Review Of SBA Entrepreneurial Development Programs And Initiatives
Summary
The record of a February 1, 2022 hearing of the Senate Committee on Small Business and Entrepreneurship, Review of SBA Entrepreneurial Development Programs and Initiatives, S. Hrg. 117-241, with Chairman Benjamin L. Cardin presiding and Rand Paul as Ranking Member. The first panel is Mark Madrid, SBA Associate Administrator for Entrepreneurial Development; the second has witnesses from America's SBDC, the Manhattan Institute, the Association of Women's Business Centers, the Cato Institute, SCORE and the Foundation for Economic Education. Chairman Cardin cites $265 million in CARES Act funding for these programs. Madrid testifies that the Community Navigator Pilot Program provides $100 million in grants to 51 grantees and that SBDCs used $192 million in CARES Act funding to train over 818,000 clients. The Committee adjourned at 4:30 p.m.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
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[Senate Hearing 117-241]
[From the U.S. Government Publishing Office]
S. Hrg. 117-241
REVIEW OF SBA ENTREPRENEURIAL
DEVELOPMENT PROGRAMS AND INITIATIVES
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
of the
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 1, 2022
__________
Printed for the Committee on Small Business and Entrepreneurship
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
47-360 PDF WASHINGTON : 2022
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED SEVENTEENTH CONGRESS
----------
BENJAMIN L. CARDIN, Maryland, Chairman
RAND PAUL, Kentucky, Ranking Member
MARIA CANTWELL, Washington MARCO RUBIO, Florida
JEANNE SHAHEEN, New Hampshire JAMES E. RISCH, Idaho
EDWARD J. MARKEY, Massachusetts TIM SCOTT, South Carolina
CORY A. BOOKER, New Jersey JONI ERNST, Iowa
CHRISTOPHER A. COONS, Delaware JAMES M. INHOFE, Oklahoma
MAZIE HIRONO, Hawaii TODD YOUNG, Indiana
TAMMY DUCKWORTH, Illinois JOHN KENNEDY, Louisiana
JACKY ROSEN, Nevada JOSH HAWLEY, Missouri
JOHN HICKENLOOPER, Colorado ROGER MARSHALL, Kansas
Sean Moore, Democratic Staff Director
William Henderson, Republican Staff Director
C O N T E N T S
----------
Opening Statements
Page
Cardin, Hon. Benjamin L., Chairman, a U.S. Senator from Maryland. 1
Paul, Hon. Rand, Ranking Member, a U.S. Senator from Kentucky.... 12
Witnesses
Panel 1
Madrid, Mr. Mark, Associate Administrator, Office of
Entrepreneurial Development, U.S. Small Business
Administration, Washington DC.................................. 4
Panel 2
Rowe, Mr. C.E. ``Tee'', President and CEO, America's SBDC, Burke,
VA............................................................. 26
Hendrix, Mr. Michael, Senior Fellow, Manhattan Institute, New
York, NY....................................................... 40
Hodges, Ms. Corinne, CEO, Association of Women's Business
Centers, Washington DC......................................... 48
Edwards, Mr. Chris, Director of Tax Policy Studies, Cato
Institute, Washington, DC...................................... 59
Weston, Ms. Bridget, CEO, SCORE, Herndon, VA..................... 71
Cox, Ms. Hannah, Brand Ambassador, Foundation for Economic
Education, Co-Founder and Host, BASEDPolitics, Atlanta, GA..... 85
Alphabetical Listing and Appendix Material Submitted
Cardin, Hon. Benjamin L.
Opening statement............................................ 1
Cox, Ms. Hannah
Testimony.................................................... 85
Prepared statement........................................... 87
Edwards, Mr. Chris
Testimony.................................................... 59
Prepared statement........................................... 61
Hendrix, Mr. Michael
Testimony.................................................... 40
Prepared statement........................................... 42
Hodges, Ms. Corinne
Testimony.................................................... 48
Prepared statement........................................... 50
Responses to questions submitted by Senators Hirono,
Hickenlooper, and Marshall................................. 124
Madrid, Mr. Mark
Testimony.................................................... 4
Prepared statement........................................... 6
Responses to questions submitted by Chairman Cardin and
Senators Hirono, Hickenlooper, Young, and Marshall......... 100
Paul, Hon. Rand
Opening statement............................................ 12
Rowe, Mr. C.E. ``Tee''
Testimony.................................................... 26
Prepared statement........................................... 29
Responses to questions submitted by Senators Hirono,
Hickenlooper, and Marshall................................. 114
Weston, Ms. Bridget
Testimony.................................................... 71
Prepared statement........................................... 73
Responses to questions submitted by Senator Marshall......... 128
REVIEW OF SBA ENTREPRENEURIAL
DEVELOPMENT PROGRAMS AND INITIATIVES
----------
TUESDAY, FEBRUARY 1, 2022
United States Senate,
Committee on Small Business
and Entrepreneurship,
Washington, DC.
The Committee met, pursuant to notice, at 2:31 p.m., in
Room SR-301, Russell Senate Office Building, Hon. Ben Cardin,
Chairman of the Committee, presiding.
Present: Senators Cardin, Cantwell, Shaheen, Coons, Hirono,
Rosen, Hickenlooper, Paul, Scott, Ernst, Inhofe, Young, Hawley,
and Marshall.
OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, CHAIRMAN, A U.S.
SENATOR FROM MARYLAND
Chairman Cardin. The Small Business and Entrepreneurship
Committee will come to order.
Senator Paul will be here shortly. He said it was okay for
us to start the hearing.
We have two panels today, and there is currently a vote on
the floor of the United States Senate, and there will be a
second vote. So we will have some interruptions. We are going
to try to keep the hearing moving throughout the process so
that members will be floating in and out. So I hope everyone
understands that.
This is a hearing to review the SBA's entrepreneurial
development programs and initiatives, and it is a great
pleasure to welcome the Associate Administrator, Office of
Entrepreneurial Development in the Small Business
Administration, Mark Madrid.
It is nice to have you with us today.
The programs that come under Mr. Madrid's administration
are critical to the support of small businesses. We are talking
about the Small Business Development Centers Program, which is
one of the principal resources available to small business in
our community. We are talking about the Women's Business
Centers that are again critically important, particularly for
underserved and disadvantaged women-owned small businesses. And
then, the services that come under the Office of
Entrepreneurship Education, which is an array of programs that
all provide essential services to our small business, from the
SCORE program, which is one of our mentoring programs that
involve a lot of volunteers, to the brand new Community
Navigator Pilot Program that was approved under the American
Rescue Plan, the online learning centers, the Regional
Innovation Clusters, and the Emerging Leaders Initiative. And
the list goes on and on and on. These are programs that help
entrepreneurs start and grow successful businesses, and
mentoring and training and access to resources otherwise
difficult to obtain, and COVID-19 has really underscored the
importance of all of these programs.
We know small businesses provide the greater innovation
into our economy and the job growth that we need to grow our
economy, but we also know that they operate on razor-thin
margins. So they do not have the resources to hire high-priced
business consultants to do their work as far as finding out
what the right avenue is to get the help that they need. The
resource partners come in here and fill the void, and that is
why these programs were established. They are the lifeline.
And I think small--thank the Small Business Administration
for new resource partners in the State of Maryland, the
Veterans Business Outreach Center that opened during this past
year and two new Women's Business Centers located in my State.
Let me just give you one example why these resource
partners are critically important, and I will talk about the
Small Business Development Centers. Last November, with the
help of the Maryland Southern Region Small Business Development
Center, operated by the College of Southern Maryland, the
Salinas family opened a Hispanic grocery store in Waldorf, one
of the fastest growing communities in our State. The SBDC
helped them develop their brand, secured financing, and
established their operations. The family wanted to create a
store that genuinely connected with customers and catered to
their needs, and they have done so successfully. For
entrepreneurs like the Salinas family, access to these programs
can be the difference between success and failure. The SBDC was
critical to the startup of that company.
Data shows that small businesses created by entrepreneurs
who receive at least three hours of SBA counseling have a
higher survival rate than small businesses created by
entrepreneurs who receive less counseling or not at all.
Because of this strong record of success and impact, Senators
Shaheen, Collins, Rubio, and I included a provision in the
CARES Act to provide the SBA entrepreneurial development
programs with $265 million to increase their capacity to serve
more small businesses, and I hope we will have a chance during
this hearing to learn how that $265 million has been allocated
and what progress we have as a result of those additional
funds. The funds help the programs deepen their expertise to
help small businesses understand, prepare for, and mitigate the
effects of the pandemic on supply chains, distribution, and
overall business operations.
President Joe Biden's American Rescue Plan went even
further than the CARES Act by establishing a Community
Navigator Pilot Program that has created a holistic network to
eliminate barriers entrepreneurs face in assessing the support
they need. This is a new program, and again, we welcome your--
this hearing where we have a chance to delve into how that
program has worked. The program was launched on December 1st of
last year, and I am looking forward to receiving the updates on
the progress.
Thanks to the additional capacity, expertise, and
connectivity the SBA has developed during the pandemic, it was
able to support the record-breaking surge of entrepreneurships
that have occurred during the pandemic. This is an amazing
success story. We have seen record numbers of new small
businesses during this pandemic, again showing the creativity
and innovation of small business owners.
The U.S. Census Bureau reports that 4.4 million new
businesses created in 2020 is the highest total on record and
represents a 24 percent increase from 2019 as well as a 51
percent increase above the annual average between 2010 and
2019.
Entrepreneurs in Black and Hispanic communities are driving
the surge. They are outpacing the other businesses. So we are
reaching the traditionally underserved. The data is showing a
38 percent increase in the number of new Black business owners
between February 2020 and August 2021.
As we shift our focus to the years ahead and Building Back
Better, the SBA must be well equipped to support these
entrepreneurs and emerging markets. This is especially
important in Maryland, which has the highest concentration of
minority-owned businesses in the country as well as one of the
strongest innovation sectors in the country due to the presence
of SBA resource partners as well as many renowned public and
private research institutions.
I am looking forward to learning more from all our
witnesses about how we can build stronger partnerships between
the SBA and underserved areas, especially with our Nation's
Historically Black Colleges and Universities and minority
serving institutions. HBCUs are a vital part of Maryland's
entrepreneurial ecosystem, with Bowie State University hosting
an innovation center and Morgan State University hosting one of
the Women's Business Centers that opened during the pandemic.
Our State has successfully leveraged these institutions'
relationships with minority communities to get these critical
services to entrepreneurs who would benefit from them the most.
As the American economy continues to recover, we must
ensure that all communities are able to partake in the
recovery, and it is clear that entrepreneurship will play a
very large role in that effort. I hope to leave this hearing
with a much better understanding of the best policies that we
could put forward to maximize the opportunity and produce a
truly inclusive recovery by supporting the SBA entrepreneurial
development programs.
With that, we will start with our first panel, and let me
now formally introduce the Associate Administrator of the Small
Business Administration, Mark Madrid. Mark serves as the
Associate Administrator for the Office of Entrepreneurial
Development at the U.S. Small Business Administration. In this
role, Mr. Madrid leads the OED, which is the SBA's technical
assistance arm, with a national resource network including the
Small Business Development Centers, Women's Business Centers,
SCORE, and the Office of Entrepreneurship Education.
Mr. Madrid previously served as CEO of Latino Business
Action Network at Stanford University and was named the 2019
Silicon Valley Nonprofit CEO of the Year by the Silicon Valley
Business Journal. He is an Honorary Colonel of the United
States Army and a Jefferson Award Recipient.
Mr. Madrid, it is a pleasure to have you here, and you may
proceed. Your full testimony will be made part of our record.
STATEMENT OF MARK MADRID, ASSOCIATE ADMINISTRATOR, OFFICE OF
ENTREPRENEURIAL DEVELOPMENT, U.S. SMALL BUSINESS
ADMINISTRATION, WASHINGTON, DC
Mr. Madrid. Great afternoon, Chairman Cardin, Ranking
Member Paul, and distinguished members of the Committee. Thank
you for the invitation to discuss the SBA's Office of
Entrepreneurial Development (OED). I am energized to be here.
Our mission is to help small businesses start, grow, and
expand by providing quality training, counseling, and access to
resources. We achieve this through the Resource Partner
Network, grants, the Community Navigator Pilot Program, and
entrepreneurship education. We are honored to spearhead this
portfolio under the exceptional and strong leadership of
Administrator Isabella Casillas Guzman.
I am a product of entrepreneurship. Like many of our U.S.
small business owners, my dad was unrelenting in changing the
course of our family's destination as he built his welding
business from the ground up in the Texas Panhandle. We are
proud of my dad for his evolution from hoeing cotton in the
cotton fields to being his own boss. Mi Papa (my dad) died from
COVID-19. Thus, I consider supporting small businesses like my
father's during this time the honor of a lifetime, and I have a
proven track record of doing so on the ground.
The last two years have tested America's entrepreneurs.
Yet, I am proud to report that entrepreneurship, as you
mentioned, Senator Cardin, is booming in 2021; 5.4 million
Americans took that courageous American step of starting a
business in 2021. This record pace of new business creation is
a credit to the thriving entrepreneurial spirit in this
country, resilient in the face of a global pandemic. It is also
thanks to the strong emergency support provided by Congress.
OED is honoring that investment through action. The
millions of new businesses are as diverse as they are numerous
and so is the range of their counseling needs. Some small
businesses benefit most from women-specific counseling. Others
need an experienced business mentor. Yet, others need technical
assistance from a university setting or an organization with
strong community ties.
OED's newest program, the Community Navigator Pilot
Program, is designed to close resource gaps for small
businesses in urban and rural America, including those owned by
veterans, women, and socially and economically disadvantaged
individuals. Funded by the American Rescue Plan, it provides
$100 million in grants to 51 rigorously selected grantees that
work with hundreds of community organizations to connect U.S.
small businesses to SBA and Federal, State, and local
resources.
SBA's resource partners are also ultimately critical. Small
Business Development Centers have tremendous reach via 62 lead
centers and over 900 service centers. SBDCs utilized $192
million in CARES Act funding to train over 818,000 clients and
jumpstart over 26,000 new small businesses in 2021. One of
those clients is Saskia Foley. She is the CEO of Radius
Corporation in Kutztown, Pennsylvania. I had the opportunity to
visit Saskia. Radius makes sustainable toothbrushes. And
because of the Kutztown SBDC, Saskia was able to access an
Economic Injury Disaster Loan and two draws of PPP, enabling
Saskia to retain her 29 employees and to compete with major
brands on Walmart shelves.
Our network of Women's Business Centers also creates
gateways for women entrepreneurs. The $48 million in CARES Act
funding enabled WBCs to assist more than 87,000 small
businesses and help start over 3,300 new small businesses in
2021.
SCORE is another resilient technical assistance pillar,
with over 10,000 volunteer mentors working through 250
chapters. In 2021, SCORE mentored over 570,000 clients.
Through our Office of Entrepreneurship Education, we
deliver an expansive e-learning and in-person training
portfolio to small businesses, including the underserved,
underrepresented, and underaccessed. OEE's portfolio includes
the Emerging Leaders Initiative. In December, we graduated 759
small business owners from this intensive executive-style
program, and multimonth, I may add. Collectively, these
leaders, small business owners, account for over $1.2 billion
in annual gross revenues. This program represents why we do
what we do in OED.
Finally, we are proud to support small businesses in Indian
Country through the Office of Native American Affairs.
America's small businesses are tenacious, and we admire
their resilience and their optimism. We are honored, as you
are, to support them as they recover, persist, and thrive. And
we share your commitment to entrepreneurs and strengthening the
support we provide them, collectively, particularly at this
inflection point. I, and the strong team at OED and the SBA,
look forward to further collaborating with you. Thank you.
[The prepared statement of Mr. Madrid follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Cardin. Thank you, Mr. Madrid, for your testimony
but more importantly for your service.
At this time, I will recognize the Ranking Member, Senator
Paul, for any comments he may want to make.
OPENING STATEMENT OF HON. RAND PAUL, A U.S. SENATOR FROM
KENTUCKY
Senator Paul. As we review the tumultuous first year of the
Biden SBA, some trends have emerged. Time and time again, the
SBA has conducted itself in a manner to prefer one set of
Americans over others. Whether it is the unconstitutional way
the SBA tried to distribute Restaurant Revitalization Fund
money through the use of racial and gender quotas, until they
were struck down by the Judiciary, or it is the awarding of
Community Navigator Program money to many organizations that
overwhelmingly donate to Democrats and the Democratic Party,
the SBA seems more focused on political virtue signaling rather
than fulfilling its mission, helping American small business
thrive. Such a focus is unconscionable when the Federal
Government all but demanded the cessation of economic activity,
putting the livelihoods of small business owners and their
employees at risk.
While the SBA's mind was elsewhere, the Agency allowed much
of the Office of Entrepreneurial Development's core function to
rot from within. Emblematic of that rot is a recent report from
the Inspector General. The report looked at what SBA did with
$25 million allocated to develop a website for small businesses
to learn about Federal COVID programs and to fund training on
those programs for mentors. Turns out, less than 1 percent of
small businesses accessed the website during 2020, and just 62
of 14,000 counselors received any training at all.
Simply put, as is so often the case, government is doing
more harm than good. According to SBA's own polling of
entrepreneurs' experiences, over two-thirds of entrepreneurs
were unconvinced that the services they received from SBA
resource partners benefited their bottom lines. The irony, that
a government agency devoted to help small businesses thrive in
the marketplace cannot satisfy its customers, should not be
lost on anyone.
The SBA's resource partners can tout their aggregated,
rather than their client-specific, data and anecdotal success
stories, but the clients have spoken. The resource partners
provided largely useless advice. For every three, quote
unquote, success stories they cite, data suggest there are
roughly seven stories of failure. Frankly, I am not surprised.
The idea that bureaucrats from a government that
incessantly demands compliance with burdensome and costly
regulations would then deign to educate the innovators and
entrepreneurs of this country on how to run a business is,
frankly, absurd. The best thing Federal, State, and local
governments can do is get out of the way, lift the burdensome
regulations creating barriers to entry for pre-venture and seed
stage entrepreneurs, ease the cost of attempting to untangle
the extensive web of compliance rules existing entrepreneurs
face, and most of all, stop needlessly shutting down or
restricting businesses through lockdowns and vaccine passports.
Only then would government truly allow small business to
thrive.
Chairman Cardin. Let me thank Senator Paul for his
cooperation in putting together this hearing.
We will now go to approximately five-minute rounds of
questioning. As I have indicated earlier, there is a vote on,
on the floor of the Senate. So members will need to come in and
out, and we will try to keep the hearing moving forward. With
that in mind, let me start the questioning.
Mr. Madrid, as I indicated, under the CARES Act, bipartisan
support, the entrepreneurship programs were given several
hundred millions of dollars of additional resources. Now, when
I take a look at the results and see the significant increase
in small business growth during the pandemic, that gives me a
degree of confidence that we were helpful, particularly during
a pandemic, when we know that the valuable help that the
resource partners can give can help small businesses that
otherwise would not have been able to get that type of
assistance.
So I still believe we have a major need in regards to
emerging markets, and I know that is an area of focus that you
have within your division. There has been legislation and
efforts by the administration, as well as members of Congress,
to do an uplift program, to develop ways that we can work with
the HBCUs and minority-serving institutions, in order to try to
help emerging technologies and companies to be able to get the
type of initial help that they need.
My question to you is: What additional support do you need
in order to provide opportunities for traditionally underserved
communities so that they can take advantage of the
opportunities that are emerging in America?
Mr. Madrid. Thank you, Chairman Cardin. As a point of
reference, just to look at the CARES Act funding results--and I
am glad to see the resource partners here--between SCORE, the
SBDCs, and the Women's Business Centers: With the SBDCs, during
the period that we are taking about, particularly through the
pandemic, over 800,000 clients served; 26,000 new businesses
started. With the WBCs, 87,000 clients served; 3,300 new
businesses. And with SCORE, over 570 clients mentored. And so
that is extraordinary.
And I do echo your sentiment about the booming
entrepreneurship, with over 5.4 million new applications and
starts in 2021, which is a record by a million.
So these resources I--when you were asking your question, I
wrote the name, Yaeli. Yaeli is a bread manufacturer in Miami,
Florida, and she owns a company called Anny's Bread Factory,
specializing in brioche rolls. And she--her goal a couple years
ago was just to get--meet the $250,000, you know, annual gross
revenue mark. And when she did, she turned to the local
district office, and they told her about the Emerging Leaders
Program which is under the purview of OED.
She took that program because she qualified, and in the
process she met the Florida International University (FIU)
SBDC. And I am glad that she did because she secured counseling
and one-on-one coaching and she was able, through the pandemic,
because of this support system, to access an EIDL loan. And
under this administration, that loan carried to the $500,000
mark. And because of that she was able to put bread on the
shelves in the likes of Target and grocery chains quicker than
the big brands and now she is developing protein bread.
So that is the spirit of entrepreneurship and why these
resources are so critical. Think about 5.4 million new Yaelis
across the country and Puerto Rico, and we need to support them
with these resource partners and the Community Navigator Pilot
Program.
Chairman Cardin. Well, I appreciate that answer. I want
to--the other area that additional resources were provided was
for the Navigator program. This is new. We had not had this
before. And the administration just recently announced the
implementation of the Navigator program by using a hub-and-
spoke system with three-tier participation.
And I have looked at the 51 hubs that have been selected
and see a good variety of nonprofit-type entities that are
marshaling the Federal funds and then reach out for partners in
local communities, so sometimes as small as just one county,
sometimes a State. In my State of Maryland, oh, I think we have
somewhere around 10 spokes that are currently operating under 4
national hubs.
You have had now a little bit of time to assess how the
program is working. It was originally conceived in order to
direct small businesses to where they could get the help they
needed with the tools that are available under--for small
businesses, which sometimes would be SBA, but sometimes it is
local government; sometimes it is private sector help. Can you
share with us the initial assessment of how the Navigator
program is operating?
Mr. Madrid. Thank you, Chairman Cardin. The boots are on
the ground I am happy to report. And thank you for mentioning
the coverage in Maryland. We have coverage in 50 states and
Puerto Rico through the Navigators with the hub-and-spoke
system. The 51 grantees represent not only geographic diversity
but diversity in coverage and sectors served.
We have rural America covered through the likes of such
like the Abilene Chamber of Commerce, for instance, and we have
our diversity segments. We are so proud of that work. We have
Tier 1 grantees with the National Urban League, with the United
States Hispanic Chamber of Commerce, U.S. Black Chambers. We
have the Institute of Veterans and Military Families out of
Syracuse serving military, you know, veteran entrepreneurs and
their spouses. We have the Oweesta Corporation serving small
businesses in Indian Country, the U.S. Pan Asian American
Chamber focusing on the AAPI community. Also, women
entrepreneurs are being served, rural entrepreneurs. So we are
very, very excited.
And I will give you an example with the Institute of
Veterans and Military Families (IVMF) in Syracuse. All they are
doing is scaling the support that they have given. One in
particular, a veteran opened a business recently to help other
veterans with benefits, and he turned to the IVMF to scale that
business. And we are happy to report that it is working and
that is the type of services that will be rendered by IVMF with
multiple states.
And when you look at the State of Maryland, we are excited
about the Disability Institute. Who does not want to serve
disabled small business owners? And so that focus of the
Disability Institute in their mind, they issued to us and
shared with us that until now disability small businesses felt
invisible. So that is an example of the work that is being done
on the ground.
We have other examples. Recently, I did travel to Abilene,
Texas, and took a look at their footprint in terms of the spoke
arrangement that they have with the Cisco Community College
there, and they are looking specifically in that area as well
to serve women-owned businesses and also the veterans at that
base. And we were also delighted to have the Abilene Black
Chamber of Commerce. That is the second oldest Black Chamber in
the State of Texas.
Chairman Cardin. So let me follow-up just briefly on this
as far as how the accountability works. You mentioned National
Disability Institute. They are one of the hub grantees. They
have a spoke in Maryland, Griffin-Hammis Associates. How does
that relationship work as far as the accountability to make
sure the services are really going as intended?
Mr. Madrid. Absolutely. Thank you for the question, Senator
Cardin. So we have a robust technology platform that is real-
time that is between the spokes and the hubs. The hubs are the
aggregator of the data that is reported back to our team at the
Office of Entrepreneurship Education and grants management team
there and our grants management specialists and supporting
team. So this is real-time data that is being supported and
aggregated through the hubs, and the hubs are submitting the
data to us for evaluation. And that will be done every quarter,
but we also have real-time acquisition of that data.
Chairman Cardin. Thank you.
Senator Paul.
Senator Paul. Do you believe the taxpayer has a right to
know how you spend their money?
Mr. Madrid. Senator Dr. Paul, thank you for that question.
We--in the Office of Entrepreneurial Development, our purview
is helping our small businesses navigate through their taxes.
We are not in tax policy.
Senator Paul. No, no, we are not talking about tax policy.
I am talking about the citizens. Do the citizens of the United
States have a right to know how you are spending their money?
Mr. Madrid. Well, in our area, we are focused on developing
entrepreneurs.
Senator Paul. No, no. This is a transparency question. Do
you think the citizens of the United States, through their
representatives, have a right to get information from you and
your department about how you are spending the money?
Mr. Madrid. We--my purview is to assist our resource
partner network and the Community Navigator----
Senator Paul. It is a sort of a ``yes'' or ``no.'' I do not
think you are getting the question. It is a real simple
question. The answer is ``yes, of course, the citizens do,''
but you cannot say that?
Mr. Madrid. I can attest to what we are doing at the Office
of Entrepreneurial Development.
Senator Paul. No. But, I mean, it is a more general
question. Do the citizens of the United States have the right
to know how you are spending their money?
Mr. Madrid. Dr. Paul, I can shine the light on what we are
doing at OED and, you know, in terms of tax preparation,
materials that we have----
Senator Paul. This is a really general question just on
transparency. Do the citizens of the United States, through
their representative, have the right to ask questions about how
you are spending their money?
Mr. Madrid. I am here to answer any questions that you have
on the Office of Entrepreneurial Development.
Senator Paul. It is a ``yes'' or ``no.'' Can you
acknowledge that, yes, citizens have a right and an expectation
to know how their money is spent by organizations? That is why
you come here. It is for oversight. It is a very general
question. It is not accusing you of anything. It is just
saying, do citizens have the right to know how you are spending
their money?
Mr. Madrid. Dr. Paul, I would love to just shed some more
light on the Office of Entrepreneurial Development.
Senator Paul. But you cannot answer whether or not citizens
have the right to know how you are spending the money?
Mr. Madrid. I would be happy to talk about our tax
preparation classes with our resource partners.
Senator Paul. But you cannot acknowledge, yes or no,
whether citizens have the right and the expectation, through
their representatives, Republicans and Democrats, to ask you
for information on how money is spent? That is a yes-or-no
question. It is about--it is a very basic question about
transparency, but I am not hearing you answer a ``yes'' or
``no.''
Mr. Madrid. Dr. Paul, I would love to tell you more about
what we are doing at the Office of Entrepreneurial Development.
I am energized to be here and talk about our programs
throughout the country.
Senator Paul. But it sounds like you are obfuscating the
issue and you are not willing to answer that there is sunlight
and that you are open to any kind of scrutiny by
representatives as to how you are spending the money. You do
not believe that citizens have the right to understand how you
are spending money and to ask questions through their
representatives about how you spend the money?
Mr. Madrid. Dr. Paul, I am here to answer any questions
that you have on----
Senator Paul. But I am asking you, do citizens have the
right to know that, and you are giving me some other answer
that is not an answer to the question. This is a question: Do
citizens have the right to expect you to answer questions about
how your money is spent?
Mr. Madrid. Dr. Paul, I am here to answer any questions
that you have on the fulfillment of our OED programs that
include the resource partner footprint, the Community
Navigator.
Senator Paul. Let the record show that the witness is
refusing to answer a very basic question about transparency.
The reason I ask this question is we sent you questions
back in the beginning of the summer about the Community
Navigator Program. These are not political questions that I
know of. How many organizations applied for funds under the
Community Navigators Program? That question was asked in the
beginning of last summer. We asked again in November, and we
have not had answers. I think your staff decided to send us
some piece of paper today or yesterday still not answering that
question.
What is the geographic distribution of states and
localities covered by each grantee?
These are not even politically charged questions that we
sometimes encounter, but you cannot even answer whether or not
citizens have an expectation to get answers from you, and then
when we ask questions you do not answer them. That, to me, is
serious breach of your duty as a civil servant.
You cannot answer a question on sunlight, and then when we
send you written questions of an objective nature you refuse to
answer the question. You do not even respond to us. I mean,
that is utterly contemptuous and disregarding of representative
government.
Mr. Madrid. Dr. Paul, we did answer your letter. So I would
be happy to answer----
Senator Paul. When was the answer? When were the questions
answered?
Mr. Madrid. We will get back to your office, but I know
that we answered.
Senator Paul. No. The questions that I just asked you, the
two questions. We got something yesterday or today from your
office, when you knew you were going to be here and have to
answer some questions. You resisted for months sending any
answer, but you still have not answered the two questions I
just outlined. I do not believe we have got an answer for
either one of those questions.
Mr. Madrid. Well, Dr. Paul, we believe in transparency, and
we did respond to your question.
Senator Paul. No more questions.
Chairman Cardin. Let me point out I believe the Community
Navigator Program started in December. So it is a relatively
new program. So the information is just, I think, becoming
available in a way that it is going to be meaningful for us to
be able to obtain the type of information that Senator Paul has
requested.
Senator Hickenlooper.
Senator Hickenlooper. There. Great. Thank you, Mr. Madrid,
for appearing today but also for your extensive public service.
And I think your father's story is obviously an inspiration to
you but I think can be an inspiration to all of us.
We saw, somewhat surprisingly, a dramatic increase in
entrepreneurship during COVID, almost 24 percent. How are the
entrepreneurial development programs--how are they handling
that, and how is--how are they supporting these new businesses?
Mr. Madrid. Well, thank you, Senator, for your question. I
mean, it is an entrepreneurship boom for sure, 5.4 million new
businesses applications. And when you think about that
ecosystem in conjunction with the repeat customers of the SBA,
those that were going to our resource partners, our SCORE
chapters, our SBDCs and Women's Business Centers, and then you
think about the customers that came to the SBA for the first
time during the pandemic, so you have three ecosystems that
were supported. And they need to be served just like I was
mentioning the Yaelis of the world.
And we have so many examples that small businesses--we all
know that 20 percent of small businesses that are formed die in
the first year. That is a fact. That data supports it. So we
all need to work together to support them. After all, they do
create almost half of our jobs, and that is just a resounding
tick of new entrepreneurship in the midst of a global pandemic.
So we look forward to supporting them through the networks that
I have described.
Senator Hickenlooper. Great. And I want to just kind of
follow-up on that because I do know as a small business person
myself. I spent 20 years in small business and did avail myself
of an SBA 504 loan and went through that whole process after, I
guess, I had been in business three or four years. The thing
that most surprised me--and I was tremendously, and unto this
day, appreciative--was the counseling, that in the process of
applying for a loan how much small business advice I got.
My dad died when I was a little kid. I did not have any
family members who were in business. I was really kind of--I
mean, I had to go to the library on how to write a business
plan. I did not--honestly, I was a geologist. I did not know
what the word ``pro forma'' meant.
And the staff at the Small Business Administration really
bent over backward to make sure that not only did I understand
the programs but that I thought, you know, they had concrete
suggestions on how I might think about marketing and how I
might think about expanding my business, which were invaluable.
Part of their advice was about staffing, hiring personnel, and
I think certainly when I--I opened in an abandoned part of
downtown Denver, and we had a very diverse workforce.
And I think today we see more and more women-owned
businesses, more and more minority-owned businesses also
dealing with a diverse workforce and right now with real
trouble, real challenges in terms of their hiring. And one of
those issues that I experienced back then, and I think people
are experiencing today, is the skills gap. And how do your
entrepreneurial development programs address--or, how can we do
a better job of addressing--the issue of reskilling? And how do
we help people get those skills that allow you to upskill
existing employees but actually make sure that incoming
employees have the necessary skills?
Mr. Madrid. Thank you, Senator, for that question. And I
chuckled at ``pro forma'' because I was also a business owner
many years ago and I did not know what that meant either until
I learned from going to one of these Small Business Development
Centers.
Upskilling and workforce development is critical. I was
visiting with a small business owner in the Lehigh Valley area
of Pennsylvania, in Reading, Pennsylvania, Johanny Cepeda, the
owner of Mi Casa Su Casa. And she said: ``Mark, when the COVID-
19 happened and lockdown happened, I had no idea how to
transform my restaurant business into a digital business,
whether I should go with one of the DoorDashes of the world.
And that required education. That required technology.''
And so she talked about taking care of her workforce,
keeping them safe. She talked about quality childcare and
access to resources and also education. So all those buckets we
fulfill at OED, whether it is the resource partners that
pivoted to be virtual. Also, that is a rural area. So she was
able to lean into the district office and the SBDC and that
whole network, and now she is leaning into Community Navigators
as well that will be servicing that service portfolio in that
particular area.
Senator Hickenlooper. Great. Thank you very much and thanks
for all your work.
Mr. Madrid. Thank you.
Senator Hickenlooper. Back to the Chair or the Ranking
Member.
Senator Paul [presiding]. Senator Marshall is no longer
here. Senator Ernst?
Senator Ernst. Yes, thank you so much. First off, I just
want to say that I really do appreciate the Small Business
Administration's programs, especially in the area of
entrepreneurship, whether that is for our veterans or women
that are looking for opportunities.
But I do want to say I am a little dismayed at the lack of
an answer to our Ranking Member, Mr. Madrid. We are accountable
to our constituents. They provide taxpayer dollars for many of
the programs, most of the programs at SBA. And it should be
easy for us to state back to them that we believe in
transparency and, yes, they should have the ability to know how
their taxpayer dollars are being spent. I think it is
incredibly important that we provide transparency to those
folks so that we know we are watching out for their dollars at
every opportunity.
So over the last couple of weeks, I have been in Iowa and
doing a 99-county tour that I do every single year. And many of
those constituents are telling me that their small businesses
are really struggling under the impact of inflation in their
businesses, they are struggling with supply chain issues, this
is hurting them, it is hurting their employees, it is hurting
their families.
So on February 10th, I will be introducing the PRICE Act,
and that would require all proposed spending to include a
report detailing the impact on inflation and household incomes
to provide American families the economic stability they need
against this administration's reckless spending. So again, this
is a transparency measure. We want people to know and
understand how those taxpayer dollars are being spent.
So what is the SBA doing to help these small businesses
navigate these escalating prices and to prevent those costs
from being passed along to consumers? How can the
administration help us respond to inflation to help struggling
small businesses?
Mr. Madrid. Thank you for your question, Senator. And I did
invest some time in Fort Dodge, Iowa, visiting with the Iowa
SBDC when they launched their Inclusivity for All Challenge,
and it was an unbelievable honor to be there in the Des Moines
area, in Fort Dodge, and visiting with those rural
entrepreneurs.
What I would say is our resource partner footprint,
specifically some of the SBDCs on the ground are looking at
prices, specifically through supply chain education. For
example, we have an SBDC at Rutgers University that is looking
at inventory management and making sure that the supply chain,
along with the Made in America Initiative, is driving down
cost. And so we are excited about that work that is being done
across our footprint, and that includes the Women's Business
Centers as well.
Senator Ernst. And, thank you. And I think there is a lot
of other ideas that we can come up as well. So we will continue
working on that.
And so you did mention kind of Made in the USA. So maybe
talk a little bit more about any assistance for helping those
small businesses source domestically produced alternatives as
we are going through the supply chain issue?
Mr. Madrid. Absolutely. Under President Biden's leadership,
we are looking at opening more ports and getting more inputs on
the ground, specifically with our small business owners. And so
that training that I talked about with the SBDCs are Rutgers
University is looking exactly at that, using--there is a motto:
Get business for each other and do business with each other
right here in the U.S.A. And so they are looking at, you know,
peer-to-peer management systems where they can drive down those
costs. So that is an example of one of the efforts that is
happening on the ground.
Senator Ernst. One of the issues that I heard while I was
in Iowa visiting a furniture manufacturer was the issue with
the ports, and so I do think we have to have greater capacity
at the ports. So while it is getting those ships in, unloading
them, getting that cargo stored in containers there at those
port yards--but what I am also hearing is the shortage of CDL
drivers and then the ability of drivers to go into those ports
when they are nonunion drivers. Is that something that the SBA
could be pushing with the Administration? Opening up those
ports to all drivers.
If you have a CDL, you have passed the requirements. So the
excuse that we had heard through this business, what they had
been told is that nonunion drivers were not considered safe. So
some of those ports were not allowing nonunion drivers to come
in and pick up containers, which is exacerbating the supply
chain issue.
So I am a little concerned that this Administration needs
to find other avenues of opening up the flow of goods to help
our small businesses. Is that something that the SBA can
communicate to the Administration?
Mr. Madrid. We look forward to continuing to help our small
businesses. We would love to hear from your office on this
issue.
Senator Ernst. Thank you. That is all I have.
Senator Paul. Senator Rosen by Zoom.
Senator Rosen. Yes, yes. Thank you, Ranking Member Paul.
Appreciate you calling on me. Thank you for holding this
important hearing to review the SBA's entrepreneurial
development programs and its initiatives, and I want to thank
the witnesses here for the testimony today.
I want to talk a little bit about support for startups
because Nevada is home to more than 280,000 small businesses,
which actually make up over 99 percent of businesses in our
State. Over the past two years, Nevada has seen a spike in new
startups, creating jobs, of course, and great new economic
opportunities. And according to the Economic Development
Authority of Western Nevada, the Reno-Sparks Metro Area alone,
nearly 100 startups have launched since the beginning of the
pandemic.
Startups, we know, are an integral part of the American
economy, and they are increasingly becoming part of Nevada's
economic resurgence from the pandemic. And as a strong advocate
for entrepreneurship, I want to ensure that this surge
continues. So, Mr. Madrid, how is SBA encouraging new startups
in the midst of the pandemic, and how can Congress help you
improve the startup ecosystem, particularly in the emerging
startup markets beyond Silicon Valley, markets like Las Vegas
and Reno?
Mr. Madrid. Thank you, Senator, for the question. I am
happy to report that one of Administrator Guzman's charges is
to focus on innovative startups. So thank you for your
question.
Innovative startups. Given that stat of 5.4 new business
applications in 2021, which is 1 million more than the previous
year and a record, this is absolutely essential when we look at
the job creation potential and also considering that 20 percent
of new businesses die in the first year. So we are excited.
I am glad you mentioned, you know, Nevada there. We
recently visited with an entrepreneur there that is in
utilities. It is Live Electric. And she was a graduate of our
Emerging Leaders Program, and she talked about her startup
phase and the journey of becoming a woman-owned certified
business and her journey in terms of procuring with the
utilities companies. And she would not have been able to do it
as quickly or as efficiently without the support of the
resource partners.
And so we are excited to continue that storyline and the
storyline that I mentioned with the 5.4 million potentially
Yaelis of the world and their startup phase because we do not
want one to fail, much less 20 percent.
Senator Rosen. Thank you. I want to move on and talk about
expanding our program eligibility because, you know, there has
been a lot of economic challenges brought on by the pandemic.
It has been devastating for small businesses, of course, not
just in Nevada but everywhere. But Nevada, we still have the
second highest unemployment rate in the Nation. So for some of
my constituents, without additional relief or at least access
to the SBA's traditional support programs, their businesses
could end up closing their doors.
It is why I have made a priority to expand SBA program
eligibility to all small businesses in Nevada and nationwide.
And last year, Senator Ernst, who was just before me, she and I
have bipartisan legislation to allow nonprofit, small-business
childcare providers to participate in all SBA programs. I have
also advocated for state-legal cannabis small businesses to
receive equal support from the SBA.
So again, Mr. Madrid, as the U.S. faces a childcare crisis,
what can the SBA do to ensure that nonprofit childcare
providers get the entrepreneurial development support that they
need? And separately, in Nevada and so many other states, we do
have legalized marijuana, and what can we do to ensure that
legal businesses, including state-legal cannabis business,
small businesses, can take advantage of these entrepreneurial
programs as well?
Mr. Madrid. Thank you, Senator, and thank you for
mentioning the criticality of childcare. We are very interested
at the agency level to help small business and invest in
working small businesses so that they can have quality and
affordable childcare. Thank you for your efforts with childcare
businesses specifically in Nevada. And we will continue to look
at that. We would love to work with your office, of course.
So thank you for mentioning that and overall just about
your sentiments on startups and specifically taking a look at
the coalition building that is taking place in Nevada. We feel
that the resource partners, with their nuanced specialty
programs and building coalitions together and creating a cross
referral network, including the Community Navigators, is going
to be essential. It is going to be essential in Nevada as well.
Senator Rosen. Thank you.
I see my time is just about 10 seconds. So, Mr. Chair, I
will yield back.
Chairman Cardin [presiding]. Senator Hawley.
Senator Hawley. Thank you very much, Mr. Chairman.
Thanks for being here, Mr. Madrid. Before I start, I do
want to come back to I am flummoxed by your exchange with
Senator Paul. I cannot understand your position on this. Why is
it that you think that taxpayers should not be able to have an
accounting of how you are spending money?
Mr. Madrid. Senator Hawley, great to see you. We do believe
in accountability and transparency.
Senator Hawley. But that is not my question. My question
is: Why don't you think they should be able to see how you are
spending the money? It is their money, not your money. And I
just do not understand. Why is it you think they should not
receive an accounting of how your office is spending the money,
how SBA is spending its money?
What is the--there must be some philosophical objection
here. I just do not understand what it is.
Mr. Madrid. You should be able to see everything that we
report and through our public reporting. So we do believe in
accountability and transparency.
Senator Hawley. Oh, so you do think then that the public
should be able to see what you spend and what you do. Is that
right?
Mr. Madrid. I am replying in terms of our footprint at OED
and our public reporting on our resource partners.
Senator Hawley. So, okay, I got it. So the locus of your
disagreement with Senator Paul is you just do not want to
answer the questions he asked you. That is the real answer. Is
that right?
Mr. Madrid. Senator, thank you for your question. I am here
to--you know, I am here to report on the Office of
Entrepreneurial Development and my purview, and so that is what
I will continue to do.
Senator Hawley. Yes, the reason I think it is so
irritating, frankly, is because this administration and this
SBA has repeatedly and consistently stonewalled this Committee,
and in particular the Republicans on this Committee, for going
on a solid year now. It is really extraordinary. So to have you
come in here and say that you do not think that you ought to
have to give an accounting for taxpayer money is really
extraordinary.
So I just want the record to reflect that, that I
completely agree with Senator Paul and Senator Ernst that your
position on this, this administration's position on this, is
just really frankly unbelievable, and I am startled that you
are taking the positions you are.
Let me ask you about some other accountability. For this
fiscal year, fiscal year 2022 I should say, SBA submitted
budget justifications that request funding increases for most
of the programs and initiatives that we are here to discuss. I
want to know about some of the data, however, that has been
published about how effective these various programs are.
For example, Small Business Development Centers, according
to data collected by the SBA's Office of Entrepreneurial
Development in their annual studies from 2003 to 2012, only 20
percent of program participants reported that the services they
received enabled them to retain current staff, only 16 percent
reported that services received enabled them to hire new staff,
and only 29 percent of participants said that the services they
received had a positive impact on their profit margin. So let
me just ask you, Mr. Madrid, does the Office of Entrepreneurial
Development continue to conduct annual studies of program
participants to assess the impact and effectiveness of these
programs?
Mr. Madrid. We report on our outcomes and our goals, and
that is standard per the statute. So we report on the metrics
and the goals annually, and those are publicly available.
Senator Hawley. But do you do studies to assess the impact
of the programs? I mean, we know that SBA did from 2003 to
2012. My staff has not been able to find any reports published,
I think, past 2012. So this is just a factual question. Do you
conduct annual studies of your program participants to assess
the impact or no?
Mr. Madrid. Senator, we issue public reports. So we would
be happy to work with your office on the data that we do have
and the reporting that we do have.
Senator Hawley. But do you conduct annual studies of
program participants? That is my question.
Mr. Madrid. We report on the data that is aggregated from
our resource partners.
Senator Hawley. So that is a ``yes'' or that is a ``no?''
Mr. Madrid. We can report on the----
Senator Hawley. When was the last time you published an
annual study?
Mr. Madrid. We can work with your office to give you our
reporting that we have on our----
Mr. Madrid. But when was the last time you published an
annual--I am just trying--these are not gotcha questions. I am
just trying to establish some basic questions--some basic facts
so I can ask you some questions about them. So either you are
not prepared or you are not here to answer my questions, which
goes back to what we talked about earlier.
So let us try again. When was the last time you published
an annual report? And you can read the memo your staff keeps
giving. Maybe we should have the staffer come testify. He seems
to be the one who is giving you the answers. We could probably
make room at the table. If somebody is willing to answer
questions, I would love to hear from them. Go ahead.
Mr. Madrid. Senator, thank you for your question. We report
publicly, annually, on the metrics that are per the statute,
and we would be happy to work with your office to supply them,
the most recent ones.
Senator Hawley. Okay. So those are--you survey the
participants of the program annually?
Mr. Madrid. This is the data that we receive through our
resource partners, like capital infusion, unique clients
served, et cetera. We would be happy to work with your office--
--
Senator Hawley. Well, have the performance metrics that you
have seen, have they improved since the publication of the 2013
report?
Mr. Madrid. I am sorry?
Senator Hawley. Have the performance metrics that you have
seen--you say that you collect performance metrics.
Mr. Madrid. Yes, they have. There are some of the metrics
that have improved, and I would be happy to supply them to your
office.
Senator Hawley. Give me--well, give them to me. I mean,
what--so in 2012, only 20 percent of program participants said
that the services they received helped them retain current
staff. So what is the number now?
Mr. Madrid. I can give you what we do have in terms of the
capital infusion, and I would be happy to work with your
office.
Senator Hawley. Okay. I wish I could say this was
productive, but it is manifestly not. And I do not know what to
say, Mr. Chairman, other than that we will give you a bunch of
questions for the record.
But if we are going to have these hearings and be able to
do any kind of oversight, you are going to have to prepare and
you are going to have to come prepared to answer questions. And
this performance today, frankly, is just ridiculous.
Thank you, Mr. Chairman.
Chairman Cardin. Let me just reinforce a couple comments
that have been made. First, every member of this Committee is
entitled to as much information as we can get for oversight. We
do believe in transparency, as Mr. Madrid has said, and we want
to make sure that every member has access, as well as the
taxpayers have access, as to how the programs at any Federal
agency, including the Small Business Administration, is
handled.
I am aware of several requests that were made by the
Minority for information from the Small Business
Administration, and I am also aware of that information being
made available to the Minority members. Whenever I have been
asked by the Minority for information, I have tried to
facilitate that information being made available, and I think
we have been successful in getting that information to the
Minority. So I just want to go on record to indicate that we
have had cooperation from the Small Business Administration in
providing members of this Committee detailed information.
Now admittedly, a lot of this is not involved in the
entrepreneurship programs. This is other areas that have been
more of interest to the Republican members. But in regards to
the entrepreneurship programs, many of these are, as I said
particularly on the Navigator program, a new program. And we do
really want to oversight that, so we do want to make sure that
we get timely information.
And let me just reinforce one of the messages from my
Republican colleagues. During the last administration, we had
significant challenges in getting information as to how the new
programs set up under the CARES Act were being administered,
and we needed that information as we were adjusting the policy
and deciding whether to replenish the funds. And we could not
get that information. We knew there was something needed to be
adjusted, but we did not have the specific information in order
to do it even though we were certain that the SBA had that
information. It just was not making it available to us. So as
an effort to try to correct that, we actually put language in
the statute to require timely information to Congress so that
we could adjust policies.
So this has been a constant challenge in regards to those
who administer the programs and getting information to
Congress, and it is critically important that we get timely
information so that if resources are needed or adjustments in
policies are needed or something is not going right, we can
work together to make sure that the funds are used in a most
cost-effective way.
Let us be pretty clear about this. The SBA was charged
during COVID-19 with an unprecedented amount of
responsibilities. Over a trillion dollars of assistance was
given out under the umbrella of the SBA. They had never before
come anywhere close to that amount of money being allocated
over multiple years. So this was a new challenge, and I think
by and large we were very proud of the manner in which these
programs were stood up, the amount of extraordinary work the
staff put in to make sure these timely aids could be gotten.
So I just really want to make it clear that despite some of
the questions and the tone of the questions I do believe we
have had cooperation from the SBA. I would like to see more
timely information made available to us so that we can do our
responsibility and would urge the administration to be
sensitive not just to the Inspector General but to Congress to
make sure that we get timely information in order to properly
be able to review programs.
With that, Mr. Madrid, thank you very much for your
testimony, and we are going to turn now to the second panel.
Mr. Madrid. Thank you very much.
Chairman Cardin. As I explained at the beginning of this
hearing, there are votes going on, on the floor of the United
States Senate. So Senator Paul was kind enough to stay here so
I could cast my vote. He is now back voting on the Senate
floor.
We have six witnesses on the second panel. I believe
Senator Paul may wish to make some additional comments in
regard to three of these witnesses that were invited at his
request. So what I will do is give brief introductions for all
six but recognize that Senator Paul may very well wish to
supplement that in regards to the three witnesses that he
invited to the panel.
So let me welcome all six of our witnesses. What I will do
is try to introduce this, if I can, in the order in which we
will be asking you to speak.
Our first witness will be ``Tee'' Rowe, who is the
President and CEO of America's Small Business Development
Centers. Mr. Rowe has a long history of legislative and
advocacy experience on behalf of the small business community.
Prior to joining America's SBDC, he served as the Associate
Administrator for Congressional Legislative Affairs for the
United States Small Business Administration from 2005 to 2009.
Next would be Mr. Michael Hendrix, who is a senior fellow
and Director of State and Local Policy at the Manhattan
Institute. His writings have appeared in various national
publications, including the National Review, the City Journal,
and National Affairs. He holds a master's degree in
international relations from the University of St. Andrews.
Our third witness would be Corinne Hodges, who joined the
Association of Women's Business Centers as CEO in January 2019
and is charged with bringing about enhanced sustainability and
increased capacity to the Association and its members. Her
immediate priority is the modernization and reauthorization--an
issue I want to talk about--of the Women's Business Center
Program while building capacity throughout their growing
network of 135 Women's Business Centers. She resides in
beautiful Brunswick, Maryland, with her husband of 16 years and
her 14 year old child.
Our fourth witness is Chris Edwards. Chris Edwards is the
Director of Tax Policy Studies at CATO Institute and serves as
a member of the Fiscal Future Commission of the National
Academy of Sciences. Prior to joining CATO, he served as a
senior economist at the Joint Economic Committee, a manager
with PricewaterhouseCoopers, and an economist with the Tax
Foundation. He holds a bachelor's in economics from the
University of Waterloo and a master's in economics from George
Mason.
Our fifth witness is Bridget Weston. Bridget Weston is the
CEO of the SCORE Association, where she provides executive
leadership and works directly and collaboratively with the
board of directors to establish the vision and direction of
SCORE. Additionally, she has served as a member of the Futures
Task Force that created SCORE's vision for 2025 and has been a
leader in the fiscal year 2020 tactical plan for SCORE.
And rounding out the panel is Hannah Cox, Content Manager
and Brand Ambassador for the Foundation for Economic Education
and the host of the podcast BASEDPolitics. Her work revolves
around the defense of free markets, individual liberty, and
limited government.
Before turning to the witnesses, let me recognize the
Ranking Member, Senator Paul, if he wants to make any comments
in regards to these--he is fine, okay.
I hope I did a good job introducing your witnesses. I did
the best I could.
We will start off with Mr. Rowe.
STATEMENT OF C.E. ``TEE'' ROWE, PRESIDENT AND CEO, AMERICA'S
SBDC, BURKE, VA
Mr. Rowe. Thank you, Chairman Cardin.
Chairman Cardin. I should point out, without objection,
your full written testimony is being made part of the record.
You may proceed as you wish.
Mr. Rowe. Thank you, Chairman Cardin, Ranking Member Paul,
Senators. Thank you for inviting me to testify.
I am the President of America's SBDC, the association of
Small Business Development Centers. For over 40 years, SBDCs
have been providing services to small business owners
throughout the Nation. We operate out of our host institutions
and operate statewide. But while SBDCs may be headquartered at
colleges and universities, our centers are in the communities.
That is why you will find SBDCs at the St. Mary's County
Economic Development Office, the city hall in Berea, Kentucky,
or the Boulder Public Library.
SBDCs help all small businesses at all stages. Roughly 50
percent of our clients are women, 10 percent of our clients are
veterans, and minority clients comprise about 38 percent of our
client base. In an average year, we provide over 1.5 million
hours of counseling and training to over 500,000 small business
owners and their employees, and that assistance has generated
results. From 1990 to 2020, our clients accessed $82 billion in
capital, increased their sales by $144 billion, and created 4
million jobs, and that helped generate over $11 billion in tax
revenue.
And as I laid out in my written statement, we offer a wide
variety of assistance. So I would really like to just focus on
a few things.
First, our COVID pandemic response. Over the last year and
a half, SBDCs have done over three years' worth of work. We
participated in over 3,500 webinars and assisted over 315,000
people just in the first few months of the pandemic. Our
networks opened new centers, like the nine in Pennsylvania,
hired new advisors, and pivoted to provide specific services
aimed at helping small businesses weather the pandemic. We
assisted them with billions in financing through PPP, EIDL,
SVOG, and Restaurant Revitalization.
And now, hopefully coming out, our client surveys show us
that the most urgent need is finding new customers, which was
also their most frequent challenge during the pandemic. Of
course, they also still need help with strategic planning,
digital marketing, supply chain flexibility, and employee
retention.
Going forward, we see small businesses increasingly reliant
on technology. That is why we teach cybersecurity as well as
social media. We have based our cybersecurity program on the
DOD Cybersecurity Maturity Model. The Delaware SBDC's
DatAssured Program covers all facets of that DOD guidance, to
provide basic education for small businesses, and it was
nationally recognized by the Department of Homeland Security
and has been adopted by over a dozen SBDC networks.
Now these changes are going to present significant
challenges in communities, underserved communities,
particularly with limited broadband access, and those are both
urban and rural communities. And to overcome that, SBDCs are
increasing our outreach, working with Urban League chapters,
Black and Hispanic Chambers, to ensure that we are reaching
everyone. And we have centers at 21 Historically Black Colleges
and Universities.
And to further that effort, we have begun the Inclusivity
Challenge based on our Northern California SBDC's Inclusivity
Project. The Inclusivity Challenge is all about helping all
entrepreneurs overcome impediments to their success. That
effort is complementary, we believe, to the Community
Navigators Program. In fact, several SBDCs are already engaged
in Community Navigators.
We are dedicated to finding the most effective ways to
deliver services to small business, and to that end we strongly
support reauthorization of the entrepreneurial development
programs. We think it is time to review and renew the
commitment to assisting small business.
I have one final item, and that is the need for
collaboration and cooperation between all small business
programs. Now our three programs work well together, but there
are so many more across the Federal Government. And frankly, we
need to integrate all those activities so we can all be more
effective and cut out what I consider to be unnecessary
friction and siloes.
That concludes my testimony. I look forward to any
questions you all might have. Thank you.
[The prepared statement of Mr. Rowe follows:]
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Chairman Cardin. Thank you.
Michael Hendrix.
STATEMENT OF MICHAEL HENDRIX, SENIOR FELLOW, MANHATTAN
INSTITUTE, NEW YORK, NY
Mr. Hendrix. Chairman Cardin, Ranking Member Paul, members
of the Committee, thank you for the honor of participating in
today's hearing.
My name is Michael Hendrix, and I serve at the Manhattan
Institute. And today, I want to be clear at the outset.
Entrepreneurial success makes the American dream a reality. New
businesses create jobs, foster opportunity, help build vibrant
communities, and empower marginalized Americans. And the SBA,
through its resource partners, has committed to assisting these
entrepreneurs, and they should be applauded for their worthy
mission.
But my message today is also simple. The SBA's
entrepreneurial development programs and initiatives are too
often opaque, ineffective, and duplicative. We must find a
better way to serve America's entrepreneurs.
First of all, the track record and oversight of the SBA's
entrepreneurial development program is spotty at best. If these
programs helping small businesses were small businesses
themselves, they would have failed.
I have visited these offices before. At one, at a startup
hub, I was told my first step as a technology entrepreneur was
to visit the library to learn Microsoft Word and after that to
write a business plan which I could design with MS Paint and
clip art. Not only was this advice clearly out of date; it was
also out of context.
Worse yet, the SBA and their partners are barely keeping
track of whether their work actually works. The SBA's Inspector
General has found again and again the Agency has poor oversight
over its resource partners and the taxpayer dollars they are
spending. For instance, they were not accurately measuring or
reporting whether SCORE was achieving any goals or, quote,
assessing whether the program achieved its intended purpose. I
cannot imagine they would advise their clients to do the same,
nor would I hope that they would recommend their own management
practices.
The SBA's recent multimillion-dollar hub for educating
small businesses during the COVID-19 pandemic ended up helping
just 1 percent of the businesses it was intended to serve. And
out of 14,000 resource partner counselors, only 62 completed
any of the training intended to help them help businesses. Just
62 out of 14,000.
The SBA's resource partner network is also duplicative,
plain and simple. When the SBA program and programs like SCORE
were launched, there were not many resources like them
available, but there are now. Today, if you would like a free
business plan, Google gives you 3.5 billion results. The
Harvard Business Review will show you ``How to Write a Winning
Business Plan'' alongside Google's 57 million video results
answering the same question. If you are in need of mentoring,
there is a long list of organizations now ready to help. We see
programs in the private sector helping entrepreneurs without
the need for government subsidies.
Meanwhile, the Agency's Small Business Development Centers,
Women's Business Centers, Veterans Centers, SCORE chapters,
they all provide similar services, and that is according to the
SBA's own Inspector General. Many of these facilities are also
located close to one another. For instance, 95 percent of
Women's Business Centers are within 25 miles or less of an SBDC
or SCORE office. When the SBA's own Inspector General came
before this Committee in 2011, she had a simple message, reduce
this duplicative business counseling, and that is a quote.
For nearly 60 years, the SBA's entrepreneurial development
program has yielded questionable results and mounting
inefficiencies. During this same time, new business formation
has plummeted, not risen. Yet, every new decade has brought new
initiatives, new requests for new funding. The folks in these
organizations are well-intentioned. They have a worthy mission.
They are good people. But ideally, groups like SCORE and others
should be able to stand on their own two feet without tens of
millions of dollars in Federal subsidy. They should compete
just as their clients must.
Of course, ultimately, we must ask: Is the Federal
Government best placed to offer entrepreneurs advice?
Thank you.
[The prepared statement of Mr. Hendrix follows:]
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Chairman Cardin. Thank you for your testimony.
We will now hear from Corinne Hodges.
STATEMENT OF CORINNE HODGES, CEO, ASSOCIATION OF WOMEN'S
BUSINESS CENTERS, WASHINGTON, DC
Ms. Hodges. Thank you, Chair Cardin, Ranking Member Paul,
and members of the Committee for convening today's hearing. On
behalf of 140 Women's Business Center grantees and nearly
100,000 entrepreneurs served by our network, I appreciate the
opportunity to share the ongoing efforts and benefits of our
program in catalyzing women's business ownership.
The Committee needs no reminding that the success of the
American economy depends on a robust entrepreneurial system. By
any metric--net new jobs, GDP, share of innovation--it is
dynamic small businesses that drive economic growth, and women
have contributed heavily to that growth for the past several
decades.
Since today's hearing is intended to review the government
support of this sector and technical assistance, I am here to
say that investing in women business owners through the Women's
Business Center Program is delivering well worth the return on
investment. Even with the COVID crisis, every Federal dollar
invested in the Women's Business Center Program in 2020, at
least $2.28 flowed back into the economy from $61,769,695 in
business revenue generated by those served. As the front line
of technical assistance for our Nation's 13 million women
business owners, we help start and grow their businesses by
providing counseling, training, mentoring, networking
opportunities, as well as access to capital.
In years past, policymakers questioned investment of
taxpayer dollars into the programs represented today. Indeed,
one of my colleagues on this panel suggests there is little
need for our program thanks to other actors like philanthropy
and State governments, which is helpful albeit inconsistent.
So why should the government be involved in supporting
business creation and growth? Well, simply put, it is the
greatest economic imperative our country has. It is why
entrepreneurship, commerce, and intellectual property are
cemented in the U.S. Constitution. Now, in this defining moment
of crisis and resilience, we should be doubling down on our
investment, not shortchanging it.
The critical support of Women's Business Centers in the
CARES Act, for which we are grateful to this Committee, was a
perfect experiment. With additional funding, Women's Business
Centers' impact skyrocketed across every metric, including a 36
percent increase in the number of clients served, despite the
challenges that were presented to them in remote work. But
beyond the macroeconomic imperative, entrepreneurship is one of
the most effective ways to close the wealth gap and produce
longstanding generational wealth among women, minority groups,
and veterans. So this dual benefit of the program far outweighs
the relatively small investment in the context of the Federal
budget.
We must not overlook the importance of consistency that our
program provides as a reliable source of counseling and
support, no matter the circumstances. To best serve their
communities, Women's Business Centers' doors must remain open
in the good times along with the bad.
But that is not to say that programs should be etched in
stone. Indeed, we are pleading for this Committee to modernize
it. In the last Congress, legislation that would have better
prepared Women's Business Centers for COVID-19 passed the
House, but it stalled in the Senate.
We hope this Committee and its counterpart across the
Capitol can address statutory anachronisms and flaws and bring
our program literally into the 21st century. I urge this
Committee to consider introduction of complementary legislation
to the bipartisan bill recently introduced in the House of
Representatives, H.R. 6441, the Women's Business Centers
Improvement Act of 2022, which addresses longstanding requests
of Women's Business Centers, of this Committee, and of SBA. It
increases the grant cap and indexes it to inflation and,
finally, reauthorizes the program for fiscal years 2022 through
2025.
The bill addresses several deficiencies cited in OIG
reports by strengthening coordination between AWBC and SBA and,
most critically, creating an accreditation program to ensure
uniform standards across the program. Notably, this is
something our peer resource partner has; yet, it continues to
be a disparity for women entrepreneurs.
Women's Business Centers not only survived the last two
years but brought forward more than 170,000 women entrepreneurs
and helped them leverage well over three-quarters of a billion
dollars in capital, a significant contribution to the small
business ecosystem and the American economy. We are proud of
our achievements, and we urge Congress and this administration
to continue to entrust us with this vital work. We stand ready
to work with this Committee and pass much needed legislation to
modernize the program.
Thank you so much for this opportunity to testify, and I am
happy to answer questions.
[The prepared statement of Ms. Hodges follows:]
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Chairman Cardin. Thank you for your testimony.
We will now go to Chris Edwards.
STATEMENT OF CHRIS EDWARDS, DIRECTOR OF TAX POLICY STUDIES,
CATO INSTITUTE, WASHINGTON, DC
Mr. Edwards. Thank you very much, Chairman Cardin and
Ranking Member Paul.
The Chairman is right that entrepreneurship is a bright
spot in the economy. Since the summer of 2020, the number of
U.S. business startups has soared. However, I am worried that
rising inflation, possible tax and regulatory increases, could
undermine this startup boom.
Startups are crucial to the economy. They add competition.
They drive innovation. And we are all agreed on that.
I am skeptical that governments need to fund
entrepreneurial development, however. Many private
institutions, as Michael was talking about, fill similar
functions as SBA's entrepreneur programs. For example, America
has 335,000 angel investors, who are wealthy people that invest
in startup businesses. Angels are in every city and town in the
Nation, and they provide advice and guidance to entrepreneurs.
So government can spur entrepreneurship with policies favorable
to angel investment, and as I have written, low capital gains
taxes are crucial to angel investors.
Many private foundations fund entrepreneurship programs.
The Kauffman Foundation spends $100 million a year on training
for entrepreneurs. I noticed recently that the PNC Foundation,
the banking company, recently gave $16 million to create the
National Center for Entrepreneurship at Howard University,
supporting Black entrepreneurship. The Blackstone Charitable
Foundation, the Coleman Foundation, and many others spend
millions of dollars a year on entrepreneurship programs
focusing on disadvantaged communities. The National Foundation
for Teaching Entrepreneurship says that it reaches 100,000
students a year. Entrepreneurship degrees and certificates are
offered at over 500 colleges today. And as Michael touched on,
there is a huge array of free entrepreneurship courses online
and on YouTube. So these growing efforts for entrepreneurial
development cast doubt on the need for Federal involvement, I
think.
Let me switch over to regulations for a few minutes.
Efforts to boost entrepreneurship, either by SBA or by the
private sector, are undermined by barriers to startup.
Economists generally agree that the regulatory barrier on small
businesses is much larger relatively than on large businesses.
Regular surveys of small business by CNBC, the NFIB, and others
find that regulation is a major concern of small businesses
although recently inflation has risen to the top concern of
small businesses.
I recently conducted a study on State and local regulations
on startups, and I will give you a few examples of how
regulations really undermine--can really undermine startups at
the State and local levels.
Occupational licensing. Most of us are aware of this issue.
The share of U.S. jobs requiring an occupational license has
risen from just 5 percent a few decades ago to over 20 percent
today. Licenses cost time and money that young people with
modest incomes may not be able to afford. So occupational
licensing restrictions are restrictions on startup businesses.
Alcohol licensing. This is a really surprisingly big issue.
Alcohol licensing is a big hurdle to restaurants startups. In
my study, I found 18 states that strictly cap the number of
liquor licenses in towns and cities. The caps can make
restaurant startups very costly or block them entirely. In
these 18 states, entrepreneurs may have to pay literally
hundreds of thousands of dollars to get a liquor license. Those
high costs favor corporate restaurant chains over independent
and moderate-income entrepreneurs. Cities with tight alcohol
license caps can strangle economic development, particularly in
poorer neighborhoods because in those neighborhoods the
entrepreneurs cannot afford these expensive licenses. This is a
big problem in New Jersey; it is a big problem in
Massachusetts.
There is, interestingly, a similar problem in some of the
states that have legalized marijuana. California has tightly
restricted its marijuana licenses. So if you do not have a lot
of money or inside political connections, it is very hard to
get a legal license for marijuana in California.
Home-based businesses are another issue. Millions of
Americans run businesses out of their homes: daycare providers,
small-scale food producers, artists, yoga teachers, many, many
others. But local governments impose zoning rules that ban,
restrict, or raise costs for home businesses. This is a
particular problem for lower-income entrepreneurs because for
them home businesses allow them to run a business and saving
the cost from commuting, from rental commercial space, from
getting childcare, and that sort of thing. So reforming local
zoning laws to allow more home-based businesses would be a way
to expand entrepreneurship.
Finally, the connection between deregulation and
entrepreneurship can be seen with the huge success of the craft
beer industry in recent decades. And I note one of the members
of your panel here, Senator Hickenlooper, of course, is a
pioneer in the craft brew industry. President Jimmy Carter
signed legislation in 1978 legalizing home brewing. That was
followed by many states deregulating the rules for brew pubs
and allowing small, independent brewers to self-distribute to
retailers. The number of breweries in America exploded from 100
in 1980 to more than 8,000 today. So, from nothing, the craft
beer industry is now a $22 billion industry, thriving with
entrepreneurship, and so that was a pro-entrepreneur,
deregulatory success.
Thank you very much.
[The prepared statement of Mr. Edwards follows:]
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Chairman Cardin. Thank you for your testimony.
We will now go to Bridget Weston.
STATEMENT OF BRIDGET WESTON, CEO,
SCORE, HERNDON, VA
Ms. Weston. Chairman Cardin, Ranking Member Paul, and
members of the Committee, thank you for the opportunity to
offer testimony on SCORE's impact, including our response to
the COVID pandemic and the funding challenges we currently face
in effectively serving American small businesses.
SCORE is the Nation's largest network of volunteer expert
business mentors of which 100 percent are required to take our
mentoring methodology course and annual code of ethics
training. These 10,000 volunteers are offering free and
confidential advice as well as educational workshops to current
and aspiring small business owners. Founded in 1964 as a
resource partner of the SBA, SCORE has now helped more than 11
million entrepreneurs start, grow, or troubleshoot their
businesses.
When the pandemic began in 2020, many more business owners
reached out for SCORE's help than ever before as evidenced by a
30 percent increase in our services. We quickly pivoted to
delivering 100 percent virtual mentoring and education without
missing a day of service. And during this time, SCORE sought
much-needed additional funding from the CARES Act to support
our efforts. However, we did not receive any additional
dollars.
We were not deterred. SCORE saw a critical need to help
business owners navigate the challenges they are facing with
the pandemic. So we worked to launch the Small Business
Resilience Hub. Two months after the pandemic hit, SCORE's
Small Business Resilience Hub was available to help business
owners navigate Federal and local government programs, adapt to
change, launch new businesses, and attract and retain clients,
all using SCORE's existing resources and mentors. To date, this
hub has had nearly 900,000 visitors, and this is in addition to
our website www.score.org, which reaches over 4 million people
annually.
Now many business owners told us they would not have
applied for PPP or EIDL without a SCORE mentor to walk them
through the process step by step. In fact in fiscal year 2020,
the first year of the pandemic, SCORE delivered over 840,000
mentoring or educational services. It is through these efforts
that SCORE helped our clients to stay in business; 82 percent
of our in business clients stayed open and added nearly 75,000
jobs. And we helped another 45,000 businesses start.
It was through our work with these business owners that
SCORE saw firsthand how the pandemic significantly and
negatively impacted small businesses, and the date SCORE
collected shows that some businesses, such as Black- and
Hispanic-owned, have been more negatively impacted than others.
Because SCORE serves a diverse range of small business owners,
with 60 percent of our clients being women and 46 percent
minority, we knew SCORE was uniquely positioned to ramp up
efforts to help those business owners most impacted. One of
SCORE's key areas of focus continues to be fostering diversity,
equity, and inclusion both for clients and for volunteers.
Expanding our volunteer corps to reflect the communities we
serve has resulted in 40 percent of our volunteers being women
or minorities. With the support of SCORE, our volunteer
strategic partnerships, both nationally and locally, we
launched our SCORE for All Initiative to help disadvantaged
business owners address their specific needs.
SCORE was hopeful that the Community Navigator grant would
help to amplify these successful programs. However, SCORE was
not awarded a Community Navigator grant. Nevertheless, we know
we must continue these efforts. SCORE has reached out to those
who did receive Community Navigator awards and offered to
support in any way. We have already signed an MOU with the U.S.
Hispanic Chamber of Commerce to be a part of their program.
SCORE did all of this without any additional funding.
Further complicating SCORE's situation, SCORE has experienced
problems with the SBA's EDMIS system, culminating in recent
EDMIS outputs that have dramatically underestimated SCORE's
impact. The EDMIS reports do not reflect the SCORE data being
entered into the system, which is different from SCORE's
salesforce-based system and our annual survey of client impact
and engagement.
SCORE has also been operating without any Federal funding
for 4 months as we are still waiting on our notice of award. We
continue to work closely with the SBA to resolve these issues
but feel it is important to note these challenges limiting our
ability to more fully deliver our mission.
SCORE is proud of our ability to serve over 300,000 people
each year, but these efforts are simply not sustainable at our
current funding levels. It is why we continue to respectfully
request an increase of $9.5 million in funding for a total
appropriation of $21.7 million. With this investment, we can
provide even greater value to business owners and the economy.
This increased funding would allow us deliver more than half a
million additional client services with a projected outcome of
100 additional new businesses started or jobs created. SCORE
volunteers and the small business centers they serve need to
see a commitment to, and an investment made in, them so we can
sustain SCORE's efforts and help even more businesses survive
and thrive.
Thank you for your time, and I look forward to your
questions.
[The prepared statement of Ms. Weston follows:]
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Chairman Cardin. Thank you for your testimony.
Ms. Hannah Cox.
STATEMENT OF HANNAH COX, BRAND AMBASSADOR, FOUNDATION FOR
ECONOMIC EDUCATION, AND CO-FOUNDER AND HOST, BASEDPOLITICS,
ATLANTA, GA
Ms. Cox. Thank you, Chairman Cardin, Ranking Member Senator
Paul, and members of the Committee.
When I was born on December 30th of 1987, it was not yet
legal for me as a woman to secure a business loan without a
male co-signer in most states. That was merely 34 years ago. In
1963, when my mother was born, she could not yet obtain a
credit card without a man. Women have faced unique challenges
in this country, but they are challenges that we face because
our government first upheld a system that treated us as second-
class citizens under the law for centuries and erected
financial barriers we have had to tear down. Due to this, we
have some catching up to do in the business world.
But since receiving equal financial footing, the number of
women-owned businesses increased by 31 times, rising from
402,000 businesses in 1972 to 12.3 million business, or 40
percent of all firms, by 2018.
Today, women face the same struggles when it comes to
entrepreneurship as men, struggles that, it must be pointed
out, continue to be created by our government and its meddling
in the market. True feminism means the advocacy of women's
rights on the basis of the equality of the sexes. So I am here
to advocate for men in business every bit as much as I am to
advocate for women because what the government is currently
doing hurts all of us.
What entrepreneurs need to be successful is not a
government handout. What we need is for the government to get
out of our way. Entrepreneurs are being choked to death by the
Federal Government's expansive regulatory apparatus. Between
1995 and 2017 alone, there were 88,899 rules and regulations
implemented. Government agencies and unelected bureaucrats have
run amok and are throttling our economy while Congress fails to
rein them in.
As a result, business owners are forced to spend the bulk
of their time jumping through legal hoops and wasting their
profits on compliance. This is despite laws like the Small
Business Regulatory Enforcement Fairness Act, which is supposed
to ensure Federal agencies help small businesses comply with
statutes and regulations. This has largely not happened, and
American entrepreneurs receive little relief when it comes to
maneuvering this framework.
The Federal Government also makes it increasingly difficult
to succeed in business as it renders our currency void through
reckless spending policies that drive the printing of new
dollars and as it excessively taxes us at every turn. We are
being pillaged by your policies.
This includes the $4.9 trillion in new spending under the
CARES Act, which led to rampant inflation. Prices have risen 7
percent, representing the largest increase in a 12-year period
in the last 4 decades. For entrepreneurs, that is a tremendous
hidden tax. It is money they no longer have to hire, expand, or
save. And it also means consumers have less money to spend. You
have stacked the deck against us.
Not only that, but the Federal Government continues to pick
winners and losers, giving our tax dollars to big business
competitors and rigging the playing field against
entrepreneurs. You do this through subsidies, selective tax
breaks, regulations, and programs that prioritize some business
owners over others. As one example, the Restaurant
Revitalization Fund administered by the SBA prioritized
awarding funds to small businesses owned by women, veterans, or
disadvantaged individuals despite the fact that
unconstitutional government lockdowns harmed all restaurants.
This is only scratching the surface when it comes to the
ways that the Federal Government serves as a barrier to
entrepreneurship. The Federal Government purports to promote
competition and entrepreneurship with its right hand while its
left is the primary source strangling the free market. The
Federal Government is one of the last entities that should
oversee entrepreneurship programs. And we have seen no numbers,
no proof of efficacy in their work to counter that point.
In fact, the research we have shows the opposite. The
Office of Inspector General evaluated the SBA's handling of the
CARES Act grant to train, counsel, and educate small businesses
on Federal resources. Under this grant, partners were given
$18.6 million to create an informational and training hub. Yet,
the Office's report found that less than 1 percent of the 30
million small businesses this was intended for used the portal
and only 62 of approximately 14,000 resource partner counselors
and mentors completed any of the training modules. That is a
tremendous amount of our tax dollars being wasted, tax dollars
that entrepreneurs could do a lot more with if they were left
in our pockets.
The SBA recently announced it intends to elevate the Office
of Women's Business Ownership, and in a statement on the
reorganization staff claimed this was indicative of the Biden
Harris administration prioritizing recovery for small
businesses and addressing longstanding inequities for women
entrepreneurs. I find this offensive. You cannot claim that the
Federal Government cares about female entrepreneurs after it
worked to shut down our businesses, close schools, leaving
women in the workforce scrambling for childcare, and mandated
vaccines and COVID policies that have cost billions of dollars.
The same is true as it always was. The government is the
main roadblock to our success. The only role the Federal
Government has to play in entrepreneurship is in removing the
onerous burdens it has placed on the backs of every hardworking
American. Women need the government to quit fantasizing itself
our knight in shining armor when in reality it is more akin to
a wicked stepmother locking us away from opportunities. We need
the government to remove itself from the market so that we can
actually take up space and use the dollars currently being
wasted for innovation and growth.
Thank you.
[The prepared statement of Ms. Cox follows:]
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Chairman Cardin. Let me thank all six of our witnesses for
their patience and their testimony.
With Senator Paul's consent, I am going to go to Senator
Inhofe first, who has a conflict on time.
Senator Inhofe. Well, thank you very much, Mr. Chairman. I
appreciate that. It was very important for me to get over and
ask a couple questions. Ironically, I got here just in time to
hear Ms. Cox. I am not sure I need to do that now.
However, I just want to make sure to emphasize the problems
that we are having in my State of Oklahoma and other states are
having the same types of problems. We talk about inflation up
to 7 percent, the highest it has been in 40 years, the small
businesses that are having the effect of this. Is there
anything that you can add?
I actually have two questions I wanted to ask you. How
would the radical spending plans only serve to hurt the small
businesses and hinder entrepreneurship?
Ms. Cox. Thank you, Senator. It is important to remember
that every dollar spent by the government is dollars that
entrepreneurs do not get to keep in their pockets, that they
could actually invest into their own companies, hire more
people with, save. And so we continue to see this hurt small
business across the country. They are demanding relief. I talk
to small businesses and entrepreneurs across this country, and
one of the main things they say they need are tax cuts or, at
the very least, a simplification of the tax codes that they do
not have to spend so much time jumping through hoops to meet
compliance from the government.
So I would suggest that the government look into those two
items first and foremost. Secondarily, I suggest they quit
spending money recklessly and give it back to the actual
entrepreneurs who know, on the ground, how to invest the
dollars better than the Federal Government could from so far
away.
Senator Inhofe. And I think that pretty much addresses the
second question I would ask on how can this administration
advocate for policies that actually help benefit the playing
field and ensure all entrepreneurs have a fair shot.
Ms. Cox. Yes, I would love to see an actual review of all
the regulations currently in play in various industries. I
think it depends on which industry we are looking at, but if
you examine any given one at a certain moment you are bound to
find a number of ways the Federal Government is preventing
entrepreneurship and hurting small businesses.
I will use one bill that comes to mind within the
agriculture industry right now. The PRIME Act is seeking to
make it to where small farmers can merely just sell their meat
without having to jump through the hoops the Federal Government
has laid out for them to process their cows. That is a
ridiculous burden on them that actually makes them lose money
and have to kill their cows and waste product.
That kind of thing can be found in virtually every industry
in our economy, where the Federal Government has come in and
put in silly requirements that people have to jump through
merely just to do their job. So I would love to see the Biden
administration actually go through and figure out what those
regulations are and start to remove some of these things so
that people can just get back to work.
Senator Inhofe. That is particularly a great statement to
make from my State of Oklahoma because that is a problem I have
heard from other people and it is serious. So I think we
understand that these are serious problems that small states,
ag states, are having problems with, and that is what this is
all about. We have these people here. You have your own
problems. And I appreciate those comments very much.
And that is primarily the message I wanted to add, Mr.
Chairman. And both of you, I appreciate you. Thank you.
Chairman Cardin. Thank you, Senator Inhofe.
Let me again thank our witnesses. There is, you know,
clearly different views. There is different views on this
Committee, but what I like about this Small Business Committee
is historically we have worked together in a bipartisan way in
order to carry out our role in the United States Senate on
behalf of small businesses.
So during the pandemic, we got together, Democrats and
Republicans, and we passed through this Committee and through
overwhelming majorities on the floor of the Senate and House
relief for small businesses that was unprecedented. And as I
have traveled through the State of Maryland and I have traveled
through this country--and I have heard the same thing from my
Republican colleagues--business after business said they would
not be open today but for the help that was provided by
Congress as a result of the COVID relief packages that we
passed.
So I just point that out, that we have this tradition of
listening to each other. We have different views, and we
respect each other's views, and we try to come out with
policies that are consensus policies that represent the best
interests for the small business community.
And I do think that we are getting to a consensus here
among at least the witnesses that are before us today that
Congress needs to speak in regards to the entrepreneurship
programs. After all, the Small Business Development Center
program was authorized in 1980 and has not been comprehensively
reviewed by legislation since that time. The Women's Business
Centers was last reauthorized in 2005. The SCORE program goes
back to 1997.
So we should carry out our responsibility. It is one thing
to say you do not have the resources you need, et cetera, or
you think there is misuse of resources. If Congress has not
acted--we are the policy arm. We have that responsibility. So I
would suggest first that we really do have responsibility as a
committee and as a Senate to review these statutes and try to
update them and feel what is best, listening to both Democrats
and Republicans, and see whether we cannot come to what we
think the current policy should be in regards to these resource
partners.
Now the question I am going to ask deals with a view that I
have that may differ from Senator Paul and other members of
this Committee. I look at the commercial banks and their record
of providing assistance in disadvantaged communities, and it is
not a good record. And we all agree that we want to use the
talent in every community and the energy in every community to
build not only personal wealth and accomplishment but also
economic strength for our whole country. So it was for good
reason that we established access to capital programs for
disadvantaged communities or for smaller businesses because the
private sector was not providing that opportunity.
So we developed the 7(a) program and the 504 program, the
largest programs of access to capital through the SBA, but when
you look at the record--and when I first came to the Senate in
2007 I got the numbers in Maryland, and I was appalled because
the number of 7(a) loans made in disadvantaged communities was
so small compared to the demographics of small businesses
located in disadvantaged communities. I knew we could do
better.
Now, yes, we did develop other programs such as the
Community Advantage 7(a) program and the microloan programs,
and they work much better; they do. There is much better
participation in all communities in those programs. But I
mention that because we want to provide opportunities to all
communities.
So as I look at our resource partners, I want to know what
you are doing because you are the services that we are
providing particularly to the vulnerable small businesses. So
tell me how your program is providing opportunities to small
businesses who otherwise may not be given an opportunity to
survive, how you are able to do that under an existing program,
and if you need additional help, please let me know. Why don't
I start with Mr. Rowe in regards to the SBDCs?
Mr. Rowe. Thank you, Mr. Chairman. As I said in my
testimony, we work with the Urban League and the Black and
Hispanic Chambers. And I will tell you that, honestly, if we
look at 7(a) and 504 they came about not just because we were
not--the banking community was not fulfilling its, you know,
duty to the disadvantaged communities. But they were also being
hampered by things like the Basel policies, the Basel
regulations, international banking regulations, and reserve
requirements that, frankly, sit harder on community banks than
they might on a big regional bank.
And we are working now--and I will just throw this out
because I agree with Ms. Cox. Today in D.C., our SBDC is
holding--helping small businesses do their taxes today. And it
is kind of sad that the tax system is so complicated that we
have to help people pay their taxes. You know, you have got a
situation where a small business owner who may have 1099
employees has to deal with 20 different 1099s, and so then they
have to fill out a 1096. And if they fill out that 1096, they
cannot download that off of IRS's website because if you try
and download the form off their website it does not scan
properly. So if you send it in to the IRS, you get penalized.
So when we are--we are in the same boat when we are working
with the disadvantaged communities, whether it is in the
District or, you know, any community, in a rural community.
Helping people speak ``banker'' sometimes is most of what we
do, helping people understand what they have got to go through
just to get a loan. You know.
And we keep trying. We will keep pushing out with the Urban
League, like I said, and through the HBCUs, through the
Community Navigator Program, whether it is as a hub or a spoke,
just because we are trying to help everyone. But if I was going
to say we were living in an uncomplicated world, I would be a
flat-out liar.
Chairman Cardin. Ms. Hodges, how is the Women's Business
Center carrying out its mission to help underserved,
disadvantaged businesses located in disadvantaged communities?
Ms. Hodges. Thank you, Chairman. Yes, Women's Business
Centers are inclusive. They are open for all, but we do reached
the underserved. Of the individuals Women's Business Centers
served in 2020, 70 percent were women; 56 percent of those that
reported demographic data were people of color; and of those in
2020 who identified as people of color, 51 percent were African
American, 33 percent were Latinx, 10 percent were Asian, 2.7
percent were Native American-Alaskan Native, 1.2 percent were
Native Hawaiian. You get the idea here.
So the Women's Business Center Program continues to expand
its reach. We have even added 24 new Women's Business Centers
just since March 2021. Now three of those were on campuses with
Historically Black Colleges and Universities, one of those in
your State of Maryland.
We have some Women's Business Centers who collect more
robust data, and those Women's Business Centers are tracking
that more than 90 percent of individuals served are represented
by categories of underrepresented or underserved, meaning
women, minorities, or low-income households.
And I would like to share an anecdote as well, if I could,
which is that in the State of Kentucky, in Georgetown, an
African American, woman-owned business just in 2012 opened her
business and explained to me in November she struggled to
secure a $5,000 startup loan without the signature of her
husband and if not for the Women's Business Center of
Kentucky's Lexington office she would not be in business today.
She has since survived the COVID pandemic, has given birth to
twins, and is on the top 10 bakery list with a business
employing 12 employees.
Chairman Cardin. Thank you.
Ms. Weston, on SCORE?
Ms. Weston. Thank you for the question. SCORE has always
placed a high value on helping underserved business owners; 60
percent of our clients are women, 46 percent minority, 11
percent veterans.
We have formed strategic partnerships at the national and
local levels to help reach and inform these underserved
business owners of the resources available: U.S. Hispanic
Chamber of Commerce, the Latino Coalition, U.S. Black Chambers,
BIPOC Support Foundation. And our 240 chapters, with 10,000
volunteers across the country, have formed partnerships at the
local level with banks and credit unions, economic development
centers, colleges and universities, all with the intent of
reaching these business owners and aspiring entrepreneurs who
can benefit from the resources and guidance that SCORE
provides.
We were told and saw firsthand during the pandemic the
problems and the impact that this pandemic has had on all small
business owners but some more negatively than others. We saw
that Black and Hispanic business owners applied for more--for
loans more often but received less.
So what SCORE is doing is building and expanding our SCORE
for All initiative, which brings unique content that speaks to
their specific needs--financial literacy, broadband, whatever
it is depending on that specific market--to help them increase
their chances of success. We heard that these programs can be
confusing and overwhelming and that they would not have applied
for them without a SCORE mentor guiding them along the way. And
we hope to be able to expand this program and continue to make,
you know, more of an effort for these underserved communities,
hopefully with more funding from Congress.
Chairman Cardin. And just concluding, Mr. Edwards, I want
to agree with you in regards to the regulatory burdens that can
prevent smaller entrepreneurs from entering a field. We need to
look at that.
And you gave the craft brewing industry as a good example,
and I agree with you completely, and I am proud of legislation
I have authored to make it easier for craft brewers to be able
to survive. And I cannot match Senator Hickenlooper for owning
a brewery, but I will match any member of Congress for the
number of craft brewers I have been to and enjoyed. It is my
normal Friday afternoon visit to a Maryland business was always
going to be a craft brewery or a winery on a Friday afternoon.
So I thank you for that point because I do think the
regulatory environment, the tax environment, is a very
important point for encouraging small business entrepreneurs,
and I thank you for that.
Mr. Edwards. Can I add a comment on that? I talked about
some areas where regulation, I do think, has a disproportionate
negative impact on lower-income and disadvantaged communities:
the alcohol licensing and marijuana licensing, the occupational
licensing, the home-based businesses.
I think the SBA could serve a really positive role here. It
has an Office of Advocacy, the SBA--I assume that you have
oversight over it--that, you know, their role is to examine
other government rules and regulations and to find out what is
too onerous. And in fact, I mean for example, I discussed home
based businesses. They did a fantastic report a decade or so
ago about home-based businesses and some of the burdens that
they face from local government zoning. So I think that
reinvigorating that office would be a great way, you know, to
shine a light on some of these regulations that
disproportionately hurt some communities.
Chairman Cardin. Good suggestion. There is no question that
particularly those with less capital have very little
opportunity to contest a lot of these issues or compete for
licenses. I think your point is well taken.
Senator Paul?
Senator Paul. I think Mr. Edwards makes a good point. You
know, one of the examples they often use is for hair-braiding.
They are often immigrants to our country, many from Africa or
Jamaica. And States put them out of business with $1,500
licensure, and you got to go two years to learn how to braid
hair. And it is like, really, you think the customer cannot
decide whether you can braid hair well or not? But that runs
throughout our economy, and a lot of those are State laws.
But there have been some good groups. Institute for Justice
has fought a lot of these cases over time and has won quite a
few of them.
But absolutely, regulations. When you think about it, the
richer I am the more I can evade a regulation. In fact, people
talk about it as rent-seeking. So the big corporations love
regulation often. They come to us. They do not want the craft
brewers. So the big people come to us. They are all for
regulating the small guy at a business. But I think too often
we do not look at how regulations--removing them would actually
disproportionately help lower-wage and people who have
historically had more trouble getting loans.
Mr. Hendrix, on the--often capitalism is sort of described
as creative destruction, that to get a loan, to stay in
business, you know, only the best survive. I mean, it really is
this strong sort of you have to make a profit.
And there is a definite difference between sort of a
government extending a loan and a private entity extending a
loan. And the private entity, if they keep making mistakes,
will not have any more money to loan. The government seems to
have an infinite amount. Can you describe that a little bit,
the difference between private and public loans and how one may
breed more excellence or better results?
Mr. Hendrix. The private sector is built around finding the
right sort of businesses to invest in and finding the right
partners to help grow the economy, to grow those businesses to
serve customers. And banks, financial institutions, community
institutions, they are best placed to do that.
The government has certainly extended help to many
businesses over the years, but their track of finding winners,
good businesses, ones that will stay afloat is spotty at best.
And they also do not have a clear mission of what sort of
businesses they are supposed to serve. It is sort of all over
the place. It is scattershot.
So what we should be doing is helping the businesses that
do exist, the banks that do exist, the community institutions
that are built to serve their neighbors, helping them to do
their job rather than competing with them when we know our
track record is not good.
Senator Paul. Same question, Mr. Edwards, and any kind of
disadvantages to leaving this role to government as far as
other businesses that do not get funded.
Mr. Edwards. One thing I am worried about, you know, with
all of these issues is government crowd-out. When the
government enters an area, they tend to push out, you know,
private sector solutions. And I think with the SBA loan
guarantees, you know, either they are just replacing stuff that
the private sector generally would have done itself or they are
extending loans probably to people that maybe should not get
the loans. We saw that with the housing crisis over a decade
ago.
So as Michael said, you know, the private sector lenders
want to lend. That is how they earn a return.
And you know, I went into detail about--in my testimony, my
written testimony, about angel investors. There is 300,000 of
them out there in America, in every town and city. They are
looking for young entrepreneurs to invest in, and they will
invest, and they will hold their investment for 5 or 10 years,
waiting patiently for returns. It is a very risky business. And
so it is fantastic, you know, it seems to me, that a lot of
wealthy people do this very high-risk investment, take these
chances on unknown entrepreneurs.
Senator Paul. When there is a feedback loop, you get
information and you make decisions based on the information.
Are they profitable? Did I make a mistake here? Did I do a good
investment or a bad investment? You give more to the good
investments; you give less to the bad investments. That does
not exist in government, and so that is sort of the problem.
And government can do the wrong thing for decades. I mean,
I remember William Proxmire talking about them spending $50,000
on a study to see what makes people happy. That was 50 years
ago. Congress just funded a study last year wanting to know if
you take selfies and look at the selfie of yourself smiling if
that makes you happy. We have been doing it for 70 years. The
learning curve is really steep around here.
Ms. Cox, I appreciate you putting forward some of the legal
impediments that did exist for women at one time, and I think
it is important to remember that both with gender and race
there were legal impediments to people in business. I think,
unfortunately, as we have removed those, people keep thinking
something else has to be done, something else has to be done.
But are you aware of a legal or systemic bias against women in
business that currently exists?
Ms. Cox. No, I am not aware of any bias that currently
exists. If there is any bias, it is in our favor. I continue to
see women get elevated as if we need special favors from the
government or we need help.
Again, we do not need special favors. We do not need
government to give us money. We need the same thing as male
entrepreneurs. We need them to get out of our way so that we
can compete and actually live in a meritocracy.
I am a strong believer in capitalism, but we have a problem
where a certain number of entrepreneurs, a certain number of
businesses are expected to actually compete in the market and
then others get bailouts from the government, others get
regulatory insulation from competitors and then some get
special handouts like we see under these SBA grants. And I
think that is offensive, and I think Americans are increasingly
fed up with that system, where their tax dollars are taken from
them and given to others. That is not a society that will stand
for long.
Senator Paul. You know, I think if you talk to many women
in corporate America or African Americans in corporate America,
you actually find that even without government telling the
businesses what to do businesses are actually very eager to
advance African Americans who are in the business place, as
well as women. And I think we get stuck in statistics, you
know, of how many CEOs there are or this or that. But really,
as far as impediments, I do not think there are legal
impediments.
And so I think if you wanted to make the loan program more
efficient you just would not have women's centers at all. Just
judge people--we could have human business centers. You know. I
mean, I do not think we really--I think it is demeaning,
actually, to women or people of race to think somehow that you
are inferior or incapable of doing exactly the same work. And
so I think we are like 40 years beyond the time when we should
be judging people on the color of their skin or their gender.
We really should be, you know, proud of judging people equally
before the law. You know, equality before the law.
But I appreciate you all coming today, and that is all the
questions I have.
Chairman Cardin. Thank you. I want to ask one additional
question, if I might. In response to the resource partners
reaching out to disadvantaged communities, you mentioned, at
least one or two of you, the partnerships with HBCUs. And we
have Women's Business Centers located at HBCUs. We have in the
other programs direct partnerships with HBCUs. In Maryland, we
have four HBCUs that are all involved in entrepreneurship
programs in order to expose their students to the opportunities
of entrepreneurship.
So I want to just hear from you briefly, if I might, how
relevant or important it is to utilize the HBCUs in trying to
carry out your missions of entrepreneurship. Again, I will
start off with Mr. Rowe.
Mr. Rowe. I think it is absolutely essential. We work with,
I think--what did I say? Twenty-one different HBCUs in 14
different states. They are a valuable part of our effort to
make sure that we are fulfilling our statutory mission, which
is to serve everyone in the State or region that the SBDC is
assisting.
And the HBCUs are a valuable tool for us in part of what we
do, which is pedagogy on entrepreneurship. We are working
regularly with programs, for example in Alaska, K through 12,
just to teach kids about having a business, what it means. So
we think it is absolutely essential to work with the HBCUs.
Chairman Cardin. Ms. Hodges, I know that Morgan State
University has an entrepreneurship center and recently coupled
that with the Women's Business Center.
Ms. Hodges. Yes, sir, that makes six now Women's Business
Centers located on Historically Black College and University
campuses. We find it is incredibly important for Women's
Business Centers to be available everywhere potential
businesses are, inclusive of places like HBCUs and minority-
serving institutions. We just really need to be accessible and
available to all women entrepreneurs, especially minority
groups. I mentioned the three that had opened previously, and
you know, we would like to see continued growth in that area in
the future.
Chairman Cardin. Thank you.
Ms. Weston?
Ms. Weston. SCORE has recently formed a relationship with
Tougaloo Foundation, a research and development foundation,
which is a collaboration of HBCUs across the country. We are
working with them to make sure that HBCUs have access to SCORE
mentors and our educational materials regardless of where they
are in the country. Many of the local HBCUs do partner with our
SCORE chapters and have used our educational materials and
courses as well as helped us be an avenue to let people know
about the mentors and resources that SCORE brings to these--to
anyone looking to start or grow a small business.
Chairman Cardin. Thank you.
Senator Paul?
[No audible response.]
Chairman Cardin. Well, once again, let me thank our
witnesses. I think your testimony will help us as we move
forward in regards to legislative oversight and action.
So with that, the Committee will stand adjourned, with our
thanks.
[Whereupon, at 4:30 p.m., the Committee was adjourned.]
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