S. Rept. 114-241 - THE SMALL BUSINESS DEVELOPMENT CENTERS IMPROVEMENT ACT OF 2015114th Congress (2015-2016)
Committee Report
| Report Type: | Senate Report |
|---|---|
| Accompanies: | S.999 |
| Committees: |
S. Rept. 114-241 - 114th Congress (2015-2016)
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Senate Report 114-241 - THE SMALL BUSINESS DEVELOPMENT CENTERS IMPROVEMENT ACT OF 2015
[Senate Report 114-241]
[From the U.S. Government Publishing Office]
Calendar No. 109
114th Congress } { Report
SENATE
2d Session } { 114-241
======================================================================
THE SMALL BUSINESS DEVELOPMENT CENTERS IMPROVEMENT ACT OF 2015
_______
April 21, 2016.--Ordered to be printed
_______
Mr. Vitter, from the Committee on Small Business and Entrepreneurship,
submitted the following
R E P O R T
[To accompany S. 999]
The Committee on Small Business and Entrepreneurship, to
which was referred the bill (S. 999) to amend the Small
Business Act to provide for improvements to small business
development centers, having considered the same, reports
favorably thereon with an amendment (in the nature of a
substitute) and recommends that the bill, as amended, do pass.
I. INTRODUCTION
The Small Business Development Centers Improvement Act of
2015 (S. 999) was introduced by the Committee's Chair, Senator
David Vitter, on April 16, 2015.
The purpose of the Small Business Development Centers
Improvement Act of 2015 is to improve the Small Business
Development Centers (SBDCs) program and ensure SBDCs continue
successful delivery of entrepreneurial development services to
small businesses. SBDCs represent a key component of the Small
Business Administration's (SBA) counseling and training
programs for small businesses. In order to continue these
services, the Small Business Development Centers Improvement
Act of 2015 (by amending the Small Business Act\1\ requires
limitations on the creation and funding of SBA initiatives
outside those mandated by Congress. The legislation also
strengthens the quality, scope, and performance of SBDCs
through enhanced SBDC marketing and data privacy, allowance for
accepting participation fees from community partners,
responsible spending, broader servicing areas, and improved
grant distribution.
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\1\Originally, title II of the Act of July 30, 1953, c. 282, 67
Stat. 232 was designated as the Small Business Act of 1953. A plethora
of amendments in subsequent Congresses led to a rewrite in 1958. Pub.
L. No. 85-536, Sec. 1, 72 Stat. 384 (1958). The Act is codified at 15
U.S.C. 631-657s.
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During the markup of the bill, the Vitter amendment to the
bill was approved by voice vote. The Vitter amendment removes
the requirement for an annual report on all entrepreneurial
development activities undertaken in the current fiscal year.
The bill, as amended, was also approved unanimously by voice
vote.
II. HISTORY (PURPOSE & NEED FOR LEGISLATION)
The United States has consistently recognized the need to
encourage entrepreneurship as a means to combat unemployment
and promote economic development. Therefore, the SBA's mission,
as evinced in the Small Business Act, 15 U.S.C. Sec. 631-57p,
is to ``aid, counsel, assist, and protect, insofar as is
possible, the interests of small business concerns . . .''\2\
In carrying out its mission to provide small businesses with
assistance, the SBA oversees a number of programs that offer
counseling to potential entrepreneurs and extant small business
owners. The SBA itself does not generally carry out this
training; in most circumstances, the agency enters into a
cooperative agreement with another organization to offer such
services. These parties are termed as resource partners by the
SBA and are required to obtain a significant portion of their
operating budgets from non-federal sources (be they private
donors or state funds).
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\2\Id. at 631(a)
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The largest such program is set out in Sec. 21 of the Small
Business Act, 15 U.S.C. 648. The program is denominated as the
SBDC Program because the resource partners--SBDC grantees--
operate service centers where small business owners and
potential entrepreneurs can receive free counseling. Typically,
the grantee is an institution of higher education (but not
always) and the grantee agrees to offer these services
throughout a state or through a portion of the state.\3\ Since
its inception, the SBDC program has been extremely successful
in training and counseling small firms. For example, in fiscal
year (FY) 2013, SBDCs trained over 330,000 clients and
counseled over 201,000 clients. Further, in FY 2013 SBDCs
assisted small business clients in obtaining $4.5 billion in
financing.
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\3\The grantee agrees to provide services throughout a state. For
reasons not relevant to H.R. 4121, two states--California and Texas--do
not have statewide grantees.
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While the SBDC program has achieved many notable results,
the program has not received a comprehensive modernization in
several years. The Committee also has learned of certain
operational challenges faced by SBDC grantees that hinder their
ability to offer services to small business owners. The
Committee has determined that these operational issues should
be rectified legislatively. The majority of necessary
legislative changes would be minor, such as statutorily
prescribing that SBDCs may market their services and collect
fees at partnership events, as well as eliminating the
Administrator's ability to reimburse the SBA for administrative
expenses associated with the SBDC program. In this case, as
federal funding becomes scarcer, it is necessary to update the
Small Business Act to ensure that SBDCs receive all funding
allocated in the budget, and are able to obtain matching funds
through self-promotion of the benefits of their program and
fostering a fruitful relationship with local community
partners.
The SBA has three other resource partners focused on
entrepreneurial training. Although their missions and scope of
service territories also vary, the Women's Business Centers
(WBCs) and Veteran Business Outreach Centers (VBOCs) operate in
a fashion akin to that of the SBDCs. The other major
entrepreneurial outreach program, SCORE, operates somewhat
differently. Although SCORE also offers free advice (from
volunteer active and retired business executives), SCORE is
provided almost all of its funds from those appropriated by
Congress. The SBA also is required to provide offices and other
ancillary services to SCORE at no charge to SCORE or its
clients.
III. HEARINGS & ROUNDTABLES
In the 112th Congress:
The Committee held a number of hearings during the 112th
Congress related to the SBDCs and oversight of entrepreneurial
development programs at the SBA. On July 21, 2011, the
Committee held a hearing titled, ``Entrepreneurial Development:
Obstacles and Opportunities for Supporting, Sustaining and
Growing America's Entrepreneurs,'' which heard from relevant
trade associations, small business owners, and the SBA
regarding SBA's entrepreneurial development programs and
possible legislative proposals to improve/reauthorize these
programs. On November 29, 2012, the Committee held a hearing
titled, ``Creating Jobs and Growing the Economy: Legislative
Proposals to Strengthen the Entrepreneurial Ecosystem.'' This
hearing was held to consider S. 3442, the SUCCESS Act, which
included provisions limiting grant distribution to higher
education institutions and eliminating the geographical
restrictions for SBDC assistance after a presidentially-
declared natural disaster.
In the 113th Congress:
In the 113th Congress, the House Committee on Small
Business held hearings relevant to the SBDCs and other
entrepreneurial development programs at the SBA. One hearing,
entitled `Entrepreneurial Assistance: Examining Inefficiencies
and Duplication Across Federal Programs' on March 20, 2013,
specifically examined inefficiencies, redundancies and other
challenges to in the SBA entrepreneurial assistance programs. A
witness from the Government Accountability Office (GAO)
discussed a recent GAO report that addressed particular
challenges to the SBDC program, including missed opportunities
for more collaboration with other public and private programs
as well as difficulties in obtaining data on the progress of
SBDCs.
On April 18, 2013, the Committee held a hearing entitled
``The Budget Outlook for the Small Business Administration'' at
which members, on a bipartisan basis, raised concerns with the
then- administrator about the impact that these new initiatives
would have on existing resource partners. Some members
expressed concerns that creating new programs, rather than
utilizing existing programs and resources, would cause
confusion and result in less aid being delivered overall.
Several members thought that the services provided under the
new SBA initiatives could be provided under existing programs.
On March 5, 2014, the House Committee on Small Business
approved the Small Business Development Centers Improvement Act
of 2014 (H.R. 4121). H.R. 4121 would have banned the SBA from
prohibiting applicants receiving grants under the SBDC program
from marketing and advertising their services. Additionally,
the legislation would have revised privacy requirements,
directed the SBA to consult with SBDC associations to develop
documents governing data collection activities, would have
prohibited the SBA from awarding grants under the SBDC program
to entities other than not-for-profit institutions of higher
education, and would have removed the geographic proximity
requirement in situations involving a presidentially-declared
disaster area. The Committee passed the bill, as amended, by
voice vote.
IV. DESCRIPTION OF BILL
S. 999 would require that all SBA-created initiatives be
delivered through those authorized programs specifically cross-
referenced in this subsection. The exceptions to this overall
prohibition, in subsections (a)(2)(A)-(E), relate to assistance
offered to: small business concerns owned by an Indian tribe;
activities and programs in support of a member of the Armed
Forces, including the Reserves and National Guard, a veteran,
or a spouse of a service member or a veteran; the PRIME, STEP,
and FAST programs; and other initiatives in operation at the
time the Committee considered this bill.
The Small Business Act is silent on the question of whether
SBDCs can market and advertise its products and services. This
bill amends Section 21 of the Act to ensure the SBDCs are able
to market and advertise their products and services. Greater
awareness of the services available through the SBDCs will
allow more small businesses to receive entrepreneurial
assistance without imposing any more financial burdens on
SBDCs, the SBA, or the taxpayer.
In order for the SBA to provide Congress with information
to properly evaluate entrepreneurial development programs, the
SBA has attempted to gather better performance data. Some of
the newly required information would force SBDCs to capture and
report data that small businesses are reluctant to share. In
cases where this information is of little value to the
government, these requirements place an unnecessary burden on
the SBDCs and will dissuade some small businesses from seeking
SBDC assistance. This bill requires the Administrator to
consult with the Association of Small Business Development
Centers on the creation of documents governing data collection
activities related to SBDCs.
In order to obtain funding, SBDC grantees must match funds
provided by the federal government with non-federal sources,
such as private donations or state funds. Therefore, SBDCs
often work alongside other community partners--such as a local
chamber of commerce--to host events as a partnership or a co-
sponsor. In these instances, a participation fee may be charged
to businesses by the partnership or cosponsoring party.
However, under current law SBDCs are not allowed to collect the
necessary fee. Therefore, this bill permits SBDCs to collect
fees or other income related to the operation of partnerships
or co-sponsorships. This authorization does not alter the no-
cost counseling provided by SBDCs to individual small
businesses.
Under current law, up to $500,000 of authorized funding to
SBDCs could be utilized by the Administrator to pay for
examination expenses associated with reviewing SBDCs. No other
entrepreneurial development program has an allocation of funds
to reimburse the SBA for the agency's administrative expenses.
This section eliminates the award of $500,000 of SBDC grant
monies to reimburse the SBA for program administration.
This bill enables SBDCs to operate in other states,
regardless of geographical proximity to the SBDC. Currently,
SBDCs can only operate out-of-state if such activities are in a
bordering state or otherwise ``in close geographical proximity
to the SBDC.'' By allowing SBDCs to work within any state,
SDBCs with extensive experience in particular natural disasters
can assist other states which have significantly less
experience during a disaster.
A majority of SBDC grantees are partnered with higher
education institutions which bolster SBDCs ability to obtain
private matching funding as required under law. This bill
prohibits entities other than institutions of higher education
from becoming grantees under Sec. 21. An exception is provided
for current SBDC grantees that are not institutions of higher
education. These institutions may continue to renew their
status as a grantee until they no longer wish to do so or the
SBA determines that these grandfathered grantees are incapable
of providing such services.
The amendment removes the annual report on entrepreneurial
development programs.
V. COMMITTEE VOTE
In compliance with rule XXVI (7)(b) of the Standing Rules
of the Senate, the following vote was recorded on April 23,
2015.
A motion to adopt the Small Business Development Centers
Improvement Act of 2015, a bill to amend the Small Business Act
to provide for improvements to small business development
centers, as amended by the Vitter amendment, was approved
unanimously by voice vote with the following Senators present:
Senators Vitter, Risch, Fischer, Gardner, Ernst, Ayotte, Enzi,
Shaheen, Cantwell, Cardin, Heitkamp, Booker, Coons, Hirono, and
Peters.
VI. COST ESTIMATE
In compliance with rule XXVI (11)(a)(1) of the Standing
Rules of the Senate, the Committee estimates the cost of the
legislation will be equal to the amounts discussed in the
following letter from the Congressional Budget Office:
May 29, 2015.
Hon. David Vitter,
Chairman, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 999, the Small
Business Development Centers Improvement Act of 2015.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susan Willie.
Sincerely,
Keith Hall.
Enclosure.
S. 999--Small Business Development Centers Improvement Act of 2015
S. 999 would direct the Small Business Administration (SBA)
to develop procedures to collect data about Small Business
Development Centers (SBDCs) that receive grants from the
agency. The bill also would amend rules affecting SBDCs by, for
instance, allowing them to market their services.
Based on information from the SBA, CBO estimates that
implementing S. 999 would cost less than $500,000 per year over
the 2016-2020 period, assuming availability of appropriated
funds, for additional data collection and monitoring
activities. Enacting S. 999 would not affect direct spending or
revenues; therefore, pay-as-you-go procedures do not apply.
S. 999 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, or tribal
governments.
The CBO staff contact for this estimate is Susan Willie.
The estimate was approved by Theresa Gullo, Assistant Director
for Budget Analysis.
VII. EVALUATION OF REGULATORY IMPACT
In compliance with rule XXVI (11)(b) of the Standing Rules
of the Senate, it is the opinion of the Committee that no
significant additional regulatory impact will be incurred in
carrying out the provisions of this legislation. There will be
no additional impact on the personal privacy of companies or
individuals who utilize the services provided.
VIII. SECTION-BY-SECTION ANALYSIS
Section 1. Short title
This section provides for the title, ``Small Business
Development Centers Improvement Act of 2015''.
Section 2. Use of authorized entrepreneurial development programs
Currently, the Administrator is creating and separately
funding initiatives developed by the agency. This section
provides that all SBA-created initiatives must be delivered
through the programs authorized in sections 7(j), 7(m), 8(a),
8(b)(1), 21, 22, 29, and 32 of the Small Business Act. The
exceptions to this restriction, in subsections (a)(2)(A)-(E),
are as follows: small business concerns owned by an Indian
tribe; activities and programs in support of a member of the
Armed Forces, including the Reserves and National Guard, a
veteran, or a spouse of a service member or a veteran; the
PRIME, STEP, and FAST programs; and other initiatives in
operation at the time the Committee considered this bill.
Section 3. Marketing of services
The Small Business Act is currently silent on the question
of whether SBDCs can market and advertise their products and
services. Greater awareness of the services available through
the SBDCs will allow more small businesses to receive
entrepreneurial assistance without imposing any more financial
burdens on SBDCs, the SBA, or the taxpayer. This section amends
Section 21 of the Small Business Act by adding a new subsection
(o), which restricts the Administrator from prohibiting
applicants receiving grants under Section 21 of the Small
Business Act from marketing and advertising their services to
individuals and small businesses. This ensures the SBDCs are
able to market and advertise their products and services.
Section 4. Data collection
In order for the SBA to provide Congress with information
to properly evaluate entrepreneurial development programs, the
SBA has attempted to gather better performance data. Some of
the new required information would force SBDCs to capture and
report data that small businesses are reluctant to share. In
cases where this information is of little value to the
government, these requirements place an unnecessary burden on
the SBDCs and will dissuade small businesses from seeking SBDC
assistance. This section requires the Administrator to consult
with the Association of Small Business Development Centers on
the creation of documents governing data collection activities
related to SBDCs.
Section 5. Fees from private partnerships and co-sponsorships
In order to obtain funding, SBDC grantees must match funds
provided by the federal government with non-federal sources,
such as private donations or state funds. Therefore, SBDCs
often work alongside other community partners, such as a local
chamber of commerce, to host events as a partnership or a co-
sponsor. In these instances, a participation fee may be charged
to businesses by the partnership or cosponsoring party.
However, under current law SBDCs are not allowed to collect the
necessary fee. Therefore, this bill permits SBDCs to collect
fees or other income related to the operation of partnerships
or co-sponsorships. This authorization does not alter the no-
cost counseling provided by SBDCs to individual small
businesses.
Section 6. Equity for Small Business Development Centers
Under current law, up to $500,000 of authorized funding to
SBDCs could be utilized by the Administrator to pay for
examination expenses associated with reviewing SBDCs. No other
entrepreneurial development program has an allocation of funds
to reimburse the SBA for the agency's administrative expenses.
This section eliminates the award of $500,000 of SBDC grant
monies to reimburse the SBA for program administration,
consistent with other entrepreneurial development programs.
Section 7. Assistance to out-of-state small businesses
Currently, SBDCs can only operate out-of-state if such
activities are in a bordering state or otherwise ``in close
geographical proximity to the SBDC.'' This restricts SBDCs that
have specialized experience dealing with certain natural
disasters from assisting SBDCs in other regions outside of the
current statutory limitations that are inexperienced with said
natural disaster. For example, during Hurricane Sandy SBDCs in
the affected and neighboring states had relatively little
experience responding to major hurricane disasters compared to
Gulf state SBDCs. Affected states during Hurricane Sandy could
have greatly benefited from the Gulf states' SBDC assistance;
however, current statutory law restricts their aid.
Consequently, this provision enables SBDCs to operate in other
states, regardless of geographical proximity to the SBDC, which
follows the precedent of WBCs and SCORE, neither of which have
territorial limitations.
Section 8. Confidentiality requirements
The SBA's current operational guidelines for the SBDC
program require that SBDCs collect certain information on the
businesses they counsel. This information is the basis for some
of the performance metrics the agency uses to determine the
effectiveness of the SBDCs in fulfilling their mission. Some of
the information collected for this purpose, while relevant and
necessary for the SBA and SBDCs, is sensitive information that
small businesses wish to have treated as confidential. This
sensitive information--such as the name of business--is not
necessary to develop performance metrics. However, its forced
disclosure could dissuade businesses from seeking assistance
through the SBDCs, thereby undermining the intent of Congress
when it created the SBDCs. Therefore, this section amends
Section 21(a)(7)(A) of the Small Business Act to prohibit the
SBA from distributing and sharing SBDC client information with
other parties. This reinforces longstanding efforts to ensure
the confidentiality of information that small businesses
provide to SBDCs.
Section 9. Limitation on awards of grants to Small Business
Development Centers
A majority of SBDC grantees are partnered with higher
education institutions which bolster SBDCs ability to obtain
private matching funding as required under law. This section
prohibits entities other than institutions of higher education
from becoming grantees under Section 21. An exception is
provided for current SBDC grantees who are not institutions of
higher education. These institutions may continue to renew
their status as a grantee until they no longer wish to do so or
the SBA determines that these grandfathered grantees are
incapable of providing such services. Additionally, this
provision also clarifies that this new limitation should not
prohibit grant recipients from entering into grants, contracts,
or cooperative agreements with any other entity.
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