Oversight of SBA's Office of Disaster Assistance
Summary
Transcript of S. Hrg. 117-328, the July 13, 2022 hearing of the Senate Committee on Small Business and Entrepreneurship on oversight of SBA's Office of Disaster Assistance, with Chairman Benjamin L. Cardin presiding. The witness, Francisco Sanchez Jr., Associate Administrator of the Office of Disaster Assistance, testifies that shifting direct disaster lending to the Office of Capital Access improves customer service. Chairman Cardin says EIDL provided loans to nearly four million businesses. Ranking Member Rand Paul cites an inspector general report on the Shuttered Venue Operator's Grant Program that found over $33 million in unauthorized commitments and as much as $9.7 billion that could have been disbursed without proper authorization. The record includes Sanchez's prepared statement and responses to questions submitted by Senator Cantwell and Senator Hirono.
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[Senate Hearing 117-328]
[From the U.S. Government Publishing Office]
S. Hrg. 117-328
OVERSIGHT OF SBA'S OFFICE OF DISASTER
ASSISTANCE
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
OF THE
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
JULY 13, 2022
__________
Printed for the use of 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
48-248 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
----------
Page
OPENING STATEMENTS
Cardin, Hon. Benjamin L., Chairman, a U.S. Senator from Maryland. 1
Paul, Hon. Rand, Ranking Member, a U.S. Senator from Kentucky.... 3
WITNESS
Sanchez Jr., Mr. Francisco, Associate Administrator, Office of
Disaster Assistance, U.S. Small Business Administration,
Washington, DC................................................. 4
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
Cardin, Hon. Benjamin L.
Opening statement............................................ 1
Paul, Hon. Rand
Opening statement............................................ 3
Sanchez Jr., Mr. Francisco
Testimony.................................................... 4
Prepared statement........................................... 6
Responses to questions submitted by Senator Cantwell and
Senator Hirono............................................. 24
OVERSIGHT OF SBA'S OFFICE OF DISASTER ASSISTANCE
----------
WEDNESDAY, JULY 13, 2022
United States Senate,
Committee on Small Business
and Entrepreneurship,
Washington, DC.
The Committee met, pursuant to notice, at 2:30 p.m., in
Room 428A, Russell Senate Office Building, Hon. Ben Cardin,
Chairman of the Committee, presiding.
Present: Senators Cardin, Shaheen, Booker, Rosen,
Hickenlooper, Paul, Risch, Scott, Ernst, Inhofe, Hawley, and
Marshall.
OPENING STATEMENT OF CHAIRMAN CARDIN
Chairman Cardin. Good afternoon. The Committee on Small
Business and Entrepreneurship will come to order. Today the
Committee will conduct oversight of the SBA's Office of
Disaster Assistance, which administers the SBA's disaster
programs.
The office also implements the COVID EIDL program that
Congress created to support small businesses through the
pandemic. Over the last two years, the SBA's attention has
largely been focused on supporting small businesses through the
pandemic. EIDL has provided loans to nearly four million
businesses and served as a lifeline when credit was not
available from other sources. It was critically important
during this pandemic and it worked.
While the program has had its share of problems, including
widespread fraud in the early month of the pandemic and poor
communications with applicants, particularly during the
program's final months, its importance for small businesses
cannot be overstated.
This hearing is an opportunity to discuss the Office of
Disaster Assistance's traditional role, which is to help
communities rebuild in the wake of natural disasters. Due to
the effects of climate change, natural disasters are becoming
more dangerous, deadly, and frequent in every part of this
nation. In the Southern states, what used to be once-in-a-
century hurricanes and tornadoes are devastating communities
and causing billions of dollars' worth of damage every few
years. In Western states, there have been life-threatening heat
waves, crop-killing droughts, and historic wildfire seasons in
just the last three years. And in my home state of Maryland, in
a single town, historic Ellicott City suffered two devastating
flash floods in two years.
So as we discuss the Office of Disaster Assistance's
procedures this afternoon we must keep in mind that the SBA's
disaster loans to families and businesses will continue to be
among the most important Federal resources available in the
wake of a disaster. The faster communities can access capital
after natural disasters, the more quickly they can return to
their homes and reopen their businesses. For homeowners, faster
loan processing times reduces the destabilizing effects of
natural disasters that may prevent parents from going to work
and keep kids out of school. For small businesses, how quickly
they receive a disaster loan could be the difference between a
swift reopening or closing their doors for good.
Small businesses, we know, are the growth engine of our
economy. We know that is where we create jobs. But they do not
have the same resiliency and the same deep pockets that larger
companies have. So when a natural disaster occurs, they are
much more vulnerable of not being able to make it through that
disaster. Moreover, acting quickly to get families back into
their homes and to reopened shutters businesses help
reestablish a state of normalcy for communities and can prevent
them from splintering.
The SBA, and the Office of Disaster Assistance more
specifically, must do all it can to improve the disaster
response to provide as much support as possible to communities
in light of the increased dangers created by climate change.
I was a member of this Committee when the SBA made several
improvements to a system to shorten loan processing times
following Hurricane Sandy almost a decade ago. Now, as the
COVID EIDL program continues to wind down, the SBA must
similarly take the lessons learned from the pandemic to make
even more improvements. And that is the role of this Committee,
to oversight how the SBA is responding to the experiences
learned during the pandemic.
So to Assistant Administrator Sanchez, I am looking forward
to hearing more about the consolidation of disaster lending
functions in the Office of Capital Access that was finalized
last week. I hope this change will address the widespread
customer service problems that we saw in the COVID EIDL program
over the last two years. I am also looking forward to hearing
more about how the SBA intends to further empower resource
partners and local community organizations to play a central
role in the aftermath of natural disasters.
The Maryland SBDC was an invaluable asset to small
businesses in historical Ellicott City following the floods in
2016 and 2018. I was there, and I saw their work, and I saw how
they literally saved small businesses.
In addition to working with resource partners to help small
businesses recover after a disaster, the SBA should leverage
these organizations' regional knowledge and relationships to
better prepare small business owners before a natural disaster.
For example, the SBA should use the SBDC's SCORE chapters and
Women's Business Centers to help small business owners create
business continuity plans that will make it easier to reopen
following a disaster.
Mr. Sanchez, I want to thank you once again for joining us
today. Oversight is one of the most critical functions of this
Committee so I am looking forward to a frank discussion about
how the SBA and the Office of Disaster Assistance intends to
support our communities in the years ahead.
And with that let me yield to the distinguished Ranking
Member, Senator Paul.
OPENING STATEMENT OF SENATOR PAUL
Senator Paul. This past December, violent storms swept
across my state. The tornadoes took the lives of 88 and injured
hundreds more across several other states. The damage was
immense. In the days following the storms I met with local
officials across western Kentucky to help them secure the
resources they needed to clear debris and rebuild.
It is understandable that government has a role in natural
disaster recovery. However, I think Congress made a mistake by
expanding the scope of the Office of Disaster Assistance. That
office, already tasked with helping rebuild after natural
disasters, had plenty of responsibilities without also having
to clean up manmade economic disasters like the ineffective and
authoritarian COVID lockdowns.
Last week, the Small Business Administrator's inspector
general released a report detailing gross mismanagement of the
Shuttered Venue Operator's Grant Program. For example, the IG
found that the SBA knowingly chose a riskier method of
distributing funds. Rather than doling out money at intervals,
designed to ensure appropriate use of taxpayer dollars, the SBA
shelled the money out in one large sum. As a result, SBA was
unable to check if grantees spent the awards on permissible
expenditures.
The IG report also detailed how the allocated funds were
without government authorization and documentation. In the ten
awards reviewed by the inspector general, none had the proper
authorization. This stunning absence of safeguards resulted in
over $33 million in unauthorized commitments, that we know of.
The IG report found that as much as $9.7 billion could have
been disbursed without proper government authorization.
Perhaps most shockingly, in some instances the Offices of
Disaster Assistance gave applicants more money than they
requested. Of the ten awards received, the IG found that three
recipients were awarded more than they asked for, to the
cumulative tune of $2.6 million. It seems Milton Friedman's
prophetic statement that ``Nobody spends somebody else's money
as carefully as his own'' is applicable.
To adequately address these concerns, my staff requested
that the Committee invite Inspector General Mike Ware to
testify today, but unfortunately that request was declined.
Nevertheless, we should not be deterred from addressing the
major problems that the IG identified. I hope the Chairman will
commit to ensure that the SBA is a responsible steward of
taxpayer dollars.
Chairman Cardin. Let me thank Senator Paul. As our staffs
have talked about, I do think it is important to have the IG
here, and we intend to invite the IG to the Committee for a
hearing to deal with the broader issues coming out of the
different programs administered by the SBA. But today's hearing
is going to focus primarily on the reorganization and how SBA
is handling the Office of Disaster Assistance.
And we are pleased to have with us today the Associate
Administrator of the Office of Disaster Assistance for Small
Business Administration, Francisco Sanchez. He took this
position in January of 2022, but he comes to us from
experiences in local government. He was the Deputy Homeland
Security and Emergency Management Coordinator for Harris County
Office of Homeland Security and Emergency Management, leading
strategic development planning, public affairs, and community
preparedness initiatives for Texas's largest county.
Mr. Sanchez, it is a pleasure to have you before the
Committee. You may proceed. Your full statement will be made
part of our record.
STATEMENT OF FRANCISCO SANCHEZ, ASSOCIATE ADMINISTRATOR, OFFICE
OF DISASTER ASSISTANCE, U.S. SMALL BUSINESS ADMINISTRATION
Mr. Sanchez. Good afternoon, Chairman Cardin, Ranking
Member Paul, and distinguished members of the Committee. Thank
you for the invitation to be here.
This week marks six months leading the Office of Disaster
Assistance, Office of Disaster Assistance, at the U.S. Small
Business Administration. Disaster recovery is one of the most
important functions of our work. We provide financial
assistance so communities can rebuild, recover, and now to be
more resilient.
SBA knows that we must do more to better leverage its
programs and resources to help small businesses in the face of
increasingly frequent and catastrophic disasters. I am proud to
be one of the architects that is optimizing the disaster
program. By shifting the direct disaster lending to the Office
of Capital Access, it improves customer service and elevates
our investments in preparedness, resilience, and recovery.
My experience has been formed by nearly two decades in
disaster response and putting communities back together. Prior
to joining SBA, as you mentioned, Chairman, I served as the
Deputy Homeland Security Emergency Management Coordinator.
Harris County is 1,777 square miles, serving five million
residents, including the city of Houston. I had the honor to
serve on command staff for four of our nation's ten most
devastating natural disasters. My experience in times of crisis
informs how we are now leading recovery from the ground up and
across the SBA and the Federal family.
A priority of the Biden-Harris administration and
Administrator Guzman is to improve the effectiveness of helping
businesses, homeowners, renters, and private nonprofits for all
hazards. In my short time at the SBA I have learned that we
have a great asset, an incredible team that is up for that
task.
From helping open the Astrodome during Hurricane Katrina
and welcoming more than 200,000 evacuees to being at the helm
during Hurricane Harvey, which now ties Katrina as the
costliest tropical storm on record, I have looked in the faces
of people going through their worst, and on their worst days we
must be at our best.
This is not just a professional obligation. To me,
response, recovery, and resilience has a deep personal
connection. In 1983, at the age of 11, Hurricane Alicia struck
the Texas coast. It spared my family but that name was retired.
During Tropical Storm Allison in 1989, my mom stood watch as
the water swelled out of the bayou, swept up our street, and
letting out a sigh of relief as it retreated from the front
door. Hours later, we felt under our feet the dark water seep
up from the floorboards, and Allison too was a name that was
retired.
During Hurricane Ike in 2008, I was working in our
Emergency Operations Center, feeling helpless as my childhood
home flooded again, this time a total loss. With the help of
Federal programs we helped my mom rebuild, including elevating
her home. The storm hit on September of 2008, and my mom would
not be able to move back in until September of 2012, a rough
road of four long years. That storm name, too, was retired.
During Hurricane Harvey in 2018, I worked around the clock
in our Emergency Operations Center responding to 50 inches of
rain. That is 9 trillion gallons of water. My mom was
responding too. Her resilient home was an island of refuge as
dozens of neighbors and friends escaped the several feet of
water that drowned the neighborhood. But my mom and her home
were safe.
Recovery tied to resilience works. Each of those storm
names have been retired, but the remnants and the havoc they
wreaked remain. Disaster are a continuum, and we are reshaping
our work to respond accordingly.
The year 2021 marks the sixth consecutive year in which ten
or more billion-dollar disasters have struck the United States.
Today we are on the ground across 11 states and 25 primary
counties, responding to three presidentially declared
disasters, four agency declarations, and five governor
certifications. We are only at the start of the 2022 hurricane
season but already have three named storms.
We are responding to the challenges we face today in
reshaping to be nimble, scalable, and flexible for the
disasters on the horizon. In short, we are ready.
My thanks to this Committee for your support of our mission
and for your dedication to help disaster survivors. I look
forward to our continued work together to build resilient small
businesses so our local economies can thrive and people can
prosper.
And again, thank you for the invitation, Mr. Chairman.
[The prepared statement of Mr. Sanchez follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Cardin. Well thank you, Mr. Sanchez. I appreciate
your testimony and your service.
I want to drill down a little bit more on your comments
indicating that the reorganization under the Office of Access
to Capital is going to, you say, make the services more
friendly to those who are relying upon disaster relief help. I
would like you to explain how you see the improved services to
the people in need and what lessons we learned from the
pandemic that we can use to improve the services during a
disaster, whether it be a natural disaster or whether it be a
pandemic.
Mr. Sanchez. Thank you, Mr. Chairman, for that question. It
right person, right job, and it is, in part, implementing some
of the lessons that we learned from COVID--technology, building
capacity, surge, putting those protocols in place to be able to
detect and deter fraud and respond to that.
The Office of Capital Access is the home to the lending
programs of SBA, so the expertise is already there. We will see
efficiencies, improved technologies for improved customer
service. What that allows the Office of Disaster Assistance to
do is to focus on the very critical piece of connecting
disaster survivors with that streamlined and improved disaster
lending process.
Chairman Cardin. Because, yeah, particularly during the
pandemic there were concerns on how the programs were being
administered. I understand the Office of Capital Access has
direct lending services to your customers. So I do think you
need to assure that the service levels meet the needs. During a
disaster it is critically important to be on the ground
immediately, have your personnel on the ground immediately at
the site. The businesses cannot seek you out. They are trying
to board up their properties and figuring out what they have to
do in order to stay afloat. You need to be where they are.
Is that the intent that you will be able to provide that
type of on-ground services during a natural disaster? Actually,
before it even starts you need to be on the ground.
Mr. Sanchez. Senator, that is exactly the intent, to meet
the customer where they are. Part of that improvement is we can
be on the ground quicker. We can meet with those, as you
mentioned, those local resource partners, SCORE, and those
programs, to ensure that we are tailoring our response in a way
that is reflective of that community's needs, and we can stay
longer, focused on that mission of being on the ground to
ensure that long-term recovery, that we are part of that and in
sync with those local priorities.
Chairman Cardin. So how do you coordinate the work that you
do with your resource partners with the SBDCs and the Women's
Business Centers, or with the other community organizations,
such as the CDFIs, or, quite frankly, with the other Federal
agencies that are involved during a natural disaster such as
FEMA and HUD? How do you coordinate the different players that
are there to help someone, a business or homeowner, during a
disaster?
Mr. Sanchez. By its very definition, a disaster means that
local resources are overwhelmed. Not even a Federal agency can
tackle that altogether. So that is why those relationships are
critically important.
In every opportunity that I have had to be on the ground I
had visited with our local partners, our Business Development
Centers, our Women Entrepreneur Centers, local Chambers of
Commerce, to see how we can leverage those relationships. We
work across the board with FEMA, HUD, and other agencies to
make sure we are lockstep moving forward and being nimble and
scalable to tailor our response from the ground up to meet
those needs.
Chairman Cardin. Well, I want to follow up, not necessarily
right now, as to how we make sure that we have that type of
coordination and how this reorganization with the SBA will
assist. You are the lead in some areas, in some you are not,
but you all have to be working in a coordinated way during
these stressful times.
I want to get to one other subject, and that is the pre-
disaster planning, to have plans in place to use resources to
help particularly small businesses develop a pre-disaster
strategy and plan. We have allowed the use of resources for
this purpose. Tell me how you intend to carry out that role of
your responsibilities.
Mr. Sanchez. Yes, Senator. That is exactly the part of the
new mission is to making sure that we lean in ahead of the
disaster as we have folks on the ground working with our field
office, working with our local resource partners, that we take
those plans, at the high level, but then tailor them to meet
the unique needs of that community, not just now, well in
advance of a disaster, but as we are landing on the ground,
making sure we tweak those to be responsive in the moment, and
we are going to move forward as we do that, make that part of
the planning process, make that the institutional way to
respond, and build out that culture.
Chairman Cardin. Thank you. Senator Marshall.
Senator Marshall. Thank you, Chairman. Administrator
Sanchez, welcome, and thank you for coming here this afternoon.
Kind of a follow-up question that the Chairman was getting at
as well.
Kansas does not have a huge hurricane with billions of
dollars of damage. Typically we have lots of small disasters.
That is a tornado impacting a town, you know, two or three
different times a year, and then we have had our share of
wildfires as well. While the disaster office has been there for
each of our events, they are at an incredibly slow pace. For
example, fires in Hutchinson, Kansas, on March 9th, the SBA
Resource Center was not set up until April 28th, seven weeks
later. Constituents struggle to wait seven weeks for that
assistance.
Why would there be substantial delays? What would you feel
is success? How do you measure success? What would be your goal
in your response team getting to a disaster?
Mr. Sanchez. Sure. Thank you, Senator. I will address, in
part, what the SBA challenge is and how we tie it to the larger
picture. Typically, for loan processing, it is about five days,
and then disbursement of first funds is--I am sorry. Loan
processing is about eight days for homeowners, five days for
the actual disbursement.
We come in on the ground after there has been a disaster
declaration at the state. We are working with our state
partners to educate about how we meet the threshold to try to
expedite that process so that we can be on the ground quicker
as well.
Senator Marshall. What about the time to be on the ground,
from the time the disaster occurs? How do you measure that and
what would you think? Like seven weeks just seems too long to
me.
Mr. Sanchez. Yeah, Senator. That was seven weeks from the
time of the disaster. What we have to wait for to actually open
the lending process is for the disaster declaration to be
cleared, requested by the state, and then we can be on the
ground. We are working with our partners to educate how we can
expedite that for our states. But once we get that trigger we
can be on the ground within 48 to 72 hours.
Senator Marshall. So your goal would be once the state
declares a disaster is to have presence there in two to three
working days.
Mr. Sanchez. Yes, sir. Once that comes to us we sign it and
we are on the ground.
Senator Marshall. Okay. Again, kind of along the same line
of questioning, for those wildfires it appears that our staff
had to do most of, I am going to call it marketing, letting
them know what the SBA could and could not do, how they could
help. What can you do to better improve your communication to
those small businesses that you are there to help them? What
are the opportunities for improvement there?
Mr. Sanchez. I think as the Chairman mentioned, reaching in
to SCORE and those local district offices to see how we can
tailor that for that specific community, and I have a
commitment to work with our officials from those states and
local officials to see--you are where the expertise is on the
ground. How do we leverage our knowledge to those local
communities? What community should we be in? What does that
message need to look like? We want to increase access of those
programs. It is an under-told story so we want to partner with
that when we are on the ground with local officials and local
expertise to make the most impact.
Senator Marshall. Okay. Thank you so much. I yield back.
Chairman Cardin. Senator Shaheen.
Senator Shaheen. Thank you, Mr. Chairman, and Mr. Sanchez,
thank you for being here and for your ongoing efforts.
I want to begin with a statement that I know is not
directly under what this hearing is about and what we are
working on today, in terms of disaster assistance, but I would
be remiss if I did not ask you to take back to SBA the
frustration that we still hear in New Hampshire from small
businesses who were in the queue for EIDL loans and the program
was so precipitously discontinued. Business owners are still
very frustrated by that, and it left a very bad taste for
people who were counting on the SBA to help them through the
pandemic.
So again, I appreciate this is not under your purview but I
do think it is a message that the SBA needs to hear, and
hopefully that as we look at lessons learned we will be looking
at what we can do better in those kinds of situations.
One of the things that has been really important in New
Hampshire has been our district office in sharing with small
businesses what help is available through the SBA. They have
really done great outreach, and I know that, or at least as I
understand under this reorganization you are looking at ODA to
be that office that does outreach and education.
So can you talk about how you see that continuing to work
with the district offices and what resources you think district
offices are going to continue to need in order to do their
piece of outreach and information to small business?
Mr. Sanchez. Sure. First, Senator, I will gladly take back
that message, and I will assure you, from the Office of
Disaster Assistance for those lessons that were had during
COVID, while they may have not been in the Office of Disaster
Assistance we are going to take those lessons and make sure
that we can apply them across the board to our mission, to
improve the customer experience.
In terms of our district offices, they are so incredibly
connected in those communities. They know how that community
works. They know where their Economic Development Agencies are
and those Chambers.
We are in communication constantly about how we can partner
up with that local expertise. From us, bring the resources that
we can bring to bear for that lending capacity and connecting
people with programs. But they are also critical for us to
deliver after a disaster not just lending but connecting them
to the resources that are already provided by the SBA across
the board, to bring those to disaster survivors. So not only
have we provided lending but those resources so they can
continue to thrive and be more resilient, and tackle that from
the whole SBA angle.
Senator Shaheen. Well, I am really glad to hear that. I
know there is a proposal through SBA to reduce pretty
significantly the operating budgets of district offices. So I
hope, again, that you will take back just how important it is
in New Hampshire--and I am sure it is true of the other states
that members represent here--the work that gets done.
My next question is really a more overarching one for the
long term, and that is how are we going to continue to address
disaster assistance given the increasing costs each year from
climate change and other aspects of disasters that we are
seeing? Because I do not think that we are going to be able to
continue to do it in the same way that we have, and so we have
got to take a different approach. I appreciate that this
reorganization may be one effort to take a look at that, but I
think we are going to have to be much more visionary about how
we think about this in the future.
Mr. Sanchez. Senator, it is something I am passionate about
from a local perspective. I come from a region where we now
average a presidentially declared disaster every nine months,
and that does not even include Harris County, Houston, Texas.
And so along the Gulf Coast, and it does not even include the
SBA declarations yet or the other smaller disasters.
And let me sort of paint, if I can, the landscape.
Senator Shaheen. Great.
Mr. Sanchez. SBA is often the first and only on the ground,
as we do not meet those other thresholds, and we are there more
often. Since 2000, for example, there have only been four years
in which there were more presidentially declared disasters than
there were SBA disasters. So not only are we often the first
and only, the only Federal agency to the scale that we do to do
homeowners and renters, private nonprofits, and businesses. So
we have to scale up, so we have got teams that can get ready to
surge and meet those disasters this hurricane season and
wildfire season.
We need to be flexible, and we need to be nimble. And we
need to work within the authorities that we have to be able to
adapt to need. But the pace is incredible, and we have got some
work ahead.
Senator Shaheen. If I can ask one more question, Mr.
Chairman, one of the things that we looked at when we were
working on bipartisan infrastructure package last year was how
to put in funding for resilience. And you talked about your
mother's home and building it back more resilient than it was
originally.
But how do we incorporate that in ways that are within
existing law, for example? One of the things I found
particularly frustrating when I first got to the Senate was the
fact that under our FEMA requirements you had to build back
exactly the way it was before, and it took a long time for us
to get that changed.
But resilience has got to be part of what we are doing now.
We have got to be looking at prevention as much as we are
looking at restoration after a disaster has occurred. So how do
you think about that in terms of SBA?
Mr. Sanchez. Sure. From my perspective, from every cycle of
emergency management, preparedness, response, recovery, and
mitigation, two elements. One is on the mitigation piece. Once
you get a disaster loan, you get 20 percent on top of that to
mitigate in a way that you build more resilient to the disaster
you were impacted, we need to explore making mitigation
available at the front end as well instead of having to wait
for businesses or homeowners to be impacted.
The other piece is a cultural shift in recognizing that
that problem is real, that it is here, and we need to adapt,
and we have got some catching up to do. And what I have heard
from small businesses across the country is they want to tackle
it but they are busy trying to keep the lights on and keeping
the open sign there.
So what we can do, and will be doing, is providing, at the
front end, accessible information on how they can be resilient,
from simple steps to the more robust steps, how climate change
may affect those regions. And so they have that bandwidth and
knowledge and make it easily accessible so we can digest that
for them and make it something they can take action on, and do
that homework for them and be a good resource.
Senator Shaheen. Thank you. Thank you, Mr. Chairman.
Chairman Cardin. Senator Inhofe.
Senator Inhofe. Thank you, Mr. Chairman. I do have a
couple--one is not a question but it is a request for
assistance in a problem that we are having, that you probably
are not aware of but maybe you are. I do not know. When
disasters happen, states can request a FEMA disaster
declaration or SBA disaster declaration to help with the
rebuilding process. Unfortunately, the Oklahoma Office of
Emergency Management in my state has been told by your SBA
regional counterparts, for a number of years now, that if a
state is denied a FEMA declaration they forfeit the ability to
subsequently apply for SBA declaration in order to receive
assistance.
Now I know that some people have denied this, and
headquarters says that this is not the case, and that states
can apply for an SBA declaration.
Now this is a discrepancy that is repeated several times,
and the request I would like to have from you, Mr. Sanchez, we
need your commitment to resolve this issue. We have had this
for a long period of time. We get some inconsistencies with
this. And to do this it would be necessary, I think, to follow
up with both my office and your Office of Emergency Management
to correct this.
Can I depend on you to help us in this effort?
Mr. Sanchez. Yes, Senator.
Senator Inhofe. To personally become involved in?
Mr. Sanchez. Yes, sir. Not only that, Senator, I am working
on it already. You know, Oklahoma is a neighbor of where I come
from in Texas.
Senator Inhofe. Sure. Sure.
Mr. Sanchez. I called this morning to Mark Gower, who is
the Director for the state Office of Emergency Management in
Oklahoma. You can apply for an SBA disaster declaration if you
are denied by FEMA. I think there is confusion as to whether
you can launch SBA prior to FEMA, and so we are going to work
through that. And I am glad to keep your office informed and
work directly with Oklahoma to make sure we can be as flexible
and nimble as we can be to get those programs on the ground.
Senator Inhofe. Well, I know you can do it. And by the way,
I am very familiar. In the real world I was a builder and
developer, mostly in South Texas, and I know how things worked.
And I have worked with your department over a period of time.
So if we could do that, if you could do that and give that
commitment to us, that would make our lives a lot easier.
We have a lot of natural disasters, as you know--tornadoes,
wildfires, and other problems. The SBA is currently working
with FEMA to respond to recent flooding in Seminole, Oklahoma.
These disasters have a unique impact on rural communities, and
we are a rural state, so when we have rural problems we feel it
a little bit more than a lot of others do. They have a unique
impact on the communities where they can easily wipe out the
livelihoods of Oklahomans involved in farming and ranching.
So is there something that you could share with us today
that I could take back that you are doing to ensure the
individuals in rural communities are able to access SBA
disaster resources?
Mr. Sanchez. Senator, thank you for asking that because
that hits close to home for me. I was both in deep South Texas,
rural Texas.
Senator Inhofe. Where?
Mr. Sanchez. Brownsville. Two miles more south and it would
have been Matamoros. Mercy Hospital.
Senator Inhofe. I am totally familiar with that, South
Padre Island and then all the way up to--well, halfway up the
state.
Mr. Sanchez. It is. My grandfather actually owned about a
20-acre ranch, Los Palmitos. So he was a rancher as well and
did some crops there. So I get rural. It is actually a focus of
mine.
I have reached out--and that is part of making sure we meet
the customer where they are at. We have had some rural
communities hit, and my instruction to the team is get on the
ground, talk to local officials, let us get out there, in less
time than necessary. I have spoken to county executives
directly myself that have 7,000 or less population, 17,000 or
less population. It is a focus of mine. And if there are
lessons to be learned or ways that we could improve, not only
am I open to it, it is something that I am highly focused on
personally.
Senator Inhofe. Good. That is all I could ask, and I look
forward to great results. Thank you.
Mr. Sanchez. Thank you, Senator.
Chairman Cardin. Senator Hickenlooper.
Senator Hickenlooper. Thank you, Chair Cardin, and thank
you for your service and for appearing here.
First, thank you for taking into consideration the
suggestion that my colleague, Senator Bennet, Representative
Neguse, and myself all made in terms of the Marshall Fire, the
letter we sent in March. I think modernizing how the SBA
calculates building costs is an important first step, as
Coloradans figure out how they are going to rebuild after that
horrendous fire. But I think we also need to update the
borrowing limits to reflect the median value of a house, that
has more than doubled in the 28 years since the last time we
had a reset.
So how do you think the SBA should, and how well the SBA
update their disaster loan assistance home and personal
property loan maximums to account for this roughly 30 years of
consistent inflation?
Mr. Sanchez. Senator, that is an excellent point in terms
of the lending limits. The last time we looked at it, it was
1990. I was graduating high school. It is time for us to look
at those numbers, and we are looking at that. And my hope is
that in the next few weeks we will have some news to you from
the Office of Capital Access and our joint work together about
how they are going to tackle that, because we have got an
approach that is being put together and we are going to be
responsive to that.
And I was very pleased to be able to visit with Mayor
Stolzmann and local officials there in the Marshall Fire to see
how we could use existing rules to be adaptive, and we will
continue to do that.
Senator Hickenlooper. Great. I appreciate that.
The chaos and damage that follows disasters often
exacerbate the existing obstacles for traditionally underserved
communities in their efforts to try and access capital. What is
the SBA doing, and what could it be doing more to ensure that
individuals who may otherwise struggle to secure affordable
credit have the opportunity to use these disaster relief loan
programs?
Mr. Sanchez. Senator, we recently launched an equity action
plan to tackle issues like that, and fortunately the great team
in place before I came on board was wrapping that up. But one
is access to capital, making sure that we meet the customer
where they are. So whether it is a language issue or economic
issue, that we are meeting them where they are and explaining
those programs. It is, in the end, a lending program, so people
have to go through a complex financial process, so we are
trying to streamline that and improve that.
In the meantime, and even more so, my approach is if you
come to the SBA and ask for assistance, and if we cannot quite
get to a yes yet, what other programs within SBA can we bring
to the table and leverage, and navigate our local resources to
connect them with everything else in the community and Federal
programs? So that really unified approach is something that we
are looking at to bring that to the ground.
Senator Hickenlooper. Interesting. And this is a little bit
more out on getting out on the edge. We, obviously, in
Colorado, we feel that we are on the front lines of climate
change and the climate crisis. We are seeing--I do not think
you could call it a drought anymore. It is aridification or
desertification. It is the consistently drying of our
precipitation patterns, which has led to more and more, worse
and worse wildfires.
What is the SBA doing to ensure that the 7(a), the 504,
other lending programs are being used by small businesses,
taking into account resilience, you know, the resilience for
disasters but also preparedness to help mitigate what we know
is coming in the form of climate change?
Mr. Sanchez. Senator, in the past two years I believe we
have had 400-plus drought declarations in this country, and
Colorado is ground zero for some of those, and parts of the
Western United States. Working with my colleagues across SBA
that oversee those programs, to see how we can leverage that.
And again, it is really bringing the whole of SBA. We cannot
look at disasters in that narrow scope anymore. What can we do
to build resilience? How do we incentivize that across other
programs so that, quite frankly, those businesses and homes can
withstand the next disaster and recover quicker? So that is a
priority.
Senator Hickenlooper. Yeah, and I think obviously that is
something you are still figuring out and we are all still
figuring out, is how to look at this new reality.
Anyway, thank you for all your work and taking on such a
challenging but very important job.
Mr. Sanchez. Thank you.
Senator Hickenlooper. I yield back to the Chair.
Chairman Cardin. Thank you. Mr. Sanchez, my experience
during the disaster and the flooding in Ellicott City,
Maryland, was a positive experience with the SBA, the Federal
agencies, the local agencies. It was, I would compare it to a
one-stop shop. They were there. And yes, we went through a
declaration, but we had resources out before the declaration as
far as advising the business owners, property owners what they
were likely to need to be able to do.
So my question is, as you are now reorganizing, are there
discussions taking place to make sure that we have a seamless
system of applying for Federal help? The process might be
different at FEMA and HUD than it is at SBA. But are you
coordinating that to make it easier for the customer to be able
to not be bounced from one line to another but that can take
care of all of their inquiries and applications in one
location?
Mr. Sanchez. Senator, I am glad you bring up sort of the
difference between the lending program and also how it rolls
out on the ground. I am the first non-banker to be in this
position, so I come from the perspective of a local official
that has been repeatedly hit with disasters. How do we improve
that customer experience? And I know collaboration is the key
to that.
We are working with FEMA, HUD, and our Federal partners to
work on what does the sequence look like, how can we collapse
it or be adaptable to make those resources, all of those
resources, available in a one-stop shop as much as possible.
Already we are removing barriers. We had a pilot program on
the threshold, so there would be less bouncing around between
FEMA and SBA. We have now implemented that for hurricane
season. So that is just one step and that is already in effect,
and we are going to continue to explore how we do that better.
Chairman Cardin. The SBA already allows the borrower to use
a certain amount of their loan for future mitigation. Are they
doing that? Is that program well understood by the customer,
that they are permitted to do mitigation with a certain amount
of their loans?
Mr. Sanchez. We are actually increasing right now. We have
had, in my short time here, going on two or more educational
opportunities for our lenders on the ground so they can explain
that program better. It is, I think, an underutilized program,
so we are going to continue to champion that, and even go back
to existing disasters. You have two years to apply for that
after you get the loan, so we are even going to go back and
reach out to the folks that are already accessing the program,
to remind them about that opportunity.
Chairman Cardin. I appreciate you keeping us informed as to
whether there are additional authorities that you need or
whether you have adequate authorization. Mitigation is so
critically important, so we do want that information to get out
there.
Senator Rosen.
Senator Rosen. Oh, thank you. Thank you. I just came from
presiding. Thank you. I appreciate it. Thank you for holding
the hearing and for waiting for me to come from the floor. It
is so important, the disaster assistance that you do for small
businesses, and I really want to thank you for being with us
today.
You know, you know, Senator Cardin is, of course, from
Maryland, but I am from Nevada, out west, and what do we have
there but a major, major drought, extreme drought, and extreme
heat. And so extreme heat and drought really do have effects on
our small businesses.
We have experienced historic high heat, high temperatures.
Reno and Las Vegas are the two fastest-warming cities in the
country--or two of them, excuse me--and extreme heat events
have caused hundreds of deaths. They have devastated our small
businesses and rural communities, who really rely on outdoor
recreation and that part of the tourism economy.
Unfortunately, the Federal Stafford Act does not list
extreme heat as a potential disaster, and therefore FEMA has
never declared an extreme heat disaster. But given that small
businesses can only receive SBA disaster assistance if they are
located in federally declared disaster areas, businesses facing
the impacts of extreme heat, they are really just left without
support. Last year, Senator Cornyn and I sent a letter to FEMA
asking the agency to address extreme heat as a major disaster.
So, Mr. Sanchez, as FEMA works through its own internal
process how can SBA work with FEMA? How can you provide more
resources to our small businesses that are dealing with these
impacts of extreme heat? And I would also add that, you want to
include drought in that too because really, it is pretty much
the same issue.
Mr. Sanchez. Senator, thank you for that question. You
know, I come from Houston where we experienced the hottest June
on record, and there are records like that all over the
country. I will certainly work with FEMA to see how we are in
that process and fold that under disaster declaration.
I had the opportunity actually a few months ago, before I
even came on board here, to visit with a colleague in Cook
County--I am sorry. Not Cook County.
Senator Rosen. Cook County is in Illinois, and Chicago,
right. Clark County. That is my Clark County.
Mr. Sanchez. Thank you, Senator. And what they are seeing
there is heat having a cascading impact, as a community that is
used to heat but even more that disaster is becoming more
problematic and more consequential. So it is a local concern
there, and I do look forward to addressing that. And if that is
something that is a declared disaster we certainly can bring
resources to bear to help recover.
Senator Rosen. Yeah, and like I said, we are trying to work
with FEMA to get these disasters declared. On top of this,
because of the extreme heat and extreme drought we have
wildfires. They are impacting our small businesses, hundreds of
wildfires each year in Nevada. They threaten lives and
livelihoods. Of course, they are happening all across the West
and across the country. But they drive away our tourists with
wildfire smoke, our poor air quality, and in the case of the
2018 Martin and Sugarloaf Fires, they burned nearly 1 million
acres of land.
And so 80 percent of Nevada, over 80 percent, is federally
owned or managed in some form, so we all have to coordinate,
and SBA has a major role to play in terms of stakeholder
collaboration, because we have Department of Defense, we have
Department of Energy, we have BLM, et cetera, et cetera.
So as we enter wildfire season can you discuss your
outreach to our small businesses that may be in the wildfire
impact zones, if you will?
Mr. Sanchez. Sure, Senator. As a former firefighter I get
the threat that the wildfires face, and particularly in areas
like the West and in Nevada. Not only are we ready to respond
to that in bringing resources on the ground, we are trying to
be innovative. We have got a strategic partner in the Institute
for Business and Home Safety.
We recently launched an event in California where we saw
the Paradise Fire, as an example of launching information of
how businesses and homeowners can become more resilient and
prepare for wildfires. So not only responding when it happens
so we can provide those resources for recovery on the ground,
working with partners to ensure that they have the preventive
preparedness information in advance as well.
Senator Rosen. And then, again, I think this probably would
take coordination with FEMA or other agencies. But we have
businesses that are impacted. Maybe they are okay but the road
is out because of a fire or a flood or a mudslide. A bridge is
out. Our internet is out because of the wildfires. So these
businesses have business interruption even though they may not
be burning down themselves.
And so can you commit to trying to work with FEMA on how
you can help the small businesses again that are in this impact
zone? They are impacted as a result of this fire, drought, or
heat, but they are not burning down at the moment.
Mr. Sanchez. Excellent point, Senator, and I am committed
to that collaboration. I will tell you, we are already doing
that. I visit with my counterpart at FEMA on a regular basis to
see what does that local situation look like? We did exactly
just what you asked in Montana, for the fire in Yellowstone. We
had businesses that were not impacted but roads and bridges
were down so tourism was down. So we worked with the state and
said, hey, were you aware that you can still apply for disaster
loan for disasters, so they would be able to utilize that.
And so we are working on those options and we will continue
to do that, and are doing that now, just through our normal
course of work.
Senator Rosen. Thank you. I appreciate it, and really
getting the word out to our small businesses across the country
really makes a difference. Thank you.
Chairman Cardin. Senator Booker.
Senator Booker. Administrator, so good to have you here----
Mr. Sanchez. Thank you, Senator.
Senator Booker [continuing]. And thank you very much for
your really hard work under difficult [inaudible-off
microphone] small businesses and the work you are doing is
important.
I know from my time as a mayor, when I had a real job, that
we were really dealing with the impact of disasters. And being
the mayor during Hurricane Sandy was quite the challenge for my
community, and I was really proud of how my city, even though
we had loss of life and tremendous loss of property, I was
really proud about how we rose to meet that challenge.
But I learned a lot, because we were still doing recovery
in New Jersey from Hurricane Sandy a year or two later, when I
became Senator for the state of New Jersey, and traveling up
and down with Bob Menendez and seeing a lot of things that just
do not make sense to me. And that is why I am excited about
pre-disaster resources, because when people are hit time and
time again, when I have people telling me stories about, you
know, back in 1980 we had this happen, or even more recently,
it is clear that we, as a country, could save taxpayer dollars
through a lot of our investments.
So again, the additional loan funds for mitigation,
property improvements, I really believe are critical and
something that I really support, investments in natural
infrastructure. These issues, whether it is fires or flooding,
are going to get worse and worse and worse, and we have got to
start acting.
Each weather event, as you know, typically costs tens of
billions of dollars in Federal recovery funding. Federal
spending on disaster recover totals approximately half a
trillion dollars since 2005. And unfortunately, up to 13
million people can be displaced.
So I just would love to hear and better understand how the
SBA has made these significant pre-disaster mitigation
investments to help on resiliency, and I was wondering if you
could describe some of the work in that area and maybe give me
some more hope that I can talk to a lot of the other mayors
that are still doing the real work, that we are going to be
making more investments in helping for resiliency.
Mr. Sanchez. Excellent question, Senator, because
mitigation is critical to making sure those businesses and
homeowners can withstand a disaster but get back on their feet
quicker, especially in these economic times where it is already
challenging enough.
We are adding a new focus and emphasis on that mitigation
program, so once you have a disaster loan you can add 20
percent on top of that. But there are opportunities to explore
the ability to make those lending pre-disaster. So that is
critically important.
You talked about Sandy. The number I have off the top of my
head is about a quarter billion for Ida. In New Jersey I
believe that is $6 million that folks have utilized for that
mitigation program, but they have the option to do that up to
two years later. So if local officials are looking at how do we
address mitigation, let us work with those individuals to see
if they want to access that program to build back stronger. And
for businesses, making sure they know the resources that they
have available and education, what they can do on their own, in
addition to what we do, to build that resilience piece, moving
forward.
Senator Booker. And so this is one of those times where I
think the SBA is ahead of other government agencies in having
this kind of forethought. Are there lessons you are learning
that other agencies might be able to benefit from?
Mr. Sanchez. One, from a local perspective, is that is what
we are bringing to the table in terms of the importance of
resilience. There is a vast effort in the Biden-Harris
administration to look at resilience and climate change and
tackle that. So there are a lot of moving parts.
I think for us we need to own what is our primary mission
and deliver everything that we can, and so that is what we are
doing at the Office of Disaster Assistance. And as we move
forward with that robust approach for resilience, is really
doing that in lockstep and in sync with our partners to see how
we can maximize those impacts.
Senator Booker. That is very humble of you. It sounds like
you are saying, ``Cory, I am just going to do my job and keep
focused on my goals and missions.''
How about this, a little bit of advice for us? Do you think
Congress should be making larger investments, given your sort
of cost benefit analysis, investment return analysis? Do you
think we should be doing bigger investments in Congress in pre-
disaster mitigation or other things that you think are great
investments in terms of return, like that pre-disaster money
might be?
Mr. Sanchez. Senator, in sheer numbers, for every $1 we
invest in mitigation there is $6 in return. But I do not think
we can look at that in a dollar-per-dollar ratio anymore. What
does that mean for getting kids back in school, people back in
their jobs, rebuilding those neighborhoods and making sure
people do not flee those disaster areas? That is absolutely
critical and not part of the economic equation.
So for me, as someone that has responded to that many
disasters, mitigation and resilience is absolutely key to
making sure people do not even have to recover.
Senator Booker. Fantastic. Thank you very much, Mr.
Chairman.
Chairman Cardin. Thank you.
Mr. Sanchez, let me thank you very much. The record will
stay open for two weeks for those who may have questions for
the record. We ask that you respond as quickly as possible to
that.
And thank you for what you are doing. We are very
interested in being kept informed, as you see hurdles that you
think we can help you with. As Senator Booker was saying, we
are very much interested in trying to do pre-disaster
mitigation. We also are very supportive of using part of the
disaster loans to mitigate future challenges. So this is all
part of our priorities, and we look forward to your best advice
to us how we can work together to achieve those objectives.
Thank you very much, and with that the hearing will stand
adjourned.
Mr. Sanchez. Thank you, Senator.
[Whereupon, at 3:24 p.m., the Committee was adjourned.]
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