Democratic View

September 21, 2001

ADDITIONAL VIEWS
H.R. 203 - National Small Business Regulatory Assistance Act

 

Democrats agree strongly that some targeted, uniform delivery system must exist to make small businesses more aware of their regulatory obligations. If greater assistance is not targeted to small businesses, a divide could develop between large businesses that have the resources to comply with regulatory requirements and small businesses that do not. As a result, we strongly support a regulatory compliance assistance program operated through SBA's Small Business Development Center Program and believe that its overall success will ensure the success of the pilot program established under H.R. 203.

Small businesses have often been overwhelmed by the growing and constantly changing Federal, State and local regulatory requirements. They fear, with the onslaught of federal regulations, that they will inadvertently fail to comply with some obscure rule, their business will be shut down by the government, and they will be driven into bankruptcy because they cannot afford the cost of compliance. On the other hand, small businesses also fear that going to the very agencies that create and enforce the regulations is tantamount to turning themselves in, and will ultimately result in penalties being levied on their businesses. In fact, many believe that the government is more interested in recovering penalties than in promoting compliance with the law.

Although Federal and State regulations and regulatory programs usually provide substantial benefits, they can be confusing, burdensome and incur significant costs that disproportionately fall on small businesses. Small businesses are not only in need of quality regulatory compliance assistance programs, but also programs that are uniformly developed nationwide and targeted to small businesses.

An important aspect raised during the Committee's most recent hearing is the technical expertise one must have to understand each individual regulatory requirement. Providing that knowledge to small businesses is as important, if not more important, as providing advanced notice of any regulatory requirement they must comply with. Therefore, we believe that the purpose of this new pilot program is to establish an initial contact that results in a referral to the appropriate program or experts. It is our belief that the new pilot program is required to utilize existing Federal or State compliance assistance programs and avoid competing with them. Some of these existing compliance assistance programs, such as those created under Section 507 of the Clean Air Act Amendments (e.g. EPA's State Small Business Assistance Program), have established a level of expertise in compliance assistance and provide invaluable technical assistance targeted to small businesses. In addition, SBDCs must be careful in the type of counseling they provide and the liability that can result from such counseling.

During the Committee mark-up session, there was some confusion on who would be receiving the grant awards. We concur with the report language that directs the Administrator to select two State SBDC programs from each of the ten SBA regions across the nation. The State SBDC program, not an individual center or subcenter, will receive the grant money to implement the assistance statewide.

As introduced, H.R. 203, required assistance with only Federal regulations. However, Congress often defers the authority to promulgate and enforce Federal regulatory requirements to the States. Therefore, small businesses must also comply with regulations on the State level and many times, these regulations either conflict or are even more stringent and complicated than Federal regulations. A prime example is EPA's TMDL regulations, where EPA promulgates the regulations but States are given the authority to enforce those regulations. Thus, States can also, and often do, promulgate their own regulations to enforce the requirements under the TMDL regulation. The Committee Democrats proposed and supported an en bloc amendment to H.R. 203 in committee, containing language that included assistance with State regulations within the pilot program.

Democrats are also concerned with privacy protections. During this day and age of new information technologies, privacy protection is one of the most critical issues facing all individuals, including small businesses. Although confidentiality provisions were included in H.R. 203 as introduced, these provisions applied only to participants of the pilot program. Therefore, Democrats sought strong privacy protections throughout the existing SBDC program.

Since its inception, privacy protections have been an inviolate principle of the SBDC program. However, in recent years, SBA began seeking the names and addresses of SBDC clients. At first, the agency assured the SBDCs that the information would be kept confidential, but later informed them that the agency could not ensure the confidentiality of their client information. This puts the SBDCs in a precarious position for two important reasons.

First, each SBDC client signs a liability waiver when it seeks SBDC assistance. As part of that waiver agreement, the SBDC agrees to never disclose the identity of the client. Therefore, this can create liability problems for the program that could result in expensive litigation, not to mention the possibility of large court imposed penalties and fines. Second, and possibly the most important, is the loss of trust from clients. SBDC assistance includes assisting small business who struggle against Federal and State regulations that could lead to possible investigations or penalties against the small business owner. If the SBDC clients believe that their identities will not be held in confidence, they will no longer seek the assistance. This could potentially threaten the success of the program and quite possibly terminate its existence.

As a result, the en bloc amendment to H.R. 203, proposed and supported by the Democrats, included language prohibiting the SBDCs, or an agent of an SBDC, from disclosing the name or address of any SBDC client. However, to ensure the integrity of the program, these privacy protection provisions will not pertain to financial auditors who must review each State SBDC program.

In addition, we believe that fees must not be charged in conjunction with this pilot project. Although the SBDCs are permitted to charge fees under limited circumstances, one-on-one counseling is provided free of charge. Current and past Administrations have attempted to implement a fee-for-service structure for SBDC services that are, and have been, historically free. However, implementing such a structure would not only be detrimental to the pilot program, but to the overall SBDC program. Democrats have consistently opposed such a move and will continue to oppose future attempts.

The proposal also establishes a repository and clearinghouse for the information obtained by the SBDCs, primarily to provide unbiased feedback to agencies and to detect inconsistencies in information regarding compliance with a regulation. This will also work to identify government-wide trends in regulatory rulemaking and enforcement. This will facilitate the ability of the agencies and Congress to improve, not only compliance, but compliance assistance, on a government-wide level.

This pilot program will be able to offer small businesses a voluntary, confidential, and nonpunitive means in which to obtain assistance in complying with the numerous regulations that could determine the success or failure of their businesses. By utilizing SBDCs as a delivery network, small businesses will be able to obtain counseling, training, and education, in an environment that is not perceived as intimidating or threatening.