[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
THE SHUTDOWN: ECONOMIC IMPACT ON SMALL BUSINESSES
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
FEBRUARY 6, 2019
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Small Business Committee Document Number 116-002
Available via the GPO Website: www.govinfo.gov
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34-637 PDF WASHINGTON : 2019
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
ABBY FINKENAUER, Iowa
ANDY KIM, New Jersey
SHARICE DAVIDS, Kansas
JARED GOLDEN, Maine
JASON CROW, Colorado
JUDY CHU, California
MARC VEASEY, Texas
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
ADRIANO ESPAILLAT, New York
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
VACANT
STEVE CHABOT, Ohio, Ranking Member
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
TRENT KELLY, Mississippi
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
Adam Minehardt, Majority Staff Director
Melissa Jung, Majority Deputy Staff Director and Chief Counsel
Kevin Fitzpatrick, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Nydia Velazquez............................................. 1
Hon. Steve Chabot................................................ 2
WITNESSES
Dr. Matthew D. Shapiro, Lawrence R. Klein Collegiate Professor of
Economics, University of Michigan--Department of Economics, Ann
Arbor, MI...................................................... 4
Mr. Bill Butcher, Founder, Port City Brewing Company, Alexandria,
VA............................................................. 5
Ms. Heidi Gerding, CEO, HeiTech Services, Inc., Landover, MD..... 7
Mr. Charles Rowe, President & CEO, America's Small Business
Development Centers, Arlington, VA............................. 9
APPENDIX
Prepared Statements:
Dr. Matthew D. Shapiro, Lawrence R. Klein Collegiate
Professor of Economics, University of Michigan--Department
of Economics, Ann Arbor, MI................................ 31
Mr. Bill Butcher, Founder, Port City Brewing Company,
Alexandria, VA............................................. 39
Ms. Heidi Gerding, CEO, HeiTech Services, Inc., Landover, MD. 44
Mr. Charles Rowe, President & CEO, America's Small Business
Development Centers, Arlington, VA......................... 56
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Statement of Hon. Troy Balderson............................. 63
Chamber of Commerce.......................................... 65
DataPoint.................................................... 67
FRANdata..................................................... 68
IFA - International Franchise Association.................... 69
NAGGL - National Association of Government Guaranteed Lenders 73
National Council of Nonprofits............................... 75
Paychex...................................................... 82
THE SHUTDOWN: ECONOMIC IMPACT ON SMALL BUSINESSES
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WEDNESDAY, FEBRUARY 6, 2019
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 11:00 a.m., in Room
2360, Rayburn House Office Building. Hon. Nydia Velazquez
[chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Finkenauer, Kim,
Davids, Golden, Veasey, Evans, Schneider, Delgado, Chabot,
Balderson, Hern, Hagedorn, Stauber, Burchett, Spano, and Joyce.
Chairwoman VELAZQUEZ. Good morning. The Committee will come
to order.
We thank everyone for joining us this morning, and I want
to especially thank the witnesses for being here today.
As we are all aware, the recent government shutdown was a
particularly painful experience that will leave a lasting
impact on our small business economy and our workforce. For
many federal workers, contractors, and small business owners,
it was 35 days of missed paychecks, delayed loans, and strained
budgets. Most unsettling to many of us was the shear
uncertainty of just how long this would last.
Despite the shutdown ending, many small business owners and
workers are still feeling its effect. While those direct and
indirect costs are being tallied, there are some things that we
already know.
We know that $3 billion in economic activity has been
permanently lost, according to the latest Congressional Budget
Office figures.
We also know that federal contractors and workers, many of
whom live paycheck to paycheck had to take extraordinary
measures to make ends meet.
We know that the shutdown delayed $18 billion in federal
discretionary spending and shuttered numerous Federal agencies,
including the Small Business Administration.
Because of the shutdown, SBA was forced to suspend many of
its most crucial services, including the approval of small
business loans and contractor certifications.
During the shutdown, we heard one heartbreaking story after
another. From small businesses who have lost customers and
others waiting on SBA loans, to small contractors who are not
getting paid, the impact was felt by many.
But, what we do not know is the shutdown's full cost to the
small business community.
Today's hearing gives us the opportunity to answer this
question. We will hear from a flourishing brewery that had to
postpone the rollout of 2019 beers due to a lack of federal
approval.
We will also be hearing from a federal contractor that had
to take extraordinary measures to ensure her employees were
supported through this difficult time.
These stories, along with many more, will give us insight
into how small businesses, their employees, and local economies
weathered this terrible storm.
It is my hope that we can shed light on the difficulties
entrepreneurs and federal workers alike are still enduring
after the shutdown, and that as lawmakers we can come together
to prevent another one in the future because the consequences
are far too real for our nation's job creators.
I look forward to today's hearing and thank the witnesses
for being here to share their stories with us.
I now would like to yield to the Ranking Member, Mr.
Chabot, for his opening statement.
Mr. CHABOT. Thank you, Madam Chairwoman.
The partial government shutdown left many small businesses
in a state of uncertainty, and it is important that we address
how quickly we can bring the small business economy back up to
speed.
Many American small businesses utilize services from the
Federal Government, and of particular interest to this
Committee, they often turn to the SBA, the Small Business
Administration. The SBA provides small businesses with many
different types of assistance, including aid and competing for
government contracts, gaining access to capital, and
entrepreneurial development. Unfortunately, during this
winter's partial government closure, the majority of the SBA's
employees, with the exception of the Office of Disaster
Assistance, were furloughed. This temporarily halted the SBA's
lending programs and left many small business contractors
without pay. Many small businesses around the country also saw
a drop in consumer spending, especially those most frequented
by government employees.
Yet, even in the most trying of times, I am always
encouraged by the determination of America's entrepreneurs.
Despite the dysfunction in Washington, small businesses started
off 2019 strong. According to the National Federation of
Independent Business (NFIB), small firms added workers,
realizing the best rate gain since last July. Wages also rose
in January with the percentage of business owners reporting
that they increased employee compensation and it continued at
45-year record highs.
This welcomed news, however, does not mean that small
businesses came out unscathed. Many small businesses' bottom
lines were influenced by the government's closure, and
obviously, adversely. Now that the Federal Government has
reopened, many small businesses are wondering what is next.
Today, I hope we will be able to provide clarity to any
small business affected by the shutdown. While government
shutdowns often prompt people and politicians alike to assign
blame, I hope that today we can put those differences aside and
have a productive conversation to help our nation's small
businesses get back on track so they can continue to prosper,
innovate, expand, and hire folks.
Thank you, Madam Chairwoman, and I yield back.
Chairwoman VELAZQUEZ. Thank you, Mr. Chabot.
The gentleman yields back. And if Committee members have an
opening statement prepared we would ask that they be submitted
for the record.
I would like to take a few minutes to explain the timing
rules. Each witness gets 5 minutes to testify, and each member
gets 5 minutes for questioning. There is a lighting system to
assist you. The green light will be on when you begin and the
yellow light will come on when you have 1 minute remaining. The
red light will come on when you are out of time, and we ask
that you stay within the timeframe to the best of your ability.
I would now like to introduce our witnesses.
Our first witness is Dr. Matthew Shapiro. Dr. Shapiro is
the Lawrence Klein Collegiate Professor of Economics at the
University of Michigan. He is editor of the American Economic
Journal of Economic Policy. Dr. Shapiro is also the Chair of
the Federal Economic Statistic Advisory Committee, the official
advisory Committee of the Census Bureau, the Bureau of Labor
Statistics, and the Bureau of Economic Analysis. Welcome, sir.
Our second witness is Mr. Bill Butcher. Mr. Butcher is the
founder of Port City Brewing Company, an artisanal craft
brewery in Alexandria, Virginia. He is a fourth generation
Alexandrian and is a long-time craft beer aficionado. He
watched the craft beer business evolve and become more like the
fine wine business. It was this evolution that convinced him
and his wife Karen to start Port City Brewing Company in
Alexandria in 2011. Welcome.
Our third witness today is Ms. Heidi Gerding. Ms. Gerding
is the CEO and cofounder of HeiTech Services, a woman- and
service-disabled veteran owned business. HeiTech Services is a
federal programs and technology solutions provider
headquartered in Landover, Maryland. She is the first woman
from Minnesota to graduate from the U.S. Naval Academy. Ms.
Gerding's naval career spanned nearly 10 years during a time
when being an academy graduate, a naval officer, and a woman,
challenged established tradition. Welcome, Ms. Gerding, and
thank you for your service.
I now yield to our Ranking Member, Mr. Chabot, to introduce
our final witness.
Mr. CHABOT. Thank you, Madam Chairwoman.
Our final witness today is Mr. Charles T. Rowe, president
and CEO of America's Small Business Development Centers, a
nationwide network of 975 centers providing no cost business
counseling and training to small business owners. Prior to this
role, Mr. Rowe served as the associate administrator with
Congressional Legislative Affairs for the SBA, the Small
Business Administration, and also served on the House Small
Business Committee, this Committee, as counsel for 10 years.
Welcome back to the Committee, Mr. Rowe, and we thank you for
testifying today.
And we thank all the witness, and Ms. Gerding, thank you
for your service. Appreciate it.
Chairwoman VELAZQUEZ. Thank you, Mr. Chabot.
And now I recognize Dr. Shapiro for 5 minutes.
STATEMENTS OF MATTHEW D. SHAPIRO, LAWRENCE R. KLEIN COLLEGIATE
PROFESSOR OF ECONOMICS, UNIVERSITY OF MICHIGAN - DEPARTMENT OF
ECONOMICS; BILL BUTCHER, FOUNDER, PORT CITY BREWING COMPANY;
HEIDI GERDING, CEO, HEITECH SERVICES, INC.; CHARLES ROWE,
PRESIDENT AND CEO, AMERICA'S SMALL BUSINESS DEVELOPMENT CENTERS
STATEMENT OF MATTHEW D. SHAPIRO
Mr. SHAPIRO. Thank you for the opportunity to testify about
the effects of the recent partial government shutdown.
The recent government shutdown had an immediate and direct
effect on government workers and contractors who were not paid
during the shutdown and businesses who therefore lost sales.
Research on the 2013 government shutdown provides concrete
evidence about how government workers coped with a drop in pay
and provides insights into how the direct effects of the lost
pay affect the economy in general and small businesses in
particular.
Many households live paycheck to paycheck. A typical
government worker had about a week's worth of spending in the
bank prior to the 2013 shutdown. Roughly 20 percent only had 1
day's worth of spending in the bank prior to the shutdown.
Hence, many government workers needed to take multiple steps to
make payments and meet expenses when they go payless.
In October 2013, government workers took a number of
measures. On average, they cut overall spending by an amount
equal to about half the pay shortfall. Households with a low
cash buffer cut spending more sharply. Many deferred payments,
including mortgage, rent, and credit card payments.
There is little evidence, however, that workers affected by
the 2013 government shutdown borrowed by incurring new charges
on their credit cards. Those who have little cash and
substantial credit card debt appeared very reluctant to
accumulate new debt in the face of the drop in income.
Because the 2013 shutdown resolved quickly and workers were
paid promptly, it had little lasting effect on workers'
financial conditions or on the overall economy. Workers who
deferred mortgage payments or rent were able to make payments
once they received retroactive pay, often within the month, so
there was no discernable effect on their credit.
While the coping strategies of affected workers in the
recent shutdown appear similar to that in 2013, the severity of
the shutdown for affected workers led to much greater economic
impacts.
Few households have sufficient cash buffers to offset a
month with no pay. As the shutdown entered its fifth week last
month, there was considerable risk of a sharp drop in economic
activity. The out-of-pocket costs of coming to work, commuting
costs or childcare expenses are significant and needed to be
paid even by those government worker who were mandated to work.
The temporary expedient of skipping a payment of rent, of
mortgage, of credit card, of cellphone, of utilities, of
insurance, of doctors' bills, you name it, something that might
have seemed at first fairly low risk given the short duration
of previous shutdowns was a looming financial disaster for many
households. Disruption of Federal services, particularly air
transportation, were becoming widespread.
Small businesses provide many consumer needs for
discretionary purposes. Examples include restaurants and coffee
shops, dry cleaners, corner grocery stores, parking lots, movie
theaters, or car dealerships. When households have to make
cutbacks, they focus on discretionary purchases, such as eating
out, or big ticket items that can be deferred, such as a car or
appliance purchase. Businesses and locations where Federal
workers and contractors live or work were disproportionately
affected.
Workers deferring their payments also affect business. Some
of these payments--mortgage, credit cards, utility, phone
bills--were paid to large institutions who presumably had a
financial buffer. In contrast, late rent payments may go to
small landlords who themselves owe payments to creditors and to
the small businesses who service their properties. The shutdown
may have placed such businesses under stress, which could have
been severe had the shutdown continued into a second cycle of
monthly payments.
There are other effects much harder to quantify but equally
important from having the Federal Government operating
partially for 5 weeks. Those doing business with the
government, those awaiting regulatory approvals, those awaiting
loan approvals, or just trying to get information were put on
hold. They face continuing delays as the affected agencies
clear the backlogs associated with the 5-week closure.
These disruptions are likely to have an accumulative and
persistent effect on business output and productivity.
Perhaps a silver lining from the recent shutdown is the
widespread disruptions it caused made salient the many Federal
functions that provide vital services to business and the
public.
Further estimates on the effect of the shutdown are
available from official statistics, macroeconomic models, and
the University of Michigan Consumer Sentiment Survey. I provide
some details in my written testimony.
Thank you for asking me to testify before the Committee,
and I look forward to your questions.
Chairwoman VELAZQUEZ. Thank you so much for being on time.
I really appreciate it.
And now we will recognize Mr. Butcher for 5 minutes.
STATEMENT OF BILL BUTCHER
Mr. BUTCHER. Chairwoman Velazquez, Ranking Member Chabot
and members of the Committee, thank you for asking me to
testify today. I look forward to speaking on behalf of the
small and independent brewers about the impact of the partial
government shutdown.
My name is Bill Butcher. I am the founder of Port City
Brewing Company in Alexandria, Virginia. Port City began
operations in 2011 and since then we have grown to have 56
employees. We brew a variety of beers, with a number of year-
round staples, seasonal beers, as well as one-offs.
In 2015, we were named Small Brewery of the Year, and our
beers have won, local, national and international awards. I
invite all of you and your staff to come visit Port City any
time and see how our brewery is run.
Port City is committed to being a local and independent
brewery. For example, we purchase close to 400,000 pounds of
Virginia-grown wheat to use in our Optimal Wit, which is our
best-selling beer. We are proud of our work with our supply
chain partners in manufacturing, agriculture, and retail, and
the jobs we have helped to create.
According to the Brewers Association, which is the trade
association that represents small and independent brewers,
breweries like ours contributed $76.2 billion to the U.S.
economy in 2017, and we employ more than 135,000 Americans in
manufacturing and service jobs.
Running a brewery is capital and time intensive. As a small
business, we rely on planning to make sure that we can operate
our brewery, meet our suppliers' needs, and pay our employees.
We know that unexpected issues can arise, and we do everything
we can to prepare for them. Unfortunately, no one could prepare
for the impact the partial government shutdown would have on
breweries. Two major agencies that we rely on to run our
businesses were closed during the shutdown. The Alcohol and
Tobacco Tax and Trade Bureau, also known as the TTB, and the
Small Business Administration (SBA). One of the TTB's main
functions is to process certificate of label approvals, also
known as COLAs, which breweries are required to have if we
package our beer and sell it across state lines. Some states
also require COLAs for all beer packaged and sold in state.
Without a label approval we cannot sell our beer.
You may be surprised to hear that as an industry we get
along with our regulators. Over the past few years, the TTB has
taken steps to increase efficiency and turnaround time of
approvals. Last year they approved more than 34,000 malt
beverage labels. Prior to the shutdown, the turnaround time on
malt beverage label approvals was between 6 and 30 days. As of
February 1, the TTB estimated a 53 day approval time and was
only processing labels that were submitted last December 13.
The backlog is not the fault of the TTB. The employees who
process labels, formulas, and brewers' notices are deemed
nonessential. They were prohibited from reporting to work
during the shutdown.
To give you an idea of how this hurts a brewery, I will use
Port City as an example. We spent months putting together a
release calendar for our 2019 beers to help us determine when
we will purchase ingredients and packaging supplies. On
December 18, we submitted a label for a beer that we were
planning to release in the spring. Until we get that approval,
we cannot sell that beer and the entire supply chain is on
hold.
The uncertainty is not just impacting my business. It is
impacting everyone I do business with. We are just one of the
thousands of businesses who are dealing with these
repercussions.
We are asking that the TTB employees be declared essential.
To our business and thousands of others they are just that. If
you empower a Federal agency to give approvals for basic
business activities, you need to keep them at work.
Unfortunately, time is of the essence. The upcoming
deadline for funding the government has brewers throughout the
country nervous about another shutdown and its long-term
impacts on their business. Port City was also hurt by the
furloughing of SBA staff who were working on a loan application
for our new bottling line. We have been unable to lock down an
interest rate, and I will likely have to pay thousands more
over the life of the loan in interest. Last year, the SBA
provided $1.4 billion in loans to more than 1,900 small
breweries. I can attest firsthand to the importance of those
loans. We ask that the SBA employees who approve federally-
backed loans also be declared essential.
Congress can also help mitigate the effects of the shutdown
by making the Federal excise tax rates from the Craft Beverage
Modernization and Tax Reform Act permanent. In 2018, breweries,
wineries, and distilleries across the U.S. have hired new
employees, increased their economic development, and made
capital improvements to their businesses. Making the lower rate
permanent in 2019 will allow breweries to continue doing these
things and to help cover any losses that resulted from the
government shutdown.
In conclusion, my company and other breweries need reliable
Federal partners to continue to grow. We cannot sell our
product without them. I ask that in the future you work to get
TTB and SBA employees declared essential.
Thank you again for having me here, and I look forward to
any questions you may have.
Chairwoman VELAZQUEZ. Thank you, Mr. Butcher.
And now Ms. Gerding is recognized for 5 minutes.
STATEMENT OF HEIDI GERDING
Ms. GERDING. So thank everyone.
I want to start first of all by thanking Ms. Velazquez and
Mr. Chabot for having us here today. Also, the veterans that
are serving as congressmen today, thank you very much for your
service as well. Nothing is more important to me. I also serve
on a board of directors for the National Veterans Small
Business Coalition and very near and dear to my heart still.
I have in my testimony that you have in front of you, it
was interesting. My son read it and said, Mom, this sounds more
like a proposal for the government than it does testimony. So
you will see exhibits and attachments and all sorts of fun
things in there.
It is based into four areas--background, impact, I
summarize, and then the call to action. My testimony is a very
personal testimony. It does not have a lot of statistics in
there about small business and things. This is an impact to my
business directly.
We are HeiTech Services. This is a government contractor.
The one thing I will say is that we really recognize, spent a
lot of time recognizing the Federal workforce. No time
whatsoever was spent recognizing the government contractors
that support those agencies. Our people were not allowed to go
into food banks and get food, yet they were without pay for a
number of weeks. My company fortunately, after 2 weeks of no
pay, for 36 employees of about 160 billable staff that I had
working, so it is about 22.5 percent of my billable workforce,
were without pay for 2 weeks. The company asked them to take
vacation, personal time, or leave without pay. Normally, we do
not allow our people to take leave without pay. We ask them to
expend their vacation and personal time, but due to the
circumstances, knowing that a couple of our employees were
getting married and had plans, needed to save their leave and
things like that. We had other members that were pregnant and
they knew that maternity leave was coming up. They had plans
for their vacation. So they went without pay for 2 weeks. After
2 weeks my staff got together and said, you know what? I could
not do this as an owner of a business. This is ridiculous. So
at the third week we put our employees back on the payroll at
our erosion of profits to keep those people.
When you consider the time and the effort it takes to
recruit a new person to fulfill a government contract, which
our costs are about $1,100 per new person. That does not
include the time to get them through a national agency
clearance investigation, a NACI check, which can range from 3
to 8 weeks once we identify and get an offer letter back from
an employee accepting employment. They then go through 3 to 8
weeks waiting for the government to say, yes, they can start
work. If in the worst case scenario an agency takes 8 weeks to
approve that person to start on the job and it comes back
denied because they found something that I did not pick up in
my background check that maybe they had access to FBI records
or something that my background people do not have access to,
the whole process starts again. So we have staff that are
performing work extra because of vacancies that are currently
existing on contracts.
When I talked about the impact, I labeled it into three
areas--financial impact on the employees, the financial impact
on the company, and then the emotional toll it took on both
sides which are, I mean, they are just unbearable to even think
about. Probably the biggest thing was the employees that were
not affected, were still working for the FDA, were concerned
that the FDA might run out of money and would they be
furloughed? What would happen then?
The only relief came when they heard that the company put,
after 3 weeks, everybody back on the payroll. It did provide
some relief, but there was a lot of anxiety associated with
that. When people are worried about things, they do not perform
at their top performance level.
Our company processes paper and electronic forms for the
Federal Government. Our work is considered mission critical. At
the Food and Drug Administration, we are processing medical
device applications for approval. We are also processing the
adverse events that come from the result of a malfunction,
serious injury, or a death of a malfunction. Those are mission-
critical services, and they are usually fee-based. So those
employees continued to work.
One employee gave me an acknowledgement that we take a lot
from importers overseas calling the FDA and asking us questions
about registering things. It was an embarrassment he said to
have them have to explain to foreign countries or foreign
companies that our country was shut down in that particular
area and could not process something. It was unfathomable to
another country that this country could not do something.
So I want to summarize things, although please take time to
read my testimony. I personally wrote this testimony because it
was from the heart. I saw what my employees went through. I
know what I would have gone through. But I wrapped it up with
three calls to action.
The first one is, please, please fund these last seven
agencies and departments. Do not have my employees have to go
through this again next week.
The next thing is to treat--do not forget about the
Government contractors. There are so many government
contractors that outnumber Federal employees. Do not forget
about us. The analogy that I use in there is when the Vietnam
War era, people came back from the war, they were not treated
respectfully. And as a result of that, today our veterans are
coming back and being respected. Do not make this analogous to
that situation. Have us be those returning war veterans and
treat us with the same amount of respect.
And finally, something that I just became aware of myself
was the debt ceiling that is looming on March 2. Please do not
lose sight of that. The economic impact to my business and me
personally as a mother is unconscionable. So please do not
forget about the debt ceiling and do a bipartisan piece of
legislation and vote for extraordinary measures to get that
through.
Thank you.
Chairwoman VELAZQUEZ. Thank you, Ms. Gerding.
And now I recognize Mr. Rowe for 5 minutes.
STATEMENT OF CHARLES ROWE
Mr. ROWE. Thank you, Chairwoman Velazquez, Ranking Member
Chabot, members of the Committee.
I am president of America's SBDC, the association that
represents the nationwide small business development center
system.
For 40 years, SBDCs have been assisting small business
owners and aspiring entrepreneurs.
So, what was the effect of the shutdown? Well, luckily,
SBDCs were able to carry on. Our host institutions have the
flexibility to support us for a short period.
Some networks were forced to suspend advisors and reduce
hours, but it was really our clients who bore the brunt of the
shutdown's impact. Our Federal contracting clients had to
suspend work. SBDCs started fielding calls and questions from
them right away.
Small contractors are often the most affected by a
shutdown. Procedures go into place, notices go out, and
sometimes there are more questions than answers. A large
contractor can shift employees, sort out disruptions, absorb
some overhead, but for a small business, the owner and the
employees are hanging out there together and key employees can
actually be lost to a better opportunity.
There were 41,000 small business contractors affected. One
SBDC client supporting the FAA employs 75 people and 90 percent
of those employees were furloughed. Their contract is back now.
They weathered this shutdown. But they are uncertain about what
will happen if there is another one.
And when a small business contractor gets furloughed, there
is no recouping lost revenue.
And it is not just the existing contracts. An SBDC client
was awaiting 8(a) certification. Without that and letters of
support from the local Federal lab which was closed, they could
not go to an Air Force pitch day, so time was lost and
opportunities that will never come back.
SBDCs also have thousands of clients seeking financing. And
when SBA shuts down, 7(a) and 504 lending stops.
A Lynchburg, Virginia borrower was awaiting SBA approval so
he could move to a permanent location. He had given up his
long-term lease expecting that approval. Now he is waiting,
worried that his landlord might evict him if he finds a long-
term lessee.
In Twin Falls, Idaho, the SBDC works closely with a local
504 lender. Eleven million dollars of financing was halted. In
Twin Falls, that is a lot of money. Another $800,000 there was
stopped when a lender funding a remodel could not get a simple
subordination.
Until SBA reopened, clients could not do simple things like
that. Or get approval for a life insurance payout to a widow
whose spouse was her business partner. It happened all over. A
childcare center in North Carolina waiting for a decision from
SBA may cost the business their building. In Illinois, an 80-
year-old design and engineering company may close because their
loan was not funded by the closing date of December 27.
SBDCs have a partnership with the International Franchise
Association. They told us that roughly $12 million a day in
SBA-backed loans were being delayed for franchises. Now, SBA is
working to clear the backlog, but in the meantime, small
businesses are trying to figure out bridge loans and
alternatives. Hopefully, they will come to us to work it out.
Otherwise, desperation can lead to poor business choices,
something I know the Chairwoman has worked on and we really
support her bill on that.
As I mentioned above, 8(a) certifications were suspended.
So were mentor-protege agreements. So a small business trying
to get approved to team with a large contractor is put on hold.
And if it is a defense contractor, they are still working but
the small business cannot.
And business stopped at the Department of Commerce.
Export.gov was shut down. SBDC clients are okay because we have
certified export counselors, but any small business looking for
help on export regulations on their own was stuck.
SBDCs are providing all the help we can to keep our clients
in the black and help any new small business clients. The DC
SBDC is co-sponsoring an event with Intuit bringing in advisors
to help contractors and hosting a meet and greet for D.C.
restaurants that felt the pinch, too. It is, more than
anything, a morale boost because many of them are wondering
what will happen come February 15th. Our mission is to help
them and prepare them for the future. Small business hates
uncertainty, and that is exactly what a shutdown is. They are
not bad business people. They did not make mistakes. They just
got caught up in the shutdown.
Thank you. I look forward to answering any questions.
Chairwoman VELAZQUEZ. Let me thank all the witnesses for
sharing your stories. You know, sometimes here in Washington we
lose perspective into the incredible long-lasting impact that a
government shutdown will have, not only on federal workers but
on those who really keep this economy growing.
I recognize myself for 5 minutes, and I will start by
asking Dr. Shapiro the first question.
The CBO projects a reduced level of GDP for this first
quarter, nearly $8 billion lower than expected. Even the Wall
Street Journal has also reported small businesses have become
more cautious in their expenditures. What could another
prolonged shutdown possibly mean for the economy, consumer
confidence, workers, and spending?
Mr. SHAPIRO. Thank you very much.
As the last witness said, uncertainty makes planning very
difficult. That is true for both businesses and households. So
even the threat of a shutdown is presumably slowing down
activity this month as workers try to build up cash balances
and businesses are uncertain whether they should hire or buy a
piece of equipment. So the risk of a further shutdown is likely
having effects now. Resolving the uncertainty would be very
important.
At the University of Michigan, we have a Consumer Sentiment
Survey, which asks random sample of households across the
country--how is the economy going to do? The index of consumer
sentiment fell 7 percent in Janaury, a very significant drop. A
number of respondents mentioned the shutdown. These were folks
who were not necessarily directly affected, but were concerned
about its effect on the economy overall.
I also find the CBO estimates highly credible, but they are
based on previous shutdowns where the resolution was fairly
quick and the uncertainty was rapidly resolved. If the impasse
over funding the government drags on, I would expect the CBO
might have to update its estimates and that they would show a
bigger effect on GDP.
Chairwoman VELAZQUEZ. And if this sharp decline in consumer
and business confidence or sentiment were to continue, could
this lead to an economic slowdown this year?
Mr. SHAPIRO. That is potentially the case. The part of the
government that is directly affected is small enough that it
alone would not lead to a recession. But I think there is a
concern with overall confidence, that the government is not
functioning, and that ordinary decisions are not being made
would depress confidence overall and have very dramatic
spillovers. Recessions are hard to predict. The economy is
quite resilient, but it is possible that a further shutdown
could trigger a recession.
Chairwoman VELAZQUEZ. Thank you.
Mr. Butcher, how much of a delay would you say this
unexpected interruption has cost you in time and money? I know
that you put some planning into the 2019 beer rollout, so if
there is any way for you to quantify that.
Mr. BUTCHER. Yeah. We spent the last four months of 2018
planning for 2019 and introducing new beers to the market. The
craft beer business, growth is driven by innovation. By
releasing new beers. Craft beer drinkers are always looking for
something new. Our restaurant customers are always looking for
something new. And when we submit the label it should take
about 14 days to get approved. And so the labels that we have
caught up in the backlog at the TTB are beers that we plan on
releasing next month, as well as the month following. So March
and April and May. And what that does for us is it just, if we
cannot sell our new beers in the market, those beers just do
not get purchased. We cannot make that up. People going out to
eat or buying beer in a store, they are going to buy something
else. And that effectively slows down our business.
Also, when we look at our suppliers, we buy a significant
amount of wheat from a farm in Heathsville, Virginia, and we
contract that wheat. And if we are not going to buy it when we
say we were going to buy it, it slows their small business down
as well and then they need to figure out what they are going to
do with that excess wheat. Do they send it to the maltster, or
do they have to sell it as animal feed, or do they just not get
to sell that grain? So it really affects us up the supply
stream as well as down the supply stream with restaurants that
are slowed as well.
Chairwoman VELAZQUEZ. Thank you.
Ms. Gerding, you said that, small contractors and their
workers are the silent victims of the shutdown. It seems their
plight is a difficult one to get hard numbers on as we are
gathering anecdotal stories from the press and those who reach
out to us. So I would really like to hear your thoughts on
whether you are worried about the potential for negative past
performance ratings caused by the shutdown and how that could
impede your ability to win future contracts.
Ms. GERDING. So the answer to that question is the
potential is certainly there. I think today all of our
customers completely understand the shutdown and are giving us
a pass, if you will, for deliverables and timeliness and things
that they measure our performance on. My concern is a month or
two from now that will have been forgotten about, the shutdown,
and they will want to know why we were not able to recover, why
we were not able to catch up. So today I am okay, but I am
worried about past performance down the pike. I am still
gathering information from my project managers in the field as
to any backlogs that may have resulted and how that may impact
our performance in the future. But you know, past performance
is key to winning contracts, and if it is marred in any way it
will hinder my ability to grow the business.
Chairwoman VELAZQUEZ. Thank you.
My time has now expired. The Ranking Member, Mr. Chabot, is
now recognized for 5 minutes.
Mr. CHABOT. Thank you, Madam Chair.
And before I ask questions, just kind of a point here. I
think all the witnesses have indicated why we want to avoid
another shutdown occurring in the very near future because
these things impact the economy. They impact real people in
many ways, especially as you mentioned, Ms. Gerding. And it
ought to happen in Congress. The President ought not to have to
take emergency action of any sort. So it seems to me that there
is somewhere between $5.7 billion for border security and zero
that we in good faith when we deal with trillions of dollars
every year we ought to be able to find some area there. We have
not yet but hopefully our leadership, and we in conjunction
with our leadership, will do that.
Mr. Rowe, let me begin with you. What specific forms of
support can SBDCs that you are intimately involved in and
knowledgeable about, obviously, and other entrepreneurial
development centers offer to small businesses during times of
uncertainty such as a government shutdown?
Mr. ROWE. It really depends on the business, Mr. Chabot. If
they are a Federal contractor, we can offer them some advice.
We operate 29 of the 94 PTACs, Procurement Technical Assistance
Centers. And we can offer them some advice on how to handle the
loss of revenue and try and deal with it as Ms. Gerding did.
But honestly, we cannot really tell them anything about what is
going to happen in terms of the government coming back on.
Now, with borrowers, the 7(a) and 504 lenders, they are
stuck. They cannot get approvals from SBA, and very often, the
very reason we have gone with our clients through a 7(a) loan
process or a 504 loan process is because they have exhausted
the other options. So then we are trying to help them find
bridge or alternative financing. Very often there is some
limited ability to do that. Some of the folks in the 504 and
7(a) community have been really great about stepping up and
finding ways to help the clients, but that is a limited
resource.
Mr. CHABOT. Yes. Yes.
Let me move to Ms. Gerding. Ms. Gerding, I think you very
poignantly highlighted one of the most significant items that I
think oftentimes got ignored in the coverage of the shutdown,
and that is it was not just government employees. You know, you
would sometimes hear cavalier statements about, oh, well, they
are off for 3 weeks or 2 weeks and it is an unpaid vacation at
this point but they are going to get paid and that kind of
thing. But the government contractors, those employed by
private entities, they oftentimes are going to get nothing
back. And literally were receiving nothing. And you talked
about that.
What would you like to comment about that and how it really
affected real people that you knew of?
Ms. GERDING. I think that the back pay situation is
something that Congress should consider reimbursing those
contractors. All four of my contracts that were affected out of
the 20 were firm fixed price contracts. Technically, I should
be reimbursed at the end of the month for the work that was
done or not done because I am based on a firm fixed price.
However, the acquisition workforce is new and many of the
people do not understand the regulations. And so there has been
a lot of pushback in the past that if I have a vacancy or if
there is another presidential mandate because a former
president died and there is a day that is off in this
particular town, that they are not going to reimburse us for
those days because we did not work. And so there has been a lot
of education that has been tried to go back and forth with the
acquisition officers.
SAIC, I know, was reporting that for every week they were
off they were losing something like $10 million for every week.
Certainly, we are not at that size but I think that
extrapolating our information to what they are experiencing, it
is a ripple effect across government contracting.
Mr. CHABOT. If I could stop there because I have only got
less than or about a minute.
Ms. GERDING. Can I just say one quick thing?
Mr. CHABOT. Real quick.
Ms. GERDING. Just recognize them. Just acknowledge that we
exist. I think that will go so far.
Mr. CHABOT. Thank you very much.
Mr. Butcher, I have only got a short time here.
We passed the Tax Cuts and Jobs Act a while back and a lot
of small businesses, individuals, a lot of folks benefitted
from that. Could you comment briefly on how your company has
used the savings in that either to reinvest or for your
employees or what you have done with it?
Mr. BUTCHER. Yes. The savings and when the excise tax was
cut last year, we have used that savings to buy new tanks for
our brewery. We have hired more people at our brewery.
Salespeople out in the field. And we have used that money to
continue that savings, to continue to grow our business. We
also have installed a brand new bottling line that would not
have been possible without the excise tax being cut.
Mr. CHABOT. Thank you very much.
My time is expired, Madam Chair.
Chairwoman VELAZQUEZ. The gentleman's time has expired and
the gentleman yielded back.
The gentlelady from Iowa, Ms. Abby Finkenauer, who is the
Chair of the Subcommittee on Rural Development, Agricultural
Trade, and Entrepreneurship is now recognized for 5 minutes.
Ms. FINKENAUER. Thank you, Madam Chair.
I just want to thank all of you today for being here and
hearing from you. You know, I am one of the freshmen that got
sworn in in the middle of the shutdown, and Ms. Gerding and Mr.
Butcher, your testimony today underscores what I was hearing
back in my district and also across the country, that our
working families and our small businesses should never be used
as bargaining chips when it comes to policy decisions. And Mr.
Shapiro, you underscored that not only is that bad for our
values, it is also bad for our economy. And I am just, again,
very grateful to have you all here today.
Mr. Rowe, I really appreciate your testimony. And one of
the things you highlighted was small businesses, and for me,
especially our farmers, hate uncertainty. And so this question
I am hoping you can help me with here a bit. You know, this
shutdown has had serious impact on Iowa's workers and our
farmers across the board. In my district we heard from small
businesses that could not afford to have their products
inspected and approved for sale, and from farmers who missed
out on key data and loan deadlines. This shutdown hurt Iowa's
families and our farmers, which are quite frankly the lifeblood
of our economy in rural America. And on top of that, our
farmers and workers are getting hit hard every single day from
this trade war.
In Iowa, nearly half of our employees work at small
businesses, which are 99 percent of our businesses. From your
different perspectives, and I know that you all have many of
them, but Mr. Rowe, again, I hope you can help me with this
one, what could we do to help minimize the impact to our
farmers, small businesses, and their employees, in the case of
another shutdown, which I hope we do not see? Should we be
looking at ideas on regulatory relief? Waiving payment
deadlines? Or would a new short-term loan program make sense to
minimize disruptions? Do you have any ideas of what we could be
doing in the future here? Because quite frankly, we should
never be put in this position again, but I want to make sure
that our small businesses and our farmers are taken care of.
Mr. ROWE. Thank you, Ms. Finkenauer.
Well, the easiest thing would be to just come to agreement
and not have a shutdown. But honestly, we do deal with a lot of
value-added agriculture, rural businesses.
While USDA inspections are considered mandatory, there is a
bit of a gap sometimes. And I have heard this actually from one
of our clients in Texas, that there are USDA inspectors who do
not have a company car so they cannot get around to do the
inspections unless they are spending their own money on gas and
using their own car. I think one of the things USDA could look
at is making sure that their inspection force is up and ready
for everybody who is involved. I think waiving the payments, if
you do not have someone to make a payment to, it should
essentially be waived. I do not understand how that system
works, I admit. As far as loans go, USDA's B&I loan program was
shut down just like 504 and 7(a) at SBA. It is the same problem
there.
Chairwoman VELAZQUEZ. The gentlelady yields back.
And now we recognize Representative Troy Balderson, Ranking
Member of the Subcommittee on Innovation and Workforce
Development for 5 minutes.
Mr. BALDERSON. Thank you, Madam Chair. And I would like to
say a few opening statements as the Ranking Member also did
just to bring up a couple points.
It is important that we carefully consider the impacts of
the Federal Government's actions, or inactions, have on the
average American. Unfortunately, even a partial shutdown, like
the one we just experienced, can have a detrimental impact on
Ohioans and their small business.
I have another solution. I have introduced a piece of
legislation called End the Government Shutdowns Act, which will
prevent small businesses from ever suffering again due to
appropriations impasse. I thank the Ranking Member for his co-
sponsorship and support on this important piece of legislation.
Today I plan to listen to these folks at the witness table
who have so graciously volunteered their time so I may learn
from your experiences. I hope my colleagues on both sides of
this dais will join me in finding solutions for small
businesses, the heart of our economy. And I invite my
colleagues to co-sponsor the End Government Shutdowns Act.
My first question is directed to Mr. Rowe. Do you believe
the continued operation of programs such as the 7(a), 504, and
microloan programs is critical?
Mr. ROWE. Yes, sir, I do. The whole point to the 7(a) and
504 programs, and I worked as Committee counsel, as Mr. Chabot
pointed out, the whole point to these programs is to provide
assistance to solid small businesses that have not been able to
access the financing they need in the private sector.
Mr. BALDERSON. Thank you.
Question for Ms. Gerding. I appreciate you sharing your
insight on the difference between the treatment of Federal
contractors and Federal employees. I had that situation in my
district and I, myself, said the same thing. There are other
folks out there that are being affected by this that the
conversation is not happening with. Could you elaborate on how
a partial lapse in appropriations impacts affect the
contractors differently?
Ms. GERDING. The first point I will make is the
recognition. Just the fact that we are not even being
recognized at the table, I think a lot of our employees feel
not valued and that their work is not important. As I hear the
other speakers here testify about not having gas money and
things like that my head goes to are these government
contractors, which leads to a whole different discussion on how
contracts are being bid and won on low cost, technically
acceptable. So maybe whoever bid this contract did not put that
in there to save money and so, but the public does not know
that they are government contractors maybe performing. So it is
a whole another discussion.
But I think the other thing is the indirect costs that are
associated with this. Many of my customers are uneducated in
how government contracting is bid. And they do not recognize
the fact that when I pay somebody $50,000 an year, they think
that I should charge them $50,000 an year. They do not consider
the overhead, the indirect expenses associated with running the
business. So oftentimes I am having to educate my customers
about that whole process which is maddening sometimes because
they think if I am charging $75 an hour to the government but I
am only paying the employee $50 an hour that $25 is profit
going in my pocket when, in fact, it is not. It is paying for
health insurance. It is paying for all the other insurances and
fringe that I am covering. I am paying for the other staff that
is supporting the company, the payroll people, the CFO, the
chief operating officer, other things just to keep the business
running. So I think there is a big disconnect right there is
that the government contractors, it impacts more than just the
employee. It affects those that are indirectly supporting the
company as well.
Mr. BALDERSON. I agree. Thank you for your answer.
Dr. Shapiro, would you agree that preventing Government
shutdowns from occurring all together would provide more
certainty for small businesses and the American economy?
Mr. SHAPIRO. Yes, I would agree with that.
Mr. BALDERSON. Thank you. I yield back the rest of my time,
Madam Chair.
Chairwoman VELAZQUEZ. The gentleman yields back and now we
will recognize the gentlelady from Kansas, Ms. Davids, for 5
minutes.
Ms. DAVIDS. Thank you, Madam Chair.
So Ms. Gerding, I am going to start with you because in
Kansas, like in a lot of places, there are a lot of Federal
employees, but also a lot of Federal contractors, specifically
in my district. In fact, in Overland Park there are a lot of
government contractors and all over my district. And yesterday
I spoke with the owner of Veracity, also a woman-owned
business. And the similarities between what I am hearing from
you today and what I heard from her yesterday are stark and
highlight that, although these are anecdotal, that it is across
the board we are seeing similar outcomes.
In January alone, yesterday, she told me that she lost
$135,000 in her business, and continued to pay employees,
although she was not sure, the uncertainty that we have heard
about, was not sure when her contracts would pick back up.
Which leads me to a question about retention, employee
retention, the concern about being able to attract high-
skilled, quality employees, both as Federal civil service but
also in these very important contracting companies. Can you
tell me a bit about your concern? What is your outlook for not
just attracting but also retaining the people who are in your
company now?
Ms. GERDING. So thank you for acknowledging Overland Park.
We actually supported the National Benefits Center out there
for many, many years in Overland Park and Lee's Summit,
Missouri. In fact, I have staff still emailing me and texting
me regularly asking me to bid on the contract and please come
back to work. So you may see me again.
In response to your question, retention was a problem
during this shutdown. I had one employee resign as a result of
the fact that he was new to government contracting and just
thought it was too risky for his family.
I will say that because I am fortunate and come from the
Washington, D.C., area, it is not as big a concern. The one
thing that government contract is, is it will not make you rich
but you are assured of getting paid, whereas other commercial
businesses do not have that same benefit.
So in terms of retention, I think that HeiTech Services won
a lot of brownie points, if you will, with the fact that we put
people back on the payroll. Another shutdown, I am not sure
that I will be able to do that. In fact, the first thing I
thought was when some of my employees said, well, you put those
people back on the payroll so I was not concerned, I thought,
yeah, but I do not know that I could support 160 people on the
payroll for a long period of time. I did not tell them that but
that is what I thought. So I am not sure it has a big impact. I
think that Federal contracting is still a very secure place to
be.
Ms. DAVIDS. I appreciate that. And then just a quick follow
up, or it is not a follow up directly to that question but
something that you mentioned earlier which is education of the
customers that you are servicing in the procurement process and
what specifics are in and the terms of the contracts that you
are filling.
Can you talk a little bit more about that? When you talk
about the customers, who exactly in the negotiation of that are
you talking about?
Ms. GERDING. So it is everywhere form the contracting
officer's representative, the technical person in the Federal
agency that we are actually doing the work for, all the way
through the acquisition officer, the contracting officer. It
just varies as to the level of experience and support. So you
never know when you are talking, you know, you are talking to
your contracting officer's representative on the technical side
about the way things should be done. They call the contracting
officer and we are sure that the contracting officer is going
to support us by saying it is a fixed price contract, pay them.
Instead they say, oh, no, no, no. You had vacancies on the
contract. And we were like, oh, my gosh. So I am going to my
attorney. I am incurring a lot of out-of-pocket expenses to try
to figure out how to get back there without ruining my
reputation with the customer or the contracting officer because
I do not want to be seen as a difficult customer. So it is
just, I think, time and education.
Ms. DAVIDS. I am low on time so I am not sure if you can
give me a yes or a no here but what I feel like I am hearing is
that even in our procurement process there is a lot of
education that needs to be done on the Federal civil service
side around contracts like yours and probably others?
Ms. GERDING. Yes.
Ms. DAVIDS. Okay. Thank you.
I yield back the remainder of my time.
Chairwoman VELAZQUEZ. The gentlelady yields back.
And the gentleman, Mr. Kevin Hern, Ranking Member of the
Subcommittee on Economic Growth, Tax, and Capital Access, is
recognized for 5 minutes. From Oklahoma.
Mr. HERN. Thank you, Madam Chairwoman.
In true bipartisan fashion, I would truly appreciate you
removing the President's name from the original title of the
hearing today.
As we all know, this, in true government fashion, we are
talking about government shutdowns that have been occurring
regularly for almost 40 years now. So today we are probably not
going to solve the problem, but I think it really begs to
understand why we have them.
As a business person, as a person that has been in small
business for 34 years, has been signing his paycheck on both
sides for over 25 years, I certainly would be the first to
acknowledge that anything that disrupts the normal process of
competing with each other as opposed to competing with the
Federal Government's regulations and overburdensome taxation,
it is a problem that when we have something as extraordinary as
a shutdown, regardless of whose name was on the front of it or
why it was caused, quite frankly, many people, and one of the
reasons I am here is because we seem to cannot do our job up
here of just passing something as simple as 12 appropriation
bills, we would not be talking about shutdowns again.
So we could introduce all kinds of new legislation. We
should just introduce a new legislation which I have signed
onto which is No Budget, No Recess. You do not have to have a
constitutional amendment. You do not go home until it gets
passed. We will not even have these hearings anymore because we
will all be getting paid in regular order and this will be a
whole different place to live and breathe in. I know my
business friends certainly would appreciate that, and Dr.
Shapiro, there would probably be less to talk about in your
world. But I would really appreciate that.
Mr. Rowe, as someone who is highly involved in America's
small businesses and you see a lot of different industries, I
have a question for you. If you remember, since we are talking
about what causes shutdowns, and more importantly, what causes
the enthusiasm in small businesses or not, could you describe
based on your thousands of businesses that you are touching,
what drove the enthusiasm so highly, so quickly, in November
2016? About a 14-point jump enthusiasm on November of 2016
according to NFIB.
Mr. ROWE. The Small Business Community was very enthused by
the passage of the Tax Act. They thought things were going very
well. As a result, we saw increased economic activity and
involvement. I think the biggest problem we have now is that we
had all that increased activity and a fair amount of it flows
through the SBA's loan program.
Mr. HERN. So, Mr. Rowe, if I may, back in 2016, not 2018.
Mr. ROWE. Oh, 2016.
Mr. HERN. Yeah. It happened to be an election year.
Mr. ROWE. Yes, I know. What enthuses people? Mr. Hern, I am
going to be honest and tell you that I think people are always
seeking change in an election year and I think that is what
they wanted and that is what they got. I think they were a
little bit frustrated, particularly in the small business
community with what they considered to be a low-growth economy.
Mr. HERN. If I may, just to fast forward that, with the
change in 2018 November election, there was a decline in small
business enthusiasm, almost coinciding with an election,
coincidentally or not. But as we go forward here I just want to
ask you, I really appreciate certainly the two business people
at the table talking about what we should do because I think
that is what business people do. They look at the problem and
they try to find an agreement or a solution how to move
forward. And you are asking of us as members of Congress to
stop this madness of repeating history time and time again. It
is insanity. The two gentlemen on each end are describing what
happens when you have these disruptions. And so the combination
of all the testimony here is very important for us all to
listen to and for us to take to back to our members because if
we truly care about 70 percent of the job creation in America,
we truly care about big businesses growth in the future because
our small businesses are incubators for large businesses in the
future, you would think that would be the most important thing
in the world to drive this economy. This economy is found on
job creation and business. You would think that we would take
that back and we would vote accordingly to drive that economic
engine. But you see quite the difference in that. And we were
talking again imminent shutdown over other things that drive
policy. So we have got to determine what is the most important
thing that we are all going to work on in this small business
and take back up to our respective leaderships to move forward.
I will remind us all, the greatest social program in the
world is a job. And there are two job creators up there. I am
one as well. So I appreciate you all's testimony and I yield
back the balance of my time.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
And now I recognize Mr. Jared Golden. He is the Chairman of
the Subcommittee on Contracting and Infrastructure.
Mr. GOLDEN. Thank you, Madam Chair.
The first thing I want to say is to Ms. Gerding. You know,
coming out of the Marines and seeing your background in the
Navy, I am not surprised to hear that just a couple weeks into
this you and the people that help you run your business
instinctually knew that you had to do something to do to help
take care of your workers so you put them back on the payroll.
One of the things that this shutdown I think impressed upon me
in my first few weeks in Congress is that when we fail to
provide that kind of leadership in Congress, that is one of the
embarrassing things about it is people like you have to step up
and fill that leadership gap and I think that is also one of
the positives. We see that we have got people like you out
there running businesses and taking care of workers. So thank
you very much for that.
In looking here at your testimony, there is a bullet here
about financial impact to business. And you noted here that you
are operating off a budget that is predicated on an expected
budget. And you noted a deficit in indirect expenses of about
$100,000. My folks back home run a small business. It is not as
big as yours. It is very small. One hundred thousand dollars
would be a lot. I do not know what the impact is to you, but I
am wondering if you could just tell us a few things relevant to
steps you might have to take to try and get your budget back on
track.
Ms. GERDING. So we have already taken a look at that. The
budget last year when we developed 2019's budget was based on a
$16.5 million revenue stream. From that what we did was we had
to reduce that to $16.25 million, about a quarter of a million
dollars came out of our budget because the revenue is going to
be lost from the company, which means we had to go back in to
all of our indirect expenses and realize where we were going to
reduce costs. I still am assessing the impact right now because
we did have to go into our line of credit to use, especially at
the beginning of the year when we are paying full amounts of
FUTA and SUTA and all those other things that hit you at the
beginning of the year. Plus, you have short months. You know,
28 days in February, et cetera. And then there is a number of
Federal holidays that hit at the beginning of the year. So we
will have to sharpen our pencils and reduce our costs
throughout the company to make sure that we come in on budget,
which we will do, but it does have an impact on everyone across
the board.
Mr. GOLDEN. Thank you. So there are some short-term steps
that you are going to have to take on a longer term.
Ms. GERDING. We are already talking. Yes.
Mr. GOLDEN. I talked to a constituent back home who runs a
business and contracts with the Federal Government. They noted
that during the shutdown, GSA was not posting any solicitations
for bids. I do not know if that is something that you also had
to deal with during this, but can you talk a little bit about
how that might impact either yourself or a business like the
one I am noting back home in Maine in terms of their long-term
confidence and business planning to deal with the fact that
there is no solicitation of work for them to be competing for
during a shutdown?
Ms. GERDING. So that gets in, I mean, there is an impact
based on the shutdown. There are bigger impacts that impact the
small business community that are successful and grow outside
their size standards and now all of a sudden they are playing
with the big guys but they are only, let us say, a $40 million
company and now all of a sudden I am having to compete with
Lockheed Martin. With the government going to category
management, if you do not have one of those contract vehicles,
you are not going to play. You will always be a subcontractor
to a large contractor. And then you are at their mercy to play
whatever game they want to play. When I get a teaming agreement
I am looking at it saying, this is unfair. I want that if you
get the option here, I get the option here. And they said,
look, either take it or I will find another company that wants
to do the work. So I am forced to kind of negotiate like that.
In terms of the shutdown itself, we were not adversely
affected by the proposal process. What I was anecdotally told
from another company was that the Acquisition Office was
needing approval from another government agency. So it was a
Department of Defense agency that needed approval from another
Federal agency that was closed that shut the acquisition
process down because that agency was not open. So that is going
to slow roll that procurement and move it to the right.
Mr. GOLDEN. All right. Thank you.
Well, one last question shifting gears. Dr. Shapiro, I am
just looking here at some data. This is Vistage Worldwide who
did some work with the Wall Street Journal. They were making
note that in 2018, economic confidence among smaller firms,
actually downward, 14 percent of firms expected the economy to
improve in 2019, but 36 percent expected it to get worse. Could
you just talk a little bit about how something like a shutdown
in the month of January might add to that kind of downward
confidence among small firms in particular?
Mr. SHAPIRO. I do not think that we have direct evidence
that that survey was affected by the confidence. I think for
the reasons stated by the witnesses at this hearing, it is very
hard for businesses to plan. It is very hard for them to know
whether to hire a worker. It is very hard to know whether to
develop a new brew if the government approvals business depends
on are delayed. So I can well imagine that many businesses'
confidence is affected.
Mr. GOLDEN. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back.
I now recognize Mr. Hagedorn from Minnesota for 5 minutes.
Mr. HAGEDORN. Madam Chair, thank you for the time. I
appreciate the leadership that you and the Ranking Member have
shown on this and all your past work on this Committee.
It is a pleasure to be here helping our Main Street
businesses. Small businesses are certainly very important to
the 1st District of Minnesota and all the people across the
country, the small businesses, the job-creating backbone of our
economy. And I appreciate the testimony of the folks here.
I would like to say to Ms. Gerding, I appreciate you coming
up. It was nice to meet you before the hearing. As a fellow
Minnesotan, welcome. And I think that Congressman Oberstar,
when he nominated you to the Naval Academy, knew what he was
doing, and congratulations on that. And thank you for your
service to our country.
I have heard a lot from the witnesses about certainty, and
obviously, when the Federal Government shuts down that is not a
good thing for you. That is not a good thing for anyone. And we
can debate on why that happens and so forth and what should
happen in the future. That is, I suppose, the ultimate thing
that in your line of work that we could do to create certainty
is to make sure we do not shut down anymore. I get that.
But when you look at the Federal Government and its impact
on small business and our economy, there are lots of ways that
the government can throw a wrench in things and have a lot of
uncertainty across the board. I think what my friend, Mr. Hern
was getting at is before the 2016 election there might have
been a little bit of uncertainty on regulatory policy, whether
or not we were going to have something like Waters of the
United States or the Clean Power Plant, things like that would
drive businesses to maybe look at things different and take a
step back as to whether or not they were going to move forward.
Taxation, obviously. Energy policy. Labor. Trade. You can go on
down the line.
I am drawn to the brewer in the bunch, so I will say to Mr.
Butcher, how does certainty play and uncertainty? And what are
you looking for from the Federal Government, the Executive and
Legislative Branch moving forward, in general?
Mr. BUTCHER. Well, thank you, Mr. Hagedorn.
As far as certainty goes, in founding a small business and
running a small business, you start up in an environment of
uncertainty. You do not know exactly how things are going to go
but you have to go with your gut and you have to do the best
job you can every single day.
As far as the government giving us more of a level of
certainty, we are in a highly-regulated industry and I accepted
that when we decided to get into the brewing industry. We are
regulated by the TTB at the Federal level. We are regulated by
the FDA at the Federal level as well. And so we accept that.
But in order for us to function and introduce our new beers and
keep our innovation pipeline alive, we need those services to
be available. Unfortunately, the only aspect of the TTB that
was operating was they were taking our checks and cashing our
checks. But as far as certainty goes, by having the government
running, by enabling the TTB to allow us to perform our basic
business function at the very least would provide a better
level of certainty.
Mr. HAGEDORN. Sure. And I would say obviously we want your
businesses to expand and you to be successful, but we want
other enterprises to be created and people have ideas right now
that they are thinking about and it is important for the
government to have consistent policies so they can go to the
community banks and others to get the loans needed in order to
be able to show them the case that, yeah, this is what they are
going to spend and these are going to be the costs for
healthcare and everything else. And down the road this is how
they are going to pay it back and expand their businesses and
be successful.
So with that I yield back. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize Mr. Marc Veasey from Texas, for 5 minutes.
Mr. VEASEY. Thank you, Madam Chair.
You know, there has been a lot of talk about how much money
the Federal Government lost and our economy lost because of the
prolonged shutdown. I believe the U.S. Chamber of Commerce, Dr.
Shapiro estimated that the cost of the shutdown of money that
we will never get back ended up being about $2.3 billion. Does
that seem right to you?
Mr. SHAPIRO. That is a reasonable ballpark estimate. The
Congressional Budget Office has estimated the effect on GDP for
the year about one-tenth of 1 percent of GDP. GDP is a big
number so it does add up.
Mr. VEASEY. One of the things the President talked about
last night during the State of the Union was the economy. He
touted the economy. He talked about job numbers. Talked about
how we are experiencing growth. And I wanted to ask you, you
know, we are about to reach another government shutdown here
soon if a deal is not reached, February 15th. In your opinion,
if we do not reach a long-term deal, what would an additional
prolonged government shutdown mean for not just Q1 but for
overall economic activity this year?
Mr. SHAPIRO. I think it would useful to dial back to how it
felt the week the shutdown was resolved. Not only were
businesses and individuals directly affected cutting back; it
looked like the Air Transport System was getting tenuous, which
is very bad for a whole range of businesses. Also, the shutdown
revealed a myriad of details of how the Federal Government
makes the economy run better. Granted, regulation is a burden,
but also there are benefits to regulation. There is a reason
why breweries have to take their labels to the government. The
public expects that what is on the label will be in the bottle
of beer, and similarly for many other food products. We have
inspectors who verify safety and purity of food and beverages.
There is a real partnership between business and the
government. If that partnership appears to be breaking down,
there is substantial risk of indirect effects that could be
very significant for the economy.
Mr. VEASEY. Thank you very much.
And I wanted to ask Ms. Gerding, you know, we have heard a
lot about small contractors, and I know in the district that I
represent that there are just so many hurdles to people that
are trying to start up a small business, people that own small
businesses, and delayed pay, working on projects and not being
paid in a prompt manner and how it can be a lot harder to find
that capital to continue operating your business without that
flow of income coming in, and I wanted to hear how your company
managed through the shutdown if they are not receiving
payments. I would be very curious about how you were able to
work through that.
Ms. GERDING. So we have not seen the impact yet because the
shutdown occurred in December and January. So I do have lines
of credit in place. I will say to your initial part of your
question that starting a business is not for the faint of
heart. And I have a lot of people, because I do a lot of public
speaking, that come up to me afterwards and say I want to be
just like you. How can I get my business going? What is your
advice? And I said, are you currently working now? And their
response is yes. I said stop working. Well, how will I take
care of myself? I said that is what you are going to experience
as a business owner. I said if you do not have enough money put
away for 12 months to live on you should not start a business
because as long as you are working you are not focusing on
growing your business. You cannot do both things, especially in
Federal contracting. Your customers are there during the day,
not in the evening. And so you need to be out there, in their
face during the day.
So, you know, I anticipate a lot of these things that
happen. I do not like to consider myself a victim by these
circumstances. So we have to plan for these events. I am not
happy about them. It erodes my profit. You know, but at the end
of the day, our mission statement in my company is that we help
the government keep Americans safe because of the work we do,
and that is really what drives my workforce. They are not
highly-paid employees. Many of them are Service Contract Act
employees that make minimum wage. And when I ask them why they
get up and come to work every day, especially in places like
Lee's Summit, Missouri, supporting the National Benefits C
enter for Immigration, it is because, Mrs. Gerding, I am
helping keep Americans safe because I am keeping terrorists out
of this country. And I am thinking, you open the mail. But they
feel such a connection to what they are doing every day that
that is what brings them to work. So I think that there has to
be something other than the money. People have to be prepared
for these events if you are going to be in government
contracting.
Mr. VEASEY. Thank you very much.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
And now we recognize the gentleman from Florida, Mr. Spano,
for 5 minutes.
Mr. SPANO. Thank you so much, Madam Chair, Ranking Member.
I appreciate your leadership and look forward to serving under
it these next 2 years.
I am grateful for each of you that have come and offered
your expertise and testimony. I am, as was mentioned earlier, a
small business owner as well, and I have owned my own business
for over a decade now. And frankly, it is one of the things,
the challenges that I was encountering as a small business
owner was one of the things that really prompted me to run for
office, to seek office as a member of the State House because I
really did not feel like government really had my back, that
government really cared about small business. There was a lot
of lip service being paid to small business but there really
was not a whole lot being done to help. And so I am glad for
what the Small Business Administration has done, for what this
Committee has done in that regard, and I look forward to
serving you in an effort to help small business moving forward.
I am trying to get a handle around, and maybe it was
offered before I walked in, but I am not sure who among you
would be willing to offer your testimony on this, maybe Mr.
Rowe potentially, but the percentage of small businesses that
actually directly contract with the Federal Government and/or
have subcontracts that are directly impacted by government
shutdown.
Mr. ROWE. Well, Mr. Spano, I am just going to quickly rely
on some information I got from my friends at the US Chamber of
Commerce. I serve on their Small Business Council. What they
put together working with Bloomberg.gov one agency spending
data. They found 41,107 small business contractors and $2.35
billion in contracts at risk during the shutdown. I can give
you this document. I am happy to. It has a breakdown state by
state. In Florida, there were 2,359 contractors, small business
contractors.
Mr. SPANO. And thank you for that information.
I guess what I am looking for is a comparison. I understand
the numbers that have been offered, the total projected impact,
but vis-a-vis those small businesses that do not have direct or
even indirect contact with the government in terms of
contracting, what are we looking at in terms of percentages?
Mr. ROSE. Well, if you look at the Office of Advocacy, I
think their numbers say they are around 27 million small
businesses in the United States, but I think if you look at
small businesses with employees, it is probably closer to 8
million.
Mr. SPANO. Okay. And I did not major in math. That is why I
became an attorney. So just in my head I am trying to figure
out what percentage is that? It seems like, obviously not to
minimize the impact, but it does seem like a fairly small
percentage.
One of the things that I do and have done in the last 6
years as a member of the Florida House, and I am sure we will
be doing it here as well, is to balance competing policy
interests. There is usually an argument to be made on both
sides. Sometimes you can usually make pretty good arguments on
both sides but you try and do the best you can to weigh those
interests and then come down on what you feel like is the best
thing to do.
One of the things that I would be interested to hear about
at some point, Madam Chair, in the next maybe few months, is
the impact that illegal immigration potentially has on small
businesses. The uncertainty that our inability to come to some
long-term agreement on immigration reform. I would love to hear
the impact that that has on small business because obviously
that is an issue as well, and certainly, we are not going to,
any of us disagree that that is an issue that is of concern,
that has at least in part caused the shutdown. And so it would
be helpful for me to understand the impact of that issue on
small business. And whether or not that interest in the small
business community's interest, the impact that it may have on
them outweighs the potential interest that is served by having
certainty with regard to continued government.
Do you follow my line of questioning? And so I guess I have
got 24 seconds here, but I guess would you acknowledge that
that is an issue of potential concern, the uncertainty that
illegal immigration causes and would it not be a great idea to
have an idea at least from the small business community of how
that impacts our policymaking decisions?
Mr. ROWE. I would never say that there is not an impact
from that. One of our SBDCs testified last Congress for Mr.
Chabot on the impact that opioid awareness and the opioid
crisis is having on small business. All of these things add up.
And I think there are indirect impacts from a shutdown that go
beyond the contractors and the subcontractors. If you just look
at, for instance, all of the restaurants and other businesses
that might surround a Federal facility, you would be amazed at
how many lunches at a large contracting facility, if you have a
restaurant next to it, that you are missing in 3 weeks. That is
a big chunk of their business. It is all, you know, a big,
interconnected ecosystem.
Mr. EVANS. I thank the gentleman.
I am temporarily filling in for the Chairperson. As you can
see, I am not the Chairwoman. However, I want to make sure that
I ask questions myself. I limit myself to 5 minutes to ask
questions.
What I would like to do is start off with my question that
I believe is a discussion that is taking place right now at the
Ways and Means Committee. I am honored to be on that Committee,
and that Committee is holding a hearing today, The Focus on
Improving Retirement Savings for American Workers.
One thing I have been hearing is that many workers are not
offered a retirement savings plan through private employers.
Around 2 million people in my home state of Pennsylvania do not
have access to a retirement plan through their employer. That
is especially true for employers of small businesses. Due to
obstacles these businesses often face them being able to
provide employee benefits.
Ms. Gerding, in your written testimony you discuss some of
the financial impacts of the shutdown on your workforce. Can
you explain how the shutdown impacted benefits small businesses
offer to employees like retirement plans?
Ms. GERDING. So we do offer a retirement plan. In fact, if
you are going to be a government contractor, to keep up with
your competition, you need to have some sort of benefits
package. The really small companies, maybe not. But as you
start to do more and more work with the Federal Government, you
really need to have one.
In our particular case, my concern that we are trying to
pull numbers around is if an employee did not draw a salary
during the shutdown, what did they lose in 401(k) contributions
that they might have had coming out of their paycheck? And then
what was the match that they lost that our company would have
provided?
We had a couple of people who had garnishments in their
paychecks. So when we started talking about this with my HR
person, what came to light was that they were going to have a
reduced paycheck anyway. So let us say they were going to get
$1,500 for a pay period. All of a sudden now, because of the
government shutdown, they took leave without pay, it is now
maybe $750. They now have a garnishment pulled out of that.
They now have flexible spending. So we up front the cost in
their flexible spending accounts at the beginning of the year,
let us say $2,500. In January, they may have had something that
they went to the doctor for. So the first thing we are going to
do before we pay them is pull that money out of their account.
So now when they are expecting about a $750 check, they are
really only going to get, let us say, $350. So we are trying to
assess the costs of that right now and what the impact is. But
the biggest one that I can think of in terms of benefits if
flexible spending. I was concerned about health care because
our SCA employees contribute through their health and welfare
benefit that the Department of Labor under the Service Contract
Act requires that we pay. If an employee took leave without
pay, they were not entitled to the health and welfare benefit.
Those people, the company paid for their health care during
that shutdown period when they were leave without pay. So no
one went without in terms of healthcare benefits. And there is
no discussion right now to pull that money back out of their
pay.
So health care a little bit, although no one was adversely
affected, and 401(k), which no one has brought to my attention
either. I am always concerned about being an older person, I
want to make sure that the young people are looking towards the
future and their 401(k). And do not match that match that the
company is giving you, so.
Mr. EVANS. Thank you.
Mr. Rowe, the agriculture industry, which is critical to my
home state of Pennsylvania, in total agriculture contributing
$75 billion to our state economy, our ability to explore and
promote our products in the global market is critical to not
only our economy but obviously, the livelihood of individuals.
In your written testimony you highlighted the challenges some
of your clients face when attempting to explore goods and
services. Can you elaborate on that, please? And what impact
does this have on the ability of our small businesses to remain
competitive abroad?
Mr. ROWE. Now, when there is a shutdown, you lose access to
the Census Bureau's assistance on export regulations and
information. You lose the Commerce Department's support, the
International Trade Administration's support. Our Small
Business Development Centers, a lot of whom in Pennsylvania and
other states form a backbone for the state's export program,
then we are kind of fighting for the small business with one
hand tied behind our back at that point.
Mr. EVANS. I yield back the balance of my time.
The next person who has questions, I think this will be the
first time on the Small Business Committee, a brand new
gentleman from the great state of New York, Mr. Delgado. You
have 5 minutes.
Mr. DELGADO. Thank you, sir.
I am really excited to be here. I thank each and every one
of you for your testimony and for taking the time. I really
appreciate it.
I did want to, as I heard one of my colleagues speak about
competing interests and how there could be valid positions on
either side, I would be remiss to not make the point that it is
hard to have those interests compete in the absence of an open
government. That is their role. And so I would just encourage
all of my colleagues to understand that we need government for
interests to compete. Otherwise, what are we doing?
And for that reason it is simply inexcusable that we found
ourselves in this position. And as members of this body, we
cannot let us get there again.
Now, over the past 34 days, I have held three public town
halls and met with folks back home who are farmers and
contractors and small business owners. We have over 27,000 in
my district. And Mr. Butcher, I would also note that my
district has one of the most breweries in the country.
The impact is unnecessary, obviously, of a shutdown. In
fact, one of our local cideries received a value-added
production grant from the USDA but they could not receive their
reimbursement for the equipment they purchased during the
shutdown. Other farmers in my district are highly concerned
about the H2B visa program and that migrant farmers will be
arriving a month later than expected. This shutdown has created
uncertainty as discussed and frustration from many in my
district who are working hard to make ends meet. I think we
have all heard the statistics. Seventy-eight percent of folks
in this country living paycheck to paycheck. You miss a check,
it is going to hurt. And it is simply unacceptable that we find
ourselves in this position.
So my question is for you, Mr. Butcher. In your testimony
you mention the deep supply chain that brewers rely on. Can you
talk about how the shutdown has affected the brewers and
farmers you work with and what would happen if the Governments
down again at the end of this week?
Mr. BUTCHER. Thank you, Mr. Delgado.
Our supply chain obviously is crucial to our business. We
rely on our farmers. We work closely with them. We work
directly with a wheat farmer in the Northern Neck of Virginia.
And we plan with them our production schedule. And they plant
their crops according to what our needs are. And we are
fortunate to have a farmer who is able to work with us and who
is able to scale up with us and continue to help us grow our
business. And if we are not able to buy that grain because we
cannot get our label approved because the TTB is shut down, it
directly affects their small family farm as well. So they take
this grain that they have grown for us and they have to figure
out what to do with it. Do they send it to a malting house and
try to find another buyer for it? Are they going to downgrade
it and sell it as animal seed and make a much lower sale price
on it? Or are they just going to lose that business altogether?
We also contract 2 and 3 years out with our hop farmers.
And these are farms in the Pacific Northwest. They are farms
mainly in the Pacific Northwest, but we have to work with them
2 and 3 years out to plan our purchases of hops. And they also
are putting the hops in the ground that we want to buy a year
from now and 2 years from now. So there is long-term planning
that goes on. And like I said, the last 4 months of the year we
spent with our sales and marketing and our production team
planning out the brewing schedule, planning out our new release
schedule, and planning out our supply chain purchases as well.
So that is really how it affects upstream with our farmers and
with our suppliers.
Mr. DELGADO. Thank you. That was very helpful.
I yield back the rest of my time.
Mr. EVANS. I thank the gentleman.
The next gentleman I would like to, Mr. Kim, who is the
Chairman of the Subcommittee on Economic Growth, Tax, and
Capital Access, I want to let you know that I was the Ranking
Member for that, so you see where I am today as a result of
that.
Mr. KIM. So you will have some good advice for me.
Mr. EVANS. Mr. Kim?
Mr. KIM. Well, I appreciate that.
Thank you so much for coming and sharing your thoughts and
wisdom with us.
My district is very much a small business district in New
Jersey. It stretches from the Delaware River to the Jersey
Shore, and you know, this is an area where I constantly hear
from people about their concerns. And similar to my colleague,
you know, having a town hall, hearing about just the
difficulties with deal with that political uncertainty. And I
think for me, I come at this from an angle. I have been a
public servant my whole career. I have been on the foreign
policy side. Coming into this there is a lot that I need to
learn, and I try to come into this job with a certain amount of
humility to understand what is it that we can be able to
provide?
So when I am asked those types of questions at a town hall
from a small business owner asking me, you know, what advice do
you have for me on how I can best position my business going
forward for these types of political uncertainties, whether
that is government shutdowns or other problems, I wanted to ask
that question to this panel here and just get your collective
thoughts on what is it that I can do to pass that message back?
What should I be telling small business owners in my business
on how best they can try to weather some of those uncertainties
going forward?
I will open that up to anyone who wants to jump in.
Ms. GERDING. So my advice is planning for a crisis. I think
that every company should go through those exercises, whether
they are a cybersecurity attack or a financial impact that hits
the business, and how you are going to handle those things. If
it is not a line of credit that you have in place and worked
out a good relationship with your bank so that if you miss your
covenants on that line they understand, especially if you are
in Federal contracting. You really need to exercise and plan
those events. That is the only way that we would get through
that.
Mr. BUTCHER. As a small business owner, when we were
opening the small business, my wife's advice to me as we were
planning was to not just have a plan B but always love your
plan B. In a situation like this, it is not really, we have
been at a loss. What are we going to do? And it is hard to put
together a plan B when the basic functions of the regulators
that you rely on are just not open for business. So
unfortunately, I do not have a lot of answers. We are still
waiting to hear back from the agencies now that they are
reopened, but I guess my advice would be to find a way to keep
the government functioning.
Mr. KIM. Go ahead.
Ms. GERDING. I want to add one more thing. There is
something that my company tracks called the Z score. It is a Z
score. And we evaluate our performance at the end of every
month based on our Z score. And what that is, is a combination
of looking at different financial factors and what the backlog
in terms of how much money I have. If everything were to stop
in my business today, how long can I sustain my business? And
if business owners, small business owners are not looking at
those kind of numbers and have 3, 4, 5 months of reserves ready
to go, they are in a bad situation. Government contracting is
pretty stable, but then you have these moments like this that
are unpredictable. So when we look at our numbers, and we do a
financial analysis at the end of every month, that is one
number that I focus on is how many months could I operate if
nothing was paid? So I think that is something that business
owners need to start looking at is those numbers.
Mr. KIM. No, that is right. I mean, this is helpful. I
mean, first of all, it is just an unnecessary burden that is
placed on small businesses for having to deal with the failures
of Washington to be able to get their house in order. And I
think not only is it unpredictable in terms of timing, but it
is also unpredictable in terms of what services will be closed
and which ones will be open. And that is constantly difficult
especially when what I heard is small business owners that are
telling me they do not have the time to keep track of
everything that is happening and the political discussions
about what is going to stay open and what is not and that they
were trying to see, you know, what my office might be able to
provide to try to help with some of that clarity. I am
certainly interested in what this Committee and other
institutions in our government can be done so that every small
business owner themselves does not have to go out there and dig
that information up, you know, every time that there is some
moment of potential political instability. So that planning and
that kind of information is key.
Ms. GERDING. Can I say one more thing?
Mr. KIM. Yes.
Ms. GERDING. Industry associations solve that problem for
me. I belong to the Professional Services Council, the Mid-Tier
Advocacy Group, and the National Veterans Small Business
Organization. All three of those groups are focused on
government contracting. It is difficult to stay on top of every
regulation that is passed up on The Hill here. What happens is
they synthesize it and they force feed it to me in things that
I need to know about on a regular basis. So that might be
something they want to consider, is join a professional
organization that will keep them apprised, whether it is the
Chamber of Commerce or an industry association so that they do
not have to try to stay atop of what is going on up here.
Mr. KIM. I appreciate that.
I yield back.
Mr. EVANS. Thank the gentleman.
I want to thank all of the witnesses for taking time out of
your busy schedule. Your comments were very helpful.
It is clear from the testimony today that the government
shutdown had dire economic and real consequences on our small
businesses, the SBA, and our workforce. As we look towards the
next looming deadline, I hope we can all remember what we heard
today and work quickly to find a long-term solution.
I would ask for unanimous consent that members have 5
legislative days to submit statements and supporting materials
for the record.
Without objection, so ordered.
If there is no further business to come before this
Committee, we are adjourned. Thank you very much.
[Whereupon, at 12:37 p.m., the Committee was adjourned.]
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