BUDGET ESTIMATE FOR FISCAL YEAR 1982-REVISED DIRECT LENDING No major change in policy is proposed in SBA's direct lending program. Direct lending will still be targeted toward priority groups and markets, and a contingent fund will be used to supplement any shortfalls in meeting total lending goals to these priorities. Proposals to consolidate the different lending programs, and increase the direct loan interest rate to a rate comparable to the guaranty rate are being recommended. The total direct lending program has been reduced from $346 to $260 million in fiscal year 1982 to reflect the anticipated decrease in demand due to increased interest rates. The budget effects of the fiscal year 1981 direct and guaranteed lending reductions are reflected in the President's special message on rescissions and deferrals. This will reduce the fiscal year 1982 Budget Authority Request and is an integral component of the Administration's comprehensive economic plan to constrain Federal credit and reduce overall spending. SMALL BUSINESS DEVELOPMENT CENTERS SBA's policy has been revised to retain the academic community as one of the resources available to provide management assistance to small businesses, but not to be the focal point for the future delivery of SBA's management assistance programs. Accordingly, funding for the SBDC program has been eliminated in the revised fiscal year 1982 budget request. Continued funding of the SBI program delivered through colleges and universities is still recommended in the revised fiscal year 1982 budget. The revised budget has reduced contractual assistance funding for this program in fiscal year 1981 and in fiscal year 1982 from $3.1 million to $.9 million and $5.5 million to $.7 million respectively. Instead, SBA will integrate the Women's Program with ongoing Agency Programs and continue to assist the small businesses owned by women. A reduced Central Office staff will monitor and promote the effectiveness of SBA's existing programs in addressing the specific needs of women business owners. DISASTER LENDING The fiscal year 1982 budget had included $50 million to fund the nonphysical disaster lending program, which includes businesses that suffer economic injury as the result of an adverse action precipitated by an act of Congress or Government regulation. The revised fiscal year 1982 budget proposes to eliminate the funding of the nonphysical disaster lending programs starting in the second half of fiscal year 1981. However, small businesses which suffer these economic injuries are still eligible to receive assistance through SBA's regular business lending program. Legislation will be submitted to eliminate these programs. In addition, the fiscal year 1981 Disaster supplemental appropriation request has been withdrawn. Plans and policies are being formulated to ensure that the Disaster Loan Fund operates within its current budgetary resources for the remainder of fiscal year 1981. OTHER BUDGET REVISIONS As part of the Small Business Administration's efforts in reducing Government spending the revised fiscal year 1982 Congressional Submission recommends other reductions to our original submission. The following overview will highlight these reductions. PREPARED STATEMENT OF E. PHILIP RIGGIN, DEPUTY DIRECTOR, NATIONAL LEGISLATIVE COMMISSION, and JAMES G. BOURIE, DIRECTOR FOR ECONOMICS, THE AMERICAN LEGION Mr. Chairman and members of this subcommittee: The American Legion is grateful that this Subcommittee is holding oversight hearings to assess the recent progress of the Small Business Administration in implementing "special consideration' for veterans, and is appreciative of the opportunity to present our views on this important program. There is little doubt that the base for this country's economy is small business, as nearly ninety percent of the Nation's business concerns are classified as "small business." The American Legion's involvement with the SBA dates back to 1969, when the Administrator, Mr. Hilary Sandovel, after meeting with the Legion's Special SBA Subcommittee, issued a bulletin to the field stating that veterans, especially returning Vietnam veterans, were to be given priority in all loans with the most liberal interpretation as possible of all SBA rules and regulations. Mr. Sandovel also recognized the returning Vietnam era veteran as one of America's finest resources. They remain so today, and are at an age when most individuals contemplate owning their own businesses. This "priority" bulletin formed the genesis of "special consideration" for veterans that Congress later enacted in PL 93-237 (Small Business Act of 1974). However, it took the SBA nearly two years to publish regulations implementing this legislative mandate. It was interpreted to mean, among other things, that veterans were to receive management assistance; placement of Veterans Affairs Officers in all local SBA offices; prompt processing of loans; direct loans; media campaigns announcing "special consideration;" veterans workshops; and a close cooperation with veterans' organizations. But the hard truth is that the SBA never fully embraced this legislative mandate to provide "special consideration" for veterans; they were at no time a top priority group. Even now, six years after the enactment of PL 93-237, four SBA Administrators, and four Presidents, little has been done for veterans by the SBA. Yet, The American Legion and other service organizations continue our elusive pursuit in hopes that one day we can happily end this frustrating experience. This is a sad commentary indeed, as the Nation has become so suddenly military minded with the present Administration urging young men and women to enter the Armed Forces. Any right minded young person must compare the propriety of such a request with the treatment rendered to yesterday's young person who did answer the call. There is, nonetheless, some positive movement within the SBA concerning “special consideration” for veterans. Last spring, the SBA appointed Dr. Al Prendergast to not only head the Division of Field Service, but also to assume control of its very inactive veterans programs. The American Legion began working closely with Dr. Prendergast, and continues to be impressed with his professionalism, dedication and candor in attempting to bring about a meaningful veterans program. While wearing two hats and operating under a tremendous load, he instituted over 100 nationwide veterans work shops. Recent statistics of these work shops reveal that The American Legion co-sponsored approximately 20 percent of them, more than any other service organization, and will continue to co-sponsor as many as possible in the future. Dr. Prendergast also ensured that there was a Veterans Affairs Officer in each local SBA office who was knowledgeable in veterans programs. Importantly, he opened previously strained channels of communications with the Legion by holding briefing sessions in an effort to keep us abreast of veterans' programs development. Further, he readily accepted our comments and recommendations to improve the program. In short, the Legion and SBA began to once again cooperate for a mutual goal. In following up on those work shops, the Legion received detailed reports from nearly twenty-five state departments representing over one million veterans. Comments ranged from "well organized and informative," "outstanding," to "all show," and "nothing mentioned about veterans;" but for the most part the departments had high praise for the veterans work shops and hoped that they would continue in the future. This is not to state, however, that there are no problems. The field reports indicated that: local SBA offices must advertise these work shops more, with emphasis on being designed specifically for veterans; they must be held at a convenient time and place, such as on weekends when one would not lose a day's work in order to attend; there must be increased involvement with the SBA and Veterans Administration; also, increased involvement on the part of local Veterans Affairs Officers with service organizations; and continuing and regularly scheduled veterans work shops. Invariably, the question was asked at these work shops; "What about funding?" The reply was nearly always the same, that no direct funds are available for veterans. Then what use are these veterans work shops if only to generate a false hope. The SBA makes it quite clear that they are withdrawing entirely from the direct loan programs, and emphasizing instead the guaranteed loan programs. Thus forcing the veteran into a volatile money market with its 20-plus percent interest rates requiring him, in some instances, to pledge 90 percent of the loan. But not everyone has the same problem as veterans do with SBA loans, even for questionable ventures. The Washington Post recently ran articles entitled: "SBA Programs Hit for Links to Crimes" (12-20-80), "Massage Parlor Became Part of U.S. Loan Deal" (12-22-80), and "Woman Found Guilty of Investment Fraud" (1-27-81); to name only a few. Millions of taxpayers' dollars wasted for illegal and questionable purposes. A close scrutiny of the SBA's fiscal 1981 and 1982 budgets reveal no direct funds available to veterans. Funding comes from various sources and is manipulated on the basis of district need. Not only is this a precarious and capricious method of administering millions of dollars, it again points to the fact that veterans have a low priority. Mr. Chairman, The American Legion is very concerned that the SBA fully implement "special consideration" for veterans. At our recently concluded Twenty-first Annual Washington Conference, the National Economic Commission reauthorized the Special SBA Subcommittee to oversee and coordinate Legion involvement. Moreover, our National Commander, Michael J. Kogutek, has accepted an invitation to sit on the SBA's Advisory Council, which recommends policy and procedure to the Administrator. Commander Kogutek is the only representative of a service organization to sit on such a prestigious committee, and he will undoubtedly provide important input to improve veterans programs. Unlike the past, when many State departments of the Legion simply gave up on the SBA, attitudes are presently changing. As previously stated, nearly twenty-five Legion state departments reported some involvement with the SBA. This indicates several important factors: one, willingness to cooperate with the SBA on veterans programs; second, increased demand for veterans programs on small business; and, lastly, a greater sensitivity on the part of local Veterans Affairs Officers to the business needs of veterans, especially Vietnam era veterans. We believe now is a prime opportunity for the new Administrator to seize the moment and build a meaningful veterans program. If not, what little confidence The American Legion now has in the SBA will be dashed and a potential friend may be transformed into a formidable foe. The American Legion continues to proclaim its commitment to the SBA's veterans programs and stands ready to assist them in any reasonable way. We have proven our commitment in the past and will do so in the future. We are respectfully recommending to the new Administrator that he issue a strong directive to be included in all field manuals that "special consideration" be given veterans. However, we are also first recommending that the SBA establish a small 90 day committee to study and clarify “special consideration," as the term now only is replete with vague and misleading connotation, fostering a sense of confusion, and, thus, avoidance. Most of all, the new Administrator must ensure that veterans have separate, direct funds available; nothing else will suffice. Mr. Chairman, The American Legion is not unreasonable in its request. Impatient, yes. We are working very hard to simply see that the SBA complies with the law in a meaningful way, nothing more. We also fully understand the problems facing the new Administrator and again pledge our assistance. Mr. Chairman and members of this subcommittee, The American Legion thanks you for allowing us time to present our views. The Task Force on Women Business Owners which began its owners. The Task Force found many obstacles facing women To ensure that women can fully participate in our economic system I have today issued an Executive Order which establishes a national policy for expanding the opportunities for women's business enterprise. The Order creates an Interagency Committee on Women's Business Enterprise which will be the permanent structure for promoting, coordinating and monitoring greater efforts on behalf of women-owned businesses by the Federal government. The Order also directs Federal departments and agencies to cooperate with the Committee and to develop affirmative action plans for a greater role for women business owners in their business assistance and procurement activities. There are many actions that agencies and departments could take to implement this policy. For instance, the Task Force noted that since women face special barriers in acquiring the capital necessary for creating or expanding their own businesses, they need greater access to Federal loan programs. As part of this new policy, the Small Business Administration (SBA) has agreed to take the following actions: O Establish a goal of $50 million in FY 1980 for |