news

STATEMENT

of the

Honorable Nydia M. Velázquez, Ranking Member

House Committee on Small Business

SBA-created Initiatives: Necessary or Redundant Spending?

April 30, 2014

For more than 50 years, the SBA has been assisting America’s entrepreneurs and small business owners.  By providing loans, training, and contracting opportunities, the agency has helped create new businesses – and the jobs that come with them – throughout the nation.  Last year, it channeled more than $25 billion in loans to small firms, provided counseling and training to over one million entrepreneurs, and helped small businesses secure nearly $100 billion in federal contracts.

To accomplish this, the SBA relies on a broad network of programs, most of which have been established in law for decades.  These initiatives are overseen by the GAO and the agency’s own Inspector General and have codified regulations and performance benchmarks.  As a result, many of these efforts have been able to deliver services to small businesses in a manner that is efficient for the taxpayer.

Unfortunately, the SBA has repeatedly diverged from this path and created – and shuttered – numerous unauthorized pilot programs aimed at assisting businesses in underserved markets.  Since 2003, SBA has created no less than six entrepreneurial development pilots and 16 access to capital pilots.  Unfortunately, independent evaluations of these pilot programs have shown SBA typically fails to properly set goals, conduct timely program evaluation, or provide adequate oversight.  This has led to increased costs for taxpayers and, in many circumstances, limited agency resources going to waste.

For fiscal year 2015, the SBA has proposed continuing this practice.  The agency has requested $15 million for Entrepreneurship Education, $6 million for Regional Innovation Clusters, $7 million for Boots to Business, and $5 million for Growth Accelerators.  In addition, the SBA has undertaken similar efforts in its Small Loan Advantage program, the Community Advantage program, the Impact Investing fund, the Early Stage Innovation fund, as well as the Business USA website. The cost of these programs for the next fiscal year would be $39 million and together constitutes nearly 20 percent of the SBA’s non-credit programs budget. 

Some of these pilots may deliver limited benefits and today the SBA is sure to provide the Committee with anecdotes – and maybe even some hard data – of their success.  Doing so, however, simply provides a smokescreen for a practice that is at best inefficient and at worst wasteful.  The real question is – why spend money on initiatives that lack the proven track record and safeguards that other SBA programs have?  This makes no sense.

Initiatives like the Small Business Development Center are recognized delivery mechanisms for nearly every entrepreneurial develop pilot program the agency has created.  Why not use it?  Programs on the books – like the New Markets Venture Capital program – duplicate the SBA’s new SBIC initiatives, but have wasted away due to a lack of funding. Why not fund it?   By choosing not to do so, the agency has continually diverted taxpayer dollars to risky schemes that lack clear goals, programmatic guidelines, and performance metrics.

Today, we will examine these initiatives, while trying to better understand the agency’s spending rationale.  With the recent sequester, setting appropriate budget priorities is more important than ever.  Doing so is critical for both the small businesses who depend on SBA programs and taxpayers who foot the agency’s bill.

The SBA remains an important institution for America’s small businesses.  It must continue to evolve and change with the growth of the economy. But, it must do so in a manner that is well-thought out and prudent.  In this regard, I look forward to working with the agency to ensure that it can continue to progress and meet the needs of tomorrow’s entrepreneurs.

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