Floor Statements

Mr. Speaker, on November 20, 2004, the House took up consideration of and passed H.R. 4818, the Consolidated Appropriations Act for 2005. Division K of H.R. 4818 contains the Small Business Reauthorization and Manufacturing Assistance Act of 2004. Since the act was incorporated directly into the Consolidated Appropriations Act for 2005, no committee report accompanies the legislation. As chairman, I am submitting for insertion in the Record, the attached explanation of the Small Business Reauthorization and Manufacturing Assistance Act of 2004. I would expect the Administrator, in implementing the provisions of this act, to accord the enclosed explanation the same weight in defining congressional intent that the Administrator would give to a report after a mark-up prior to floor action or the language in a conference report. This expectation is particularly apt in this circumstance because the provisions were negotiated and agreed to in cooperation with my counterpart in the United States Senate.

Joint Explanatory Statement of Division K of H.R. 4818 Filed by

Chairman Manzullo

Section 101. Express loans

Section 7(a)(25)(B) authorizes the Administrator to create

pilot loan programs. In exercising that authority, the

Administrator created an ``Express Loan Pilot Program.'' The

program authorizes lenders to use their own forms in

submitting requests to the Administrator for the issuance of

guarantees. Two significant restrictions are imposed by the

``Express Loan Pilot Program:'' the guarantee cannot exceed

50 percent of the loan and the maximum loan amount is

$250,000.

Section 101 codifies, with a few significant differences,

the provisions of Pub. L. No. 108-217, which addressed the

Express Loan Program. The two most significant changes are

the permanent authorization of the Express Loan Program by

creating a new paragraph (31) in Sec. 7(a) of the Small

Business Act and the statutory increase in the size of such

loans to $350,000.

Section 101 defines an ``express loan'' as any lender

authorized by the Administrator to participate in the Express

Loan Program. Congress expects that the Administrator will

establish by rule the standards needed to qualify as an

Express Lender.

Section 101 defines an ``express loan'' as one in which the

lender utilizes, to the maximum extent practicable, its own

analyses of credit and forms. Congress fully expects that the

conditions under which express loans are made will not vary

significantly from those conditions that currently exist

under the ``Express Loan Pilot Program.'' Nevertheless,

Congress understands that the Administrator may wish to

revise the standards and operating procedures associated with

``express loans.'' Nothing in the statutory language should

be interpreted as prohibiting the Administrator from imposing

these additional requirements that are otherwise consistent

with the statutory language.

Section 101 codifies the existing concept of the

Administrator's ``Express Loan Pilot Program.'' In other

words, the ``Express Loan Program'' is one in which lenders

utilize their own forms and get a guarantee of no more than

50 percent.

Section 101 restricts the program, including the increased

loan amount of $350,000, to those lenders designated as

express lenders by the Administrator. Designation as an

express lender does not limit the lender to making express

loans if the lender has been authorized to make other types

of loans pursuant to Sec. 7(a) of the Small Business Act.

Although a lender may only seek status as an express lender,

this section was included to ensure that the Administrator

not limit the ability of an express lender to seek other

lending authority from the Administrator. Nor is the

Administrator permitted to change its standards for

designating an express lender in a manner that only

authorizes the lender to make express loans. To the extent

that the lending institution wishes to offer a full range of

loan products authorized by Sec. 7(a) and is otherwise

qualified to do so, the Administrator shall not restrict that

ability on the lender's status as an express lender.

Section 101 prohibits the Administrator from revoking the

designation of any lender as an express lender that was so

designated at the time of enactment. This prohibition does

not apply if the Administrator finds the express lender to

have violated laws or regulations or the Administrator

modifies the requirements for designation in a way that the

express lender cannot meet those standards. Congress does

not expect that the Administrator will impose new

requirements for express lenders that prohibit them from

making loans under other loan programs authorized by the

Small Business Act for which they have approval from the

Administrator.

Congress, at the request of the Small Business

Administration, determined that it was appropriate to expand

the size of ``express loans'' to $350,000. Any change in the

size of an express loan now will require action by Congress.

Congress is concerned that the Administrator will take

regulatory actions that unduly favor express lending over

other types of lending authorized by Sec. 7(a) of the Small

Business Act. As such, Congress incorporated a provision

prohibiting the Administrator from taking any action that

would have the effect of requiring a lender to make an

express loan rather than a conventional loan pursuant to

Sec. 7(a). Any significant policy change in the operation of

the lending programs authorized by Sec. 7(a) of the Small

Business Act requires notification to the House and Senate

Small Business Committees. Furthermore, the statutory

language on notification goes beyond that which is required

pursuant to Sec. 7(a)(24) of the Small Business Act.

Section 102. Loan guarantee fees

Section 103 increases the loan guarantee amount to a

maximum of $1.5 million. Given the fact that borrowers are

getting an additional increment in loan guarantees, the

sponsors determined that it would be appropriate to require

an additional 0.25 percent fee for the amount of guarantee in

excess of $1 million. Thus, on the amount of the guarantee

between $1 million and $1.5 million, the upfront fee

authorized pursuant to Sec. 7(a)(18) of the Small Business

Act increases from 3.5 percent to 3.75 percent but only for

that portion of the loan guarantee in excess of $1 million.

This is consistent with typical commercial lending practices

of charging fees that are commensurate with the lenders'

exposure to risk.

Section 102 also raises the fee collected by the

Administrator from banks of the unpaid balance of deferred

participation loans. To avoid situations such as those that

occurred at the end of calendar year 2003 in which the

Administrator was required to drastically reduce lending and

impose other restrictions on the program, Congress determined

that it would be appropriate for the Administrator to have

some discretion in setting the fee paid by lenders on the

unpaid balance. The total amount of the fee cannot in, any

year, exceed 0.55 percent of the unpaid balance. Congress

expects the Administrator to use this authority only when

needed to drive the cost, as that term is defined in the

Federal Credit Reform Act, of the loan program to zero, i.e.,

not need an appropriation. Any use of this discretion to

raise the fee beyond the current level of 0.5 percent should

trigger the notification provisions in Sec. 7(a)(24) of the

Small Business Act. As a further oversight tool, Congress

expects that the Administrator would satisfy any relevant

committee's request for information on the utilization of

this discretion.

Finally, Congress determined that the Administrator also be

given the authority to lower fees charged to borrowers and

lenders if the subsidy cost becomes negative, i.e., the fees

will actually take in more money to the government than it

costs to operate the Sec. 7(a) loan program. Congress adopted

an approach that the Administrator should it undertake a fee

reduction first consider reducing the fees set forth in

clauses (i)-(iii) of subsection 7(a)(1 8)(A) and then reduce

fees on lenders. As a further restriction on the discretion

of the Small Business Administration, the fees that were

charged to borrowers on the date of enactment of this

conference report may not be raised. Congress adopted this

language to ensure that any fee increases to borrowers

beyond the statutory limits requires the action of

Congress.

Section 103. Increase in guarantee amount and, institution of

associated fee

Access to capital is vital to the growth of small

businesses. Particularly for manufacturers and high

technology research and development businesses, typical

amounts of capital available under the existing loan limits

authorized by Sec. 7(a) of the Small Business Act often are

inadequate. Given the importance of capital to grow small

businesses, Congress determined that it would be appropriate

to permanently increase the amount of the loan guarantee from

$1 million to $1.5 million. No additional changes were made

in the overall statutory cap of a gross $2 million loan.

Thus, the Administrator will be able to guarantee up to $1.5

million of a $2 million loan rather than the current limit of

$1 million. Congress expects that this will increase the

number of lenders willing to make loans to small

manufacturers who face significant global competition.

Section 104. Debenture size

Congress raised all of the loan limitations for qualified

state and local development companies (``CDCs'') because they

had not been raised in many years and the long-term financing

needs of small businesses were not being met by loans that

did not exceed the thresholds for loans made pursuant to

Sec. 7(a) of the Small Business Act. Raising the loan

limitations has two effects. First, it signifies the

recognition that Title V of the Small Business Investment Act

and Sec. 7(a) of the Small Business Act has very different

purposes in mind. Second, an increase in the threshold allows

more effective economic development projects to be funded by

CDCs.

Congress believes that the increases to $1,500,000 for

regular projects, $2,000,000 for public policy goal projects,

and $4,000,000 for small manufacturers will provide

significant new financial inputs to small businesses in

general and to small manufacturers in particular.

While all small businesses whose primary industrial

classification is in North American Industrial Classification

sectors 31, 32, and 33 (the sectors for manufacturing), not

all small business concerns in those sectors are considered

small manufacturers. Congress adopted a requirement that

small manufacturers should be limited to those small business

concerns that have all of their production facilities are

located in the United States. Congress does not intend that

small business concerns that have manufacturing facilities

situated outside of the United States should be denied

assistance under programs operated by the Small Business

Administration. However, special benefits should be afforded

to those manufacturers whose production facilities are

located in the United States. Finally, the definition in

Sec. 106 is identical to the definition in this section

thereby avoiding any potential interpretive concerns about

what the legislature meant when it used the same term in

different sections of legislation.

Section 105. Job requirements

The Administrator has promulgated regulations, pursuant to

Sec. 501 of the Small Business Investment Act mandating that

a loan made by a CDC must create or save one job for each

$35,000 in guarantee. This standard has not been revised

since it was adopted in 1990. The standard clearly does not

reflect inflation or the dramatic increases in productivity

that has led to higher wages for all employees. Congress

determined that the standard should be revised to take

account of the changes in the economy during the past 14

years. Therefore, 105 statutorily raises the job creation

standard to one job for every $50,000 in guarantees.

Manufacturing requires greater capital investment than

other businesses. Such investment may lead to higher

productivity for small manufacturers and therefore fewer jobs

created per investment. Congress does not want to prejudice

the ability of CDCs to fund projects that would assist small

manufacturers. Section 106 establishes a standard that

authorizes CDC loans to small manufacturers if the project

creates one job for each $100,000 of guarantee.

CDCs do not need to meet job creation standards for

individual loans if the loan is used to further one of the

public policy objectives in Sec. 501(d). Section 105 modifies

that requirement slightly by exempting a particular project

from the job creation standards if the project was meeting a

public policy objective and if the CDC's overall loan

portfolio creates one job for $50,000 in guarantees.

Since the basic premise of loans made pursuant to Title V

of the Small Business Investment Act is to encourage economic

development, Congress concluded that it made sense to

establish a different standard for job creation in

economically-depressed areas or places with unusually high

wage requirements. Congress believes that CDCs should be

provided more leeway in creating jobs in economically-

depressed areas and Alaska and Hawaii. As a result, CDC loans

in these areas only need to meet a more lenient job creation

standard of one job per $75,000 of guarantee in certain

areas.

Given the importance of small manufacturing to economic

development, Congress excluded loans to small manufacturers

from the calculations needed to determine whether a CDC's

loan portfolio meets the overall job creation standard of one

job per $50,000 of guarantee or the $75,000 standard for

high-wage and economically depressed areas. Congress intends

that the public policy goals set forth in Sec. 501 should be

accomplished without reference to job creation for small

manufacturers. Section 105 also authorizes the Administrator

to waive any of the standards when appropriate. Congress

expects that the Administrator will promulgate regulations

specifying when the job creation standards will be waived.

Two restrictions are imposed on the Administrator's

discretion. First, the Administrator may not waive the

requirements concerning small manufacturers. Second, the

Administrator may not mandate a job creation standard with a

number lower than that set forth in Sec. 105 but does have

the liberty to set a higher dollar guarantee per job

standard. These restrictions ensure that the Administrator

does not undermine the ability of CDCs to lend to small

manufacturers.

Section 106. Report regarding national database of small

manufacturers

Institutions of higher education can play a vital role in

reviving small manufacturers. Universities must purchase

large amounts of standard manufactured products (often on an

annual basis--such as furniture for dormitory rooms). They

also often purchase very sophisticated tools and laboratory

equipment that small manufacturers may produce. Congress

believes that some mechanism should be in place so that

institutions of higher education can identify suppliers from

the universe of small manufacturers. While not an ideal

system, a database similar to PRO-NET represents a useful

model for making institutions of higher education aware of

the capabilities of small manufacturers. PRO-NET is a

database operated by the federal government in which the

capabilities of numerous small businesses are outlined.

Contracting officers use PRO-NET to find small businesses

capable of providing goods and services. Section 106

requires the Administrator and the Association of Small

Business Development Centers to study the

viability of creating a PRO-NET-like database that all

institutions of higher education can use to identify small

manufacturers (the definition is identical to the

definition in Sec. Sec. 104-05) capable of providing their

procurement needs. The bill also requires a report to

Congress on the viability and cost to establish such a

database.

Section 107. International trade

All Sec. 7(a) loans can be used to refinance existing debt

except for international trade loans. Congress determined

that the restriction did not make sense especially since

businesses harmed by unfair international competition will be

more competitive if their debt service payments are lower.

Therefore, Congress authorized businesses otherwise eligible

for an international trade loan to use it for refinancing of

debt but only to the extent that the Administrator determines

the applicant's existing debt is not structured with

reasonable terms and conditions. Congress expects that the

Administrator examine the interest rate being charged

relative to the interest rates generally available for

similar businesses to determine whether the terms and

conditions are not reasonable.

To obtain an international trade loan, the applicant must

demonstrate that the business either is engaged in or

adversely affected by international trade. To avoid the

necessity of having to prove adverse effects if other

government agencies already reached that conclusion in the

same industry as the borrower, Congress mandated that the

Administrator must accept as conclusive proof of injury a

finding by the Secretary of Commerce issued pursuant to

chapter 3 of Title II of the Trade Act of 1974 or any

determination by the International Trade Commission. If an

applicant is in an industry for which the Commission or the

Secretary has made an injury finding, Congress concluded that

it would be pointless to require the small businesses so

suffering to go through the additional expense of presenting

new evidence to the Administrator of injury.

Congress intends that the utilization of the findings by

the Secretary or the Commission is not a limiting factor if a

small business can present other evidence of injury. For

example, the Commission or Secretary may not find that an

industry was injured or that no claims were made to either

agency. Nothing in Sec. 107 prevents a small business from

presenting of evidence of specific injury to his or her

business. The Administrator then would be required to rule on

the adequacy of the proof, and if sufficient evidence was

found of injury, make a loan under Sec. 7(a)(16).

Section 107 also provides for an increase in the size of

international trade loans. Given the nature of international

trade, Congress typically has mandated that loan caps be

$250,000 higher than those for conventional Sec. 7(a) loans.

This section maintains that practice and increased the cap

for international trade loans based on the increase in the

guarantee fees for conventional loans.

Section 121. Program authorization levels

This section amends Sec. 20 of the Small Business Act and

provides for authorization of appropriations. Congress

selected authorization levels with sufficient room to allow

for expected growth and expansion of programs authorized by

the Small Business Act and Small Business Investment Act.

Congress also determined that an authorization of

appropriations not elsewhere provided should apply to all of

the Small Business Investment Act.

Finally, Congress concluded that the existing standing

authorization of appropriations only for carrying out title

IV of the Small Business Investment Act was illogical.

Section 121 amends Sec. 20 to provide for an authorization of

appropriations not elsewhere provided for carrying out both

the Small Business Act and all titles of the Small Business

Investment Act.

Section 122. Addition reauthorizations

The Small Business Development Center (SBDC) program's

authorization levels are set forth in Sec. 21 of the Small

Business Act. Congress provided modest authorization

increases for the SBDCs to take account of necessary growth

in providing services to entrepreneurs. In addition, Congress

also extended the authority of SBDCs to provide drug-free

workplace counseling. This authority would have lapsed

without the change. The extension of authority will give the

SBDC grantees sufficient time to coordinate their actions

with the grantees under the revised drug-free workplace

program.

Given the SBDCs expertise in providing assistance to

entrepreneurs, Congress established a program authorizing

grants to SBDCs that are willing to offer advice in

communities that are economically challenged due to business

or government facility down-sizing or closing. Congress

expects that this assistance will first be offered to

communities suffering from plant closings, then to

communities suffering from government office closings, and

finally to base realignments. To the extent that other bases

are closed in future years, Congress expects that legislation

concerning such closures will provide additional assistance

to the surrounding communities and that assistance provided

under Sec. 122 should be utilized in other areas that do not

receive the directed assistance associated with base

closures.

Section 123. Paul D. Coverdell Drug-Free Workplace Program

authorization provisions

Congress recognizes that small businesses need drug free

workplaces. Drug-free workers boost productivity and reduce

the costs of health care coverage and absenteeism. As a

result, Congress reauthorized the program for two years at

the five million dollar level. In addition, to ensure that

funding is maximized to eligible intermediaries that

specialize in providing drug-free workplace assistance to

small businesses, Congress adopted a limitation on the amount

of funds that can be awarded to SBDCs for carrying out the

purposes of the Paul D. Coverdell Program. Furthermore,

Congress, again in an effort to maximize limited dollars,

restricts the use of funds for administrative purposes to

five percent of the total made available to grantees. Nothing

in this limitation restricts the drug-free workplace advice

that SBDC grantees are authorized to provide in their normal

course of operations.

Section 124. Grant provisions

Congress recognized that improvements in coordination

between the activities of drug-free workplace eligible

intermediaries and SBDCs might improve delivery of services

to small businesses. As a result, Congress established a

grant program within the Paul D. Coverdell Drug-Free

Workplace Program to promote cooperation between eligible

intermediaries and SBDC grantees. Congress expects that the

Administrator award the two-year grants to those applicants

that best demonstrate the capacity to deliver advice in a

coordinated manner between SBDCs and eligible intermediaries.

Section 125. Drug-free communities coalitions as eligible

intermediaries

Congress recognizes that there are numerous entities that

receive grants under chapter 2 of the National Narcotics

Leadership Act of 1988 but are not currently authorized to

participate as eligible intermediaries under the Paul D.

Coverdell Drug-Free Workplace Program. This section makes

these National Narcotics Leadership Act grantees, which could

provide valuable insight into establishing drug-free

workplaces, eligible to receive awards under the Paul D.

Coverdell Drug-Free Workplace Program. Inclusion of new

additional parties should not be interpreted as directing the

Administrator to favor them over others that apply for grants

under the Paul D. Coverdell Drug-Free Workplace Program.

Section 126. Promotion of effective practices of eligible

intermediaries

To ensure that the Paul D. Coverdell Drug-Free Workplace

Program operates optimally, Congress mandates that the

Administrator provide best practices to eligible

intermediaries. The Administrator should use all of its

available outreach resources, including SBDCs, Women Business

Centers, and district offices to ensure that eligible

intermediaries are kept apprised of best practices.

Congress also believes that the performance of eligible

intermediaries should be assessed and measured. Such

evaluations will be useful to Congress when it considers what

changes, if any, need to make the program even more

effective. This section establishes the procedures for

collecting data needed to evaluate the efficacy of the

program.

Section 127. Report to Congress

This section requires the Administrator to use the data

collected under Sec. 126 and report to Congress on the

efficacy of the program and dissemination of drug-free

workplace information. Congress expects the relevant

committees to examine the report and make necessary

legislative changes as a result to ensure optimal operation

of the Paul D. Coverdell Drug-Free Workplace Program.

Section 131. Lender examination and review

Current practice authorizes SBIC licensees to pay for

examination and reviews conducted by the Administrator.

Congress determined that the same principles should apply to

lenders authorized to make government-guaranteed loans under

Sec. 7(a). This section grants the Administration the

authority to charge for examinations and reviews. The section

also requires that the fees be directed to lender oversight

activities including the payment of salaries and expenses of

Administration personnel involved in such functions. This

authority does not imply that the fees may be directed to the

reimbursement of other functions of the Administration.

Section 132. Gifts and co-sponsorship of events

Gifts and co-sponsorships play a useful role in the Small

Business Administration's performance of its outreach

function to small businesses. Congress determined that even

broader language than is currently permitted was necessary to

ensure the Administration's continued ability to obtain gifts

and seek co-sponsorships. In particular, Congress recognized

that in many instances the Administration does not receive

gifts but rather contributions are made by a co-sponsoring

entity to an Administration event, such as small business

forum. In other instances, the SBA uses gifts to pay for

promotional materials, such as cards that are handed out in

district offices to promote an event. This section clarifies

and broadens the existing authority of the Small Business

Administration to obtain gifts and co-sponsorships in order

to expand the agency's outreach. To ensure appropriate

clarity, Congress added the term ``recognition events''

which would include Small Business Week and sponsorship of

dinners during that period. The section also requires the

Administration to recognize the co-sponsors of such events

but only to the extent of their contributions. No

endorsements of the co-sponsors products or services are

permitted.

In order to ensure that conflicts of interest do not arise

in the solicitation or acceptance

of gifts, Congress requires the General Counsel to determine

whether a conflict of interest exists. If a determination

that a conflict of interest exists, the General Counsel is

empowered to prohibit the solicitation or acceptance.

Finally, the language clarifies that the Administrator may

delegate the approval of co-sponsorships to the Deputy

Administrator, Associate Administrators, and Assistant

Administrators. No personnel located in district or regional

offices are permitted to approve co-sponsorships. Congress

adopted this restriction to ensure close cooperation with the

General Counsel of the Administration.

Congress also requires that the Inspector General audit the

use of such gifts and co-sponsorships. This avoids potential

abuses of the program through independent oversight of an

official whose investigations cannot be impeded by the

Administrator or Administration personnel. Congress wanted

additional assurances (beyond the Inspector General audit)

that the Small Business Administration achieved a proper

balance between this new expanded authority and

accountability. As a result, a sunset date of 2006 was added

in order to properly monitor this new authority before

considering making this language permanent in the Small

Business Act.

Section 141. Service Corps of Retired Executives

Currently, the Administrator has the discretion whether to

permit the Service Corps of Retired Executives (SCORE) to

maintain offices at the headquarters of the Administration

and pay employees of SCORE. Congress determined that the

vitality of SCORE should not be subject to whims of the

Administrator and therefore require that the Administrator

maintain SCORE's offices at the Administration's headquarters

and continue to pay for the salaries of SCORE personnel.

Congress notes that this will not require any increased

appropriation since these services and expenses are currently

included in the Small Business Administration's budget.

Section 142. Small Business Development Center Program

Congress remains concerned that SBDCs were and may continue

to be revealing the name of businesses that seek their advice

to Administration employees for functions unrelated to the

financial auditing or client surveys needed to oversee the

operations of the SBDC grantees. Congress believes that such

behavior is intolerable. This section prohibits the

disclosure of client information (including the name,

address, telephone and facsimile numbers, and e-mail address)

of any concern or individual receiving assistance from a SBDC

grantee or its subcontractors (who operate service centers

that business owners can utilize to obtain advice) unless the

Administrator is ordered to make such disclosure pursuant to

a court order or civil or criminal enforcement action

commenced by a federal or state agency. Congress expects that

SBDC grantees will only respond to formal agency requests,

such as civil investigative demands, and subpoenas.

Congress also recognizes that the Administrator has

significant management responsibilities to ensure that

federal taxpayer dollars are wisely used by grantees and are

in compliance with the law, regulations, and the cooperative

agreements signed by SBDC grantees. Congress authorizes the

SBDC grantees to provide client names for the purposes of

financial audits conducted by the Administrator or

Inspector General and for client surveys to ensure that

the SBDC grantees are satisfying certain aspects of their

grant agreements. Congress recognizes that client surveys

may be misused and impose restrictions on their use. Until

regulations are in place to ensure that SBDC grantee

client's privacy is protected to the maximum extent

practicable given the management oversight responsibility

of the Administrator, Congress requires client surveys to

be approved by the Inspector General and any approval

incorporated into the semi-annual report made to Congress.

This section also makes a technical change in wording of

the SBDC program. It renames the certification program as an

accreditation program. The change was made because

institutions are accredited not certified. Since the program

determines the quality of SBDCs, it makes sense to have them

accredited not certified. An identical change is made in

20(a)(1)(D)-(E).

Section 143. Advisory Committee on Veterans Business Affairs

Congress has determined that the federal government must

provide better assistance and support to veterans in their

efforts to form and expand small businesses. In 1999, as part

of this effort, Congress established an Advisory Committee on

Veterans Business Affairs. Its responsibilities included

providing advice to Congress and the Small Business

Administration on policy initiatives that would promote

entrepreneurship by veterans. The responsibilities of this

advisory board were to be taken over by the National Veterans

Business Development Corporation on October 1, 2004. Congress

determined that the Advisory Committee's role was

sufficiently beneficial that it should not be subsumed within

the National Veterans Business Development Corporation. As a

result, Congress authorized an extension of the Advisory

Committee as a separate entity to continue its functions

through September 30, 2006.

Section 144. Outreach grants for veterans

The Administration is authorized to provide outreach grants

to help disabled veterans start and expand small businesses.

Congress determined that the outreach grants should not be

limited to disabled veterans. This section extends the

authority to provide outreach programs to veterans and

reservists.

Section 145. Authorization of appropriations

To express Congress' concern about adequate efforts to

assist veterans, Congress determined that the Small Business

Administration's Office of Veterans Affairs should have a

separate authorization. This section provides for that

separate authorization for fiscal years 2005 and 2006.

Section 146. National Veterans Business Development

Corporation

A ruling by the Department of Justice concluded that the

National Veterans Business Development Corporation was a

federal agency for all purposes and thus subject to, among

other things, federal administrative, personnel, and

procurement laws. Congress, when it created the corporation,

never intended that it would be considered a federal agency.

The legislation mandated sufficient fundraising by the

corporation that would eliminate the need for federal

funding. While that fundraising continues, Congress

determined that its original intent concerning the status of

the corporation should be honored. This section makes it

clear that the corporation is to be considered and treated as

a private entity and not an agency or instrumentality of

the federal government.

Section 147. Small Business Manufacturing Task Force

Manufacturing jobs in the United States have declined since

their historic peak in 1979 and that loss has accelerated in

recent years. Small business manufacturers constitute over 98

percent of our nation's manufacturing enterprises. It is

impossible to overstate the role of small manufacturers

within the overall manufacturing industry and our nation's

economy. The House and Senate Small Business Committees have

placed a high priority on trying to resuscitate the small

business industrial base because economic security in the

United States cannot occur in a purely post-industrial

economy.

Section 147 establishes a Small Business Manufacturing Task

Force within the Small Business Administration, charged with

ensuring that the Administration is properly addressing the

particular needs of small manufacturers. Specifically, the

Small Business Manufacturing Task Force will: (a) evaluate

and identify whether existing programs and services are

sufficient to serve small manufacturers' needs, or whether

additional programs or services are necessary; (b) actively

promote the SBA's programs and services that serve small

manufacturers; and (c) identify and study the unique

conditions of small manufacturers, and develop and propose

policy initiatives to support and assist them. This section

also instructs the Small Business Manufacturing Task Force to

submit a report of its findings and recommendations to the

President and the Senate and House Small Business Committees

not later than 12 months after the effective date of the bill

and annually thereafter. In carrying out their obligations

under this section, Congress expects that the Task Force will

consult with other agencies that have manufacturing

responsibilities, such as the Department of Commerce.

Section 151. Streamlining and revision of HUBZone eligibility

requirements

The Historically Underutilized Business Zone (HUBZone)

program was designed to direct portions of federal

contracting dollars into areas of the country that in the

past have been out of the economic mainstream. HUBZone areas,

which include qualified census tracts, poor rural counties,

and Indian reservations, often are out-of-the-way places that

the stream of commerce passes by, and thus tend to be in low

or moderate income areas also characterized by comparatively

high unemployment. These areas can also include certain rural

communities and tend generally to be low-traffic areas that

do not have a reliable customer base to support business

development. As a result, businesses have been reluctant to

move into these areas and expend the necessary funds to

develop the infrastructure for creation of jobs. It simply

has not been profitable, without a customer base, to keep

those businesses operating.

The HUBZone program seeks to overcome these problems by

providing the means for Federal procurement activities to

become customers for small businesses that locate in

HUBZones. While a small business works to grow, expand its

payroll, and establish a solid base of commercial or other

customers, federal business opportunities can be of vital

importance. Federal prime and subcontracts can become an

important source of revenue for a HUBZone small business, and

prime contracts in particular can help stabilize revenues,

establish valuable past performance record, and maintain

future profitability.

In past years, the HUBZone program has encountered issues

relating to the statutory requirement that a HUBZone firm be

entirely owned and controlled by individual U.S. citizens.

This requirement means that all HUBZone applicants need to

be owned by human beings directly and not human beings

organized as business entities. However, many small

business owners and small business investors prefer to

take advantage of

various corporate forms in order to limit the personal

liability for themselves and their families. Exceptions

for Alaska Native Corporations, Indian tribal governments,

and community development corporations were added by the

Small Business Act reauthorization legislation in 2000.

Even with those changes, the presence of a corporate

entity or a limited liability company with an ownership

stake in a small business would have automatically

disqualified an otherwise eligible firm from participation

in the HUBZone program. Small agricultural cooperatives,

which already maintain presence in rural HUBZones, would

have faced similar restrictions. These rules unnecessarily

impede the flow of capital to the very areas that need it

the most and create compliance conflicts with other small

business procurement programs.

Section 151 addresses this problem through streamlining and

revision of the eligibility requirements for HUBZone small

businesses to include small businesses that are 51 percent

owned by United States citizens, as well as to include small

businesses which are small agricultural cooperatives or are

owned and controlled by small agricultural cooperatives.

In addition, HUBZone firms owned by the Indian tribes have

been facing peculiar challenges due to statutory requirements

that they must hire a certain percentage of its workforce

performing a federal contract or subcontract from Indian

reservations or adjacent areas. These requirements, while

motivated by the desire to spur economic development of the

tribes, over time had the unintended consequence of putting

tribally-owned firms at a disadvantage in comparison with all

other HUBZone concerns by imposing a geographic restriction

on the kinds of contracts that tribally-owned HUBZone firms

could perform. Geographic restrictions also impeded business

synergies between tribally-owned HUBZone firms and Alaskan

Native Corporations. To remedy this disparity, Section 151 is

providing tribally-owned HUBZone concerns the option of

qualifying for the program based on locating in, and hiring

workers from, either Indian reservations or any other

HUBZones on the same terms as available to other HUBZone

firms. Congress notes that the Indian tribes, as owners of

the HUBZone firms, will be receiving expanded economic

benefits from new contracting opportunities.

Section 152. Expansion of qualified areas

Congress observes that the HUBZone area qualifications are

also in need of improvement. Paradoxically, economically

distressed rural communities in states with high

unemployment--among the neediest of needy areas--currently do

not qualify for the HUBZone program because rural areas

currently must qualify in relation to the statewide

unemployment average. As an example, in calendar year 2003,

Alaska had a statewide unemployment rate of 8.0 percent. To

qualify as a HUBZone area, it was necessary for an Alaskan

rural community to have an 11.2 percent unemployment rate.

But, in 25 of the 50 states, a rural community could have

qualified as a HUBZone with an unemployment range of 7.8

percent or less.

Section 152 addresses this problem by modifying the

definition of a ``qualified nonmetropolitan county'' to

provide the option of comparing the unemployment statistic

for that area to the statewide average or to the national

average. The new statutory HUBZone definition should give the

Small Business Administration flexibility to address both

national and state-wide unemployment disparities without

hurting the states that have comparatively low

unemployment overall, but with pockets of serious

unemployment.

Congress recognizes the drastic economic ramifications of

military base closures and that the HUBZone program can

uniquely harness the strength and the creativity of the

private sector by providing incentive for small businesses to

relocate to areas suffering such ramifications. According to

congressional research, more than 300 military bases closed

or realigned between 1988 and 2003 and more than 50 percent

of these bases were located outside of a designated HUBZone.

Therefore, Congress intends that, upon the later of the

enactment of this act or the date of final closure, existing

as well as future military base closure areas be designated

as HUBZones for a period of five years in order to

reinvigorate the productive capacity of such areas and

leverage existing local customers and a skilled workforce.

Congress believes that new businesses and new jobs created

through the HUBZone small firms mean new life for areas

affected by base closure.

Additionally, Congress notes the existence of numerous

complaints that the current definition of HUBZone qualified

areas based on census income data, in conjunction with the

definition of HUBZone qualified redesignated areas, fail to

provide adequate time to recoup a return on investment. These

concerns appear justified. Congress observes that the HUBZone

program is relatively young, and the federal government is

not even close to meeting its statutory prime contracting

goal of 3 percent. Because the HUBZone program was enacted

into law in 1997, the initial HUBZone areas were designated

on the basis of the 1990 Census. However, the federal

government conducted another census in 2000. As a result,

many areas were redesignated after only 3 years of the

program's existence. The statute currently grandfathers the

redesignated areas into the program for 3 years.

Congress notes that, at the time of the last redesignation,

the small business community received comparatively few

benefits from the HUBZone program despite the substantial

workforce recruitment, compliance, and business development

efforts that must be expended by each of the HUBZone firms.

These small businesses, which made business decisions to

pursue the HUBZone strategy by locating in a HUBZone,

adjusting their ownership structure, and recruiting HUBZone

residents are in danger of being penalized for the federal

government's slow initial implementation of the HUBZone

program. Further, anecdotal evidence indicates that it may

take a long time for a new firm to secure a federal contract,

and that multiple-order contracts commonly envision task

orders over a number of years. In these circumstances, a 3-

year grandfather clause would appear not to provide

sufficient time for a small business to generate a return on

the HUBZone investment. By comparison, companies under the

8(a) program can maintain such a designation for 9 years, and

a general small business designation can be maintained

indefinitely. Therefore, Congress imposes a moratorium on

HUBZone area redesignations by providing for an extension of

the redesignation period until the conclusion of the 2010

Census. No certified HUBZone firm shall be decertified as a

result of either the redesignation process based on the 2000

Census data or any revised unemployment data subsequent to

December 21, 2000, the date of passage of enactment of the

HUBZone in the Native America Act. It is the intent of

Congress to have the Small Business Administration reinstate

any HUBZone firm previously decertified based on these two

criteria.

Congress also finds that, concurrently with the moratorium,

a study on the effectiveness of the HUBZone area definitions,

including the redesignation period, must be conducted by the

Office of Advocacy of the United States Small Business

Administration. The Office of Advocacy is chosen to conduct

this study for its particular expertise in small business

procurement, rural small business development, and general

small business matters. Congress directs the Office of

Advocacy to examine the impact and effectiveness of the

HUBZone definitions on small business development and jobs

creation, and expect that the Office of Advocacy will

periodically consult with congressional small business

committees on matters concerning this study. Findings and

recommendations of the study must be reported to

congressional small business committees by May 1, 2008.

Section 153. Price evaluation preference

With regards to the application of existing HUBZone price

preferences to international food aid procurements conducted

by the United States Department of Agriculture (USDA),

Congress concludes that the preferences as they currently

stand are hindering the goals of U.S. foreign humanitarian

food assistance programs. This view is supported by extensive

consideration of market data from the Kansas City auction

office of the USDA Farm Service Agency, the structure of

auction tenders and other auction processes, as well as data

supplied by the industry. It appears that there is a risk of

various unintended and undesirable consequences to applying

the current HUBZone mandate to international food aid

acquisitions. In particular, it appears that, in the context

of food aid tender auctions, the claimed job gains fostered

by the current price preference are offset by job losses in

other communities, the non-HUBZone small businesses

attempting to compete may experience undue harm, and the

competitive supplier base may atrophy. In turn, this may

undermine USDA's capacity to secure adequate foodstuffs for

malnourished persons and increase the costs to the food aid

programs without realizing adequate jobs creation and

business development benefits.

The HUBZone price preference alternative adopted in this

act (a 5 percent price evaluation preference on 20 percent of

the contract) would alleviate these potentially damaging

effects on the U.S. food aid system. Congress believes that

this approach would preserve the HUBZone program's goal of

providing HUBZone-eligible companies with a meaningful

opportunity to compete while ensuring that the USDA has an

adequate capacity of supply from which to draw to deliver

emergency food aid in catastrophic situations. This approach

would also eliminate the current HUBZone program's

application problem which directly penalizes non-HUBZone

small businesses due to the nature of the food aid auctions.

The potential for job losses in other communities would be

limited. Importantly, this approach also reflects the

cornerstone of America's efforts to provide food assistance

to the world's neediest people through competitive markets.

According to President Dwight D. Eisenhower and

congressional architects of the Small Business Act, an

overarching purpose of small business procurement programs is

to assure a vibrant, competitive supplier base for the

federal government. Price preferences are employed to further

this purpose, and should be structured accordingly. Congress

notes that, in general, price preferences have been a

valuable tool for encouraging a more robust supplier base.

Nevertheless, Congress believes that, in these very special

circumstances, it is important to encourage competition by

keeping multiple vendors actively bidding in our food

assistance programs to secure the lowest cost procurement

and emergency supply chains in

the case of humanitarian crisis. This approach builds on

the current small business 10 percent set-aside by an

additional 20 percent allocation of every tender to small

businesses and HUBZone applicants. It guarantees full and

open competition, including competition pursuant to the

Small Business Act, in food aid procurement tenders to

assure that U.S. food aid programs do not suffer

consequences inconsistent with the intent of the price

preference program. The approach in this legislation

safeguards the dual interests of a vibrant small business

presence in federal procurements and robust food aid

programs.

Section 154. HUBZone authorizations

Congress notes that the federal government has failed to

meet its statutory HUBZone contracting goals every single

year these goals have been in effect. Continuous, dedicated

authorization of the HUBZone program is essential to continue

the effort to bring economic opportunities to the HUBZone

areas. Therefore, Congress extends the current authorization

of appropriations of $10,000,000 for the SBA's HUBZone

program through Fiscal Year 2006.

Section 155. Participation in federally funded projects

Section 155 removes the burdensome paperwork requirements

for additional certification by firms seeking to perform any

State, or political subdivision projects that utilize federal

dollars if they are currently certified, or otherwise meet

the applicable qualification requirements, for participation

in any program under Sec. 8(a) of the Small Business Act.

This change will: (1) provide federally certified Sec. 8(a)

small businesses with access to all State and local projects

funded in whole or in part by the federal government; (2)

eliminate the burden of requiring Sec. 8(a) small businesses

to get certifications from the State or local government or

both in addition to their federal certification under

Sec. 8(a); and, (3) decrease certification costs and

eliminate time delays associated with the burden of receiving

additional state or local government certifications for

businesses authorized to participate in program established

by Sec. 8(a) of the Small Business Act.

Section 161. Supervisory enforcement authority for small

business lending companies

This section creates a new Sec. 23 of the Small Business

Act. It gives the Administrator specific enforcement and

supervisory authority over Small Business Lending Companies

(SBLCs) and Non-Federally Regulated SBA Lenders as those

terms are defined in Sec. 162 of this conference report. The

vast majority of lenders authorized to make loans pursuant to

the Small Business Act have their lending and other

activities overseen and regulated by federal financial

regulators, including loans and corporate transactions

related to their general lending practices. The Administrator

makes no effort at regulating lending institutions except for

their authority to make Sec. 7(a) loans.

In contradistinction, there are a few institutions that are

authorized to make loans pursuant to Sec. 7(a) of the Small

Business Act that are not typical lending institutions. SBLCs

(except for two which are wholly-owned by national banks) are

subsidiaries of industrial corporations and thus not subject

to any regulation by financial regulators, other than certain

filings made with the Securities and Exchange

Commission. Non-federally regulated SBA lenders have some

state oversight but the extent varies according to state

law. The only authority that the Administrator has with

respect to these lenders is the ability to prohibit them

from making loans pursuant to Sec. 7(a). The Administrator

has no authority to take other regulatory action, similar

to that available to banking regulators, to protect the

public and the federal treasury. Congress concurs with the

Administrator's request that greater authority is needed

to regulate SBLCs and Non-Federally Regulated SBA Lenders.

The basic approach adopted by Congress enables the

Administrator to supervise the soundness and safety of

institutions authorized to make loans pursuant to Sec. 7(a)

but are not otherwise subject to the strict oversight imposed

by federal financial regulators. Congress concurs with the

Administrator's request that specific enforcement and

supervisory authority are needed. These authorities include

the power to: issue cease and desist orders, impose civil

money penalties, mandate capital standards, and remove

officers and directors who are acting in an unsafe and

unsound manner. The power and authority tracks closely the

powers granted to the Administrator with respect to

regulation of SBICs and their officers and employees. In some

cases, Congress differentiated regulatory powers applicable

to SBLCs and those applicable to Non-Federally Regulated

Lenders. Nothing in this section grants the Administrator the

authority to be extended to overall corporate management of

the parent that owns a SBLC.

Congress provides for the Administrator to issue capital

directives mandating maintenance of certain capital

standards, including the requirement to increase its level of

capital. The section also authorizes the Administrator to

issue cease and desist orders by the SBLC or Non-Federally

Regulated Lender. To ensure that the capital directive is

used sparingly and only in appropriate circumstances, the

Administrator is required to promulgate regulations on

capital directives and may only delegate the authority to the

Associate Administrator for Capital Access.

The Administrator also is empowered to suspend or remove

officials that have management responsibility for the

entity's lending pursuant to Sec. 7(a) of the Small Business

Act. No authority, explicit or implied, is authorized to

remove or suspend officials that do not have management

responsibilities with respect to Sec. 7(a) lending. Thus,

Congress expects that the Administrator take action not to

suspend the Chief Executive Officer of General Electric

Corporation but only its SBLC subsidiary.

Prior to the issuance of any order under this section

except for a capital directive, the Administrator is required

to provide any target of the order a hearing pursuant to

Sec. Sec. 554, 556, and 557 of the Administrative Procedure

Act. The section delegates the responsibility of conducting

the hearing to administrative law judges but the final

responsibility on determining whether an order should issue

rests with the Administrator based on the record developed at

the adjudication. The approach is similar to that used by

independent federal regulatory agencies such as the Federal

Communications Commission or Federal Trade Commission. Those

agencies use administrative law judges to conduct hearings

and the commissioners use that record as the basis for their

legal and policy determination. This bifurcation of the

hearing from the decisionmaker ensures that the hearing will

be fair and provide an opportunity for the target of an order

to make the best possible case before an impartial fact-

gathering tribunal.

The Administrator is authorized to issue orders prior to a

hearing if extraordinary circumstances exist and the order is

needed to protect the financial or legal position of the

United States. The Administrator only should use the power to

issue orders without a hearing only under those circumstances

in which an agency issues a rule without notice and comment,

i.e., a truly exigent circumstance, see, e.g., NRDC v. Evans,

316 F.3d 904, 912 (9th Cir. 2002); Utilities Solid Waste

Group v. EPA, 236 F.3d 749, 754 (D.C. Cir. 2001) (good cause

to forgo notice and comment applies only in emergency

circumstances), or when a federal court would issue an ex

parte temporary restraining order (but in order to preserve

and protect the federal government rather than the status

quo). Cf. Granny Goose Foods, Inc. v. Brotherhood of

Teamsters & Auto Truck Drivers, 415 U.S. 423, 439 (1974)

(noting that ex parte restraining orders necessary evil to

protect status quo). The section then provides that the

procedures for holding a hearing, including the notice

requirement, be commenced within 2 days after the issuance of

the order. Congress believes that this comports with the

fundamental fairness exhibited by federal courts when issuing

an ex parte temporary restraining order.

Congress' approach defines final agency action for purposes

of a challenge to the issuance of an order by the

Administrator and authorizes that a challenge may be

commenced in federal court within 20 days after issuance of a

final order. For purposes of fundamental fairness to

individuals, Congress also believes that interim relief in

federal court is appropriate for a stay of an order issued

prior to hearing until the hearing itself is completed. Both

of these provisions were added out of an abundance of

caution. Although Congress believes that federal court

jurisdiction challenging the Administrator's action may

constitute a ``federal question'' pursuant to Sec. 1331 of

the Title 28, United States Code, Congress determined that

explicit authority to challenge the Administrator's orders in

federal court removes any question that this decision has

been remitted solely to the discretion of the agency and is

not subject to review under Heckler v. Chaney, 470 U.S. 821

(1985).

This section authorizes a court to appoint a receiver for

the entities subject to regulation pursuant to this section.

The receiver is entitled to take possession of assets of the

SBLC or Non-Federally Regulated SBA Lender. Congress intends

this authority to extend only to the SBLC or Non-Federally

Regulated Lender's portfolio of loans or other instruments

guaranteed by the Administrator including any debentures,

participating debt, or securities issued pursuant to the

Small Business Investment Act.

Congress believes that suspension, revocation, or cease and

desist is an extraordinary remedy. Each requires an extremely

high burden of proof related to willful misconduct that may

present a difficult case for the Administrator to prove.

Therefore, the bill also provides the Administrator with the

authority to seek court-imposed civil penalties for the

failure to file reports required by the Administrator. Such

penalties shall issue when the failure to file is willful and

not due to neglect. The failure to file required reports for

more than two reporting periods is, in the opinion of

Congress, sufficient, but not the only evidence of willful

neglect. Congress expects the Administrator to promulgate

regulations outlining the factors that determine willful

neglect for the purposes of civil penalties (as an aid to the

entities regulated pursuant to Sec. 23). These regulations

also must contain standards for exempting SBLCs and Non-

Federally Regulated Lenders from the civil penalty provisions

as well as the procedures used for determining whether the

institution qualifies.

Section 162. Definitions relating to small business lending

companies

Almost all of the lenders authorized by the Administrator

to issue guaranteed loans pursuant to Sec. 7(a) are lending

institutions regulated by a federal financial regulator.

However, there are a few institutions that make guaranteed

loans that are not subject to federal financial regulatory

oversight or regulation by a state banking authority. The

Administrator classifies these institutions generically as

``small business lending companies.'' However, that universe

actually consists of two separate entities--small business

lending companies (not financial institutions) and financial

institutions not subject to any agency authorized to review

the safety and soundness of depositary institutions. Since

Sec. 161 adds a new Sec. 23 granting the Administrator power

to regulate these entities, Sec. 162 adds two new subsections

to the definitions in the Small Business Act defining small

business lending companies and non-federally regulated SBA

lenders.

Section 201. Amendment to definition of equity capital with

respect to issuers of participating securities

Congress determined that changes were needed in the

definition of equity capital with respect to any company that

issues participating securities. Such companies,

participating securities SBICs, commit to invest an amount

equal to the outstanding face value of participating

securities solely in equity capital. Equity capital refers to

common or preferred stock or a similar instrument, including

subordinated debt with equity features. Equity capital issued

by participating securities SBICs previously provided for

interest payments to be made to the Administration contingent

upon--and limited to--the extent of earnings on equity

capital. However, since the inception of the Participating

Security SBIC program, the majority of SBICs have not

realized sufficient profits with which to meet their

financial obligations to the federal government. This has

resulted in serious financial loss for the federal

government. In order to mitigate these losses, the definition

of equity capital has changed so that participating security

SBICs do not have to realize profits on their investments in

order to make payments to the Administration. If a

participating security SBIC is experiencing overall losses on

their investments but has other sources of funds such as

invested excess funds, royalty payments, licensing fees and

the like, Congress intends that these funds may be used to

meet their obligations to the Administration.

Section 202. Investment of excess funds

This section provides SBICs with additional flexibility for

handling funds prior to investments in small businesses by

allowing SBICs to invest such funds in additional types of

securities. Currently, SBICs holding cash, prior to investing

in a small business, are only permitted to invest directly in

obligations of the United States, obligations guaranteed by

the United States, or in certificates of deposit maturing

within one year or savings accounts that are in institutions

insured by the Federal Deposit Insurance Corporation or the

Federal Savings and Loan Insurance Corporation. This section

modifies the current restriction by permitting SBICs to

invest in securities, mutual funds, or instruments, which

themselves invest solely in the obligations that are

currently permitted. For instance, Congress expects that

SBICs will be able to invest in mutual funds that, in turn,

invest in the government-backed obligations already

authorized for investment in SBICs. Congress believes that

this modification will provide SBICs with greater flexibility

and a wider range of short-term investment options.

Section 203. Surety Bond Amendments

Section 203(a) clarifies that the current $2 million limit

on surety bonds applies to the bond guarantee and not the

contract size. Congress adopted this clarification to

prohibit contracting officers from determining that small

businesses would not qualify for an Administration-backed

surety bond for a contract worth less than $2 million even

though it was part of a bundle of contracts that exceeded $2

million. For example, a small business might be denied a

surety bond if the small business had a contract for $1.5

million, but that contract was part of a $12 million bundle

of contracts that had been awarded simultaneously.

Section 203(b) requires that an audit of each participating

surety shall occur every three years instead of annually.

This reduction in the frequency of audits will save

participating sureties time and money and allow them to

allocate these resources to more productive uses. In

addition, this will enable the Administrator to focus on more

critical elements since the sureties already provide reports

on a periodic basis that would identify problems during the

interregnum between audits.

Currently certain sureties designated by the Administrator

may issue, monitor, and service surety bonds issued pursuant

to Title IV of the Small Business Investment Act. This

authority ceased to be operative on September 30, 2003 (but

has been extended for short periods of time on a temporary

basis). Congress determined that the authority for this

program should be made permanent. Section 203(b) makes that

change by repealing 207 of the Small Business Reauthorization

and Amendment Act of 1988.

Section 204. Effective Date of Certain Fees

Loans made pursuant to Title V of the Small Business

Investment Act do not require any appropriation. Fees charged

to borrowers and CDCs absorb the costs associated with the

issuance of such loans. When the zero-subsidy for the program

was instituted, Congress made the fee authority temporary to

see whether the program could survive without an

appropriation. The program has succeeded admirably and

Congress does not expect that an appropriation to fund loans

made by CDCs will be made for the foreseeable future. As a

result, Congress determined it was pointless to continue, as

temporary, the Administrator's authority to charge fees for

loans made pursuant to Title V of the Small Business

Investment Act. Section 204 grants the Administrator

permanent authority to charge fees.

Mr. Speaker, I rise today to pay tribute to Representative Philip M. Crane. Let me share with you remarks by Edwin J. Feulner, President of The Heritage Foundation that express his gratitude to a man who has given so much to Eighth District of Illinois and the House of Representatives.

Phil Crane's Congressional colleagues will expand on his

extraordinary 35-year record of legislative achievements.

Others will speak of his unswerving commitment to sensible

conservative economic policy based on the principles of

limited government and federalism. Still others will discuss

his contributions to developing sound American foreign and

defense policy.

For me, however, Phil Crane will be the Member of Congress

who has--more than any other Member I've known in my forty

years in Washington--fundamentally understood the power of

ideas and the relationship of ideas to changes in the laws

that govern the American people.

Philip M. Crane is a man of ideas. His first book,

published in March 1964, is entitled The Democrat's Dilemma.

The book jacket notes the influence of extremist views and

organizations on the Democratic Party. If this sounds

familiar to every American who has been awake for the last

several months, it's because Phil Crane's message is as

timely today, for the 2004 election, as it was then, for the

1964 election.

In the foreword to The Democrat's Dilemma, Jameson G.

Campaigne, the then-editor of the Indianapolis Star, wrote,

``Revolutions are normally organized and engineered by small

groups of men and women.'' Phil's book is an insightful

account of how a small band of dedicated souls changed the

world. While Phil recounts in fascinating detail the

growing influence of the Fabian Socialists on the

Democratic Party, even

then--in 1964--Mr. Campaigne noted in his foreword that

the Fabians were seeing ``their power threatened by a

smaller, but equally aggressive and growing, group of

conservatives.''

I first met Phil Crane in the summer of 1964 at an

Intercollegiate Studies Institute summer school at Lake

Forest College in Illinois. Phil was a graduate of Hillsdale

College, an Army Veteran, and a bright young professor of

history at Bradley University in Peoria, having recently

received his Ph.D. from Indiana University where ``his

academic record had never been excelled.''

Ever the teacher, for more than forty years, on America's

college and university campuses, and in his committees, on

the Floor of the House of Representatives, and before

countless audiences around the Nation, a singular leader of

that ``aggressive and growing group of conservatives'' has

been Phil Crane.

Looking back on the period since the Goldwater/Johnson

election in 1964, the conclusion is inescapable that Phil

Crane's intellectual and political leadership has been

crucial to the rise of conservative ideas in this country,

and that his dedication to our shared ideas of freedom and

free enterprise, limited government, traditional values and a

strong national defense has truly changed the world.

From the day in December 1969, shortly after he won the

special election to succeed Don Rumsfeld, in the old 12th

District, when he asked me to be one of the first employees

on his Congressional staff, I have witnessed Phil lead his

colleagues in legislative battles. Some of them have been

successful, even if forgotten, like eliminating the New Deal

prohibition on the individual citizen's right to own gold.

Others were successful in their own right, and led to much

bigger things later on, like stopping President Nixon's so-

called ``family assistance plan'', which led to the eventual

overhaul of our whole federal welfare system.

Still others were, shall we say, ``ahead of their time,''

like his efforts to prohibit federal operating subsidies for

mass transit, and to repeal the private express statutes.

But there was always one thing that his legislative

initiatives, like his speeches, and his participation in

floor debates had in common: they were always based on solid

conservative principles.

Phil Crane has always known that with a principled position

and a determination to focus his efforts, he could make a

difference.

Building unlikely coalitions ranging across the political

spectrum in a bipartisan way, Phil broke down barriers and

created new alliances to expand the free society.

His early leadership role in the founding of the Republican

Study Committee as a voice for the majority viewpoint within

the then minority and, for the last ten years, majority

party, is recounted today in political science textbooks.

Undergirding Phil's legislative achievements and his House

procedural and structural reforms was his fundamental

understanding that ideas have consequences.

His understanding of the Founding Fathers and the system

they so carefully designed resulted in the publication of his

second book, which still should be a primer for conservatives

interested in the basic principles of our system, The Sum of

Good Government.

Ahead of his time as a conservative idea leader, Phil wrote

in that book, ``Once people are willing to admit the

possibility of alternatives, the battle is more than half won

and the time for refinements of a `conservative reform

platform' will be at hand.''

Phil, your work has been critical in finding, endorsing,

and fighting for the possibility of those conservative

alternatives.

Because of you, those conservative ideas are now the

mainstream of the American political debate.

And because of you, and your trail-blazing leadership, the

future is bright for conservative ideas in America.

As you retire, and as a self-appointed spokesman for all of

those who have had the honor of serving on your staff over

the last 35 years, we salute you, we always will admire you,

and we look forward to continuing to work together with you

to advance our ideas in the years ahead.

Mr. Speaker, I first had the opportunity to meet my colleague, the gentleman from Illinois (Mr. Lipinski), when I became a Member of Congress in 1993. What impressed me is the fact that I could live only 100 miles from the gentleman from Illinois (Mr. Lipinski) and he would have an accent and I do not. Some people call that a Chicago accent.

You often wonder why would somebody who lives near Egan, Illinois, a population of 39, very small county, and who raises beef cattle, obviously lives on a farm, what would he have in common with somebody who lives in a big city like Chicago.

I took a look at Bill Lipinski when I first came, knew his reputation as somebody very much interested in roads and highways and transportation. Bill and I had a lot of interesting talks, most of them about roads, the significance of highways. In the historical context, Bill would wax eloquent about the significance of commerce, why airports are necessary, why roads are necessary.

In fact, we talked one time that when the convention was called in 1787, it was on adjournment from the Baltimore meeting a year earlier where delegates from the 13 States had met under the Articles of Confederation and in vain could not come up with some kind of a system whereby to standardize the width, length and depth of the locks of the navigable waters. When the delegates met the next year in Philadelphia, the original purpose of the new Constitution, because the Articles of Confederation simply were not strong enough, was to promote commerce by making sure that this Nation had this fluid system of transportation. Bill has always understood that.

Roads do run from Egan, Illinois, to downtown Chicago. Bill always supported whatever road projects we had. I always supported his requests for buses in downtown Chicago because people go from Egan, Illinois, to Chicago.

But most important was the fact that, in the whole area of air transportation, Bill worked with us to help put Rockford, Illinois, on the map with the Greater Rockford Airport, recognizing the fact that here is an airport that needed business and so why not, to the extent possible, use it for transportation to alleviate the congestion in Chicagoland.

He chaired, back when his party was in the majority, several hearings, and I had an opportunity to testify before him. And when the majority changed and he was still on the same subcommittee, I still had an opportunity to testify before him. It really did not make any difference who was in the majority or the minority. Bill was still interested in the fact that roads connect people, they connect towns and, more importantly, they connect lives.

I have never met a person as unusual as Bill Lipinski. A Chicago accent? You have to be from rural Illinois to recognize that there is such a thing as a Chicago accent. He in his bungalow in the big city and I in my farmhouse in outside of Egan in the suburbs know this: That the dedication of this man to the people not just in his district but in the entire State, his wisdom in placing emphasis upon infrastructure and transportation as a means to better everybody because of commerce, made him rise above political labels. It was never Bill Lipinski, the Democrat. It was always Bill Lipinski, my friend.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on the subject of my special order today.

Mr. Speaker, it is a real honor to be able to honor my close friend Phil Crane, my neighbor, a person with whom I share one of our counties, and others are here to do the same thing. I will reserve my remarks for later.

First I would like to recognize the gentleman from Indiana (Mr. Pence).

(Mr. PENCE asked and was given permission to revise and extend his remarks.)

I recognize the gentleman from Illinois (Mr. Shimkus).

Mr. Speaker, I yield to the gentleman from Maryland (Mr. Bartlett).

Mr. Speaker, I yield to the gentleman from Arizona (Mr. Hayworth).

Mr. Speaker, I yield to the gentleman from California (Mr. Dreier).

Mr. Speaker, I yield to the man of the hour, the gentleman from Illinois (Mr. Crane).

Mr. Speaker, the honor of being elected to Congress is distinct, singular, as the gentleman from Arizona (Mr. Hayworth) so eloquently stated. But I never thought in

my life I would have the opportunity to serve with Phil Crane. There are big shadows in the Illinois delegation, the gentleman from Illinois (Mr. Hyde), the gentleman from Illinois (Mr. Hastert), and Phil Crane.

Mom was living when I was elected to Congress in 1992, and I think that one of reasons she was so excited when I was elected is the fact that she would have the opportunity to meet Phil Crane and talk to him on a regular basis.

I first met Phil when I was given the distinction of being awarded the Freedom Foundation Award. The Freedom Foundation is out of Valley Forge, Pennsylvania. The note that came with that was I could have somebody present this to me. I said, oh, my goodness gracious. I called Phil, and I said, Would you do me the honor of giving me this award? It was as if I needed an excuse to get in to talk to him.

I drove over to I believe it was Arlington Heights. I have got this picture. We were thinner, younger and had darker hair back then; and I keep that. It is on the refrigerator held by magnets that say ``Manzullo for Congress, 1992,'' in a place of great prominence.

I came here in 1992, actually, January of 1993, and he would ask me a simple question, Now, can you tell me the constitutional basis for that bill?

We do not talk about that anymore. We get tied up in so many issues. People do not talk about the underpinnings of liberty. Members do not get together and have discussions about what the Founders would do.

The sense of history of this place often becomes chewed up by the exogenous of the issues. And yet to this man from the 8th district of Illinois who defied logic in getting elected to Congress, I guess I share that same with him, no one ever thought I would be here. He has always understood how important history is. It makes us who we are. I read when Phil's dad wrote those articles in the newspaper for years. I always read those articles, always heard of Phil Crane.

I was the chairman of Young Americans for Freedom at American University here in Washington, D.C., and he was making noise then as a professor before he was elected to Congress. Then throughout law school and before I was elected to Congress and after, of course, he would always associate the sea change in America, the thinking of this country with getting back to roots of free enterprise to somebody called Phil Crane, eternally a professor, always the pedagogue, to me a personal mentor.

The manufacturers in this country who struggle have Phil Crane to thank for setting the template that lowers the taxes of everybody who manufactures in this country so that we can keep jobs here and be more competitive.

The other side of the coin that says free trade is fair trade, Phil always believed in that, too. In fact, he would say things such as, ``Corporations do not pay taxes. They collect them.''

It took me a while to understand what he was talking about, but what he was saying is it is the consumer that is going to pay the tax in the increased price of the product that the corporations would be collecting from them. No one has ever said that except Phil Crane, because he has always understood that the ultimate power in this republic is in the heart of the people who live here. It is the people who started the revolution in 1776. It is the people to whom government must be accountable, that every individual has worth, deep worth, self- worth, value.

I recall another time when I was running in the primary in 1992, I went to see Phil at a town meeting in Nunda Township in McHenry County. He very adroitly had scheduled that just as the bingo game ended for the senior citizens at that township, and as Phil came in the door everybody stood up. I said, wow, do they respect this man.

For about 20 minutes, without notes, he talked about the issues of the day, how they impacted the people he represented. The people would nod in agreement, and some of them got up and asked a question, and he would always be very responsive. If the person disagreed with what he had to say, Phil would smile and with this huge heart, embracing the fact that everybody is important and everybody has great worth, he would say, I welcome the fact that you disagree with me. Now, let me give you an explanation of why that is.

Where do you find people like this? How many institutions are left in America? How many walking history books are left? How many authors on their feet, mentoring Members of Congress and ask questions such as, do you think government should be this big? Why have we gotten here? Is there really a constitutional basis for what you are trying to do?

Sitting in the Crane role, the role of significance, he would ponder this place and his 35 years of distinct service and look around at all these young people and place himself in that position and have a sense of envy on his face that if he could exchange bodies and take with him that great mind, how magnificent he would be and even more respected by his colleagues.

You do not find people like that. They are just not there any more. Who are the people that remember the greatness of America? Who are the people that take the time to share the basis of the Constitution? Who talks about liberty anymore? Who talks about freedom?

Phil's legacy is that his insistence on constitutional government, on the principles of freedom, on the integrity of the individual, the wholesomeness of life, of the honesty of one's word, of a principled devotion to this Chamber. Where do you find people like Phil Crane?

Phil will officially be gone when this Congress ends, but his shadow, his influence, his love for me as a person who overcame insurmountable odds to get elected to Congress, who is this guy from Egan, Illinois, population 42, who never held office before?

He had never held office before and he could always relate to him because he had never held office before, and no one ever gave him a chance of being elected to Congress. He is my brother, he is my friend, he is my teacher, he is my mentor.

His words will always ring in my ears, and though I will not see his face every day, his spirit is impressed upon this place, and I am a better man because of him.

Thank you, Phil. God bless you and thank you for your service to America.

Madam Speaker, I thank the gentleman for yielding. It is a real joy to pay tribute to a person who has been a real role model, a mentor, and a teacher for the years that I have had the privilege of representing the people of the 16th Congressional District of Illinois.

For a long period of time, I served with Doug on the Subcommittee on Asia and the Pacific on the Committee on International Relations, of which Doug was the chairman.

In 1999, he invited me to go with him to Hong Kong in December of that year on an oversight mission to take a look at the result of the turnover of Hong Kong to Mainland China in the summer of that year, and I had never been to China before and really did not want to go, but knowing that Doug Bereuter would be the chairman of that little group gave me so much of a sense of confidence that, in case we got in trouble, he could get us out of it.

So we went over there and met with various people in China, including the Premier; and I recall when we were flying from Shanghai to Beijing, we encountered a diversion in the weather, and there was a huge dust storm that was blowing the dirt off the Gobi Desert. And so we just could not make it to Beijing. And the pilot came on, and he said, We are going to have to divert to Hohhot Inner Mongolia.

And the only thing I knew about Inner Mongolia was that it is right next to Outer Mongolia; and as the plane landed, we were given these reboarding passes that said, ``When in Hohhot, stay at the Inner Mongolia Hotel,'' which was owned by the Chinese airline. And we looked at each other, and our small delegation got in this bus. I know it was very quiet. I had two coats, and they were both stored in the belly of the airplane, and we rode late at night to this mysterious hotel and were greeted there in the lobby by so much confusion going on. It was just absolutely chaos broke loose in the lobby, and a man who was a complete stranger to our U.S. delegation, probably about eight people including Members and staff, came over and he said, ``If you give me your passports, I will get you your room.''

We did not even know who this guy was, except he looked official. And I looked at Doug, we all looked at each other, took out our passports and gave them to this complete stranger, who then proceeded to get us our rooms and took care of that.

The next 2 days we were trying to find out ways we could get to Beijing. We thought about planes, trains, and automobiles. There were several people on that airplane from Israel, and we heard that they got in a van and drove across the Gobi Desert at night to get to Beijing. We called the U.S. Consul, and they said no, we do not want a bunch of Congressmen and their staff riding in a van across the Gobi Desert. It is a pretty dangerous place.

Eventually the weather cleared up, and we got on the airplane, landed in Beijing, and what a great opportunity to spend several days with a person who has such a deep sense of history, a real love of his country, and who took hours of his time to instruct me on his thoughts on the changing face of China.

Now, I am the chairman of the American-Chinese Interparliamentary Exchange and have been there several times subsequent to the 1999 trip with the gentleman from Nebraska (Mr. Bereuter). And a year ago in January, I had an opportunity to lead the largest delegation of Members of Congress to China. Were it not for the gentleman's insistence that I go with him to China in 1999, knowing that I had such a desire and interest in that country, I probably would not be the chairman of this Interparliamentary Exchange, probably would never have had an opportunity to open up markets over there and work on areas of human rights. I can only attribute this to the gentleman from Nebraska (Mr. Bereuter).

He is one of the most decent people and kind individuals that I have met in my entire life. He has never raised his voice, always with a smile, and a sense of knowing that not only have the people of his congressional district been well served, brilliantly served by a truly dedicated public servant, but the people of America as a whole have been served by this outstanding individual.

It is retirement from Congress but not from life, and that is the good news. We look forward to working with the gentleman. I am excited about the possibilities of being the chairman of the American-Chinese Interparliamentary Exchange and to have the opportunity in the future to work with the gentleman and to continue to be his student.

Mr. Chairman, I offer an amendment.

Mr. Chairman, I first want to congratulate the gentleman from Virginia (Mr. Wolf), chairman of the Commerce, Justice, State, Judiciary and Related Agencies Subcommittee; and the gentleman from New York (Mr. Serrano), ranking minority member, for crafting an excellent bill. Regardless of how this amendment turns out, I am going to vote for it and encourage the rest of the Members of Congress to vote for it. It is very difficult to balance all the conflicting interests, and I commend them for coming up with a good bill.

With all due respect and honor to the gentlemen, I offer this amendment today to freeze funding for SBA 7(a) guaranteed lending program at last year's level.

The 7(a) is the flagship lending program of the Small Business Administration. This amendment means small businesses will be able to get started and grow. The 7(a) program is on track to create and retain half a million jobs this year. It has a proven track record by providing approximately 30 percent of the long-term financing needs for all small businesses.

Increasing fees on small business borrowers and lenders, particularly as interest rates are rising again, puts another barrier in access to capital and crimps our national economic recovery.

No matter how anybody states it, if this amendment fails, small business borrowers and lenders will face a fee or tax increase based on the amount of loan starting October 1 by as much as 100 percent. Some may characterize this as only a few dollars up front. But as the truth in lending disclosure form shows, he or she will pay up front at the time of the signing of the loan documents, hundreds if not thousands of extra dollars. The fee for a typical $100,000 loan would increase from $850 to $1,700.

On top of the up-front fee, lenders will once again see their annual fee on the outstanding balance of 7(a) loans made after October 1 increase, just after they shot up 30 percent this past April to keep the 7(a) program functional in fiscal year 2004. These fees cannot be passed on to the borrowers.

Many lenders, particularly small community banks that serve rural areas, are seriously considering leaving the program. Fewer banks offering 7(a) loans will translate into decreased access to credit for small businesses, which will result in fewer jobs created.

Mr. Chairman, my congressional district just dropped below 10 percent unemployment. Manufacturing jobs leveled off for 4 months. We lost another 11,000 this past month. We are not out of the woods yet. On top of it, the Fed decides to raise the interest rate. The last thing that we need is to have more of a crimp in capital access for the small businesses.

The amendment does not increase business spending. In fact, the Congressional Budget Office estimates the amendment will reduce outlays by $7 million in fiscal year 2005 by offering cuts in other programs.

The reductions are in other programs. The reductions will not be sensitive. They are in the Department of Justice General Administration Account. The Legal Activities Office Automation Program gets cut by $33 million for a program that they never asked for; the National Endowment For Democracy gets cut by a little over $10 million, which is still $1 million above the fiscal year 2004 level; and the salaries and expenses account at the SBA would make up the difference, to reach a $79,132,000 appropriations level for 7(a). That account would be cut by $8.46 million.

So the purpose of this amendment in making the tough choices is to keep funding level, keep the 7(a) program where it is, and although I support the goal of eventually getting the 7(a) program to a zero subsidy rate, now at the time we are just starting to see the light at the end of the tunnel, just starting a recovery, this is not the time to impose additional fees and taxes, not only upon the people that borrow the money, but upon the lenders that make it all possible.

Mr. Chairman, I again urge my colleagues to shift this $79 million from other accounts to the Small Business Account in order to help out the small businesses and keep the 7(a) program alive.

Mr. Chairman, will the gentleman yield?

Mr. Chairman, I thought I would recite the names of some of the organizations that are in favor of the Manzullo-Velazquez amendment. Sure, we have the American Bankers Association that is in favor of it, but just listen to the names of these groups that represent small businesses.

The Asian American and Hotel Owners Association; Women Impacting Public Policy, that is over 2.5 million women-owned small businesses. The Air Conditioning Contractors of America, those are all small businesses. American Society of Farm Managers and Rural Appraisers, those are small business people. American Society of Appraisers, those are small business people. America's Community Bankers, those are many small community banks in rural areas. Financial Services Roundtable, banks of all sizes, including large banks. Independent Community Bankers of America, those are mostly small banks, many in rural areas.

International Franchise Association, thousands and thousands of small business owners across America. National Association of Government Guaranteed Leaders, NAGGL, that represents people that get small business loans. National Association for the Self-Employed, I think the average membership of their group is less than five employees.

National Association of Women Business Owners, small business people. The National Bankers Association, National Black Chamber of Commerce, the National Small Business Association, the Small Business Legislative Council, the Appraisal Institute. The Tire Industry Association, these are guys that have tire shops across the country. The United Motorcoach Association, these are guys that buy buses for tourism, et cetera; and the U.S. Chamber of Commerce, which represents the large and small businesses.

The reason all these groups are behind the Manzullo-Velazquez amendment is that the core purpose of the Small Business Administration is to make capital available to small businesses, and why the SBA is fighting small businesses is beyond the recognition of the chairman of the Committee on Small Business. I cannot understand it, why the SBA is fighting this bill, which is the core program of the entire SBA.

It does not make sense. $79 million in the huge $3 trillion budget that we have is not a lot of money. But what it does amount to is the doubling of the fee of the little guys that get loans of under $150,000. The little ones get hit, the very ones that are trying to make this Nation recover.

In my district, we just dropped below 10 percent unemployment and the Fed raised the interest rate. I stand here in the gap as the chairman of the Committee on Small Business to say the Small Business Administration is wrong on this issue, and they ought to be ashamed of themselves for fighting this Congress to defund the very program that has made the SBA the organization that it is.

Sure, I could get very impassioned over little people. I come from a small business. My dad had a grocery store and then a restaurant, and the family restaurant continues today. And if my brother wants to get a loan from the SBA, why should his fees be doubled?

If the gentleman will continue to yield, this does not take funds of the MEP.

Well, I commend the chairman for funding the MEP program, but out of Justice this comes out of the administration account. It has nothing to do with FBI agents or the DEA or people involved in those positions.

Mr. Chairman, I ask unanimous consent to yield half of my allotted 15 minutes to the gentlewoman from New York (Ms. Velazquez) and that she may control that time.

Mr. Chairman, I yield 2 minutes to the gentlewoman from the Virgin Islands (Mrs. Christensen).

Mr. Chairman, I yield 2 minutes to the gentleman from Hawaii (Mr. Case).

(Mr. CASE asked and was given permission to revise and extend his remarks.)

Mr. Chairman, I yield 2 minutes to the gentlewoman from the State of California (Mrs. Napolitano).

Mr. Chairman, I yield myself such time as I may consume.

Let me first address the issue of offsets. We take $33.251 million out of a program that the President did not even request, this Legal Activities Office Automation Program at the Department of Justice, $33 million out of a program they never even requested.

I voted and continue to support the war on terrorism, but we reach a certain point when we have to ask ourselves, when do we take care of our own? When do we take care of the little people? This is not an outrageous request to ask that we have level funding this year that we had last year; $79 million is a lot of money, but compared to how far it goes to continue the program is something else.

The problem here is this: we all want to get away from this subsidy. I am in favor of a zero subsidy rate and have continued to work towards that each year that I have been chairman of the Committee on Small Business. To do it all at once at a time when the Fed has just increased the interest rate, when the unemployment in the district that I represent has just fallen below 10 percent, and at a time when small entrepreneurs continue to scramble for capital is simply unwise. To have a complete recovery, we need to make sure that the resources, the loans, are there for the little people, the ones that get up early in the morning and work 18 hours a day, sometimes 7 days a week, just for the opportunity to make a lot less money than they could working somewhere else, but who choose to do that because the spirit of entrepreneurship rings within their heart, because they know that eventually they will create more jobs and add to the economy.

That is what this bill does. It restores the same amount that they would have had last year, and I ask my colleagues to vote in favor of the Manzullo-Velazquez amendment.

Mr. Speaker, after 1999 all businesses, from normally large chapter C corporations to nontraditional corporations such as sub S partnerships, limited liability corporations and sole proprietorships, have had a tax break for the items that they export. This is the extraterritorial income exclusion, or ETI. The WTO held this tax break illegal because it gives a preferential tax break to exported items, even though Europe does the very same thing through its VAT tax, which is rebated at the border.

The present House bill replaces the ETI tax with a large tax cut for businesses that manufacture in the U.S., similar to what the other body did, except that in this House bill, only chapter C corporations get the tax cut because the House bill tax cut does not apply to other nonchapter C businesses, such as subchapter S, limited liability and sole proprietorships, normally the little guys.

The present House bill has the same problem as my bill did from early last year. That is why I admitted my mistake and abandoned the original Crane-Rangel-Manzullo bill because it, too, limited relief only to chapter C corporations. My district's 2,000 manufacturing businesses are little guys, mostly sub S like the rest of the Nation. I worked with the other body last summer to include the manufacturing benefit to everybody, which is what that body did. The House bill hurts businesses which are presently exporting and which are nonchapter C corporations by causing a tax increase.

SAS in North Carolina, 100 employees, manufactures software, exports a lot. Because it is a subchapter S business and not a chapter C corporation, SAS will have a massive tax increase. Excel Foundry and Machine in Pekin, Illinois, 100 employees, a third of its revenue coming from exports. They just added three engineers and put on an addition. Because they are a sub S and not a chapter C, their tax benefit will end, and they will have a tax increase. National Machinery of Tiffin, Ohio, the last U.S. manufacturer of cold forming machines, exports most of its product. Because they are an LLC and not a chapter C, they will have a massive tax increase. They make a machine that makes bullets.

There are tax cuts for small businesses and depending on how you total them, somewhere between $2.75 billion and $18 billion; and I want to thank everybody for those tax cuts. We appreciate the sub S reform and expensing extension for 2 years. However, the bill totals about $143 billion in gross tax cuts, meaning the large and multinational corporations get a benefit of about 93 percent of the entire bill.

The class warfare between large and small businesses was not asked for by the large companies. They want the smaller manufacturers to thrive because the little guys are the suppliers for the large companies. The supporters of the bill say the nonchapter C people got their tax break when personal income tax rates were reduced for everybody, but everybody knows it costs a lot more to run a small business. As chairman of the Committee on Small Business, I cannot discriminate against small businesses; and I hope the majority of the House will agree with that.

Mr. Speaker, I would like to respond to my colleague, the chairman of the Committee on Ways and Means. I am in favor of a tax cut for all manufacturing entities, from large corporations through to the sole proprietorships. The reason I abandoned my own bill, Manzullo- Rangel-Crane, is the fact that it limited relief only to the large corporations. Only. Only to the large corporations. I cannot support that. What we need is a bill as in the other body that has a manufacturing benefit for everybody who manufactures, not just the large ones.

Offered By: Mr. Manzullo

Amendment No. 6: At the end of the bill (before the short

title), insert the following new section:

Sec. 5__. Requirement To Buy Certain Articles From American

Sources; Exceptions.

(a) Requirement.--Except as provided in subsections (c)

through (h), funds appropriated or otherwise available to the

Department of Homeland Security may not be used for the

procurement of an item described in subsection (b) if the

item is not grown, reprocessed, reused, or produced in the

United States.

(b) Covered Items.--An item referred to in subsection (a)

is any of the following:

(1) An article or item of--

(A) food;

(B) clothing;

(C) tents, tarpaulins, or covers;

(D) cotton and other natural fiber products, woven silk or

woven silk blends, spun silk yarn for cartridge cloth,

synthetic fabric or coated synthetic fabric (including all

textile fibers and yarns that are for use in such fabrics),

canvas products, or wool (whether in the form of fiber or

yarn or contained in fabrics, materials, or manufactured

articles); or

(E) any item of individual equipment manufactured from or

containing such fibers, yarns, fabrics, or materials.

(2) Specialty metals, including stainless steel flatware.

(3) Hand or measuring tools.

(c) Availability Exception.--Subsection (a) does not apply

to the extent that the Secretary of Homeland Security

determines that satisfactory quality and sufficient quantity

of any such article or item described in subsection (b)(1) or

specialty metals (including stainless steel flatware) grown,

reprocessed, reused, or produced in the United States cannot

be procured as and when needed at United States market

prices.

(d) Exception for Certain Procurements.--Subsection (a)

does not apply to the following:

(1) Procurements outside the United States in support of

combat operations or procurements of any item listed in

subsection (b)(1)(A), (b)(2), or (b)(3) in support of

contingency operations.

(2) Procurements by vessels in foreign waters.

(3) Emergency procurements or procurements of perishable

foods by an establishment located outside the United States

for the personnel attached to such establishment.

(4) Procurements of any item listed in subsection

(b)(1)(A), (b)(2), or (b)(3) for which the use of procedures

other than competitive procedures has been approved on the

basis of section 303(c)(2) of the Federal Property and

Administrative Services Act of 1949 (41 U.S.C. 253(c)(2)),

relating to unusual and compelling urgency of need.

(e) Exception for Specialty Metals and Chemical Warfare

Protective Clothing.--Subsection (a) does not preclude the

procurement of specialty metals or chemical warfare

protective clothing produced outside the United States if--

(1) such procurement is necessary--

(A) to comply with agreements with foreign governments

requiring the United States to purchase supplies from foreign

sources for the purposes of offsetting sales made by the

United States Government or United States firms under

approved programs serving defense requirements; or

(B) in furtherance of agreements with foreign governments

in which both such governments agree to remove barriers to

purchases of supplies produced in the other country or

services performed by sources of the other country; and

(2) any such agreement with a foreign government complies,

where applicable, with the requirements of section 36 of the

Arms Export Control Act (22 U.S.C. 2776) and with section

2457 of this title.

(f) Exceptions for Certain Other Commodities and Items.--

Subsection (a) does not preclude the procurement of the

following:

(1) Foods manufactured or processed in the United States.

(2) Waste and byproducts of cotton and wool fiber for use

in the production of propellants and explosives.

(g) Exception for Small Purchases.--Subsection (a) does not

apply to purchases for amounts not greater than the

simplified acquisition threshold referred to in section 4(11)

of the Office of Federal Procurement Policy Act (41 U.S.C.

403(11)).

(h) Applicability to Contracts and Subcontracts for

Procurement of Commercial Items.--This section is applicable

to contracts and subcontracts for the procurement of

commercial items notwithstanding section 34 of the Office of

Federal Procurement Policy Act (41 U.S.C. 430).

(i) Geographic Coverage.--In this section, the term

``United States'' includes the possessions of the United

States.

Mr. Speaker, I ask unanimous consent that the Committee on Small Business be discharged from further consideration of the bill (H.R. 4478), to provide for an additional temporary extension of programs under the Small Business Act and the Small Business Investment Act

of 1958 through July 23, 2004, and for other purposes, and ask for its immediate consideration in the House.

Mr. Speaker, I rise today in support of H.R. 775, the Security and Fairness Enhancement for America Act of 2003, or SAFE for America Act. I am proud to be a cosponsor of this important piece of legislation, which eliminates the visa lottery program from the Immigration and Nationality Act.

Family connections play an overwhelming role in current immigration law. As a result of most immigrants coming from a few areas of the world, Congress established the visa lottery in the Immigration Act of 1990 to diversify the immigration pool. Approximately 50,000 foreign nationals per year are randomly selected and awarded visas to come and live permanently in the United States under this visa lottery program.

Immigrant visas are typically issued to individuals who already have some existing connection with a family member lawfully residing in the United States or with a U.S. employer. Millions of people apply for these visas through the lottery program, and the program requirements do nothing to ensure that the applicants have the skills they will need to participate in our modern economy. The recipients of these visas are selected based on luck, not by merit or existing ties with the U.S.

This visa program is also problematic because it is unfair to those immigrants who have patiently waited and complied with our immigration laws. Most family-sponsored immigrants currently wait years to obtain a visa, yet the visa lottery program allows 50,000 random immigrants to pass ahead of these family-sponsored immigrants each year with relatively no wait.

Finally, and what is perhaps most troubling are the numerous cases reported by the State Department that show that lottery winners often file fraudulent visa information. Because the lottery accepts visa applications from a variety of individuals and only requires credentials after selection, there is often a rush to find false documents once the winners are notified. False documentation is bad enough when applicants lie about education or work experience. With the amount of terrorist threats against our country, these immigration loopholes can create devastating consequences.

Mr. Speaker, in this atmosphere of ambiguity, it would be wise to closely examine the flow of legal immigration into the United States in order to implement more comprehensive screening and naturalization measures.

Mr. Chairman, as the Chairman of the Committee on Small Business, we have held close to 60 hearings on the issue of the loss of our manufacturing base in America, and much of that is centered on the fact that we have a tremendous burden of regulations. These regulations come from the people and agencies that issued the regulations, regardless of who is in the White House.

What we are trying to do here today is to have a bipartisan approach to cut away at these regulations and not concern ourselves as to who is responsible for the promulgation.

H.R. 2432 permanently authorizes the General Accounting Office to perform analyses of major rules proposed or issued by the Federal agencies. This would have proven invaluable in responding to the Department of Housing and Urban Development's proposed regulations on modifying real estate closing procedures.

HUD's analysis was woefully inadequate. An independent analysis by GAO that accurately estimated the costs of the proposal on small business

would have been helpful to the Committee on Small Business and other Members of Congress as we considered actions needed to avert a potential disaster for thousands of small businesses involved in residential real estate settlement.

H.R. 2432 also addresses the problems of paperwork burdens imposed by the IRS on small businesses. Our committee held a hearing on the IRS compliance with the Regulatory Flexibility Act. At that hearing, the IRS contended that many of its paperwork burdens are imposed by statute. In reality, the Service imposes the reporting and record- keeping requirements under various broad rule-making authorities contained in the Internal Revenue Code. Leaving it up to the IRS to determine how to reduce paperwork burdens it imposes on taxpayers is akin to the fox guarding the hen house.

We would urge the House to adopt H.R. 2432.

Mr. Speaker, we all know that this body could not function without the able assistance of our staff members. I wanted to bring to the attention of the House that the Small Business Committee will soon lose to retirement the services of the Chief Clerk, Nancy Piper. Nancy will officially retire tomorrow on April 30, 2004 after over 28 years of unselfish, dedicated public service to Congress in various capacities--both in the minority and in the majority--to five Republican leaders of the House Small Business Committee. Nancy graduated from Sweet Briar College in Virginia and has a Legal Assistant Degree from George Washington University.

Nancy began her career on Capitol Hill in the Nation's bicentennial year of 1976 working for her Congressman, Jack Wydler, from Garden City on Long Island, New York. At that time there were only 145 Republicans in the House of Representatives. Starting in 1983, she began working for the Small Business Committee for the then ranking minority Member Joseph McDade in Pennsylvania. Since then, Nancy worked for four other Republican leaders of the House Small Business Committee, including Andy Ireland of Florida, Jan Meyers of Kansas, and Jim Talent of Missouri. She has certainly seen a lot of changes over the years on how Capitol Hill operates, including the pivotal year of 1994, when her role dramatically changed to a majority staff person.

Nancy is one of the many unsung staff members of the Small Business Committee that makes sure many of the administrative functions of the committee run smoothly. Without her service and her institutional memory, the committee simply could not function. Nancy makes sure that everything associated with a committee hearing or a bill markup proceeds without a hitch.

Mr. Speaker, Members who serve on the Small Business Committee or who have once served on the committee all experienced Nancy's professionalism and pleasant demeanor. While they will miss her, I know that they will want to join me in wishing Nancy all the best as she leaves the frantic pace of Capitol Hill to enjoy her well-deserved retirement. My wife, Freda, and I express to Nancy Piper our very fondest personal wishes to her and her husband, Chris, and her two daughters, Kate and Elizabeth, as she embarks on her new journey in life.

Mr. Speaker, on March 31, 2004, the House took up consideration and passed H.R. 4062, a bipartisan bill to resolve problems associated with the restrictions imposed by the Small Business Administration on loans made pursuant to Sec. 7(a) of the Small Business Act. The bill was then passed by the Senate and signed into law by the President. Since the bill was taken directly to the floor, no committee report accompanies the bill. As Chairman and on behalf of the Ranking Democratic Member, Nydia M. Velazquez, I am submitting for insertion into the Record, the attached explanation of the bill by its sponsors. We would expect the Administrator, in implementing the provisions of H.R. 4062, to accord the enclosed explanation the same weight in divining congressional intent that the Administrator would give to a committee report on a bill that first went through a mark-up prior to floor consideration.

Joint Explanatory Statement on H.R. 4062

Filed by Chairman Manzullo for himself and Ranking Democratic Member

Velazquez

Section 1. Additional Temporary Extension of Authorization

Temporary authorizations are needed to ensure continued

operation of certain programs authorized by the Small

Business Act and Small Business Investment Act of 1958. This

section extends those programs while the House and Senate

work out their differences on a broader reauthorization

package.

Section 2. Extension of Certain Fee Authorizations

The qualified state and local development company (referred

to in this statement as ``certified development company'' or

``CDC'') program authorized by Title V of the Small Business

Investment Act of 1958 operates on fees charged by the

Administrator to lenders. Those fees need to be reauthorized

to prevent the program from ceasing operation. Given the

complexity of the financing arrangements loans made pursuant

to Title V, CDCs and small businesses need sufficient time to

develop the appropriate financing packages and submit

applications to the Administrator. To accommodate the needs

of lenders and borrowers under Title V, the sponsors

determined that an extension of the fee authorization through

the end of the fiscal year would be appropriate. Furthermore,

the sponsors believe that if the recent problems in the loan

programs authorized by 7(a) of the Small Business Act were

resolved through the end of this fiscal year, equity demands

that CDCs be able to operate unencumbered for the same

period.

Section 3. Fiscal Year 2004 Purchase and Guarantee Authority

under Title III of the Small Business Investment Act of

1958

The Small Business Investment Company (``SBIC'') program

operates without the use of appropriated funds. Fees and

profits are used to cover the cost of the program, including

coverage of losses in investment portfolios. While the

sponsors believe that the fees authorized for the purchase of

securities and debentures would allow the program to continue

full operation without modification to the authorization

levels, clarification to ensure that the program could

continue operations was an appropriate course of action. To

avoid any possible confusion or action by the Administrator

to curtail the operation of the program, the sponsors

extended the authorizations for both the purchase of

participating securities and guarantees of debentures at FY

2003 levels for the rest of the fiscal year.

Section 4. Combination Financing

For a number of years, the Administrator authorized the use

of so-called piggyback financing when using the loan program

authorized by 7(a) of the Small Business Act. The

Administrator defines ``piggyback financing'' as a situation

in which ``one or more lender(s) provides more than one

loan(s) to a single borrower at or about the same time,

financing the same or similar purpose, and where the SBA

guarantees the loan secured with a junior lien position.''

Small Business Administration, Standard Operating

Procedure 50-10(4)(E), at 20. Furthermore, the

Administrator notes that the determination of ``piggyback

financing'' requires an assessment of both the lien

position and the commonality of purpose. Id.

Earlier in the year, the Administrator, presumably pursuant

to the authority set forth in Sec. 7(a)(24) of the Small

Business Act, made certain policy changes to the operation of

the guaranteed loan program. In particular, the Administrator

prohibited the use of piggyback financing.

The sponsors believe that ``piggyback financing'' plays a

valuable role in the provision of capital to small

businesses. This is particularly the case for small

businesses requiring larger loans in cyclical sectors of the

economy. The financing technique is quite similar to that

statutorily authorized in Title V of the Small Business

Investment Act of 1958.

Section 4 creates, for the rest of fiscal year 2004, a

temporary combination-financing program by adding a new

paragraph (31) to Sec. 7 of the Small Business Act. The

provisions sunset at the end of the fiscal year, i.e., at the

end of the day on September 30, 2004.

The sponsors adopted the more formal language ``combination

financing'' rather than the term ``piggyback financing.'' The

sponsors define ``combination financing'' as a loan

consisting of both a commercial loan and a guaranteed loan. A

commercial loan is defined as one that has no portion

guaranteed by the government. The sponsors intend the term

``combination financing'' to have the same characteristics as

``piggyback financing'' as that term is used in the Small

Business Administration's Standard Operating Procedure

already cited in this statement.

The authorization of combination financing is limited to

those situations in which the small business concern

(borrower) obtains both a guaranteed loan pursuant to

Sec. 7(a) of the Small Business Act and a commercial loan.

Again the sponsors intend that the provision should operate

in a manner similar to the Small Business Administration's

determination that the commercial and guaranteed loans are

obtained for the same or similar purposes and the loans are

originated and disbursed (in whole or in part) at about the

same time.

To ensure that the public fisc is protected even when the

Administrator's lien is subordinate to the commercial loan,

the sponsors restricted the size of the combination loan to

that of the guaranteed loan. In other words, there is a one-

to-one ratio between the commercial and guaranteed loans.

While the commercial loan cannot exceed the size of the

guaranteed loan, the sponsors do not intend to prevent a

commercial loan from being smaller than the guaranteed loan.

The sponsors authorize the commercial loan may be made by

the lender that is making the guaranteed loan. However, the

sponsors also permit the commercial loan to be made by a

different lender as long as the loans meet the simultaneity

of time and purpose already limned. In addition, the sponsors

also authorize lenders designated as ``Preferred Lenders'' by

the Administrator to make the commercial loan in such

combination financings.

The sponsors also authorize lenders designated as

``Preferred Lenders'' by the Administrator to make the

commercial loan in combination financings. In order to

expedite the processing of combination financings in these

circumstances, it is the sponsors' intent that the

Administrator process applications for combination financings

submitted by such ``Preferred Lenders'' through the Preferred

Lenders Program Processing Center.

The sponsors explicitly authorize the commercial loan to be

secured by a lien senior to that of the guaranteed loan.

Nothing in this provision prevents the Administrator from

continuing or discontinuing this practice after September 30,

2004 unless directed otherwise by statute.

In normal commercial transactions, lenders that take a

subordinated lien position on

an asset are compensated for the additional risk through

additional upfront fees or by a higher interest rate. The

Administrator did not require any additional payments or

modification of applicable interest rates for taking a junior

position in its ``piggyback financing.'' Section 4 requires

the Administrator to charge an upfront fee equal to 0.7

percent of the amount of the commercial loan as reimbursement

for the risk associated with taking a subordinate lien

position. The sponsors expect that the lender that is

benefiting from senior lien position to pay the fee.

While lenders pay all fees charged pursuant to Sec. 7(a) of

the Small Business Act, some fees are recoverable from

borrowers. Lenders may obtain reimbursement of the upfront

fees mandated by Sec. 7(a)(18) of the Small Business Act from

borrowers but are prohibited from recovering from borrowers

the annual ongoing fee mandated by Sec. 7(a)(23) of the Small

Business Act. Since the ultimate beneficiary of the

combination financing as authorized by this section is the

bank making the commercial loan, the sponsors determined that

the lender should be prohibited from recovering that fee and

imposed the restriction set forth in Sec. 7(a)(23)(B) of the

Small Business Act on the payment of the commercial loan fee.

The cross-reference to the provision in Sec. 7(a)(23) ensures

that the lender will be unable to recoup the 0.7 percent from

the borrower.

The Administrator had procedures in place for combination

financing (styled in the Standard Operating Procedures as

``piggyback financing'') on October 1, 2003, and the

Administrator processed combination loan financings in the

normal course of business on October 1, 2003. To ensure that

the Administrator accept and process combination financing

loan applications, the sponsors imposed a requirement that

the Administrator must process those loan applications as

those loans were processed under the ``piggyback financing''

procedures in effect on October 1, 2003.

The sponsors did not believe that it would be prudent to

mandate the issuance of regulations to implement a temporary

program, which will sunset in about six months. In fact, the

sponsors were concerned that the promulgation process would

be sufficiently lengthy and the program would sunset before

any regulations were in place. The sponsors recognized that

the Administrator would be approving combination financings

under the rubric of ``piggyback financings'' in accordance

with already extant standard operating procedures. The

sponsors believe that these provisions are adequate for

immediate issuance of combination financing loans. The

sponsors therefore authorize the Administrator to use the

standards already in existence upon enactment without the

necessity of formal rulemaking. The provision has the

additional benefit that industry is well aware of the

procedures and standards for business eligibility in the

standard operating procedures.

The sponsors recognize that additional standards may be

necessary to determine business loan eligibility under this

section. The sponsors authorize the Administrator to adopt

such additional standards as may be necessary (in order to

reduce risk to the government and increase transparency to

the private sector) so long as those standards do not

unreasonably restrict the availability of combination

financing as was available prior to the issuance of any

additional standards. Thus, the sponsors expect that the

Administrator will make reasonable decisions that may in some

ways restrict the availability of combination financing.

However, standards that prohibit or reduce by a significant

number the combination financings made after the adoption of

additional standards would not be within the intention of the

sponsors. The sponsors do not expect any new standards

adopted by the Administrator to impose significant

restrictions on combination financings. The 0.7 percent fee

sufficiently compensates the Administrator for the additional

risk. Any additional standards should focus on the procedures

for processing combination financings or resolving situations

that are not adequately addressed under current procedures

for ``piggyback financing.''

Section 5. Loan Guarantee Fees

In late December of 2003 and early January of 2004, the

Administrator, in part pursuant to the Anti-Deficiency Act,

temporarily ceased lending under the loan program established

pursuant to Sec. 7(a) of the Small Business Act. Shortly

after the Administrator halted lending, funds were

reallocated enabling the program, but with a mandatory loan

cap of $750,000.

This restriction continues to impede the ability of small

businesses to obtain capital, expand their businesses, and

create jobs. The sponsors recognized the need to reopen the

program to its fully authorized levels ($2 million loan

maximum with a guarantee up to $1 million). Two options were

available for doing this. The first would require additional

appropriations. The second would be to raise fees associated

with the lending program authorized by Sec. 7(a) of the Small

Business Act. The sponsors were not sanguine about the

prospect of obtaining additional appropriations for fiscal

year 2004. So the sponsors reluctantly turned to the second

option.

The approach adopted by the sponsors raise, through the end

of fiscal year 2004, the annual ongoing fee charged to

lenders. The reduction was reauthorized in Pub. L. No. 107-

100. The statutory fee is currently set at a 0.5 percent but

was reduced temporarily, to encourage the creation of new

jobs, in the last reauthorization bill to 0.25 percent.

Section 5 raises that level from 0.25 percent to 0.36

percent. The sponsors also eliminate the authority of lenders

to retain 0.25 percent of the ongoing fee for loans of less

than $150,000. According to the Administrator and the Office

of Management and Budget, these fee changes, along with other

temporary modifications, raise sufficient funds to operate a

guaranteed loan program at a $12.55 billion level without any

restrictions on combination financing or caps on loan size.

Section 6. Express Loan Provisions

Section 7(a)(25)(B) authorizes the Administrator to create

pilot loan programs. In exercising that authority, the

Administrator created an ``Express Loan Pilot Program.'' The

program authorizes lenders to use their own forms in

submitting requests to the Administrator for the issuance of

guarantees. Two significant restrictions are imposed by the

``Express Loan Pilot Program;'' the guarantee cannot exceed

50 percent of the loan and the maximum loan amount is

$250,000.

According to the Administrator and the Office of Management

and Budget, expansion of the ``Express Loan Pilot Program''

to authorize lenders to make loans up to the statutory

maximum of $2 million would contribute to a significant

reduction in the subsidy rate. The sponsors adopted this

concept to ensure that sufficient funds were made available

to reopen the program at expected loan volumes.

Section 6 defines the term express lender as a lender

authorized to participate in the ``Express Loan Pilot

Program.'' The sponsors do not intend that the Administrator

need change any of the requirements for designation as an

express lender but is authorized to do so.

Section 6 defines an ``Express Loan'' as one in which the

lender utilizes, to the maximum extent practicable, its own

analyses of credit and forms. The sponsors fully expect that

the conditions under which express loans are made will not

vary significantly from those conditions that currently exist

under the ``Express Loan Pilot Program.'' However, the

sponsors recognize that the Administrator may want to impose

some additional conditions on the use of forms or analyses

for larger express loans. Nothing in H.R. 4062 prohibits the

Administrator from imposing these additional requirements.

Section 6 codifies the existing concept of the

Administrator's ``Express Loan Pilot Program.'' In other

words, the pilot program is one in which lenders utilize

their own forms and get a guarantee of no more than 50

percent.

Subsection 6(b) restricts the program, including the

increased loan amount, to those lenders designated as express

lenders by the Administrator. Designation as an express

lender does not limit the lender to making express loans if

the lender has been authorized to make other types of loans

pursuant to Sec. 7(a) of the Small Business Act. Although a

lender may only seek status as an express lender, this

subsection was included to ensure that the Administrator not

limit the ability of an express lender to seek other lending

authority from the Administrator. Nor is the Administrator

permitted to change its standards for designating an express

lender in a manner that only authorizes the lender to make

express loans. To the extent that the lending institution

wishes to offer a full range of loan products authorized by

Sec. 7(a) and is otherwise qualified to do so, the

Administrator shall not restrict that ability on the lender's

status as an express lender.

Subsection 6(c) prohibits the Administrator from revoking

the designation of any lender as an express lender that was

so designated at the time of enactment. This prohibition does

not apply if the Administrator finds the express lender to

have violated laws or regulations or the Administrator

modifies the requirements for designation in a way that the

express lender cannot meet those standards. The sponsors do

not expect that the Administrator will impose new

requirements for express lenders that prohibit them from

making loans under other loan programs authorized by the

Small Business Act for which they have approval from the

Administrator.

Subsection 6(d) temporarily expands the Express Loan Pilot

Program to $2 million. After September 30, 2004, the sponsors

expect the Administrator to operate the Express Loan Pilot

Program according to the standards that were in effect prior

to the enactment. Since the Administrator had the authority

to modify or alter the pilot program prior to the enactment

of this Act, nothing in the Act restricts the Administrator

from taking appropriate regulatory action with respect to the

program after the authority vested in this Act terminates.

The President's FY 2005 budget request for the Small

Business Administration did not include any funding for the

loan programs authorized by Sec. 7(a) of the Small Business

Act. Administrator Barreto testified at a full Committee

hearing that the loan programs should be self-funding with a

subsidy rate of zero and, as a result, the Sec. 7(a) lending

programs would be on the same footing as the CDC and SBIC

programs. Administrator Barreto's suggested mechanism for

achieving a zero subsidy rate was through a mandatory

expansion of the Express Loan Pilot Program to incorporate

almost all smaller loans (initially all loans under $250,000

but in subsequent years could increase if needed to maintain

a zero subsidy rate). The mandatory nature of the proposal

did not garner

much acceptance among members of the House or Senate Small

Business Committees.

Given Administrator Barreto's stated preference for

resolving the funding crisis associated with the Sec. 7(a)

lending programs through an expansion of express loans, the

sponsors are concerned that the Administrator will take

regulatory actions that unduly favor express lending over

other types of lending authorized by Sec. 7(a) of the Small

Business Act. As such, the sponsors determined that it was

appropriate to impose certain restrictions on the

Administrator's operation of the expanded Express Loan Pilot

Program in order to prevent actions that unnecessarily and

unduly favor express lending.

Any significant policy change in the operation of the

lending programs authorized by Sec. 7(a) of the Small

Business Act requires notification to the House and Senate

Small Business Committees. Subsection 6(e) does not limit the

restrictions imposed on the Administrator's regulatory

discretion to those matters that would require notification

pursuant to Sec. 7(a)(24) of the Small Business Act.

The most significant restriction is that the Administrator

cannot take any action that directly forces a lender to make

an express loan for any level. Thus, if a lender wishes to

make an express loan for $1.5 million dollars and is a

designated express lender, the lender may do so. If the same

lender is qualified to make other types of loans and wants to

make a $1.5 million dollar loan at a 75 percent guarantee,

the Administrator may take no action that forces the lender

to select the 50 percent guarantee over the 75 percent

guarantee.

One mechanism for demonstrating favoritism is to impose

conditions on loan programs other than express loans that

have the effect of coercing lenders to make express loans.

Paragraph (2) of subsection 6(e) ensures that the

Administrator imposes like terms and conditions on both

express and other lending programs authorized by Sec. 7(a) of

the Small Business Act. The sponsors intend that this

requirement apply to all of the terms and conditions of loans

made pursuant to Sec. 7(a) of the Small Business Act,

including collateral and the likelihood of repayment

standards.

Even if the terms and conditions on the loans are

identical, the Administrator has other mechanisms for

demonstrating favoritism of express lenders over other types

of Administrator-designated lenders. For example, the

Administrator could delay processing of 75 percent guarantee

loans, i.e., loans other than express loans, such that

lenders would, for all practical terms, be required to do

express loans. Thus, paragraph (3) of subsection 6(e)

prevents the Administrator from making any personnel changes

or altering the application of resources (be it personnel,

equipment, or funding) that increases the loan processing and

disbursement times for all loans authorized by Sec. 7(a) of

the Small Business Act as those were in effect on October l,

2003. For example, if the time for disbursement of an express

loan was five days and the time for disbursement of a 75

percent guaranteed loan was seven days, the Administrator may

take no action that increases the relative disparity between

the express loan and the 75 percent guarantee loan. Nothing

in this subsection shall be interpreted to prevent the

Administrator from improving the overall processing,

approval, or disbursement rates of all loans except that any

such improvements must affect all lenders and all lending

programs operating pursuant to Sec. 7(a) of the Small

Business Act in an identical manner.

To ensure that the sponsors' intent is clear that the

expansion of the express loan is optional and the

Administrator shall take no action that has the practical

effect of making it mandatory, the sponsors incorporated a

catchall requirement that the Administrator not take action

to create incentives that would favor express loans over

other types of loans. The sponsors believe that the

determination of the appropriate nature of a loan should not

be made by regulatory fiat but by the sound judgment of

lenders, borrowers, and the Administrator's commercial loan

officers.

The dramatic expansion of the express loan program, even on

a temporary basis, may shed dramatic light on the purposes

for which such loans are made. That information will be

critical in resolving, on a long-term basis, the funding

issues associated with the Sec. 7(a) lending programs.

Therefore, the sponsors requested, to the extent practicable,

monthly reports on the types and purposes for express loans

made in excess of the current pilot program cap of $250,000.

Subsection 6(g) terminates the effectiveness of various

subsections after September 30, 2004. Subsection (d) has its

own internal sunset provision. No sunset is made on

subsection (a), as it simply codifies existing practice of

the Administrator with respect to definitions related to

express loans. Nothing in subsection (g) is intended by the

sponsors to constitute a permanent change in any program

authorized pursuant to Sec. 7(a) of the Small Business Act.

Section 7. FY 2004 Deferred Participation Standards

As already noted, the sponsors are concerned that

regulatory or other administrative changes in loan programs

could have the practical implication of forcing lenders to

make express loans. The sponsors determined that by freezing

all terms and conditions of loans as they existed on October

l, 2003 would be a sound means of deterring favoritism for

express lending. The sponsors intend this provision to

require, upon enactment, the lifting of the cap on loans made

pursuant to Sec. 7(a) of the Small Business Act that are

currently in place. Section (7) does permit the Administrator

to modify those terms and conditions if needed to ensure

continued operation of the program within the amounts

appropriated. Although the sponsors, based on assertions

by the Office of Management and Budget, believe that the

Administrator will have sufficient funds through the end

of the fiscal year to operate without any regulatory

restraints, the sponsors do not want to prevent the

Administrator from taking actions needed to prevent

violations of the Anti-Deficiency Act. In other words, the

sponsors fully expect the terms and conditions of October

1, 2003 to apply unless unusual and very unexpected

consequences occur. Should such changes be necessary,

nothing in H.R. 4062 repeals, either implicitly or

explicitly, the notification requirements set forth in

Sec. 7(a)(24).

Section 8. Temporary Increase in Loan Limit

Access to capital is vital to the growth of small

businesses. Particularly for manufacturers and high

technology research and development businesses, typical

amounts of capital available under the loan programs

authorized by Sec. 7(a) of the Small Business Act often are

inadequate. If these manufacturers and high technology

companies are investing to increase their productivity, the

job creation requirements of Title V of the Small Business

Investment Act may make it difficult, if not impossible, to

obtain that type of financing. Therefore, the sponsors

determined that it would be appropriate to temporarily

increase the amount of the loan guarantee from $1 million to

$1.5 million. No additional changes were made in the overall

statutory cap of a gross $2 million loan. The sponsors did

not believe that was necessary because any additional gaps in

financing can be addressed using combination financing, under

the terms of this Act. Given the fact that borrowers are

getting an additional increment in loan guarantees, the

sponsors determined that it would be appropriate to require

an additional 0.25 percent fee for the amount of guarantee in

excess of $1 million. Thus, on the amount of the guarantee

between $1 million and $1.5 million, the upfront fee

authorized pursuant to Sec. 7(a)(18) of the Small Business

Act increases from 3.5 percent to 3.75 percent. This is

consistent with typical commercial lending practices of

charging fees that are commensurate with the lenders'

exposure to risk.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4062) to provide for an additional temporary extension of programs under the Small Business Act and the Small Business Investment Act of 1958 through June 4, 2004, and for other purposes.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and include extraneous material on this legislation.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, this bill is a bipartisan work product between the gentlewoman from New York (Ms. Velazquez) and me and is a result of the commitment made on the House floor earlier this month to provide a fix to the problem in the main flagship guaranteed lending program of the Small Business Administration.

This legislation would not only restore the overall 7(a) program to full strength, but also expand its outreach to help more small businesses grow and create more jobs.

Earlier this year, a funding shortfall unfortunately required the SBA to temporarily suspend the program for a week, reduce the maximum loan size to $750,000, and prohibit combination or piggyback loans.

In this compromise, the annual lender ongoing fee on 7(a) loans would increase from 0.25 percent to 0.36 percent. The lender would also pay a 0.70 percent up-front fee for combination or piggyback loans. For loans under $150,000, the lender would no longer be allowed to retain the 0.25 percent ongoing fee. Instead, this bill, under the provisions in it, the SBA will keep that fee.

H.R. 4062 raises the 7(a) guaranteed limit from $1 million to $1.5 million with an additional risk premium fee of 0.25 percent imposed on the borrower over and above the 3.5 percent fee they currently pay on loan amounts over $1 million.

Finally, H.R. 4062 allows lenders the option to make loans up to $2 million under the SBA Express program, which has a 50 percent guarantee rate; but banks can use their own paperwork. Currently lenders can only make loans up to $250,000 under the SBA Express program. I want to make it clear, however, that I intend that this provision must be truly optional on the part of the lenders. The SBA should not do anything in its internal policies or procedures that tilts this rule in favor of SBA Express at the expense of the rest of the 7(a) lending program.

All together, these provisions will provide an additional $3 billion in lending to small businesses for the rest of fiscal year 2004 to reach a total of 7(a) program level of $12.55 billion without requiring any additional appropriations or reprogramming funds from other key areas within the SBA.

When this bill is passed by Congress and signed into law, SBA assures me it will provide enough lending authority for the SBA to remove the current loan cap of $750,000 and also allow combination or piggyback loans.

By increasing the 7(a) programs lending authority, SBA estimates that through their lending partners they will be able to offer 30,000 additional guaranteed loans, which could create or retain as many as a half million jobs by the end of September.

In addition to fixing the 7(a) program, the bill authorizes the SBA to charge fees under the 504 Certified Development Company program and the Small Business Investment Company program until the end of the fiscal year or September 30, 2004. Both these programs operate solely on the basis of user fees and do not require an annual appropriation. Currently, the authority to charge these fees expires on May 21.

Finally, the general extension of SBA programs not covered by an appropriation such as the surety bond program, SBA's cosponsorship authority, and several very small procurement assistance programs, will move from the current deadline of April 2 to June 4 of 2004.

This bipartisan bill has the support of both the minority and majority sides of the Committee on Small Business. It has the support of the administration. And finally, it represents the consensus position of those who use the 7(a) program, both borrowers and lenders.

I urge my colleagues to support H.R. 4062.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I have no further speakers. I would ask the gentlewoman if she has any further speakers

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 3915) to provide for an additional temporary extension of programs under the Small Business Act and the Small Business Investment Act of 1958 through May 21, 2004, and for other purposes, as amended.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, this is a short and simple bill. H.R. 3915 authorizes a general extension of all programs under the Small Business Act and the Small Business Investment Act from its current ending date of March 15, 2004, until April 2 of 2004. This will allow SBA programs that expire on Monday to continue to operate.

In particular, these include the surety bond program which enables small businesses to obtain surety bonds in order to bid on government contracts, cosponsorship authority so that the SBA can host events or print publications with the private sector, and procurement of assistance that is provided to certain small businesses.

H.R. 3915 as amended also authorizes the SBA to charge fees for the 504 loan program with a certified development company until May 21 of 2004.

This program operates solely based on the fees charged by the SBA to certified development companies. If such fees are not extended, there will be no way for certified development companies to make the type of long-term loans that small businesses rely on to create new jobs. The 504 program operates totally upon user fees and has not received an appropriation since 1996.

Unless H.R. 3915 is signed by the President soon, the 504 program will shut down on Monday.

The ranking minority member and I have been working together on finding a solution to the 7(a) problem. Due to a variety of reasons, unfortunately, that solution is not part of this legislation. I pledge to the gentlewoman from New York (Ms. Velazquez) that I will do everything in my power to see to a resolution in the 7(a) problem as soon as possible.

I urge my colleagues to support H.R. 3915.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, will the gentlewoman yield?

I thank the ranking member. I will be willing to enter into a colloquy.

I will assure the ranking member that I will work with her to make changes to the 7(a) lending program by April 2, 2004 that will resolve the problems currently affecting the 7(a) program through the end of fiscal year 2004. I make the sincerest assurance that these negotiations will involve all relevant parties, including House leadership and the White House and that the gentlewoman and her staff will be involved in such negotiations. I truly believe that we can solve this problem together.

I would like to thank the ranking member from New York for entering into this colloquy and resolving this issue amicably.

Mr. Speaker, I yield back the balance of my time.