniformly tell 

me is that this regulatory uncertainty makes it difficult to plan for the future. What 

they would like to see happen is more regulatory fairness, so that they are not 

constantly pushing the rock uphill, only to watch it roll down again when an agency 

issues a new rule. 

What conclusions, if any, would you draw on the state of the small business 

economy from this information? 

Answer: 

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94 

It is difficult to draw conclusions about the broader small business economy merely 

from trends in federal agency compliance with the Regulatory Flexibility Act. So 

many factors affect the economy, including access to credit, prices and inflation, the 

employment situation, and many other factors, that it is difficult to assign causality to 

anyone component unambiguously. However, regulatory costs and impediments 

remain high on the list of small business concerns, and should be a focus for 

policymakers trying to increase the ability of small businesses to grow, hire new 

employees, and invigorate the economy. The uncertainty of the regulatory 

environment, as well as other factors weighing on the economy, makes it difficult for 

small businesses to plan for the future, including planning on growing their firm or 

hiring new employees, or opening a new business. Reducing this level of uncertainty 

would go a long way toward giving small business owners and entrepreneurs the 

confidence to invest in growth, which is what in tum will return the economy to 

growth and create new jobs. 

5. According to the SBA' s budget report for 2012, the Office of Advocacy produces 

an average of25 new reports each year. As someone who has dedicated the majority 

of their professional career to academia and research, I would like to talk to you about 

the research that originates at Advocacy. 

Part of the Office of Advocacy's mission is to conduct, sponsor, and promote 

economic research that provides an environment for small business growth. And I 

know that, in our previous discussions, you expressed great interest in collecting and 

analyzing data meaningful to small businesses. In fact, the Office of Advocacy's own 

research has exposed the disproportionate regulatory costs that small businesses pay -

those with fewer than 20 employees spend 36 percent more than their larger firms to 

comply with federal regulations. Uhimately, the small business community - and 

specifically those who wish to advance its interests - depend upon the Office of 

Advocacy for relevant information. 

What is your researeh bucJ;et for 2012, and how do you intend on spending it? 

Further, how are research topics proposed and how do you prioritize what 

projects you will accept? It is my understanding that Advocacy works in 

partnerships to better leverage resources, can you also describe with whom those 

coDaborations are shared? 

Does Advoc:aq pursue its research with staff members who split their time on 

regulatory issues and research, or does the Office contract out the majority of 

these studies at a higher cost? 

Page 6of7 
95 

Answer: 

The FY 2012 budget request will support an economic research program of$l.3 

million. Funding for this vital part of Advocacy's mission has been limited to 

approximately $1.1 million since 2000. As a result, we have repeatedly deferred 

updating some of our older research. We believe we could derive additional value 

from the investments we have already made in these studies. 

Also, every year we must leave on the table good ideas for specialized contract 

research that addresses important questions that arise as the economy changes. For 

instance, we have upcoming studies on small business contracting, a subject on which 

we frequently get questions, but on which we have not released research for over four 

years. 

Advocacy goes to great lengths to get input from the entire small business community 

on its research priorities. We reach out to actual small businesses, their 

representatives in trade associations, and members of Congress to see what issues are 

most important to reflect the economic environment small businesses face and provide 

necessary data to inform policy. 

The U.S. Census Bureau is currently releasing new data from its most recent Survey 

of Business Owners, conducted only once every five years. We would like to 

commission special tabulations using this new data to fill information gaps on small 

firms and their owners. Our request this year is more than 10 percent lower than last 

year's request of$I.45 million. 

Some research topics are central to our mission, like understanding trends in small 

business fmance, employment, regulation, and ownership demographics; and 

Advocacy has staff economists who work on this research. However, we do not have 

staff to cover all of these topics, and we therefore contract for research with third 

party scholars on a regular basis. While the price of research varies considerably by 

project, contract research does not on average cost more than research done by inhouse staff. The mandate of the Office of Advocacy is to cover a very broad range of 

subjects that affect small business. In order to do so with in-house staff, we would 

need many times the number of economists we currently have. By contracting with 

outside researchers, we are able to tap into the expertise of the top scholars working in 

many of these fields at a fraction of the cost of having them on staff full time. 

Page 7of7 
96 

March 14.2011 

The Honorable Mary L. Landrieu 

Chair 

Committee on Small Business & Entrepreneurship 

United States Senate 

Washington, DC 20510 

Dear Chair Landrieu, 

The Association for Enterprise Opportunity (AEO) would like to take this 

opportunity to express our views on the President's Proposed FY2012 Budget for 

the Small Business Administration (SBA). We are writing to request your 

support for three critical microenterprise programs: Microloan Program, Program 

for Investment in Micro-Entrepreneurs (PRIME), and Women's Business Centers 

(WBCs). 

AEO is cognizant of the current budget crisis, however, it is our beliefthat 

programs designed to encourage and promote job creation - especially those with 

proven track records including the Microloan programs at SBA - require 

continued support. The President's proposed SBA budget would eliminate and 

significantly reduce funding for SBA microloan counseling and technical 

assistance for entrepreneurs, small and micro businesses, and underserved 

communities. 

During the financial crisis that continues to affect businesses across the country, 

lending, credit, and access to capital dried up. Lending and technical assistance 

programs at the SBA provide critical resources to our Nation's entrepreneurs and 

smallest businesses. AEO is requesting that these important programs continue to 

be funded at FY2010 levels. 

AEO recommends the following FY20l2 funding levels to meet the demand for 

microenterprise services: . 

• Microloan Program Lending: 

• Microloan Program Technical Assistance: 

• PRIME Program: 

• WBC Program: 

$25 million budget authority 

$22 million 

$8 million 

$14 million 
97 

The President's proposed FY20l2 SBA budget would eliminate the PRIME 

Program, which is the only major program designed to provide funding to 

intermediaries which are not lenders. One of the reasons micro-businesses tend to 

have higher than average survival rates, is because lenders and microenterprise 

development organizations (MOOs) are able to provide the technical assistance 

and counseling made possible through PRIME. 

In its budget submission, the SBA determined that its network of Small Business 

Development Centers (SOBCs), Women's Business Centers (WBCs) and other 

programs and affiliates would have the capacity and resources available to 

provide the same level of assistance to the smallest of businesses. Although AEO 

recognizes the value of these organizations, we do not believe that they would be 

able to provide that same level of service that MOOs are able to provide. 

According to a recent Aspen Institute survey, 80% of businesses that received 

training and counseling though an MOO were still in business after five years. 

This compares to an overall five-year business survival rate of approximately 

50%. For these reasons, AEO requests that the PRIME Program continue to be 

funded at the FY2010 level of$8 million for FY2012. 

In addition to the elimination ofthe PRIME Program, the President's proposed 

FY2012 SBA budget also calls for a reduction in funding for technical assistance 

under the Microloan Program, from $22 million in FY20 I 0 to just $10 million for 

FY2012. Not only would technical assistance through PRIME disappear, but the 

proposed reduction in technical assistance funding through the Microloan 

Program will doubly affect the underserved population that relies on it the most. 

AEO requests that the funding levels for technical assistance provided through the 

Microloan Program remain at the FY2010 level of$22 million and funding for 

lending under the Microloan Program remain at the FY20 I 0 level of$25 million 

in budget authority. 

Women's Business Centers provide an additional resource for women and 

minority entrepreneurs and small business owners in low-income areas. Recent 

surveys of microenterprise programs have found that the majority of 

microentrepreneurs served are female (59%), and come from traditionally 

disadvantaged backgrounds (60%). AEO requests that WBCs continue to be 

funded at the FY2010 level of$14 million for FY2012. 

In response to diversifYing entrepreneurial needs, MOOs continue to expand their 

services to meet the needs of entrepreneurs. Today, the types of business 

development services provided by MOOs include technical assistance, training, 

mentoring, financial literacy, credit counseling, technological services, tax 

preparation, and legal assistance. Given today's emphasis on new job creation, 

supporting our Nation's entrepreneurs and small businesses requires an 

investment in starting and growing the smallest of businesses. AEO research 

shows that if just one in three microenterprises were to employ one additional 

employee, the U.s. economy would return to "full employment" (Le. 
98 

unemployment rate of approximately 4% based on current baseline of9% 

unemployment). 

AEO is the national member organization and voice of microfinance in the United 

States. For nearly two decades, AEO and its 450 member organizations of 

nonprofit lenders and business development practitioners have helped more than 

two million entrepreneurs to contribute to economic growth as they support 

themselves, their families and their communities. 

Thank you in advance for your consideration of AEO's view. If you have any 

questions regarding these requests, please contact Ann Sullivan at 202-626-8528 

or asullivan@madisonservicesgroup.com. 

Sincerely, 

Connie E. Evans 

President & CEO 

Office 202,650,5580 

Fax 202,650,5599 

1111 16" Street, NW, 

SURe 410 

Washington, DC 20036 
99 

~* WIPP 

Women Impacting Public Policy 

March 30, 2011 

The Honorable Mary l. landrieu 

Chair, Senate Small Business & Entrepreneurship Committee 

United States Senate 

Washington, DC 20510 

Dear Chair landrieu: 

We are writing to express our views on the Small Business Administration's (SBA) proposed 

budget for FY2012. Important to Women Impacting Public Policy (WIPP) is funding for 

implementation ofthe Women-Owned Small Business Federal Contract Program, Women 

Business Centers (WBCs), Procurement Center Representatives (PCRs), Commercial Marketing 

Representatives (CMRs), and SBA's Office of Advocacy. WIPP is a national, nonpartisan 

organization representing 54 organizations and over half-a-million women business owners 

nationwide. 

WIPP supports the proposed funding for the Women Owned Small Business (WOSB) Federal 

Contract Program of $1 million, included in the President's budget. As you know, this program, 

which has taken eleven years to enact, is designed to give women-owned businesses greater 

access to federal contracting. It will allow contracting officers, for the first time, to restrict 

competition for federal contracts to women-owned businesses. This program will assist federal 

agencies with reaching the federal goal of awarding 5% of all contracts to women-owned 

businesses. Central to the success ofthis program are procurement center representatives 

(PCRs), and commercial marketing representatives (CMRs). 

In ;;Iddition, we support the proposed $14 million in funding for Women Business Centers 

(WBCs). WBCs provide essential training, counseling, and mentoring to help women looking to 

start or grow a successful business. According to SBA's Office of Entrepreneurial Development 

(ED) 2010 Impact Report, WBC's clients who received three or more hours of counseling 

reported a 47% increase in sales while clients who received less than three hours of counseling 

reported only a 36% increase in sales. In addition, businesses that receive assistance from 

WBCs have significantly higher survival rates that those businesses not receiving similar 

support. 

1156 15th Street NW, Suite 1100, Washington, DC 20005 - 888.488.WIPP - Fax: 202.872.8543 

1714 Stockton Street, Suite 200, San Francisco, CA 94133 - 415.434.4314 - Fax: 415.434.4331 

Website: www.WIPP.org 
100 

Æ 

lastly, we support the recommended funding for the Office of Advocacy of $9.1 million. WIPP 

believes that this office provides a much needed independent voice on behalf of small 

businesses in the federal regulatory process. 

Thank you for consideration of our views. If you have any questions, please feel free to contact 

Ann Sullivan, WIPP Government Relations, at (202) 626-8528. 

Sincerely, 

Barbara Kasoff, President 

1156 15th StreetNW, Suite 1100, Washington, DC 20005 - 888.488.WIPP - Fax: 202.872.8543 

1714 Stockton Street, Suite 200, San Francisco, CA 94133 - 415.434.4314 - Fax: 415.434.4331 

Website: www.WIPP.org