House Small Business Committee
House Small Business Committee Chairman Sam Graves (R-MO) today released the following statement about the ongoing problems of the Small Business Health Options Program (SHOP) one year into Obamacare’s troubled operations.
“From the time then-Speaker Pelosi proclaimed Obamacare should be passed ‘so you can find out what’s in it’ to today’s one-year anniversary of this burdensome law’s botched implementation, the administration has wildly over-promised and painfully under-delivered every step of the way. The past year has been littered with problems, including rising costs, cancellation notices and a faulty $2 billion website. Likewise, Obamacare’s Small Business Health Options Program has fallen woefully short of any kind of acceptable standard. To this day, the administration is unable to answer basic questions such as how many are enrolled in the program – the question this Committee has asked repeatedly since January. Instead of simplifying the health insurance process for small businesses, the SHOPs program has created confusion and uncertainty with five delays along the way. Small businesses have paid the price of this inept management. Many questions remain, including this straightforward one: How many small businesses are enrolled?”
During the recent September 18, 2014 hearing of the Small Business Subcommittee on Health and Technology, Chairman Chris Collins (R-NY) specifically asked the Centers for Medicare and Medicaid Services (CMS) witness, Director of State Exchange Group, Mayra Alvarez, about the SHOP enrollment data, yet the administration was still unable to provide the information, despite repeated claims of transparency. Beginning in January, Chairman Graves has repeatedly pressed the administration to provide data on the enrollment and updated compliance timeline of federal or state SHOPs, but the requests have gone unanswered. A June 2013 GAO report requested by Chairman Graves confirmed the administration was ill-equipped for the implementation of the SHOPs, as evidenced by the program’s track record since. The Committee’s first hearing on the SHOPs mismanagement took place in December 2013.
The SHOPs challenges have occurred while small businesses are grappling with rising health insurance costs; in fact, costs are increasing for nearly two-thirds of small businesses that provide health insurance to their employees. And the National Federation of Independent Business found that 64 percent of small business owners paid more per employee for health insurance in 2013 than in 2012.
Bloomberg BNA: CMS Needs to Provide Congress SHOP Data On Enrollments, Rep. Collins Says at Hearing
By Sean Forbes
September 18, 2014
Republican members of a subcommittee of the House Committee on Small Business insisted at a hearing on Affordable Care Act small business exchanges that the administration must provide hard data to Congress in order to have an unbiased discussion about the effectiveness of the exchanges.
Rep. Chris Collins (R-N.Y.), chairman of the Subcommittee on Health and Technology, said that the Small Business Committee sent letters in January and June to the Department of Health and Human Services and the Centers for Medicare and Medicaid Services requesting enrollment figures for the Small Business Health Options Program (SHOP), but the HHS hasn't supplied any data yet.
Collins several times asked Mayra E. Alvarez, director of the state exchange group in the CMS Center for Consumer Information and Insurance Oversight, about whether the information is available and when the Congress can expect to receive the data. Alvarez didn't have a precise date, but promised that, after the CMS collected the data from the state SHOPs, it would give the information to Congress and the public “as soon as it's available.”
“As soon as it's available,” Collins repeated.
The CMS data will take the bias out of the debate over the SHOPs, but until then people “are just talking past each other,” Collins said.
After the Sept. 18 hearing, Collins told Bloomberg BNA that, “I'm not holding my breath” for the data to arrive soon.
The 90-minute hearing was titled Update on the Small Business Health Options Program: Is It Working for Small Businesses?
Fixing the SHOPs
All the members of the subcommittee, Republicans and Democrats, agreed that the SHOPs aren't perfect and are in need of repair, but differed as to their effectiveness.
Ranking Member Janice Hahn (D-Calif.) said that Medicare, enacted in 1965, also wasn't perfect and is still being improved today, “but that doesn't mean it was bad.” The same can be said for the ACA, she said.
Other witnesses differed on how to fix the SHOPs.
Roger Stark, health care policy analyst for the Seattle-based Washington Policy Center, an independent, nonprofit think tank, said that insurance rates and benefit levels should be set by the insurance market and not by government regulations, and that the state marketplaces should be able to offer an array of insurance plans without having to include the essential health benefits required under the ACA in order to make the market more competitive.
Alvarez disputed that claim, and said that the “biggest problem” with Stark's solution is that it would lead to adverse selection, which would in turn lead to higher costs for employers and plan participants.
Jon Gabel, senior fellow at the independent research organization NORC at the University of Chicago, agreed with Alvarez and said that plans in the exchanges must at least provide a minimum benefits package. Prior to the ACA, many offered plans had very low actuarial value, he said.
Rather than setting limits on copays, coinsurance and deductibles, the ACA established four actuarial value levels of coverage on plans—bronze, silver, gold and platinum—which represent the share of health-care expenses the plan covers for a typical group of enrollees. Most plans prior to the ACA provided less than 80 percent of actuarial value, the level of a gold plan, Gabel said.
The ACA allows employers with fewer than 25 full-time equivalent employees to apply for a temporary subsidy, called the Small Business Health Care Tax Credit, under which they will only have to pay up to half of the premium for their full-time employees.
Rep. Blaine Luetkemeyer (R-Mo.) asked Alvarez for the basis upon which the CMS made its decisions on whether an employer could get the temporary subsidy.
Alvarez said the decisions are based on flexibility and responsiveness to the needs of the market.
“But what's the basis?” Luetkemeyer asked.
“I can definitely get back to you with that information,” Alvarez said.
The Small Business Subcommittee on Health and Technology, under the chairmanship of Rep. Chris Collins (R-NY), today conducted a hearing to examine the ongoing problems with the Small Business Health Option Program (SHOP) exchanges, exchanges and to seek answers on behalf of America’s small businesses. During the hearing, Chairman Collins specifically asked the Centers for Medicare and Medicaid Services (CMS) witness, Director of State Exchange Group, Mayra Alvarez, about the SHOP enrollment data, however, the administration was again unable to provide the information, despite repeated claims of transparency.
From the very beginning, the SHOPs program has created more uncertainty and confusion for small businesses by delaying rules at least five separate times. A June 2013 GAO report requested by House Small Business Chairman Sam Graves (R-MO) confirmed the administration was ill-equipped for the implementation of the SHOPs, and the program’s record has since confirmed that prediction. SHOPs were meant to simplify the process of purchasing health insurance, expand employee choice and reduce the cost of health coverage for small businesses, but those goals have come nowhere close to being met. Chairman Graves has repeatedly pressed the administration to provide data on the enrollment and updated compliance timeline of federal or state SHOPs, but the requests have gone unanswered.
All of these challenges regarding SHOPs have occurred while small businesses are grappling with rising health insurance costs that are increasing for nearly two-thirds of small businesses that provide health insurance to their employees. And the National Federation of Independent Business found that 64 percent of small business owners paid more per employee for health insurance in 2013 than in 2012.
“Uncertainty and confusion are a recipe for disaster for small businesses,” said Chairman Collins. “The ability to plan ahead is key for small companies, especially since they don’t have large staffs to deal with tax, regulation, employee benefits and government mandate compliance. So, for the Small Business Health Options Program to be implemented so poorly is a major headache for the nation’s small business community. I’m pleased that CMS sent an official to testify today, but questions still remain about the viability and data collection for this program moving forward. It’s shocking that, after the billions of taxpayer money that has been spent on Obamacare, there was no process created for recording and measuring the SHOP enrollment data on a regular basis. HHS and CMS need to do a better job of operating and tracking the exchanges and communicating what lies ahead for the program.”
The Committee’s first hearing on this topic took place in December 2013. Materials from this hearing are available on the Committee’s website HERE.
Dr. Roger Stark, Health Care Policy Analyst at the Washington Policy Center in Seattle, WA said, “Although the employer mandate is a critical part of the ACA, the SHOP marketplace for small businesses seems to be almost an afterthought in the law. There is no clear evidence of interest on the part of small companies to provide health insurance through a marketplace with tax credits.
The paperwork and regulatory burden in the SHOP exchange are definite hurdles for a small business employer. There is no real free market in the individual exchanges or in SHOP. Proponents will claim that competition exists, yet all insurance plans offered in the exchanges must contain the ten government-mandated essential benefits. Insurance premium prices must be approved by the government. Consequently, individuals and employers only have government-approved plans and not meaningful choices or real competition.”
Adam Beck, Assistant Professor of Health Insurance at The American College of Financial Services in Bryn Mawr, PA said, “The Small Business Health Options Program, or SHOP Marketplace, was designed by the 111th Congress to lower health costs for small business, increase competition and therefore choice for business owners, and simplify the process of offering health coverage. These are laudable goals, however it is my opinion that the SHOP Marketplace as it is currently structured and presented falls short of these goals. I believe the SHOP Marketplace will remain inadequate and continue to enroll relatively few companies so long as three factors remain: the existing tax incentives, the lack of engagement of agents and brokers, and shortcomings in information technology infrastructure.”
POLITICO Pro: CMS: No enrollment numbers for SHOP
September 18, 2014
By Brett Norman
A CMS official told a House panel this afternoon that she could not provide enrollment numbers in Obmacare’s small business exchanges.
Mayra Alvarez, director of the state exchange group at CCIIO, said that the agency “is not the source of SHOP enrollment," because businesses did not have online access in the first year, requiring them to apply by paper, through an agent or broker or directly through insurers.
But CMS is “working to get that information from issuers, and as soon as we have it, we will share it with you,” Alvarez told Rep. Chris Collins, chairman of the Small Business Subcommittee on Health and Technology.
CMS has been forthcoming about individual exchange enrollment. This morning, Administrator Marilyn Tavenner told the House Oversight Committee that 7.3 million people were paying Obamacare customers through mid-August — the first update since the administration reported more than 8 million sign-ups after the end of open enrollment in April.
SHOP enrollment in many states this year was minimal. In Washington state, for instance, 11 companies with about 40 employees total enrolled, despite more than 2,000 businesses setting up accounts, according to testimony at the hearing.
Washington was not typical, however. Jon Gabel, a senior fellow of NORC at the University of Chicago, told the hearing that it was the only state with just one insurance company offering coverage through SHOP. He also said “SHOP plans cost less than the plans” outside of the exchange.
“Washington’s mounting regulatory burden is destructive to America’s 28 million small businesses and harmful to the economy,” said Chairman Graves. “A recent study found that federal regulations cost $2 trillion in 2012 and that small businesses annually spend $11,724 per employee to comply with federal mandates. The provisions of the Regulatory Flexibility Improvements Act, now part of the Jobs for America Act, ensure that federal agencies fully consider the impact of new red tape on small businesses, and get valuable input from small businesses before a rule is completed. Too often, federal agencies ignore the requirements of the Regulatory Flexibility Act of 1980 (RFA) and implement regulations that impose unnecessary burdens on small businesses. Under this legislation, federal agencies can no longer exploit statutory loopholes to avoid meeting their obligations to America’s job creators. Not all regulations are bad, but many impose heavy costs on small businesses, and unnecessary barriers to growth and job creation should be reduced.”
TIMELINE: In September 2013, the Small Business Committee favorably reported out the Regulatory Flexibility Improvements Act of 2013 (HR 2542). In February 2014, HR 2542 was included as Title III of the ALERRT Act, which passed the House by a bipartisan vote of 236-179. To date, the Senate has failed to act. The transcript and video of Graves’ floor speech on the ALERRT Act can be viewed here. Last Congress, the similar Regulatory Flexibility Improvements Act of 2011 (H.R. 527) passed the House by a bipartisan vote of 263-159, but died in the Senate.
SMALL BUSINESS QUOTE: “Unfortunately, all too often federal agencies view RFA compliance as either a technicality of the federal rulemaking process or, worse yet, as unnecessary. In an effort to ensure that regulations are crafted in accordance with the Congressional intent of the RFA, I urge Congress to seek out ways to improve agency compliance with the Regulatory Flexibility Act.” – Carl Harris, Homebuilder from Wichita, Kansas. (3/14/2013 hearing)
View more quotes HERE.
Reducing unnecessary regulatory burdens for small business has been a priority of Chairman Graves’ tenure at the Committee. In January 2013, the Small Business Committee launched the "Small Biz Reg Watch" initiative, which encourages small businesses to participate in the federal rulemaking process by regularly highlighting new agency proposed rules that may have a significant effect on small firms and encouraging business owners to submit comments to agencies.###
Bloomberg BNA: Bill Calls for SBA to Use Electronic Signatures in Loan Process
September 18, 2014
Sept. 18 (BNA) - A legislative proposal unveiled Sept. 18 would require the Small Business Administration to accept e-signatures in its financing programs.
Rep. Sam Graves (R-Mo.) says a long, complicated loan application process “is often a great impediment for many small businesses to secure the capital they need to get their products or services to market.”
“The majority of the time spent during the SBA loan application process consists of lenders collecting required documentation and having to seek out the ink signatures of borrowers,” said Graves, who chairs the House Small Business Committee. “The Small Business Loan Simplification Act of 2014 will employ widely used and proven e-signature and records technology to reform the SBA loan process. This will likely cut the application process by an average of 2 to 3 days.”
House Small Business Committee Chairman Sam Graves (R-MO) today introduced legislation that will streamline and simplify the loan application process at the Small Business Administration (SBA) by requiring the agency to permit the use of e-signature and electronic records. The Small Business Loan Simplification Act of 2014 would statutorily bring the SBA up-to-speed with technology already being used by private lenders and other federal agencies. Rep. Steve Chabot (R-OH), Rep. David Schweikert (R-AZ), Rep. Richard Hanna (R-NY), Rep. Tim Huelskamp (R-KS), and Rep. Chris Collins (R-NY) are original co-sponsors.
“Access to capital continues to be a major issue for many small businesses and people trying to start new companies,” said Chairman Graves. “A lengthy and complicated loan application process is often a great impediment for many small businesses to secure the capital they need to get their products or services to market. The majority of the time spent during the SBA loan application process consists of lenders collecting required documentation and having to seek out the ink signatures of borrowers. The Small Business Loan Simplification Act of 2014 will employ widely used and proven e-signature and records technology to reform the SBA loan process. This will likely cut the application process by an average of 2 to 3 days.”
The Electronic Signatures in Global and National Commerce Act (ESIGN) of 2000 made valid the use of e-signatures on binding documents, but the SBA has not yet permitted their use during the application process for its array of financing programs.
General bank lending to small businesses still has not returned to pre-recession levels. According to the Federal Deposit Insurance Corporation, at the end of the first quarter, banks held $585 billion in loans to small businesses, which is 18% lower than in 2008. And the number of loans for $1 million or less held by banks is down about 14% from 2008.
The bill is widely supported by industry, including the leading providers of electronic signature and record technology, the banking community, and a number of organizations representing various types of SBA lenders.
Small Business Loan Simplification Act of 2014:
• Permits participants in SBA financing programs, both borrowers and lenders, to use electronic signatures and records in the certification and transmission of documents.
• Requires the SBA to accept electronic signatures and records associated with the management of its financing programs.
The Committee explored telecommunications issues that are important to small firms, including net neutrality, broadband deployment, Universal Service Fund reform efforts, and wireless spectrum availability. The Honorable Thomas Wheeler, Chairman of the FCC, testified about efforts to promote wireless connectivity and ensure reliable systems. Members of the Committee repeatedly conveyed the importance of an FCC agenda that analyzed the intended and unintended consequences of their actions on innovation and rural access for small businesses.
“American small businesses depend more than ever on communications, and advances in technology have opened doors to distant marketplaces from rural America,” said Chairman Graves. “Access to these opportunities is indispensable for small businesses to grow and compete. The technology revolution in the telecommunications industry has fundamentally changed the way small firms do business not only nationally, but worldwide. Continued congressional oversight of the FCC is critical to ensure that burdensome or unnecessary regulation does not hamper innovation and growth for small firms, which are key to our economic recovery.”
Materials from the hearing are available on the Committee’s website HERE.
On Thursday, the Small Business Subcommittee on Health and Technology will conduct an oversight hearing to examine the ongoing implementation problems with the Obamacare Small Business Health Option Program (SHOP) exchanges.
Unfortunately, the program has created more uncertainty and confusion for small businesses, on top of the rising health insurance costs that are increasing for nearly two-thirds of small businesses that provide health insurance to their employees. The Committee has conducted extensive oversight of SHOPs this Congress. In January, House Small Business Committee Chairman Sam Graves (R-MO) requested enrollment numbers and related information from Health and Human Services Secretary Kathleen Sebelius. And again in June, Graves wrote to CMS Administrator Marilyn Tavenner to request information about the SHOP enrollment. To date, the information has not been produced.
The SHOPs have experienced numerous delays and mismanagement, going back to April 2013. Here is a list of all the changes that small businesses are trying to keep up with:
“Every year, the tax burden becomes more costly for America’s 28 million small businesses. The tax code is increasingly complicated and changes often. Most small businesses spend 40 hours or more preparing their taxes, and four out of ten businesses spend two full workweeks on compliance. That is a high cost in lost time and productivity for a small business. One in three small firms spends $10,000 on compliance. Jobs are still scarce, and the combined burdens of complex taxes and high rates are obstacles to growth. The jobs-stifling tax code is not just a Tax Day problem for small companies, but a year-round burden on their budgets that can impact their entrepreneurial decisions. Small businesses overwhelmingly support sensible reforms for lower rates, simpler preparation and clearer guidelines.”
Last week, the Small Business Committee examined these very challenges for small businesses. The growing number of tax provisions means that owners must spend significant resources on compliance that could otherwise be spent growing their companies. According to the Internal Revenue Service’s own National Taxpayer Advocate, there were over 500 changes to the tax code in 2010 alone, an average of more than one per day. And the steep tax rates mean small firms have less capital to invest back into hiring or expanding.
The National Small Business Association released a survey on April 9, 2014, in conjunction with the testimony of NSBA member Tim Reynolds, a small business executive. The growing complexity of the tax process causes 86 percent of small businesses to pay tax preparers.###
House Small Business Committee Sam Graves (R-MO) today released the following statement on House passage of the Employee Health Care Protection Act (HR 3522), which would give Americans in the group insurance market the opportunity to keep their policies in 2014 through 2019 and also give small businesses and their workers the option to choose plans even if they don’t comply with the Affordable Care Act’s rules.
“Complying with Obamacare has been a nightmare for small businesses. Under the health care law’s rules, costs are increasing for nearly two-thirds of small businesses that provide health insurance to their employees, according to a CMS report released in February. The frequent delays and changes with the Small Business Health Options Program (SHOP) have also made assurances of more competition and choice ring hollow. Despite the President’s promise that you could keep your plan, millions of Americans have had their plans cancelled, and many employees of small businesses are likely to get those notices this Fall. The Employee Health Care Protection Act is desperately needed because it gives small businesses and their workers the option to keep or choose the health plan they want, despite the ACA’s benefit requirements. This will provide more affordable options than what is available under Obamacare.”
The Committee has conducted extensive oversight of the Small Business Health Options Program this Congress. In June, Graves wrote to CMS Administrator Marilyn Tavenner to again request information about the SHOP enrollment. In January, Graves requested enrollment numbers and related information from Health and Human Services Secretary Kathleen Sebelius. To date, the information has not been produced.
List of SHOP delays and mismanagement:
• On April 1, 2013, the Obama Administration announced that the employer health insurance choice on the federal SHOP exchanges would be delayed until 2015, limiting employers to one single plan.
• On June 19, 2013, a GAO report requested by Chairman Graves confirmed the administration was ill-equipped for the implementation of the SHOPs, showing potential for “implementation challenges going forward.”
• On September 26, 2013, HHS announced the SHOPs online enrollment would be postponed from October 1 until November, forcing small businesses to enroll using paper forms. That same day, White House Press Secretary Jay Carney clarified the enrollment would begin on November 1, 2013.
• During a Ways and Means Committee hearing on October 29, 2013, CMS Administrator Marilyn Tavenner said the SHOPs would be operating at the end of November.
• On November 22, 2013, the Administration extended the Obamacare federal exchange signup deadline (for January 1 coverage) from December 15 to December 23.
• On November 27, 2013, the day before Thanksgiving, the Administration announced a fourth SHOP-related delay, postponing online enrollment for a full year.
The Small Business Subcommittee on Contracting and Workforce, under the chairmanship of Rep. Richard Hanna (R-NY), today conducted a hearing to examine the declining rate of small business creation over the past 30 years and the state of entrepreneurship during this latest economic recovery.
The rate of new business creation has dropped by nearly 50 percent from 1978. In 1978, there were 12 new businesses created for each existing business while in 2011 this dropped to 6.2 new firms. Under the Obama Administration, entrepreneurial job creation has declined by one-third to 7.8 percent. By comparison, the average rate for entrepreneurial job creation under the previous three presidents was 11.3, 11.2, and 10.8.
“Our economy is facing a crisis that most Americans are not aware of – a decline in entrepreneurship,” said Chairman Hanna. “For the first time in over 30 years, more businesses are dying off than being created. Today’s hearing provided further evidence that Washington must do more to provide a better regulatory and tax environment for enterprise growth. We must not allow a declining rate of business formation and sluggish growth to be considered the new normal, and we should pursue policies which unleash the economic power of entrepreneurship and the American spirit."
Materials from the hearing are available on the Committee’s website HERE.
John Dearie, Executive Vice President, Financial Services Forum, Washington, DC said, “New businesses create an average of 3 million new jobs annually, while existing firms of any age, type, or size, in aggregate, shed a net average of about 1 million jobs each year, as some businesses fail and others incorporate technology and become more efficient. Were it not for new businesses, there would be no net new job creation in most years.”
“…the policy needs and priorities of new businesses are unique. Start-ups are different from existing businesses. While they confront challenges similar to those of existing businesses, their ability to successfully navigate those challenges is more limited.”
Jonathan Ortmans, Senior Fellow, Kauffman Foundation, Washington, DC said, “Congress should… examine the role regulatory accumulation may play in depressing entrepreneurial activity. As new regulations are enacted on top of existing rules, businesses are faced with the challenge of navigating an increasingly complex regulatory regime. A handful of ideas have been proposed to address this challenge, including the establishment of a Regulatory Improvement Commission and the automatic sunset of major rules after a set amount of time.”
Chad Moutray, Chief Economist, National Association of Manufacturers, Washington, DC, said, “Beyond these issues, the best way to increase firm formation is to have a growing economy. Policymakers need to adopt pro-growth measures that will enable manufacturers and other businesses to expand, to hire more workers and to invest in more capital spending. A healthy economy will encourage more participants, and that should spur more entrepreneurship and innovation. The pro-growth priorities of manufacturers include, but are not limited to: passing comprehensive tax reform, providing regulatory relief, expanding trade opportunities, enacting sensible energy policies, investing in more infrastructure, encouraging research and development, and developing the next generation of workers.”
“Small businesses face record levels of red tape under President Obama’s policies, and America’s small manufacturers can attest that the regulatory burden is a growing problem. A study showing that federal regulations annually cost $2 trillion should be a wake-up call to this administration. Compliance costs are soaring for small businesses, which often do not have the employee expertise to decipher and handle more government paperwork and other mandates. The study finds that small businesses are annually spending $11,724 per employee to comply with federal regulations. The number increases for small manufacturers to $34,671 per employee, which means that small manufacturers are spending two-and-a-half-times more on federal regulatory compliance than large manufacturers. They are forced to invest in attorneys, accountants, consultants, tax preparers and other advisors, rather than their companies. Under this burden, the economy cannot sustain the growth needed to restore the good jobs and wages that can put more Americans back on track to budget for educational goals, homes and retirements. Small manufacturers and the entire economy would benefit from a major course correction away from burdensome government. It’s time for Washington policies to start working with small businesses for growth, not against them.”
Chad Moutray, the Chief Economist for the National Association of Manufacturers, will testify in tomorrow’s Small Business Committee hearing: The Decline in Business Formation: Implications for Entrepreneurship and the Economy.
“The SBA is responsible for managing a set of core programs designed to help small businesses succeed, but the agency has a recent history of ignoring the law and being sidetracked by its own pet projects,” said Chairman Graves. “The Committee remains concerned that the SBA’s resources are not focused on reforms and programs that Congress has mandated. For instance, the number of small businesses trained in many of the SBA’s proven entrepreneurial development programs has been in decline while the agency spends millions of dollars to fund unauthorized efforts that duplicate services available from other federal agencies and the private sector. This diversion of resources also comes at the expense of implementing contracting reforms signed into law two years ago that will help small businesses compete in the federal procurement arena. Over 40 of the tasks assigned to the SBA to implement the law remain incomplete.”
Materials from the hearing are available on the Committee’s website HERE.
Graves: Waters of the U.S. Regulatory Overreach Protection Act Is Needed To Protect Family Farms and Small Businesses
House Small Business Committee Chairman Sam Graves (R-MO) released the following statement in support of the House vote on the Waters of the United States Regulatory Overreach Protection Act (HR 5078), which would prohibit the Environmental Protection Agency (EPA) and the Army Corps of Engineers from finalizing their proposed rule that would redefine “waters of the United States” under the Clean Water Act:
“This unprecedented ‘waters of the U.S.’ proposal is indicative of many of the problems with the federal government,” said Chairman Graves. “This proposed rule creates more confusion, and applies an Washington-knows-best mentality to an issue with many variables at the local level. Under this expansive Clean Water Act proposed rule, all tributaries, including small streams and ponds that only flow irregularly or when it rains, fall under this definition as federally-controlled waters and would be subject to the Clean Water Act’s permitting and other onerous regulatory requirements. Despite the obvious consequences for farmers, home builders and other small businesses, the EPA did not conduct a Small Business Advocacy Review panel and the agencies did not assess the impact of the proposed rule on small businesses as required by law. The Waters of the United States Regulatory Overreach Protection Act is needed to protect family farms and small businesses from this gross overreach by this Administration.”
The Committee held a hearing on the Waters of the U.S. proposed rule on May 29, 2014. Small business leaders have overwhelmingly maintained that the rule creates more confusion, would be economically detrimental on many levels, and wouldn’t improve water quality.
Small Businesses: Waters of the U.S. Rule Just Another Confusing and Economically Detrimental Power Grab
This week, the House will vote on the Waters of the United States Regulatory Overreach Protection Act (HR 5078), a common-sense bill that would prohibit the Environmental Protection Agency (EPA) and the Army Corps of Engineers from finalizing their proposed rule that would redefine “waters of the United States” under the Clean Water Act.
In April, the Obama Administration proposed this “waters of the U.S.” rule, which would lead to an unprecedented expansion of federal regulatory jurisdiction. Under this expansive proposed rule, all tributaries – even small streams and ponds that only flow irregularly or when it rains – and all adjacent waters and wetlands, fall under this definition as federally-controlled waters and all the bureaucratic rules, onerous regulations, and costly requirements that entails. This includes small, temporary bodies of water, such as ditches, that may be dry for much of the year. The rule would be particularly harmful for farms, of which about 95% are small businesses; and 97% of all farms are family farms.
Through hearings and correspondence, the Small Business Committee has heard directly from small businesses that this rule creates more confusion and would be detrimental on many levels. Surprisingly, the EPA did not conduct a Small Business Advocacy Review panel to get small business input on the proposed rule, and the agencies did not prepare a regulatory flexibility analysis assessing small business impacts despite the fact small businesses will need to comply with the rule. Here are just a few of the comments from a May 29 Committee hearing:
Jack Field, Owner, Lazy JF Cattle Co., Yakima, WA:
“I don’t think the negative impacts of this definition can be overstated. As a producer and the head of a state association, I can tell you that after reading the proposal rule it has the potential to impact every aspect of my operation and others like it by dictating land use activities in Washington state from 2,687 miles away. I would also feel confident in saying that I believe it will actually have a detrimental impact on water quality.”
“Being the owner of a small business myself in the cattle industry and knowing the detrimental impact this regulation will have on my operation, it is appalling the agencies could assert that this regulation will not have a ‘significant economic impact on a substantial number of small entities.’ It is clear to me that the rule’s primary impact will be on small landowners across the country.”
Alan Parks, Vice President, Memphis Stone and Gravel Co., Memphis, TN:
“EPA’s economic analysis of this rule does not accurately show what businesses like ours will end up paying if this rule is finalized. It is not even close. One [National Stone, Sand and Gravel Association] member calculated that to do the additional mitigation of a stream required under this rule would be more than $100,000; this is just for one site in our industry. This is more than EPA has estimated the stream mitigation costs are for entire states in its economic analysis.”
“While there are many inefficiencies in the current regulatory system, adding vague terms and undefined concepts to an already complicated program is not the way to improve the process. For example, EPA states groundwater is excluded from this rule, but the rule also says that shallow subsurface connections are included. Does this mean that water that fills our pits is jurisdictional?”
Tom Woods, President, Woods Custom Homes, Blue Springs, MO:
“These definitions will leave home builders in a constant state of confusion. As a small business owner, this unpredictability will make it difficult for my business to comply and grow. The agencies suggest that the rule provides clarity; however all it does is produce more questions. Unfortunately, we have to rely on the agencies and costly consultants for answers.”
“I am a businessman. I need to know the rules. I can’t play a guessing game of ‘is it federally jurisdictional?’ But that’s just what this proposal would force me to do. Builders would face new, costly delays just waiting for the agencies to determine if a road ditch is a ‘Water of the United States.’ The only winners are the lawyers, as this rule will certainly lead to increased litigation.”
In his letter, addressed to the Chief Counsel for Advocacy, Winslow Sargent, Graves outlines the steep rise of occupations subject to state and local licensure laws, which now directly affects about one in three occupations and creates barriers for entrepreneurs. According to a 2007 study, the total cost of licensing regulations to the economy is between $34.8 billion to $41.7 billion per year. Notably, a June 2014 study found that occupational licensing was the number one regulatory burden facing small firms. In an economy in which jobs are still scarce, these requirements can reduce opportunities and create unnecessary obstacles for individuals, especially those of fewer means, who want to start a business and attain economic self-sufficiency.
“At a time of economic uncertainty, when our nation’s job creators, small businesses, are struggling to stay afloat, we are concerned that occupational licensing laws which are not narrowly tailored to the public benefit could have the unintended consequence of stifling entrepreneurship,” Graves states in the letter. “Occupational licensing also may impede innovation and business development as would-be entrepreneurs focus their resources on meeting licensing board requirements rather than on meeting the needs of their businesses or customers.”
The Committee on Small Business has closely monitored this issue and as the letter states, “The Committee on Small Business has held two hearings over the past few months regarding the barriers to entrepreneurship caused by occupational licensing and we believe that this issue merits further examination. At a Subcommittee on Contracting and Workforce of the Committee on Small Business hearing on March 26, 2014, entrepreneurs and academic experts testified on the barriers to entry that such anti-competitive licensing places on entering the market and job creation. At a July 16, 2014, Committee on Small Business hearing the Federal Trade Commission (FTC) testified on its efforts to curb anti-competitive licensing schemes through advocacy and enforcement of federal anti-trust laws to prohibit unfair competition.”
The entire letter to the Office of Advocacy is available HERE.###
Why isn't the Senate taking up innovation bill?
By Chairman Sam Graves
When folks hear the term "start-up," all sorts of images are easily conjured in one's mind. You think of energetic young people in Silicon Valley or maybe Boston or Austin creating new innovative businesses; like Facebook or Twitter — hip tech companies with new ideas that seemingly came out of nowhere and now are integral parts of our lives. The good news is this is only part of the story. As Chairman of the House Small Business Committee, I've learned that start-ups can be found across America, from Boulder, Colo. to my backyard in Kansas City, and the types of companies and problems these companies seek to solve extend far beyond just the high-tech industry.
We recently celebrated "Start-up Day Across America," a day to celebrate the importance of entrepreneurship and raise awareness about the job-creating potential of start-ups. We know that small businesses create the bulk of net new jobs in this country, but interestingly enough, research has shown that it is a particular subset of small firms — start-ups — that are actually leading the way in job creation. According to the Kauffman Foundation, a small 1 percent of start-up firms account for 10 percent of new jobs each year. Further, a report by the Pacific Research Institute estimates that in a given year, each net job created by start-up firms increases a state's gross product by almost $1.2 million; shedding light on the significant benefits growing start-ups can have on the local economy. With numbers like these, it is easy to see why Americans are beginning to focus on the importance of start-ups.
Start-ups are rapidly moving and as we all know, the government is not. So when the Small Business Committee holds hearings and listens to the real-life challenges of start-ups, we learn what we can do, or usually not do, to allow them to stimulate the economy, create jobs, and spur innovation. Frequently, the story goes that government intrusion into this space only slows down start-ups and makes things harder; even when the government's actions are best intentioned.
Take, for example, crowdfunding — it's been one step forward, with many steps back. Access to capital is an important issue, especially for companies just starting out, where a month or two of funding can change everything. While Congress passed the Jumpstart Our Business Startups Act of 2012 (JOBS Act) over two years ago, many of the relevant crowdfunding regulations are yet to be released, and the regulations that have been proposed seem to set up more roadblocks to obtaining capital than providing access to financing. The bill's supporters saw it as an opportunity to allow start-ups to thrive, not create even more onerous regulations. Unfortunately, some in Washington have mastered snatching defeat from the jaws of victory.
That said, start-ups have mentioned a few things Congress can do to help — one is finding ways to combat patent trolls. Patent trolls are entities or people that attempt to bring frivolous patent claims against all types of businesses to challenge or try to take intellectual property. For start-ups, their intellectual property may be the most valuable asset they have. The cost of patent litigation is particularly harmful to entrepreneurs because they take limited resources away from building that next great product or service.
How can we expect to get the economy back on track and create meaningful employment when start-ups are afraid to innovate and create new products due to the potential threat of an all-too-often meritless demand letter from a patent troll that could shut the company down and turn away investors?
In December, the House overwhelmingly passed H.R. 3309, The Innovation Act, with strong bipartisan support to begin addressing patent trolls. While this legislation lacked a provision specifically addressing demand letters, it was a step in the right direction to prevent costly litigation and add much needed transparency. Yet, Senate Majority Leader Harry Reid has not brought the bill up for a vote in the Senate; refusing to truly create better conditions for these important companies. To me this is inexcusable.
As we think about the economy, it is time to start thinking about start-ups as an integral piece of the puzzle. Start-ups are not just a hip new term or a group of companies isolated to one part of the country. They are in each and every one of our backyards actively working to revive America's economy and make a living for themselves.
Commentary by Sam Graves (R-Mo.), chairman of the U.S. House of Representatives' Small Business Committee and U.S. representative of the 6th congressional district of Missouri. Graves, who is a sixth generation family farmer, has served in Congress since 2001. Follow the committee on Twitter @SmallBizGOP.
Read the article online HERE.
Bloomberg BNA: Federal Government Meets Small Business Contracting Goal for First Time in Eight Years
Aug. 1 (BNA) -- The federal government awarded $83.1 billion in prime contracts to small businesses in fiscal year 2013, exceeding its 23-percent goal for the first time in eight years, according to official statistics released Aug. 1.
However, the government fell 2 percent short of expectations that small firms receive 36 percent of subcontracted dollars.
The results of the latest Small Business Procurement Scorecard were released by Maria Contreras-Sweet, head of the Small Business Administration, and Charles Bolden, head of the National Aeronautics and Space Administration, at a briefing held at Goddard Space Flight Center in Greenbelt, Md. Contreras-Sweet said despite a recent decline in federal spending, $459 billion in contracts were awarded to small businesses in the first five years of the Obama administration, a $62 billion increase over the previous five years. The president “since day one” has focused “like a laser” on the need to improve opportunities for small firms, she said. Contreras-Sweet took over at the SBA in early April after being picked by President Barack Obama for the job Jan. 15.
Twenty of 24 federal agencies received an ‘A’ or ‘A+’ in the SBA's annual assessment of individual agencies' small business contracting achievements, which resulted in the federal government receiving a top grade overall on the scorecard. Three agencies received a ‘B’ grade. On the other end of the scale, the Department of Energy received an ‘F’ for the third year in a row.
While Bolden said he was “especially proud” of NASA's record with respect to working with small business contractors, he stressed it “still has a ways to go.” Despite receiving A's on the scorecard for FYs 2012 and 2013, “a marked improvement” over the C rating it received three years ago, “we are not where we want to be,” Bolden said. “But we are on the way.” In FY 2013, service-disabled veteran-owned small businesses received 3.38 percent of prime contracting dollars ($12 billion), exceeding the 3 percent goal. Small disadvantaged businesses won 8.61 percent ($30.6 billion), exceeding the 5 percent target. However, the government failed to meet its 5 percent contracting goal for women-owned businesses and 3 percent goal for firms in Historically Underutilized Business Zones (HUBZones); these companies won 4.32 percent ($15.4 billion) and 1.76 percent ($6.2 billion) respectively. Agencies awarded 22.25 percent ($89.9 billion) of their prime contracting dollars and 33.6 percent of subcontracting dollars to small businesses in FY 2012 (100 FCR 38, 7/9/13).
Increasing Goals ‘Premature'
Contreras-Sweet praised Sen. Ben Cardin (D-Md.), a member of the Senate Small Business and Entrepreneurship Committee who attended the briefing, for his dedication to promoting opportunities for small business. She specifically applauded his work on the Women's Small Business Procurement Parity Act (S. 2481), which would provide authority for sole source contracts for certain small business concerns owned and controlled by women. But Contreras-Sweet told Bloomberg BNA she does not agree with a recent proposal to increase small business contracting and subcontracting goals.
It would be “premature” and “too stressful” to raise the goals at this juncture, she said. “Until we get this ball rolling,” the levels should remain where they are, she said. Language added to the House-passed defense authorization bill (H.R. 4355) by Rep. Sam Graves (R-Mo.), chairman of the House Small Business Committee, would increase the federal government's small business prime contracting goal from 23 percent to 25 percent and its subcontracting goal from 36 percent to 40 percent.
“Now that the small business contracting goal has been met, we should not relax in helping more small businesses compete; the Senate should follow the House in raising the small business goal to 25 percent, to help more small businesses grow and create jobs,” Graves said in a statement Aug. 1.
The House bill also was amended to allow women-owned small businesses to receive sole-source contracts on the same terms as contracts awarded via other small business contracting programs.
House Small Business Committee Chairman Sam Graves (R-MO) today released the following statement on the release of the Small Business Administration (SBA) FY 2013 Small Business Contracting Scorecard, showing that for the first time since 2005, the federal government reached the government-wide 23 percent goal for small business contracting:
“For the first time in eight years, the federal government has finally met its 23 percent goal for small business contracts. This demonstrates that the reforms enacted during the past 2 Congresses are working. We've focused on helping small businesses compete for federal contracts by including small business goals in senior agency employee performance reviews and bonus discussions, increasing the authority of the small business contracting advocates, and making the size regulations easier to follow. Once SBA implements the rest of these reforms, such as making it easier for small companies to team on larger contracts or find mentors, small business participation will continue to rise. Now that the small business contracting goal has been met, we should not relax in helping more small businesses compete; the Senate should follow the House in raising the small business goal to 25 percent, to help more small businesses grow and create jobs.