[Pages S11196-S11209]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

YEAR 2000 READINESS AND SMALL BUSINESS PROGRAMS RESTRUCTURING AND
REFORM ACT OF 1998

Mr. SHELBY. Mr. President, I ask unanimous consent that the Senate
now proceed to the consideration of Calendar No. 645, H.R. 3412.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

A bill (H.R. 3412) to amend and make technical corrections
in title III of the Small Business Investment Act.

There being no objection, the Senate proceeded to consider the
bill which had been reported from the Committee on Small Business, with
an amendment to strike all after the enacting clause and inserting in
lieu thereof the following:

[[Page S11197]]

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``Year 2000
Readiness and Small Business Programs Restructuring and
Reform Act of 1998''.
(b) Table of Contents.--The table of contents for this Act
is as follows:

Sec. 1. Short title; table of contents.

TITLE I--SMALL BUSINESS YEAR 2000 READINESS

Sec. 101. Findings.
Sec. 102. Year 2000 computer problem loan guarantee program.
Sec. 103. Pilot program requirements.
Sec. 104. Section 7(a) loan program.

TITLE II--SMALL BUSINESS PROGRAM RESTRUCTURING AND REFORM

Sec. 201. Women's business center program.
Sec. 202. SBIR program.
Sec. 203. SBIC program.
Sec. 204. Certified development company program.
Sec. 205. Small business Federal contract set-asides.
Sec. 206. Assistance for veterans.
Sec. 207. Section 7(a) loan program.
Sec. 208. Disaster mitigation pilot program.
Sec. 209. Microloan program.
Sec. 210. Real estate appraisals.
Sec. 211. Community development venture capital demonstration program.
Sec. 212. Technical amendments.

TITLE III--SMALL BUSINESS ENVIRONMENTAL ASSISTANCE PILOT PROGRAM

Sec. 301. Pilot program.
TITLE I--SMALL BUSINESS YEAR 2000 READINESS

SEC. 101. FINDINGS.

Congress finds that--
(1) the failure of many computer programs to recognize the
Year 2000 will have extreme negative financial consequences
in the Year 2000 and in subsequent years for both large and
small businesses;
(2) small businesses are well behind larger businesses in
implementing corrective changes to their automated systems--
85 percent of businesses with 200 employees or less have not
commenced inventorying the changes they must make to their
automated systems to avoid Year 2000 problems;
(3) many small businesses do not have access to capital to
fix mission critical automated systems; and
(4) the failure of a large number of small businesses will
have a highly detrimental effect on the economy in the Year
2000 and in subsequent years.

SEC. 102. YEAR 2000 COMPUTER PROBLEM LOAN GUARANTEE PROGRAM.

(a) Program Established.--Section 7(a) of the Small
Business Act (15 U.S.C. 636(a)) is amended by adding at the
end the following:
``(27) Year 2000 computer problem pilot program.--
``(A) Definitions.--In this paragraph--
``(i) the term `eligible lender' means any lender
designated by the Administration as eligible to participate
in--

``(I) the Preferred Lenders Program authorized by the
proviso in section 5(b)(7); or
``(II) the Certified Lenders Program authorized in
paragraph (19); and

``(ii) the term `Year 2000 computer problem' means, with
respect to information technology, any problem that prevents
the information technology from accurately processing,
calculating, comparing, or sequencing date or time data--

``(I) from, into, or between--

``(aa) the 20th or 21st centuries; or
``(bb) the years 1999 and 2000; or

``(II) with regard to leap year calculations.

``(B) Establishment of program.--The Administration shall--
``(i) establish a pilot loan guarantee program, under which
the Administration shall guarantee loans made by eligible
lenders to small business concerns in accordance with this
subsection; and
``(ii) notify each eligible lender of the establishment of
the program under this paragraph.
``(C) Use of funds.--A small business concern that receives
a loan guaranteed under this paragraph shall use the proceeds
of the loan solely to address the Year 2000 computer problems
of that small business concern, including the repair or
acquisition of information technology systems and other
automated systems.
``(D) Maximum amount.--The total amount of a loan made to a
small business concern and guaranteed under this paragraph
shall not exceed $50,000.
``(E) Guarantee limit.--The guarantee percentage of a loan
guaranteed under this paragraph shall not exceed 50 percent
of the balance of the financing outstanding at the time of
disbursement of the loan.
``(F) Report.--The Administration shall annually submit to
the Committees on Small Business of the House of
Representatives and the Senate a report on the results of the
program under this paragraph, which shall include information
relating to--
``(i) the number and amount of loans guaranteed under this
paragraph;
``(ii) whether the loans guaranteed were made to repair or
replace information technology and other automated systems;
and
``(iii) the number of eligible lenders participating in the
program.''.
(b) Regulations.--
(1) In general.--Not later than 60 days after the date of
enactment of this Act, the Administrator of the Small
Business Administration shall implement the program under
section 7(a)(27) of the Small Business Act, as added by this
section.
(2) Requirements.--Except to the extent inconsistent this
section or section 7(a)(27) of the Small Business Act, as
added by this section, in carrying out paragraph (1), the
Administrator shall ensure that the requirements governing
the program under section 7(a)(27) of the Small Business Act,
as added by this section, are substantially similar to the
requirements governing the FA$TRAK pilot program of the Small
Business Administration, or any successor program or pilot
program to that pilot program.
(c) Repeal.--Effective on October 1, 2001, this section and
the amendment made by this section are repealed.

SEC. 103. PILOT PROGRAM REQUIREMENTS.

Section 7(a)(25) of the Small Business Act (15 U.S.C.
636(a)(25)) is amended by adding at the end the following:
``(D) Notification of change.--Not later than 30 days prior
to initiating any pilot program or making any change in a
pilot program under this subsection that may affect the
subsidy rate estimates for the loan program under this
subsection, the Administration shall notify the Committees
on Small Business of the House of Representatives and the
Senate, which notification shall include--
``(i) a description of the proposed change; and
``(ii) an explanation, which shall be developed by the
Administration in consultation with the Director of the
Office of Management and Budget, of the estimated effect that
the change will have on the subsidy rate.
``(E) Report on pilot programs.--The Administration shall
annually submit to the Committees on Small Business of the
House of Representatives and the Senate a report on each
pilot program under this subsection, which report shall
include information relating to--
``(i) the number and amount of loans made under the pilot
program;
``(ii) the number of lenders participating in the pilot
program; and
``(iii) the default rate, delinquency rate, and recovery
rate for loans under each pilot program, as compared to those
rates for other loan programs under this subsection.''.

SEC. 104. SECTION 7(A) LOAN PROGRAM.

Section 7(a) of the Small Business Act (15 U.S.C. 636(a))
is amended, in the first sentence, by inserting ``and to
assist small business concerns in meeting technology
requirements for the Year 2000,'' after ``and working
capital,''.
TITLE II--SMALL BUSINESS PROGRAM RESTRUCTURING AND REFORM

SEC. 201. WOMEN'S BUSINESS CENTER PROGRAM.

(a) Findings.--Congress finds that--
(1) with small business concerns owned and controlled by
women being created at a rapid rate in the United States,
there is a need to increase the authorization level for the
women's business center program under section 29 of the Small
Business Act (15 U.S.C. 656) in order to establish additional
women's business center sites throughout the Nation that
focus on entrepreneurial training programs for women; and
(2) increased funding for the women's business center
program will ensure that--
(A) new women's business center sites can be established to
reach women located in geographic areas not presently served
by an existing women's business center without jeopardizing
the full funding of existing women's business centers for the
term prescribed by law; and
(B) the Small Business Administration achieves the goal of
establishing at least 1 sustainable women's business center
in each State.
(b) Authorization of Appropriations.--
(1) In general.--Section 29(k)(1) of the Small Business Act
(15 U.S.C. 656(k)(1)) is amended to read as follows:
``(1) Authorization.--There is authorized to be
appropriated to carry out this section, $12,000,000 for
fiscal year 1999 and each fiscal year thereafter.''.
(2) Effective date.--The amendment made by this subsection
shall take effect on October 1, 1998.
(c) Terms of Assistance.--
(1) In general.--Section 308(b) of the Small Business
Reauthorization Act of 1997 (15 U.S.C. 656 note) is amended--
(A) by striking ``(b)'' and all that follows through
``paragraph (2), any organization'' and inserting the
following:
``(b) Applicability.--Any organization''; and
(B) by striking paragraph (2).
(2) Effective date.--The amendment made by this subsection
shall take effect as if included in the enactment of the
Small Business Reauthorization Act of 1997.
(d) General Accounting Office Reporting Requirements.--
(1) Baseline report.--Not later than October 31, 1999, the
Comptroller General of the United States shall--
(A) conduct a review of the administration of the women's
business center program under section 29 of the Small
Business Act (15 U.S.C. 656) by the Office of Women's
Business Ownership of the Small Business Administration,
which shall include an analysis of--
(i) the operation of the women's business center program by
the Administration;
(ii) the efforts of the Administration to meet the
legislative objectives established for the program;
(iii) the oversight role of the Administration of the
operations of women's business centers;
(iv) the training and assistance provided by centers
receiving funding from the Administration as compared to the
activities of the centers that no longer receive funding from
the Administration;
(v) the degree to which--

(I) the Administration has taken the actions necessary to
ensure that the annual report submitted by the Administrator
under 29(j) of the Small Business Act (15 U.S.C. 656(j))
meets the requirements of that section; and
(II) the annual report submitted by the Administrator under
29(j) of the Small Business Act (15 U.S.C. 656(j)) meets the
requirements of that section; and

[[Page S11198]]

(vi) any other matters that the Comptroller General
determines to be appropriate in consultation with and as
directed by the Committees on Small Business of the Senate
and House of Representatives; and
(B) submit to the Committees on Small Business of the
Senate and House of Representatives a report describing the
results of the review under subparagraph (A).
(2) Followup report.--Not later than October 31, 2002, the
Comptroller General of the United States shall--
(A) conduct a review of any changes, during the period
beginning on the date on which the report is submitted under
paragraph (1)(B) and ending on the date on which the report
is submitted under subparagraph (B) of this paragraph, in the
administration of the women's business center program under
section 29 of the Small Business Act (15 U.S.C. 656) by the
Office of Women's Business Ownership of the Small Business
Administration, which shall include an analysis of any
changes during that period in--
(i) the operation of the women's business center program by
the Administration;
(ii) the efforts of the Administration to meet the
legislative objectives established for the program;
(iii) the oversight role of the Administration of the
operations of women's business centers;
(iv) the training and assistance provided by centers
receiving funding from the Administration as compared to the
activities of the centers that no longer receive funding from
the Administration;
(v) the degree to which--

SEC. 202. SBIR PROGRAM.

(a) Assistive Technology.--Section 9(c) of the Small
Business Act (15 U.S.C. 638(c)) is amended by adding at the
end the following: ``In order to carry out the purposes of
this section, the Administration shall, to the maximum extent
practicable, encourage Federal agencies to fund programs for
the research and development of assistive and universally
designed technology that is designed to result in the
availability of new products for individuals with
disabilities (as defined in section 3 of the Americans with
Disabilities Act of 1990 (42 U.S.C. 12102)).''.
(b) Federal Agency Expenditures for the SBIR Program.--
Section 9(f)(1) of the Small Business Act (15 U.S.C.
638(f)(1)) is amended by adding at the end the following:
``Notwithstanding any other provision of law, any rule,
regulation, or order promulgated by the Director of the
Office of Management and Budget relating to the definition of
the term `extramural budget' in subsection (e)(1) shall,
except with respect to the Federal agencies specifically
identified in that subsection, apply uniformly to all
departments and agencies of the Federal Government that are
subject to the requirements of this section.''.
(c) Implementation of Outreach Authorities.--Existing
procurement outreach activities of the Federal Government,
including, but not limited to, electronic commerce resource
centers and procurement technical assistance centers, shall
conduct program outreach activities for the Small Business
Innovation Research program using funds that are otherwise
available for such existing procurement outreach activities.
(d) Repeal of Termination Provision.--Section 9 of the
Small Business Act (15 U.S.C. 638) is amended by striking
subsection (m) and inserting the following:
``(m) [Reserved].''.

SEC. 203. SBIC PROGRAM.

(a) In General.--Section 308(i)(2) of the Small Business
Investment Act of 1958 (15 U.S.C. 687(i)(2)) is amended by
adding at the end the following: ``In this paragraph, the
term `interest' includes only the maximum mandatory sum,
expressed in dollars or as a percentage rate, that is payable
with respect to the business loan amount received by the
small business concern, and does not include the value, if
any, of contingent obligations, including warrants, royalty,
or conversion rights, granting the small business investment
company an ownership interest in the equity or future revenue
of the small business concern receiving the business loan.''.
(b) Funding Levels.--Section 20 of the Small Business Act
(15 U.S.C. 631 note) is amended--
(1) in subsection (d)(1)(C)(i), by striking
``$800,000,000'' and inserting ``$1,000,000,000''; and
(2) in subsection (e)(1)(C)(i), by striking
``$900,000,000'' and inserting ``$1,200,000,000''.
(c) Technical Corrections.--Title III of the Small Business
Investment Act of 1958 (15 U.S.C. 661 et seq.) is amended--
(1) in section 303(g) (15 U.S.C. 683(g)), by striking
paragraph (13);
(2) in section 308 (15 U.S.C. 687) by adding at the end the
following:
``(j) For the purposes of sections 304 and 305, in any case
in which an incorporated or unincorporated business is not
required by law to pay Federal income taxes at the enterprise
level, but is required to pass income through to its
shareholders or partners, an eligible small business or
smaller enterprise may be determined by computing the after-
tax income of such business by deducting from the net income
an amount equal to the net income multiplied by the combined
marginal Federal and State income tax rate for
corporations.''; and
(3) in section 320 (15 U.S.C. 687m), by striking ``6'' and
inserting ``12''.

SEC. 204. CERTIFIED DEVELOPMENT COMPANY PROGRAM.

(a) Liquidation and Foreclosure.--Title V of the Small
Business Investment Act of 1958 (15 U.S.C. 695 et seq.) is
amended by adding at the end the following:

``SEC. 510. FORECLOSURE AND LIQUIDATION OF LOANS.

``(a) In General.--The Administration shall authorize
qualified State and local development companies (as defined
in section 503(e)) that meet the requirements of subsection
(b) to foreclose and liquidate loans in their portfolios that
are funded with the proceeds of debentures guaranteed by the
Administration under section 503.
``(b) Requirements.--The requirements of this subsection
are that--
``(1) the qualified State or local development company--
``(A) participated in the loan liquidation pilot program
established by section 204 of the Small Business Programs
Improvement Act of 1996 (15 U.S.C. 695 note), as in effect on
the day before the promulgation of final regulations by the
Administration implementing this section;
``(B) is participating in the Premier Certified Lenders
Program under section 508; or
``(C) is participating in the Accredited Lenders Program
under section 507 and meets the requirements of paragraph
(2)(B); or
``(2)(A) during the 3 most recent fiscal years, the
qualified State or local development company has made an
average of not less than 10 loans per year that are funded
with the proceeds of debentures guaranteed under section 503;
and
``(B) 1 or more of the employees of the qualified State or
local development company have--
``(i) not less than 2 years of substantive, decision-making
experience in administering the liquidation and workout of
problem loans secured in a manner substantially similar to
loans funded with the proceeds of debentures guaranteed under
section 503; and
``(ii) completed a training program on loan liquidation
developed by the Administration in conjunction with qualified
State and local development companies that meet the
requirements of this subsection.
``(c) Authority of Development Companies.--
``(1) In general.--Each qualified State or local
development company authorized to foreclose and liquidate
loans under this section shall, with respect to any loan
described in subsection (a) in the portfolio of the
development company that is in default--
``(A) perform all liquidation and foreclosure functions,
including the purchase of any other indebtedness secured by
the property securing the loan, in a reasonable and sound
manner and according to commercially accepted practices,
pursuant to a liquidation plan, which shall be approved in
advance by the Administration in accordance with paragraph
(2)(A);
``(B) litigate any matter relating to the performance of
the functions described in subparagraph (A), except that the
Administration may--
``(i) assume the defense or prosecution of any case if--

``(I) the outcome of the litigation may adversely affect
the Administration's management of the loan program
established under section 502; or
``(II) the Administration is entitled to legal remedies not
available for a qualified State or local development company
and such remedies will benefit either the Administration or
the qualified State or local development company in such
litigation; or

``(ii) oversee the conduct of any such litigation to which
the qualified State or local development company is a party;
and
``(C) take other appropriate actions to mitigate loan
losses in lieu of total liquidation or foreclosure, including
restructuring the loan, which such actions shall be in
accordance with prudent loan servicing practices and pursuant
to a workout plan, which shall be approved in advance by the
Administration in accordance with paragraph (2)(C).
``(2) Administration approval.--
``(A) Liquidation plan.--
``(i) In general.--In carrying out paragraph (1), a
qualified State or local development company shall submit to
the Administration a proposed liquidation plan.
``(ii) Timing.--Any request under this subparagraph shall
be approved or denied by the Administration not later than 15
business days after the date on which the request is received
by the Administration. If the Administration does not approve
or deny a request for approval of a liquidation plan before
the expiration of the 15-business day period beginning on
the date on which the request is received by the
Administration, the Administration shall notify the
qualified State or local development company, in writing,
of the specific concerns of the Administration within that
15-business day period.
``(iii) Routine actions.--A routine action under a
liquidation plan approved in accordance with this
subparagraph shall not require additional approval by the
Administration.
``(B) Purchase of indebtedness.--
``(i) In general.--In carrying out paragraph (1)(A), a
qualified State or local development company shall submit to
the Administration a request for written approval from the
Administration before committing the Administration to
purchase any other indebtedness secured by the property
securing the loan at issue.

[[Page S11199]]

``(ii) Timing.--Any request under this subparagraph shall
be approved or denied by the Administration not later than 15
business days after the date on which the request is received
by the Administration. If the Administration does not approve
or deny a request for purchase of indebtedness before the
expiration of the 15-business day period beginning on the
date on which the request is received by the Administration,
the Administration shall notify the qualified State or local
development company, in writing, of the specific concerns of
the Administration within that 15-business day period.
``(C) Workout plan.--
``(i) In general.--In carrying out paragraph (1)(C), a
qualified State or local development company may submit to
the Administration a proposed workout plan.
``(ii) Timing.--Any request under this subparagraph shall
be approved or denied by the Administration not later than 15
business days after the date on which the request is received
by the Administration. If the Administration does not approve
or deny a request for approval of a proposed workout plan
before the expiration of the 15-business day period beginning
on the date on which the request is received by the
Administration, the Administration shall notify the qualified
State or local development company, in writing, of the
specific concerns of the Administration within that 15-
business day period.
``(D) Compromise of indebtedness.--In carrying out
paragraph (1)(A), a qualified State or local development
company may--
``(i) consider an offer made by an obligor to compromise
the debt for less than the full amount owing; and
``(ii) pursuant to such an offer, release any obligor or
other party contingently liable, if--

``(I) the State or local development company submits to the
Administration a written request for that release; and
``(II) the Administration approves the request.

``(3) Conflict of interest.--A qualified State or local
development company that is liquidating or foreclosing a loan
under this section shall not take any action that would
result in an actual or apparent conflict of interest between
the qualified State or local development company, or any
employee thereof, and any third party lender, associate of a
third party lender, or any other person participating in any
manner in the liquidation or foreclosure of the loan.
``(d) Suspension or Revocation of Authority.--The authority
of a qualified State or local development company to
foreclose and liquidate loans under this section may be
suspended or revoked by the Administration, if the
Administration determines that the qualified State or local
development company--
``(1) does not meet the requirements of subsection (b);
``(2) has failed to adhere to any applicable rule or
regulation of the Administration, or has violated any other
applicable provision of law; or
``(3) fails to comply with any reporting requirement that
may be established by the Administration relating to the
liquidation and foreclosure of loans.
``(e) Report.--
``(1) In general.--Based on information provided by the
qualified State and local development companies and the
Administration, the Administration shall annually submit to
the Committees on Small Business of the House of
Representatives and the Senate a report on the results of the
delegation of authority to qualified State and local
development companies to liquidate and foreclose loans under
this section.
``(2) Information included.--Each report under this
paragraph shall include the following information:
``(A) With respect to each qualified State or local
development company authorized to foreclose and liquidate
loans under this section, and in the aggregate, for each loan
foreclosed or liquidated by the qualified State or local
development company, or for which loan losses were otherwise
mitigated by the qualified State or local development company
pursuant to a workout plan under this section--
``(i) the total cost of each project financed with the
loan;
``(ii) the total original dollar amount guaranteed by the
Administration;
``(iii) the total dollar amount of the loan at the time
transferred into liquidation, foreclosure, or mitigation;
``(iv) the total dollar losses resulting from the
liquidation, foreclosure, or mitigation; and
``(v) the total recoveries resulting from the liquidation,
foreclosure, or mitigation, both as a percentage of the
amount guaranteed and the total cost of the project financed.
``(B) A comparison between--
``(i) the information described in clauses (i) through (v)
of subparagraph (A) with respect to loans foreclosed and
liquidated, or for which loan losses were otherwise mitigated
pursuant to a workout plan, by qualified State and local
development companies under this section during the 12-month
period preceding the date on which the report is submitted;
and
``(ii) the same information with respect to loans
foreclosed and liquidated by the Administration during that
period.
``(C) The number of times that the Administration has
failed to approve or deny a request for written approval of a
liquidation plan, purchase of indebtedness, or workout plan
within the time periods described in subparagraphs (A), (B),
and (C) of subsection (c)(2).''.
(b) Regulations.--
(1) In general.--Not later than 150 days after the date of
enactment of this Act, the Administrator of the Small
Business Administration shall promulgate such regulations as
may be necessary to carry out section 510 of the Small
Business Investment Act of 1958, as added by subsection (a)
of this section.
(2) Elimination of pilot program.--Effective on the date on
which final regulations are promulgated under paragraph (1),
section 204 of the Small Business Programs Improvement Act of
1996 (15 U.S.C. 695 note) is repealed.
(c) Public Policy Goals.--Section 501(d)(3)(C) of the Small
Business Investment Act of 1958 (15 U.S.C. 695(d)(3)(C)) is
amended by inserting ``or women-owned business development''
before the comma.

SEC. 205. SMALL BUSINESS FEDERAL CONTRACT SET-ASIDES.

Section 15(h) of the Small Business Act (15 U.S.C. 644(h))
is amended--
(1) by redesignating paragraphs (2) and (3) as paragraphs
(3) and (4), respectively;
(2) by inserting after paragraph (1) the following:
``(2)(A) Not later than 180 days after the last day of each
fiscal year, based on the reports submitted under paragraph
(1) for that fiscal year, the Administration shall submit to
the Committees on Small Business of the House of
Representatives and the Senate a report, which shall
include--
``(i) the information required by paragraph (3);
``(ii) a detailed description of the procurement data that
is included in the reports submitted under paragraph (1) for
that fiscal year, which shall identify--
``(I) any data on contracts from Federal agencies that is
excluded from those reports, accompanied by an explanation
for such exclusion; and
``(II) each Federal agency that has submitted a report that
deviates from the requirements of paragraphs (3) and (4),
accompanied by an explanation of the reasons for each such
deviation;
``(iii) a detailed description of any change in statistical
methodology used by any Federal agency that is reflected in
any statistic in the report submitted under paragraph (1) for
that fiscal year, including any inclusion or exclusion of the
value of any contracts or types of contracts in any statistic
represented by the Federal agency in the report submitted
under paragraph (1) as the total value of contracts or
subcontracts awarded by the Federal agency or as the total
value of contracts or subcontracts awarded to small business
concerns; and
``(iv) with respect to each change in statistical
methodology by a Federal agency described in clause (iii), a
separate calculation (which shall be provided to the
Administration by the Federal agency) of the total value of
contracts for that fiscal year, using the statistical
methodology used by the Federal agency during each of the 2
preceding fiscal years.
``(B)(i) Not less than 45 days before issuing any waiver or
permissive letter allowing any Federal agency or group of
agencies to make any change in statistical methodology
described in subparagraph (A)(iii), the Administration shall
submit to the Committees on Small Business of the House of
Representatives and the Senate, and to the Chief Counsel for
Advocacy of the Administration, a copy of that waiver or
letter.
``(ii) Not later than 30 days after the submission of a
waiver or letter under clause (i), the Chief Counsel for
Advocacy of the Administration shall submit to the Committees
on Small Business of the House of Representatives and the
Senate, and to each affected Federal agency, the written
comments of the Chief Counsel regarding the appropriateness
of the decision of the Administration to issue the waiver or
letter.''; and
(3) in paragraph (4), as redesignated, by striking
``paragraph (2)'' and inserting ``paragraphs (2) and (3)''.

SEC. 206. ASSISTANCE FOR VETERANS.

(a) Definitions.--Section 3 of the Small Business Act (15
U.S.C. 632) is amended by adding at the end the following:
``(q) Definitions Relating to Veterans.--In this Act:
``(1) Service-disabled veteran.--The term `service-disabled
veteran' means a veteran with a disability that is service-
connected (as defined in section 101(16) of title 38, United
States Code).
``(2) Small business concern owned and controlled by
service-disabled veterans.--The term `small business concern
owned and controlled by service-disabled veterans' means a
small business concern--
``(A) not less than 51 percent of which is owned by 1 or
more service-disabled veterans or, in the case of any
publicly owned business, not less than 51 percent of the
stock of which is owned by 1 or more service-disabled
veterans; and
``(B) the management and daily business operations of which
are controlled by 1 or more service-disabled veterans.
``(3) Small business concern owned and controlled by
veterans.--The term `small business concern owned and
controlled by veterans' means a small business concern--
``(A) not less than 51 percent of which is owned by 1 or
more veterans or, in the case of any publicly owned business,
not less than 51 percent of the stock of which is owned by 1
or more veterans; and
``(B) the management and daily business operations of which
are controlled by 1 or more veterans.
``(4) Veteran.--The term `veteran' has the meaning given
the term in section 101(2) of title 38, United States
Code.''.
(b) Office of Veterans Business Development.--
(1) Associate administrator for veterans business
development.--Section 4(b)(1) of the Small Business Act (15
U.S.C. 633(b)(1)) is amended--
(A) in the fifth sentence, by striking ``four'' and
inserting ``5''; and

[[Page S11200]]

(B) by inserting after the fifth sentence the following:
``One shall be the Associate Administrator for Veterans
Business Development, who shall administer the Office of
Veterans Business Development established under section
32.''.
(2) Establishment of office.--The Small Business Act (15
U.S.C. 631 et seq.) is amended--
(A) by redesignating section 32 as section 33; and
(B) by inserting after section 31 the following:

``SEC. 32. VETERANS PROGRAMS.

``(a) Office of Veterans Business Development.--
``(1) Establishment.--There is established in the
Administration an Office of Veterans Business Development,
which shall be administered by the Associate Administrator
for Veterans Business Development (in this section referred
to as the `Associate Administrator') appointed under section
4(b)(1).
``(2) Associate administrator for veterans business
development.--The Associate Administrator shall be--
``(A) a career appointee in the competitive service or in
the Senior Executive Service; and
``(B) responsible for the formulation and execution of the
policies and programs of the Administration that provide
assistance to small business concerns owned and controlled by
veterans and small business concerns owned and controlled by
service-disabled veterans.
``(b) Advisory Committee on Veterans Business Affairs.--
``(1) In general.--There is established an advisory
committee to be known as the Advisory Committee on Veterans
Business Affairs (in this subsection referred to as the
`Committee'), which shall serve as an independent source of
advice and policy recommendations to the Administrator
(through the Associate Administrator), to Congress, and to
the President.
``(2) Membership.--
``(A) In general.--The Committee shall be composed of 15
members, each of whom shall be appointed by the
Administrator, of whom--
``(i) 8 shall be veterans who are owners of small business
concerns; and
``(ii) 7 shall be representatives of national veterans
service organizations.
``(B) Political affiliation.--Not more than 8 members of
the Committee shall be of the same political party as the
President.
``(C) Prohibition on federal employment.--No member of the
Committee may be an officer or employee of the Federal
Government. If any member of the Committee commences
employment as an officer or employee of the Federal
Government after the date on which the member is appointed to
the Committee, the member may continue to serve as a member
of the Committee for not more than 30 days after the date on
which the member commences employment as such an officer or
employee.
``(D) Service term.--Each member of the Committee shall
serve for a term of 3 years.
``(E) Vacancies.--Not later than 30 days after the date on
which a vacancy in the membership of the Committee occurs,
the vacancy be filled in the same manner as the original
appointment.
``(F) Chairperson.--The Committee shall select a
Chairperson from among the members of the Committee. Any
vacancy in the office of the Chairperson of the Committee
shall be filled by the Committee at the first meeting of the
Committee following the date on which the vacancy occurs.
``(G) Initial appointments.--Not later than 60 days after
the date of enactment of this Act, the Administrator shall
appoint the initial members of the Committee.
``(3) Duties.--The Committee shall--
``(A) review, coordinate, and monitor plans and programs
developed in the public and private sectors, that affect the
ability of veteran-owned business enterprises to obtain
capital and credit;
``(B) promote and assist in the development of business
information and surveys relating to veterans;
``(C) monitor and promote the plans, programs, and
operations of the departments and agencies of the Federal
Government that may contribute to the establishment and
growth of veteran's business enterprises;
``(D) develop and promote new initiatives, policies,
programs, and plans designed to foster veteran's business
enterprises; and
``(E) advise and assist in the design of a comprehensive
plan, which shall be updated annually, for joint public-
private sector efforts to facilitate growth and development
of veteran's business enterprises.
``(4) Powers.--
``(A) Hearings.--The Committee may hold such hearings, sit
and act at such times and places, take such testimony, and
receive such evidence as the Committee considers advisable to
carry out the duties of the Committee under this subsection.
``(B) Information from federal agencies.--The Committee may
secure directly from any department or agency of the Federal
Government such information as the Committee considers to be
necessary to carry out the duties of the Committee under this
subsection. Upon request of the Chairperson of the Committee,
the head of such department or agency shall furnish such
information to the Committee.
``(C) Postal services.--The Committee may use the United
States mails in the same manner and under the same conditions
as other departments and agencies of the Federal Government.
``(D) Gifts.--The Committee may accept, use, and dispose of
gifts or donations of services or property.
``(5) Meetings.--
``(A) In general.--The Committee shall meet not less than
biannually at the call of the Chairperson, and otherwise upon
the request of the Administrator.
``(B) Location.--Each meeting of the full Committee shall
be held at the headquarters of the Administration located in
Washington, District of Columbia. The Administrator shall
provide suitable meeting facilities and such administrative
support as may be necessary for each meeting of the
Committee.
``(6) Personnel matters.--
``(A) No compensation.--Members of the Committee shall
serve without compensation for their services to the
Committee.
``(B) Travel expenses.--The members of the Committee shall
be reimbursed for travel and subsistence expenses in the same
manner and to the same extent as members of advisory boards
and committees under section 8(b)(13).
``(c) Score Program.--The Administrator shall enter into a
memorandum of understanding with the Service Core of Retired
Executives (in this subsection referred to as `SCORE')
participating in the program under section 8(b)(1)(B) for--
``(1) the appointment by SCORE in its national office of a
National Veterans Business Coordinator, whose exclusive
duties shall be those relating to veterans' business matters,
and who shall be responsible for the establishment and
administration of a program to provide entrepreneurial
counseling and training to veterans through the chapters of
SCORE throughout the United States;
``(2) the establishment and maintenance of a toll-free
telephone number and an Internet website to provide access
for veterans to information about the entrepreneurial
services available to veterans through SCORE; and
``(3) the collection of statistics concerning services
provided by SCORE to veterans and service-disabled veterans
and the inclusion of those statistics in each annual report
published by the Administrator under section 4(b)(2)(B).
``(d) Annual Report.--Beginning on March 31, 2000, and on
March 31 of each year thereafter, the Administrator shall
submit to the Committees on Small Business of the House of
Representative and the Senate a report on the needs of small
business concerns owned by controlled by veterans and small
business concerns owned and controlled by service-disabled
veterans, which shall include--
``(1) the availability of programs of the Administration
for and the degree of utilization of those programs by those
small business concerns during the 12-month period preceding
the date on which the report is submitted;
``(2) the percentage and dollar value of Federal contracts
awarded to those small business concerns during the 12-month
period preceding the date on which the report is submitted;
and
``(3) proposed methods to improve delivery of all Federal
programs and services that could benefit those small business
concerns.
``(e) Authorization of Appropriations.--There is authorized
to be appropriated to carry out this section $2,500,000 for
each fiscal year.''.
(c) Office of Advocacy.--Section 202 of Public Law 94-305
(15 U.S.C. 634b) is amended--
(1) in paragraph (10), by striking ``and'' at the end;
(2) in paragraph (11), by striking the period at the end
and inserting ``; and''; and
(3) by adding at the end the following:
``(12) evaluate the efforts of each Federal agency and of
private industry to assist small business concerns owned and
controlled by veterans and small business concerns owned and
controlled by service-disabled veterans, and make appropriate
recommendations to the Administrator and to Congress in order
to promote the establishment and growth of those small
business concerns.''.
(d) Microloan Program.--Section 7(m)(1)(A)(i) of the Small
Business Act (15 U.S.C. 636(m)(1)(A)(i)) is amended by
striking ``low-income, and'' and inserting ``low-income
individuals, veterans,''.

SEC. 207. SECTION 7(A) LOAN PROGRAM.

Section 7(a)(4) of the Small Business Act (15 U.S.C.
636(a)(4)) is amended--
(1) by striking ``(4)'' and all that follows through
``Notwithstanding'' and inserting the following:
``(4) Interest rates.--Notwithstanding''; and
(2) by striking subparagraph (B).

SEC. 208. DISASTER MITIGATION PILOT PROGRAM.

(a) In General.--Section 7(b)(1) of the Small Business Act
(15 U.S.C. 636(b)(1)) is amended--
(1) in subparagraph (B), by adding ``and'' at the end; and
(2) by adding at the end the following:
``(C) during fiscal years 1999 through 2003, to establish a
pre-disaster mitigation program to make such loans (either
directly or in cooperation with banks or other lending
institutions through agreements to participate on an
immediate or deferred (guaranteed) basis), as the
Administrator may determine to be necessary or appropriate,
to enable small businesses to install mitigation devices or
to take preventive measures to protect against disasters, in
support of a formal mitigation program established by the
Federal Emergency Management Agency, except that no loan or
guarantee shall be extended to a small business under this
subparagraph unless the Administration finds that the small
business is otherwise unable to obtain credit for the
purposes described in this subparagraph;''.
(b) Authorization of Appropriations.--Section 20 of the
Small Business Act (15 U.S.C. 631 note) is amended by adding
at the end the following:
``(f) Disaster Mitigation Pilot Program.--The following
program levels are authorized for loans under section
7(b)(1)(C):
``(1) $15,000,000 for fiscal year 1999.
``(2) $15,000,000 for fiscal year 2000.
``(3) $15,000,000 for fiscal year 2001.
``(4) $15,000,000 for fiscal year 2002.
``(5) $15,000,000 for fiscal year 2003.''.
(c) Evaluation.--On January 31, 2001, the Administrator of
the Small Business Administration shall submit to the
Committees on Small Business of the House of Representatives
and

[[Page S11201]]

the Senate a report on the effectiveness of the pilot program
authorized by section 7(b)(1)(C) of the Small Business Act
(15 U.S.C. 636(b)(1)(C)), as added by subsection (a) of this
subsection, which report shall include--
(1) information relating to--
(A) the areas served under the pilot program;
(B) the number and dollar value of loans made under the
pilot program; and
(C) the estimated savings to the Federal Government
resulting from the pilot program; and
(2) other such information as the Administrator determines
to be appropriate in evaluating the pilot program.

SEC. 209. MICROLOAN PROGRAM.

(a) In General.--Section 7(m) of the Small Business Act (15
U.S.C. 636(m)) is amended--
(1) in paragraph (7)--
(A) by striking ``(7)'' and all that follows through
``During the program'' and inserting the following:
``(7) Program funding for microloans.--During the
program''; and
(B) by striking subparagraph (B); and
(2) in paragraph (8)--
(A) by inserting ``and providing funding to
intermediaries'' after ``program applicants''; and
(B) by inserting ``and provide funding to'' after ``shall
select''.
(b) Loan Loss Reserve.--Section 7(m)(3)(D) of the Small
Business Act (15 U.S.C. 636(m)(3)(D)) is amended--
(1) in the first sentence, by striking ``The
Administrator'' and inserting the following:
``(i) In general.--The Administrator''; and
(2) by striking the second sentence and inserting the
following:
``(ii) Level of loan loss reserve fund.--

``(I) In general.--Subject to subclause (II), the
Administration shall require the loan loss reserve fund to be
maintained at a level equal to not more than 15 percent of
the outstanding balance of the microloans owed to the
intermediary.
``(II) Reduction of loan loss reserve requirement.--After
the initial 5 years of an intermediary's participation in the
program under this subsection, upon the initial request of
the intermediary made at any time after that period, the
Administrator shall annually conduct a review of the average
annual loss rate of the intermediary and, if the intermediary
demonstrates to the satisfaction of the Administrator that
the average annual loss rate for the intermediary during the
preceding 5-year period is less than 15 percent, and the
Administrator determines that no other factor exists that is
likely to impair the ability of the intermediary to repay all
obligations owed to the Administration under this subsection,
the Administrator shall reduce that annual loan loss reserve
requirement to reflect the actual average annual loss rate
for that intermediary during that period, except that in no
case shall the loan loss reserve requirement for an
intermediary be reduced to less than 10 percent of the
outstanding balance of the microloans owed to the
intermediary.''.

SEC. 210. REAL ESTATE APPRAISALS.

(a) Small Business Investment Act of 1958.--Section 502(3)
of the Small Business Investment Act of 1958 (15 U.S.C.
696(3)) is amended by adding at the end the following:
``(F) Real estate appraisals.--
``(i) Loans exceeding $250,000.--Notwithstanding any other
provision of law, if a loan under this section involves the
use of more than $250,000 of the loan proceeds for a real
estate transaction, prior to disbursement of the loan, the
Administrator shall require an appraisal of the real estate
by a State licensed or certified appraiser.
``(ii) Loans of $250,000 or less.--Notwithstanding any
other provision of law, if a loan under this subsection
involves the use of $250,000 or less of the loan proceeds for
a real estate transaction, prior to disbursement of the loan,
the participating lender may, in accordance with the policy
of the participating lender with respect to loans made
without a government guarantee, require an appraisal of the
real estate by a State licensed or certified appraiser.
``(iii) Definition.--In this subparagraph, the term `real
estate transaction' includes the acquisition or construction
of land or a building and any improvement to land or to a
building.''.
(b) Small Business Act.--Section 7(a) of the Small Business
Act (15 U.S.C. 636(a)) is amended by adding at the end the
following:
``(27) Real estate appraisals.--
``(A) Loans exceeding $250,000.--Notwithstanding any other
provision of law, if a loan guaranteed under this subsection
involves the use of more than $250,000 of the loan proceeds
for a real estate transaction, prior to disbursement of the
loan, the Administrator shall require an appraisal of the
real estate by a State licensed or certified appraiser.
``(B) Loans of $250,000 or less.--Notwithstanding any other
provision of law, if a loan guaranteed under this subsection
involves the use of $250,000 or less of the loan proceeds for
a real estate transaction, prior to disbursement of the loan,
the participating lender may, in accordance with the policy
of the participating lender with respect to loans made
without a government guarantee, require an appraisal of the
real estate by a State licensed or certified appraiser.
``(C) Definition.--In this paragraph, the term `real estate
transaction' includes the acquisition or construction of land
or a building and any improvement to land or to a
building.''.

SEC. 211. COMMUNITY DEVELOPMENT VENTURE CAPITAL DEMONSTRATION
PROGRAM.

(a) Findings.--Congress finds that--
(1) there is a need for the development and expansion of
organizations that provide private equity capital to smaller
businesses in areas in which equity-type capital is scarce,
such as inner cities and rural areas, in order to create and
retain jobs for low-income residents of those areas;
(2) to invest successfully in smaller businesses,
particularly in inner cities and rural areas, requires highly
specialized investment and management skills;
(3) there is a shortage of professionals who possess such
skills and there are few training grounds for individuals to
obtain those skills;
(4) providing assistance to organizations that provide
specialized technical assistance and training to individuals
and organizations seeking to enter or expand in this segment
of the market would stimulate small business development and
entrepreneurship in economically distressed communities; and
(5) assistance from the Federal Government could act as a
catalyst to attract investment from the private sector and
would help to develop a specialized venture capital industry
focused on creating jobs, increasing business ownership, and
generating wealth in low-income communities.
(b) Community Development Venture Capital Activities.--The
Small Business Act (15 U.S.C. 631 et seq.) is amended--
(1) by redesignating section 33 (as redesignated by section
206(b)(2) of this Act) as section 34; and
(2) by inserting after section 32 (as added by section
206(b)(2) of this Act) the following:

``SEC. 33. COMMUNITY DEVELOPMENT VENTURE CAPITAL ACTIVITIES.

``(a) Definitions.--In this section:
``(1) Community development venture capital organization.--
The term `community development venture capital organization'
means a privately-controlled organization that--
``(A) has a primary mission of promoting community
development in low-income communities, as defined by the
Administrator, through investment in private business
enterprises; or
``(B) administers or is in the process of establishing a
community development venture capital fund for the purpose of
making equity investments in private business enterprises in
such communities.
``(2) Developmental organization.--The term `developmental
organization'--
``(A) means a public or private entity, including a college
or university, that provides technical assistance to
community development venture capital organizations or that
conducts research or training in community development
venture capital investment; and
``(B) may include an intermediary organization.
``(3) Intermediary organization.--The term `intermediary
organization'--
``(A) means a private, nonprofit entity that has--
``(i) a primary mission of promoting community development
through investment in private businesses in low-income
communities; and
``(ii) significant prior experience in providing technical
assistance or financial assistance to community development
venture capital organizations;
``(B) may include community development venture capital
organizations.
``(b) Authority.--In order to promote the development of
community development venture capital organizations, the
Administrator, may--
``(1) enter into contracts with 1 or more developmental
organizations to carry out training and research activities
under subsection (c); and
``(2) make grants in accordance with this section--
``(A) to developmental organizations to carry out training
and research activities under subsection (c); and
``(B) to intermediary organizations to provide intensive
marketing, management, and technical assistance and training
to community development venture capital organizations under
subsection (d).
``(c) Training and Research Activities.--
``(1) In general.--Subject to paragraph (2), a
developmental organization that receives a grant under
subsection (b) shall use the funds made available through the
grant for 1 or more of the following training and research
activities:
``(A) Strengthening professional skills.--Creating and
operating training programs to enhance the professional
skills for individuals in community development venture
capital organizations or operating private community
development venture capital funds.
``(B) Increasing interest in community development venture
capital.--Creating and operating a program to select and
place students and recent graduates from business and related
professional schools as interns with community development
venture capital organizations and intermediary organizations
for a period of up to 1 year, and to provide stipends for
such interns during the internship period.
``(C) Promoting `best practices'.--Organizing an annual
national conference for community development venture capital
organizations to discuss and share information on the best
practices regarding issues relevant to the creation and
operation of community development venture capital
organizations.
``(D) Mobilizing academic resources.--Encouraging the
formation of 1 or more centers for the study of community
development venture capital at graduate schools of business
and management; providing funding for the development of
materials for courses on topics in this area; and providing
funding for research on economic, operational, and policy
issues relating to community development venture capital.
``(2) Limitation.--The Administrator shall ensure that not
more than 25 percent of the amount made available to carry
out this section is used for activities described in
paragraph (1).
``(d) Intensive Marketing, Management, and Technical
Assistance and Training.--An intermediary organization that
receives a grant

[[Page S11202]]

under subsection (b) shall use the funds made available
through the grant to provide intensive marketing, management,
and technical assistance and training to promote the
development of community development venture capital
organizations, which assistance may include grants to
community development venture capital organizations for the
start up costs and operating support of those organizations.
``(e) Matching Requirement.--The Administrator shall
require, as a condition of any grant made to an intermediary
organization under this section, that a matching amount equal
to the amount of such grant be provided from sources other
than the Federal Government.
``(f) Requirements.--The Administrator may promulgate such
regulations as may be necessary to carry out this section,
which regulations may take effect upon issuance.
``(g) Authorization of Appropriations.--There is authorized
to be appropriated to carry out this section a total of
$20,000,000 for fiscal years 1999 through 2002.''.

SEC. 212. TECHNICAL AMENDMENTS.

(a) Small Business Act.--Section 3(p) of the Small Business
Act (15 U.S.C. 632(p)) is amended--
(1) in paragraph (1)(A), by inserting ``located in a
metropolitan statistical area (as defined in section
143(k)(2)(B) of the Internal Revenue Code of 1986)'' before
the semicolon;
(2) in paragraph (3)(B), by striking ``; or'' at the end
and inserting a period; and
(3) in paragraph (4)--
(A) in subparagraph (A), by striking ``(I)''; and
(B) in subparagraph (B)--
(i) in clause (ii), by striking ``(ii)'' and inserting
``(II)''; and
(ii) in clause (i), by striking ``Department of Commerce''
and all that follows through ``median household'' and
inserting the following: ``Department of Commerce, is not
located in a metropolitan statistical area (as defined in
section 143(k)(2)(B) of the Internal Revenue Code of 1986);
and
``(ii)(I) in which the median household''.
(b) Small Business Investment Act of 1958.--Section 101 of
the Small Business Investment Act of 1958 (15 U.S.C. 661
note) is amended by striking the table of contents.
TITLE III--SMALL BUSINESS ENVIRONMENTAL ASSISTANCE PILOT PROGRAM

SEC. 301. PILOT PROGRAM.

The Small Business Act (15 U.S.C. 637 et seq.) is amended
by inserting after section 21A the following:

``SEC. 21B. SMALL BUSINESS ENVIRONMENTAL ASSISTANCE PILOT
PROGRAM.

``(a) Definitions.--In this section:
``(1) Advisory committee.--The term `Advisory Committee'
means the Advisory Committee on Small Business Environmental
Assistance Programs established under subsection (b).
``(2) Advocacy chair.--The term `Advocacy Chair' means the
Chair of Small Business Advocacy of the Environmental
Protection Agency.
``(3) Assistant administrator.--The term `Assistant
Administrator' means the Assistant Administrator for Small
Business Development Centers of the Administration.
``(4) Chief counsel.--The term `Chief Counsel' means the
Chief Counsel of the Office of Advocacy of the
Administration.
``(5) EPA administrator.--The term `EPA Administrator'
means the Administrator of the Environmental Protection
Agency.
``(6) Participating small business development center.--The
term `participating small business development center' means
a small business development center selected under subsection
(c) to participate in the demonstration program under this
section.
``(7) Small business development center.--The term `small
business development center'--
``(A) means a small business development center established
pursuant to section 21; and
``(B) includes a consortium of 2 or more small business
development centers.
``(b) Advisory Committee on Small Business Environmental
Assistance Programs.--
``(1) In general.--There is established an advisory
committee to be known as the Advisory Committee on Small
Business Environmental Assistance Programs which shall
provide advice and recommendations to the Administration, the
EPA Administrator, and Congress on the manner in which to
enhance existing programs designed to improve the
environmental performance of small businesses.
``(2) Membership.--
``(A) In general.--The Advisory Committee shall be composed
of the following members:
``(i) 1 member shall be the Chief Counsel, who shall serve
as the Chairperson of the Advisory Committee.
``(ii) 1 member shall be the Assistant Administrator.
``(iii) 1 member shall be the Advocacy Chair.
``(iv) Not more than 15 additional members, each of whom
shall be appointed by the Chief Counsel after consultation
with the Assistant Administrator and the Advocacy Chair, of
whom--

``(I) not more than 7 members shall be representatives of
small business concerns or trade associations of small
business concerns;
``(II) not more than 4 members shall be representatives of
small business development centers selected by the Assistant
Administrator; and
``(III) not more than 4 members shall be representatives of
small business technical assistance programs selected by the
EPA Administrator.

``(B) Service of members.--Each member of the Advisory
Committee shall serve for a term of 1 year.
``(C) Vacancies.--If a vacancy in the membership of the
Advisory Committee occurs, the vacancy shall be filled at the
discretion of the Advisory Committee.
``(D) Appointments.--Not later than 60 days after the date
of enactment of this subsection, the Chief Counsel shall
appoint the members of the Advisory Committee.
``(3) Duties.--The Advisory Committee shall--
``(A) review each program under the jurisdiction of the
Administration or the EPA Administrator that is designed to
assist the small business concerns in complying with
environmental laws and regulations or to enhance the
environmental performance of small business concerns,
including the programs established under section 21 of this
Act, section 213 of the Small Business Regulatory Enforcement
Fairness Act of 1996, and section 507 of the Clean Air Act;
``(B) develop a strategy to enhance the efficacy of the
programs described in subparagraph (A) in assisting small
businesses to comply with environmental laws and regulations
and improve their environmental performance through such
means as--
``(i) improved techniques for measuring program
achievement;
``(ii) innovative compliance assistance demonstration
projects; and
``(iii) strengthening the capabilities of State and local
programs;
``(C) develop recommendations regarding the types of pilot
programs that would implement the strategy developed under
subparagraph (B); and
``(D) not later than September 30, 1999, submit to the
Administration, the EPA Administrator, and the Committees on
Small Business of the House of Representatives and the
Senate, a report on the strategy developed under subparagraph
(B) and the recommendations developed under subparagraph (C).
``(4) Powers.--
``(A) Information from federal agencies.--The Advisory
Committee may secure directly from any department or agency
of the Federal Government such information as the Advisory
Committee considers to be necessary to carry out the duties
of the Advisory Committee under this subsection. Upon request
of the Chairperson of the Advisory Committee, the head of
such department or agency shall furnish such information to
the Advisory Committee.
``(B) Gifts and donations.--The Advisory Committee may
accept, use, and dispose of gifts or donations of services or
property.
``(5) Meetings.--
``(A) In general.--The Advisory Committee shall meet not
less than twice during fiscal year 1999, and otherwise upon
request of the Chief Counsel.
``(B) Location.--Each meeting of the Advisory Committee
shall be held at the office of the Chief Counsel located in
Washington, D.C., or such other location as the Chief Counsel
may specify. The Chief Counsel shall provide suitable meeting
facilities and such administrative support as may be
necessary for each meeting of the Advisory Committee.
``(6) Personnel matters.--
``(A) No compensation.--Members of the Advisory Committee
shall serve without compensation for their services to the
Advisory Committee.
``(B) Travel expenses.--The members of the Advisory
Committee shall be reimbursed for travel and subsistence
expenses in the same manner and to the same extent as members
of Regional Small Business Regulatory Fairness Boards
established under section 30(c).
``(C) Independent national assessment.--Not later than
March 1, 2003, the Comptroller General of the United States
shall submit to the Committees on Small Business of the House
of Representatives and the Senate an evaluation of the
demonstration program established under this section. The
criteria for such evaluation shall be based on the strategy
and recommendation in the Advisory Committee report and
developed under the direction of the Committees on Small
Business of the House of Representatives and the Senate.
``(7) Termination.--The Advisory Committee shall terminate
on the date on which the report is submitted under subsection
(b)(3)(D).
``(c) Demonstration Program.--
``(1) Notice of program establishment.--Not later than 60
days after the date on which the Advisory Committee submits
the report under subsection (b)(3)(D), the Administration
shall publish in the Federal Register a notice of the
demonstration program under this section, which shall include
application requirements for small business development
centers seeking to participate in the program, including
selection criteria based on the strategy and recommendation
included in the report of the Advisory Committee under
subsection (b)(3)(D).
``(2) Applications.--Not later than 60 days after the date
on which the notice is published under paragraph (1), each
small business development center seeking to participate in
the pilot program under this section shall submit to the
Administration an application that meets the requirements
described in paragraph (1).
``(3) Selection of participating small business development
centers.--
``(A) In general.--Not later than 90 days after the date on
which the notice is published under paragraph (1), the
Administration shall select, from among applicants under
paragraph (2), 10 small business development centers to
participate in the demonstration program under this section.
``(B) Additional selection criteria.--In carrying out
subparagraph (A), the Administration shall--
``(i) give highest priority to applicants that--

``(I) form a partnership between small business development
centers and State small business stationary source technical
and compliance assistance programs (established under section
507 of the Clean Air Act) or other environmental assistance
providers, including trade associations; and
``(II) demonstrate a cooperative approach utilizing the
relative strengths of each; and

[[Page S11203]]

``(ii) to the extent practicable, select 1 small business
development center from each region of the United States for
which there is a regional office of the Environmental
Protection Agency.
``(d) Grants to Participating Small Business Development
Centers.--
``(1) In general.--Not later than 60 days after the date on
which the Administration selects a small business development
center to receive a grant, the Administration shall make a
grant to the participating small business development center.
``(2) Grant amount.--
``(A) In general.--Subject to subparagraph (B), the total
amount made available under this subsection to a
participating small business development center for any
fiscal year shall be not more than $400,000.
``(B) Exception.--Amounts made available to a small
business development center by the Administration or another
agency to carry out section 21(c)(3)(G) shall not be included
in the calculation of maximum funding of a small business
development center under subparagraph (A).
``(C) No matching requirement.--Notwithstanding section
21(a)(4), the Administration shall not require, as a
condition of any grant made to a small business development
center under this subsection, that a matching amount be
provided from sources other than the Federal Government.
``(e) Authorization of Appropriations.--
``(1) In general.--There is authorized to be appropriated
to carry out this section--
``(A) $500,000 for fiscal year 1999, which shall be used
for direct support and reimbursement for costs of the
Advisory Committee; and
``(B) $4,000,000 for each of fiscal years 2000 through
2003, of which not more than 6 percent may be used for
administrative expenses.
``(2) Administrative costs.--
``(A) In general.--Not more than 6 percent of the amount
made available under paragraph (1)(B) in each fiscal year may
be used by the Administration for the costs of
administration, evaluation, and reporting under this section,
which shall include costs associated with the employee
designated under subparagraph (B).
``(B) Full-time employee.--The Administration shall
designate an employee of the Administration to assist in
administering the pilot program under this section on a full-
time basis.''.

Amendment No. 3674

(Purpose: To make an amendment relating to small business Federal
contract set-asides)

Mr. SHELBY. Mr. President, Senator Bond has an amendment at the desk.
I ask for its consideration.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:

The Senator from Alabama [Mr. Shelby], for Mr. Bond,
proposes an amendment numbered 3674.

The amendment is as follows:
Strike section 205 of the bill and insert the following:

SEC. 205. SMALL BUSINESS FEDERAL CONTRACT SET-ASIDES.

(a) Annual Comprehensive Report.--
(1) In general.--Section 15(h) of the Small Business Act
(15 U.S.C. 644(h)) is amended--
(A) in paragraph (1)--
(i) by striking ``At the conclusion of each fiscal year''
inserting ``(A) Not later than April 15 of each year'';
(ii) in the first sentence, by inserting ``during the
fiscal year that ended on September 30 of the preceding
year'' before the period; and
(iii) by adding at the end the following:
``(B)(i) Not later than May 15 of each year, the
Administration shall submit to the Committees on Small
Business of the House of Representatives and the Senate a
comprehensive report on the extent of the participation by
small business concerns described in subparagraph (A) in
procurement contracts during the fiscal year that ended on
September 30 of the preceding year. In preparing the report,
the Administration shall use the data from the reports
submitted to the Administration for that fiscal year under
subparagraph (A), and the Federal Procurement Data System.
``(ii) Each comprehensive report under this subparagraph
shall include a detailed description and qualitative analysis
of the procurement data submitted to the Administration under
subparagraph (A).
``(iii)(I) The description and analysis included under
clause (ii) shall include a reconciliation of the apparent
differences, if any, between the small business participation
levels reported for that fiscal year and the small business
participation levels reported for preceding fiscal years,
that result from differences in classification or reporting
of data under this subsection. In the report, the
Administration shall identify the differences in
classification or reporting, as the case may be, and set
forth the statistics on total dollar values for the later
fiscal year as those statistics would have been calculated if
the categories of contracts had been classified or otherwise
reported without the differences.
``(II) The total dollar values referred to in subclause (I)
are the total dollar values of prime contracts awarded, total
dollar values of subcontracts awarded, and total dollar
values of prime contracts and subcontracts awarded to small
businesses.'';
(B) in paragraph (2), by striking ``paragraph (1)'' and
inserting ``paragraph (1)(A)''; and
(C) by adding at the end the following:
``(4)(A) The Administration may not issue a waiver or
permissive letter authorizing the head of a Federal agency or
the heads of any group of Federal agencies to change the
statistical methodology used for meeting the reporting
requirements of paragraph (1)(A) or (2) unless, when issued,
the waiver or permissive letter is accompanied by the
comments of the Chief Counsel for Advocacy regarding the
appropriateness of the decision of the Administration to
issue the waiver or letter.
``(B) No waiver or permissive letter referred to in
subparagraph (A) shall be effective until--
``(i) the Administration submits a copy of the waiver or
permissive letter, together with the comments of the Chief
Counsel for Advocacy, to the Committees on Small Business of
the House of Representatives and the Senate; and
``(ii) 30 days have elapsed since the date of the
submission to the committees under clause (i).''.
(2) Inapplicability of content requirement to fiscal year
1998 report.--Clause (iii) of subparagraph (B) of section
15(h)(1) of the Small Business Act, as added by paragraph
(1)(A)(iii) of this subsection, does not apply to the
comprehensive report submitted under that subparagraph for
fiscal year 1998.
(b) HUBZone Program.--Section 602(b)(2) of the Small
Business Reauthorization Act of 1997 (15 U.S.C. 657a note) is
amended--
(1) in subparagraph (I), by striking ``and'' at the end;
(2) in subparagraph (J), by striking the period at the end
and inserting ``; and''; and
(3) by adding at the end the following:
``(K) the Department of Labor.''.

Mr. BOND. Mr. President, I rise today in support of H.R. 3412, the
Year 2000 Readiness and Small Business Programs Restructuring and
Reform Act of 1998. On September 15, 1998, the Committee on Small
Business conducted a mark-up of H.R. 3412, a bill making technical
amendments to the SBIC Program which passed the House of
Representatives on March 24, 1998, and was referred to the Committee on
Small Business.
The Committee approved 18-0 my amendment in the nature of a
substitute to H.R. 3412, which included the Year 2000 Readiness Act (S.
2372), the Small Business Restructuring and Reform Act of 1998 (S.
2407) and portions of Senator Kerry's bill, the Small Business Loan
Enhancement Act (S. 2448). Prior to approving my substitute amendment,
the Committee approved seven amendments by unanimous voice votes.

title i

Title I addresses the Committee's concerns about the impact the Year
2000 computer problem will have on small businesses. Earlier this year,
the Committee held a hearing on this problem, and the witnesses'
testimony was alarming. The majority of small businesses that are
likely to have Y2K computer failures are unprepared. In a study
conducted by Wells Fargo Bank and the NFIB, there are an estimated
4,750,000 small employers who will encounter Y2K problems. However,
only 15 percent of all businesses with under 200 employees have begun
to inventory the automated systems that may be affected by this
computer glitch, much less commenced fixing such systems.
Given the impact that a substantial number of small business failures
would have on our Nation's economy, the Committee determined that it
was not only important for small businesses to be aware of the Y2K
problem, but that they also had to have access to capital to fix such
problems. H.R. 3412 directs SBA to establish a limited-term loan
program under the FA$TRAK pilot program that would guarantee 50 percent
of the principal amount of a loan made by a private lender to assist
small businesses in correcting Y2K computer problems. The Committee
adopted an amendment sponsored by Senator Kerry that states that all
SBA-approved lenders under the 7(a) loan program may also make loans
for Y2K corrections under the 7(a) loan program.
Since I became Chairman of the Committee in 1995, the Committee has
maintained an active role overseeing credit programs at the Small
Business Administration. To assist the Committee in conducting its
oversight of these credit programs, H.R. 3412 includes a new provision
that requires SBA to provide notification to the Senate and House
Committees on Small Business whenever it initiates or changes a pilot
program under the 7(a) loan program. Further, SBA is required to report
annually to the Committees on the status of each pilot program. Such
report will include the number and amount of

[[Page S11204]]

loans, the number of lenders participating, and the default rate,
delinquency rate, and recovery rate for loans made under each pilot
program.

title ii

Title II of the Year 2000 Readiness and Small Business Programs
Restructuring and Reform Act of 1998 includes improvements in Federal
Programs that are in great demand by small firms. Just last year, the
Committee approved a significant increase in the Women's Business
Center Program. Demands being placed on this program are exceeding last
year's estimates, and H.R. 3412 increases the annual authorization
level for grants from $8 million to $12 million. To assist the
Committee in its oversight role, the bill directs the Comptroller
General to conduct a baseline study and a follow-up study on the
management of the Women's Business Center Program by SBA's Office of
Women's Business Ownership.
Last year, the Committee approved an increase from 20 percent to 23
percent in the amount of Federal prime contract dollars that will be
set aside each year for small businesses. This goal is extremely
important to the viability of thousands of small firms. Importantly,
the Federal government is also a big winner, since small businesses
delivery high quality, competitively priced goods and services.
The managers' amendment that Senator Kerry and I have offered amends
a provision in H.R. 3412 that requires SBA to report annually to the
Senate and House Committees on Small Business on the success of each
Federal agency in meeting the 23 percent goal. The provision in the
bill was crafted after the Committee received a report issued in April
1998 by the Department of Energy's Office of Inspector General that
indicates that the Department of Energy exploited a change in its
statistical methodology to inflate its small business contracting
achievements.
The managers' amendment refines the provision contained in H.R. 3412
that was approved unanimously by the Committee on September 15. These
changes reflect clarifications requested by the Small Business
Administration, while retaining the bill's key provisions intended to
discourage the reporting of erroneous or misleading statistics. At
SBA's request, the managers' amendment provides for use of data from
the Federal Procurement Data System in preparing reports to the
Congress on Federal procurement activities.
The managers' amendment also reduces the burden placed on the Chief
Counsel for Advocacy for commenting on SBA letters authorizing changes
in statistical methodology by the reporting agencies. As reported by
the Committee on Small Business, H.R. 3412 would have allowed such
letters to take effect 45 days after copies had been transmitted to the
Senate and House Committee on Small Business. During this time, the
Chief Counsel would have had 30 days to comment on such letters. The
Chief Counsel expressed concern to us about being able to meet this
deadline due to limited staff resources, so the managers' amendment
changes these deadlines. The Chief Counsel's comments will now be
included with the initial transmission from SBA notifying the
Committees and will not be subject to a separate statutory deadline.
The managers anticipate that this approach will encourage SBA to make
the Chief Counsel a part of any negotiations leading to the preparation
of such a letter in the first place.

The managers' amendment retains three key facets of the Committee-
reported bill, with some simpler language. The Committee continues to
believe it is appropriate, and consistent with the Chief Counsel's
other reporting responsibilities, for the Chief Counsel to comment on
letters authorizing changes in statistical methodology. Second,
whenever an agency seeks to reclassify contracts so they are not
included in statistics issued in previous years, or are included as
part of the calculation of a different statistic, the Committee wants
this information disclosed. Disclosure is vital so that recipients of
these statistics will know that they attempt to measure the same thing
from year to year--and if they do not, how they differ. Finally, the
Committee continues to require a separate calculation of what the
reporting year's statistics would have been in the absence of such
changes. This is intended to remove any incentive for an agency to
massage its statistics to inflate its small business contracting
achievements.
The managers' amendment also makes an adjustment to the HUBZone
program that was approved last year as part of the Small Business
Reauthorization Act of 1997 (P.L. 105-135). At the request of SBA, the
Department of Labor would be added to the list of Federal agencies that
may participate under the HUBZone Program within the provision limiting
participation to selected agencies prior to September 30, 2000.
Title II of H.R. 3412 has other significant provisions to improve
Federal programs to help small business owners. The following
highlights the changes:
The Small Business Innovation Research (SBIR) program is made
permanent. Since this program was last re-authorized in 1992, its
success has exceeded our expectations. The bill requires Federal
agencies to utilize its outreach activities to encourage greater
participation of small research firms from states that receive few SBIR
awards.
The program authorization level for participating securities under
the Small Business Investment Company (SBIC) Program is increased from
$800 million to $1 billion in FY 1999; from $900 million to $1.2
billion in FY 2000. Following the statutory changes in the SBIC Program
approved by the Committee in 1996, the growth in the program has
exceeded most estimates.
The Pilot Liquidation Program under the 504 Certified Development
Company Program is made permanent.
A new Office of Veterans Business Development is established at SBA,
which is directed to provide comprehensive help to veteran-owned small
businesses. An Advisory Committee on Veterans' Business Affairs
composed of 15 members is established, and a new position of National
Veterans' Business Coordinator is created within SCORE.
Title II also includes amendments that were offered by members of the
Committee on Small Business. It includes two amendments offered by
Senator Kerry. The first restructures the loan loss reserve
requirements under SBA's Microloan Program. His second amendment
changes SBA's appraisal standards under the 504 and 7(a) loan programs
to require appraisals of real estate collateral by state-licensed or
state-certified appraisers only when more than $250,000 of the loan
proceeds are to be used to acquire, construct or improve real property.
The Committee approved an amendment included in Title II sponsored by
Senator Bumpers to strike the cap on the amount of loan funds that a
single state can receive under the Microloan Program, while ensuring
equitable funding to Microloan Lender Intermediaries. An amendment
sponsored by Senator Cleland to establish a pilot disaster mitigation
loan program at SBA was accepted. And lastly, the Committee approved an
amendment offered by Senator Wellstone which authorizes a total of $20
million over four years to create the Community Development Venture
Capital Demonstration Program at SBA.

Title III

Title III of the Year 2000 Readiness and Small Business Programs
Restructuring and Reform Act of 1998 incorporates an amendment offered
by Senator Burns to create the Small Business Environmental Assistance
Pilot Program at SBA. The purpose of this pilot program is to provide
technical assistance to small businesses to help them comply with
environmental regulations. Witnesses have testified before the
Committee on Small Business about the complexity of environmental
regulations and the importance of environmental compliance tools
designed to help small businesses comply with the law and regulations
administered by the Environmental Protection Agency.
The Small Business Environmental Assistance Pilot Program has two
principal sections. The first establishes an Advisory Committee on
Small Business Environmental Assistance Programs that will review
existing programs that provide environmental assistance to small
businesses and chart the course for small business environmental
compliance assistance. The second section authorizes SBA to establish a
demonstration grant program based on the

[[Page S11205]]

recommendations and strategy developed by the Advisory Committee. Under
this program, SBA will make 4-year grants to certain Small Business
Development Centers to provide environmental compliance assistance to
small businesses in partnership with existing programs.
Mr. President, when the Committee on Small Business filed its report
on S. 3412, the Congressional Budget Office had not completed its
estimate of the costs associated with the bill. I am now in receipt of
the CBO analysis of H.R. 3412 and ask unanimous consent that it be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

U.S. Congress,

Congressional Budget Office,

Washington, DC, September 28, 1998.
Hon. Christopher S. Bond,
Chairman, Committee on Small Business,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for the H.R. 3412, the
Year 2000 Readiness and Small Business Programs Restructuring
and Reform Act of 1998.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Mark
Hadley and Kristen Layman (for federal costs), and Marc
Nicole (for the state and local impact).
Sincerely,
June E. O'Neill, Director.
Enclosure.

congressional budget office cost estimate

H.R. 3412--Year 2000 Readiness and Small Business Programs
Restructuring and Reform Act of 1998
Summary: H.R. 3412 would establish three new pilot programs
for the Small Business Administration (SBA) and would make a
number of changes to existing SBA loan and grant programs.
Assuming appropriation of the necessary amounts, CBO
estimates that this legislation would result in new
discretionary spending of $99 million over the 1999-2003
period. Of this total, $66 million is from amounts
specifically authorized in the bill for SBA programs--
primarily for grants and administrative expenses. The
remaining $33 million would be primarily for the subsidy
costs of the Small Business Investment Company (SBIC)
Participating Securities program and the proposed disaster
mitigation pilot program.
H.R. 3412 would also modify the terms of SBA guarantees for
existing general business loans. CBO estimates that provision
would increase direct spending by $4 million in fiscal year
1999. The act also could affect governmental receipts, but
CBO estimates that any such changes would be less than
$500,000 a year. Because the act would affect direct spending
and could affect receipts, pay-as-you-go procedures would
apply.
H.R. 3412 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act
(UMRA). Any costs to state, local or tribal governments
resulting from enactment of the bill would be the result of
complying with grant conditions.
Description of the bill's major provisions: Title I would
establish a pilot loan program under the SBA general business
program to address the year 2000 computer problems of small
businesses. It would require that SBA provide annual reports
on the pilot program and a detailed annual report on all
pilot programs.
Title II contains a number of changes in small business
programs. Provisions with expected budgetary effects are
outlined below:
Section 201 would increase the amount authorized for grants
to women's business centers from $8 million a year to $12
million a year. It would also clarify certain provisions of
the Small Business Innovation Research Program.
Section 203 would increase the authorized level of the
SBIC-Participating Securities program in 1999 and 2000.
Section 205 would allow qualified community development
companies (CDCs) to liquidate loans in their portfolio that
SBA has purchased. This section also would eliminate a pilot
program that allowed CDCs to liquidate loans and would allow
the CDCs to litigate in place of SBA.
Section 206 would authorize the appropriation of $2.5
million each fiscal year to establish an office of veterans
business development and an advisory committee on veterans
business affairs.
Section 207 would eliminate a provision of law that allows
SBA to pay interest on guaranteed general business loans that
have defaulted at a rate 1 percent less than the borrower's
interest rate between the time of default and the time SBA
purchases the loan.
Section 208 would establish a disaster mitigation pilot
loan program and authorize a program level of $15 million for
each year during the 1999-2003 period.
Section 211 would establish a demonstration program for
venture capital in distressed communities.
Other provisions in title II would not have any significant
budgetary impact.
Title III would establish a pilot program to improve the
environmental performance of small businesses and would also
establish an advisory committee on small business
environmental assistance programs. Finally, title III would
authorize the appropriation of $500,000 for 1999 and $4
million for each year over the 2000-2003 period.
Estimated cost to the Federal Government: CBO's estimate of
the budgetary impact of implementing H.R. 3412 is shown in
Table 1. The table does not include any estimated effects for
section 205 because CBO cannot determine whether that section
would have any budgetary impact, or what the direction or
magnitude of any such impact might be. The costs of this
legislation fall within budget functions 370 (commerce and
housing credit) and 450 (community and regional development).

TABLE 1.--ESTIMATED FEDERAL COSTS FOR THE YEAR 2000 READINESS AND SMALL
BUSINESS PROGRAMS RESTRUCTURING AND REFORM ACT OF 1998
------------------------------------------------------------------------
By fiscal years in millions of
dollars--
----------------------------------
1999 2000 2001 2002 2003
------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Specified Authorization Level........ 7 11 31 11 11
Estimated Authorization Level........ 9 11 5 5 4
----------------------------------
Total Authorization Level...... 16 22 36 16 15
Estimated Outlays.................... 12 20 31 20 16

CHANGES IN DIRECT SPENDING

Estimated Budget Authority........... 4 0 0 0 0
Estimated Outlays.................... 4 0 0 0 0
------------------------------------------------------------------------

Basis of estimate: For the purposes of this estimate, CBO
assumes that the bill will be enacted in October 1998 (the
beginning of fiscal year 1999) and that the necessary amounts
will be appropriated for each fiscal year. Outlay estimates
are based on historical spending rates for existing or
similar programs.
Spending subject to appropriation
Specified Authorizations. H.R. 3412 would increase the
authorization for grants to women's business centers from $8
million to $12 million each year. The act would also
establish an Office of Veterans Business Development, a
demonstration program for venture capital in distressed
communities, and a pilot program to improve the environmental
performance of small businesses. Assuming appropriation of
the specified amounts, CBO estimates that additional outlays
for these programs would total $66 million over the 1999-2003
period.
Estimated Authorization for Loan Programs. H.R. 3412 would
make numerous changes to loan programs administered by SBA.
The Federal Credit Reform Act of 1990 requires appropriation
of the subsidy costs and administrative costs for credit
programs. The subsidy cost is the estimated long-term cost to
the government of a direct loan or loan guarantee, calculated
on a net present value basis and excluding administrative
costs.
Section 203 would increase the authorized program level of
the SBIC Participating Securities program from $800 million
to $1 billion in 1999 and from $900 million to $1.2 billion
in 2000. Based on information from the SBA and on historical
data for this program, CBO estimates that the subsidy costs
of guarantees for the authorized levels would increase by $11
million over the 1999-2003 period. CBO estimates that this
provision would not significantly increase the administrative
costs of the agency.
Section 207 would eliminate a provision of law that allows
SBA, on defaulted general business loans guaranteed by the
agency, to pay 1 percent less than the borrower's interest
rate between the time of default and the time SBA purchases
the loan. Based on information from SBA and the Office of
Management and Budget (OMB), CBO estimates that this
provision would increase the subsidy rate by 0.01 percent.
That change would slightly increase the cost of guaranteeing
each new loan. CBO estimates that H.R. 3412 would increase
the cost of guaranteeing the authorized level of $14 billion
in loans in fiscal year 1999 from $195 million to $196
million, subject to the availability of appropriations. This
provision would also affect direct spending by increasing the
costs of loans that SBA has already guaranteed (see below).
Section 208 would authorize a disaster mitigation pilot
program to make direct and guaranteed loans to small
businesses for preventive measures that would reduce the
long-run costs of disasters. To be eligible for a pre-
disaster mitigation loan, the small business must be unable
to obtain loans elsewhere for mitigation purposes. This
section would authorize a program level of $15 million each
year over fiscal years 1999 through 2003. Based on the 1998
subsidy rate for SBA disaster loans, CBO estimates that the
subsidy appropriations for these loans and guarantees would
total $17 million over the 1999-2003 period. We estimate
that the costs of administering the pre-disaster
mitigation loan program would total less than $500,000
each year.
Section 205 would authorize qualified community development
companies to liquidate loans in their portfolio that SBA has
purchased, and would allow CDCs to litigate in place of SBA.
CDC loans, also known a section 503 and 504 loans, provide
small businesses with long-term, fixed-rate financing for the
purchase of land, buildings, and equipment. H.R. 3412 would
make permanent the pilot program that allowed CDCs to
liquidate such loans. The pilot program has not produced
enough information to date to allow CBO to make any
determination about the amount the government would recover
on defaulted loans if those loans are liquidated by CDCs
instead of by SBA
In addition, it is not clear how expenses associated with
liquidation would be paid. The

[[Page S11206]]

Federal Credit Reform Act stipulates that administrative
expenses cannot be paid out of the subsidy for loan programs.
but expenses to foreclose, maintain, or liquidate an asset
can. Many of the expenses CDCs would incur would be to
foreclose, maintain, or liquidate assets. It is not clear
whether SBA would have the authority to reimburse CDCs for
administrative expenses, including litigation costs.
Enacting section 205 could change the subsidy rate for
previous cohorts of CDC loans or the administrative costs of
SBA. However, CBO has no basis for estimating the direction,
magnitude, or timing of any such changes. The bill would not
affect the subsidy rate for future CDC loans. By law, the
Administrator of SBA must adjust an annual fee on 504 loans
to produce an estimated subsidy rate of zero at the time
loans are guaranteed. If enacting H.R. 3412 changed the costs
of future loans, that change would be reflected in fees paid
by borrowers, rather than in the appropriation required to
fund the authorized loan level.
H.R. 3412 also would make other technical changes to SBA's
loan programs, but CBO estimates that those changes would not
have any significant budgetary effect.
Table 2 summarizes estimated changes in loan levels and
subsidy costs assuming appropriation action consistent with
H.R. 3412. The increased discretionary spending associated
with SBA's loan programs would represent about $25 million of
the total cost of implementing H.R. 3412.
Reports. H.R. 3412 would require SBA and the General
Accounting Office to produce numerous reports. Based on
historical costs for similar reports and information from the
two agencies, CBO estimates that these provisions would
increase discretionary spending by less than $500,000 in each
year over the 1999-2003 period.

TABLE 2.--CHANGES IN SBA LOAN LEVELS AND SUBSIDY COSTS UNDER H.R. 3412
\1\
------------------------------------------------------------------------
By fiscal years, in millions of
dollars--
----------------------------------
1999 2000 2001 2002 2003
------------------------------------------------------------------------
CHANGES IN AUTHORIZED LOAN LEVELS

SBIC Participating Securities Loans.. 200 300 0 0 0
Disaster Mitigation Pilot Loans...... 15 15 15 15 15

LOAN SUBSIDY COSTS

SBIC Participating Securities Loans.. ..... ..... ..... ..... .....
Estimated Authorization Level...... 4 7 0 0 0
Estimated Outlays.................. 3 6 2 0 0
Disaster Mitigation Pilot Loans...... ..... ..... ..... ..... .....
Estimated Authorization Level...... 3 3 3 3 3
Estimated Outlays.................. 2 3 3 3 3
------------------------------------------------------------------------
\1\ Implementing H.R. 3412 also would increase SBA's costs for
administering loans, but CBO estimates that the changes in
administrative expenses would be less than $500,000 a year.

Direct spending
Loan Programs. Section 207, which would increase the
subsidy rate on future general business loans, would also
modify the expected cost of the guarantees SBA has provided
for existing loans. According to OMB's Circular A-11
Preparation and Submission of Budget Estimates: ``If the
modification is mandated in legislation, the legislation
itself provides the budget authority to incur the subsidy
cost obligation (whether explicitly stated or not).'' CBO
estimates that enacting this provision would increase direct
spending by about $4 million in fiscal year 1999.
Gifts. Section 206 would establish an advisory committee on
veternas business affairs, and section 301 would establish an
advisory committee on small business environmental assistance
programs. H.R. 3412 would authorize the two advisory
committees to accept and use gifts and donations to assist in
their work. Donations of money are recorded in the budget as
governmental receipts (revenues) and the use of any such
amounts under the act would be direct spending, but CBO
estimates that any such donations would be less than $500,000
a year.
Pay-as-you-go considerations: The Balanced Budget and
Emergency Deficit Control Act sets up pay-as-you-go
procedures for legislation affecting direct spending or
receipts. CBO estimates that enacting the bill would increase
direct spending by $4 million in 1999. The bill could also
increase governmental receipts, but any such changes would be
less than $500,000 a year.
Estimated impact on State, local, and tribal governments:
H.R. 3412 contains no intergovernmental mandates as defined
in UMRA. The bill would establish new programs or modify
existing programs that provide grants or contracts to various
organizations, including state, local and tribal governments.
Any costs to these governments from the requirements of the
programs would be incurred voluntarily.
Estimated impact on the private sector: This act would
impose no new private-sector mandates as defined in UMRA.
Previous CBO estimate: On March 16, 1998, CBO transmitted
an estimate for H.R. 3412 as ordered reported by the House
Committee on Small Business on March 12, 1998. The House
version of H.R. 3412 would make only technical corrections to
existing law, and as a result, CBO estimated that it would
not have a significant impact on the federal budget.
Estimate prepared by: Federal Costs: Mark Hadley and
Kristen Layman. Impact on State, Local, and Tribal
Governments: Marc Nicole.
Estimate approved by: Robert A Sunshine, Deputy Assistant
Director for Budget Analysis.

Mr. BOND. Mr. President, this is an important bill that will benefit
thousands of small businesses throughout the United States. I urge my
colleagues strong support for its final passage.
Mr. KERRY. Mr. President, we have an opportunity today in the Senate
to vote for legislation that will help our nation's 23 million small
businesses.
On September 15, the Senate Committee on Small Business, made up of
ten Republicans and eight Democrats, passed a comprehensive small
business bill, H.R. 3412, that includes all the provisions of my Small
Business Loan Enhancement Act of 1998. It also includes Senator Bond's
two bills, the Small Business Programs Restructuring and Reform Act of
1998 and the Small Business Year 2000 Readiness Act, bills introduced
by Senators Cleland and Wellstone, and four other amendments.
This bi-partisan vote was a big step towards final passage of
legislation that augments the opportunities available to every small
business owner and helps these entrepreneurs contribute to their
communities and the economy. In Massachusetts and across the country,
these are the programs that are working; assisting individuals with the
tools to successfully manage their own business.
If enacted, these changes would make a number of improvements to the
Small Business Administration's lending programs which reduce small
businesses' costs and paperwork, increase access to capital for women-
owned businesses, and promote small business lending, particularly to
those small businesses needing loans to meet the challenges of Year
2000 computer problem. They also build upon successful programs such as
the Small Business Innovation Research program and the Women's Business
Centers.
One of the most important provisions passed revises the loan loss
reserve requirement (a cash reserve to guarantee that the government is
paid back if a loan defaults) for microlenders by setting a 15-percent
ceiling and a 10-percent floor. After a microloan intermediary has
participated in the SBA Microloan program for five years and
demonstrated its ability to maintain a healthy loan fund, it can
request that SBA review and, when appropriate, reduce its loan loss
reserve from 15 percent to a percentage based on its average loan loss
rate for the five-year period. The proposed change would continue to
protect the government's interest in microloans as well as enhance the
program by freeing up cash which microlenders could reprogram for more
microloans or technical assistance to small business owners. Based on
the program's success since it was started six years ago, 36 out of 42
microlenders would qualify to maintain a loan loss reserve of ten
percent, rather than 15 percent.
To reduce unnecessary regulatory burden and costs to small business
lenders, this legislation raises the requisite appraisal threshold from
$100,000 to $250,000 for 7(a) guaranteed loans and 504 development
loans. This is consistent with federal bank regulatory policy in place
since 1994. After reviewing the legislation, SBA Administrator Aida
Alvarez sent a statement of Administration Policy, approved by the
Office of Management and Budget, to Chairman Bond on September 15
saying it had no objection to making the requisite appraisal threshold
amount consistent with existing policy. This change is estimated to
save borrowers on average from $1,000 to $3,000.
To help small businesses meet the escalating challenges of the Year
2000 (Y2K) computer problem, this bill specifies that small businesses
can use 7(a) loans to finance the cost of making their systems and
computers Y2K-compliant. The Committee complemented this change by also
approving a loan guarantee pilot program introduced by Senator Bond
which would allow 7(a) preferred and certified lenders to use their
paperwork to expedite loans capped at $50,000 to help small businesses
with Y2K expenses.
The bill expands SBA's 504 Development Company program to make women-
owned businesses eligible for loans up to $1 million to acquire
equipment and expand facilities. Currently, 504 loans to women-owned
businesses are capped at $750,000. The Committee also endorsed a
provision, based on the Kerry-Cleland Women's Business Centers bill
introduced earlier this year, which increases annual funding from $8
million to $12 million for Women's Business Centers.

[[Page S11207]]

The Committee passed several other important provisions to improve
the business climate for small business. For the sector of small, high-
tech companies that participate in federal research and development,
the Committee voted to make the Small Business Innovation Research
(SBIR) program permanent after 16 years of success. The SBIR program is
a great example of how government and business can work together to
advance the cause of both science and our economy. The results have
been dramatic for small, high-technology companies participating in the
program. From 1983 to the end of 1996, some 8,000 small, high-
technology firms have received more than 40,000 SBIR research awards,
totaling $6 billion.
Massachusetts is the second largest recipient of SBIR awards in the
nation, receiving $148 million in SBIR research dollars in 1996.
Knowing the benefits of the SBIR program, I believe we need to find
ways to make sure the SBIR awards are more equitably distributed
throughout the country without changing the program's reliance on
competition. The highly competitive nature of SBIR awards is one of the
main reasons the program has been so popular and successful.
A recent SBA study showed that one-third of the states received 85
percent of all SBIR awards. I joined my colleagues to support Senator
Carl Levin's amendment to promote the SBIR program in states that
receive the fewest awards. This amendment directs the ten federal
agencies that participate in the SBIR program to use their existing
procurement outreach efforts for SBIR outreach.
Responding to requests from Veterans Service Organizations to assist
veterans with entrepreneurial endeavors, I joined my colleagues and
supported Chairman Bond's bill that, among other things, would increase
outreach and assessment of opportunities and services for veterans by
establishing the Office of Veterans Business Development within SBA. I
am proud that the Committee adopted a version that included my
suggestion to authorize $2.5 million for this important effort.
The microloan community has more than just the loan loss reserve
improvements to applaud in this legislation. Senator Bumpers
successfully eliminated the cap on the amount of microloan funds a
single state can receive. The cap has penalized several rural states
with small populations that have a high demand for microloans. And
Senator Wellstone won unanimous support for an innovative four-year
demonstration program to spawn community development venture capital
organizations nationwide. The purpose of Senator Wellstone's initiative
is to stimulate and promote small business development and
entrepreneurship in economically distressed communities.
The Small Business Investment Company (SBIC) program is vital to our
fastest growing small companies that have capital needs exceeding the
caps on SBA's loan program, but are not large enough to be attractive
to traditional venture capital investors. The demand is clear: Last
year, participating securities in the SBIC program invested $360
million in 495 financings. In my state, where we have an impressive
community of fast-growing companies, particularly in the hi-tech
industry, there were 140 SBIC financings, worth $145.4 million.
The Participating Securities component of the SBIC program invests
principally in the equities of new or expanding businesses. To leverage
the private capital of participating securities and better serve these
fast-growing businesses, I supported Senator Lieberman's amendment
which raises the authorization level for participating securities from
$800 million to $1 billion in fiscal year 1999 and from $900 million to
$1.2 billion in fiscal year 2000.
In response to the increasing costs, loss of businesses and personal
devastation caused by disasters, the Committee passed Senator Cleland's
five-year disaster mitigation pilot program. The program, recommended
by the Administration as part of its Fiscal Year 1999 Budget, would
allow SBA to make direct loans to small business owners, who can't get
credit elsewhere and who live in disaster-prone areas, for financing
preventive measures to protect their businesses against future disaster
damage. Disaster mitigation is expected to reduce the costs of disaster
repair by 50 percent for small businesses.
To help small businesses maneuver the maze of environmental
regulations, the Committee passed a small business environmental
assistance pilot program introduced by Senator Burns. Administered
through existing Small Business Development Centers in ten states, the
program is designed to help small businesses comply with often complex
environmental regulations.
Lastly, in addition to the Committee-reported bill, the Senate today
will adopt a Bond-Kerry amendment. First, it adds the Department of
Labor to the SBA's HUBZone program, which Congress enacted last year.
And second, it amends Section 205 of this bill, H.R. 3412, to improve
the reporting tools concerning small business set-asides of federal
contracts.
Mr. President, I thank my colleagues for their support of small
businesses and ask unanimous consent that this statement be entered in
the Record.
<bullet> Mr. LEVIN. Mr. President, H.R. 3412, as amended by the Senate
Small Business Committee, has broad bipartisan support. I am
particularly pleased that H.R. 3412 makes permanent the Small Business
Innovation Research Program SBIR, which was originally established in
1982 and reauthorized and expanded in 1992. This competitive program
has a well deserved reputation for success and it is fitting that it be
made permanent.
H.R. 3412 also addresses a problem pointed out by GAO in its April,
1998 SBIR report regarding the lack of uniformity in defining the term
``extramural budget''. GAO found that participating agencies had
different interpretations of what should be included in their
extramural research budgets. This is a problem because a participating
agency's extramural budget is the base from which that agency's SBIR
funding is calculated. To resolve any discrepancies, H.R. 3412, as
amended by the Senate Small Business Committee, directs OMB to define
the term ``extramural budget'' and ensure that it is applied uniformly
throughout the government.
Finally, this bill includes a provision I authored which authorizes
existing procurement outreach programs of the Department of Defense and
other federal agencies to conduct program outreach efforts for the SBIR
program out of funds that are already available to them.<bullet>
Mr. HARKIN. Mr. President, I would like to thank my colleagues,
Chairman of the Small Business Committee, Senator Kit Bond, and Ranking
Member, Senator John Kerry, for their work in moving H.R. 3412 through
Committee. I would also like to thank Senators Bond and Kerry for
agreeing to my language requesting a report from the Small Business
Administration (SBA) on the 7(A) loan program's reporting requirements
on the subsidy rate. I have heard from a number of community bankers in
Iowa who have expressed concerns with the monthly reporting
requirement. Previously, these reports were submitted quarterly. I am
concerned that small banks, especially small rural banks, lack the loan
volume or personnel to meet this requirment in a cost effective manner.
I look forward to reviewing this report and working with my colleagues
and the SBA in addressing this concern.
In addition to improvements in popular SBA programs, H.R. 3412 also
contains a Committee passed amendment, sponsored by Senator Max Cleland
and cosponsored by myself, which will allow the SBA to conduct a
disaster mitigation pilot program. It is my hope that this program will
afford small business owners, particularly in rural areas, the ability
to invest in their property to help prevent against natural disasters.
By providing small businesses with the tools to invest in their
business before disasters strike, property destruction can be avoided
and insurance claims can be reduced.
<bullet> Mr. WELLSTONE. Mr. President, I support H.R. 3412, the ``Year
2000 Readiness and Small Business Programs Restructuring and Reform Act
of 1998.'' The bill makes useful reforms to existing Small Business
Administration (SBA) programs and authorizes certain new initiatives,
including a community development venture capital demonstration program
which I proposed during markup in the Small Business Committee. I
commend Chairman Bond

[[Page S11208]]

for his leadership on the bill, and I thank him for including my
proposal in it.
The bill makes permanent SBA's 504 liquidation pilot program, a step
I strongly support. Minnesota certified development companies with
proven liquidation and foreclosure capabilities have made use of the
pilot program, which can help bring costs down and save borrowers from
higher fees. The bill's adjustments to the loan loss reserve
requirements in the Microloan program also are appropriate. Requiring a
loss reserve based on past performance makes sense. This provision will
continue to protect the government's interest in these loans but will
allow the majority of microlenders to make more loans or provide more
technical assistance to borrowers.
I am especially pleased that my proposal to create a new $20-million,
four-year demonstration program at the SBA to develop the capacity of
community development venture capital (CDVC) organizations is part of
H.R. 3412. I thank Senator Bond again for his support and for working
with me to get this amendment accepted. I also thank the SBA for
working with my staff and for providing valuable technical assistance
in drafting the amendment.
The CDVC Program is about directing venture capital--equity and
investment capital--to small businesses with the aim of promoting
business growth and economic development in poor communities. That's
what we mean by community development venture capital or CDVC. The
money the bill authorizes would not be directly invested into small
businesses; instead, it would go to provide technical assistance to
organizations that invest in businesses in low-income communities.
CDVC organizations have been highly successful at producing a
``double bottom line'' of strong financial returns and significant
social benefits. CDVC funds create social and financial payoffs because
they consider the community impact of their investments to be just as
important as the financial returns to investors. Community development
venture capitalists target investments to companies that generate good
jobs--jobs that pay decent wages, jobs with benefits, jobs with
opportunity to advance. They influence and shape the culture of young
companies with respect to sustainable development and environmental
policies. They look to create local entrepreneurial capacity, local
ownership, local wealth. The ``double bottom line'' philosophy is what
makes these venture capitalists so unique and their work so promising.
The goal of the CDVC program is to expand and multiply this very
meritorious work.
There are about 30 CDVC funds currently operating in urban and rural
communities around the country. Northeast Ventures Corporation in
Duluth, Minnesota, is a good example of a successful and experienced
CDVC company. Northeast Ventures serves a seven county rural area and
focuses on creating good jobs in high value-added industries. Northeast
Ventures targets 50% of the jobs created through its investments to
women, low-income and structurally unemployed persons. They also
require portfolio companies to offer employees an opportunity to
participate in a health care plan in which the employer makes some
contribution. Partridge River is an example of one of Northeast
Ventures successful investments. Northeast made an initial investment
in Partridge River, a locally owned specialized manufacturer of
precision and wood component parts for furniture and cabinets, in late
1990. Partridge River uses readily available light-colored woods such
as aspen, basswood, birch and maples, and has manufacturing customers
throughout the United States. When the company needed significant
financing for an upgrade of equipment in 1994, another investor
purchased Northeast's stake at a significant premium and allowed the
entrepreneur to maintain majority ownership. Over the course of
Northeast's involvement, the company added 17 net new employees from
northeast Minnesota.
Kentucky Highlands Investment Corporation (KHIC), founded in 1968 in
London, Kentucky, is one of the oldest and most successful of the CDVC
organizations. They focus on developing profitable businesses that
provide job opportunities to residents of Southeast Kentucky. For
example, KHIC provided over $600,000 in equity financing to a startup
company that manufactures casements for the retail store industry. That
company now employs over 125 people who had few prospects for
employment in their home county. This company would not be located in
rural Clay County if not for the type of equity investment that KHIC
made available. Altogether, KHIC has infused about $40 million in
venture capital in their region, invested in more than 100 companies
and created over 5,200 jobs.
The organizations operating CDVC funds have been fortunate in
attracting talented and dedicated people, but the skills and expertise
to produce a double bottom line are still relatively scarce. The CDVC
Demonstration Program allows the most experienced and successful in
this growing field to teach, advise, and mentor the less experienced,
the new and emerging community development venture capitalists.
The CDVC Demonstration Program authorizes $20 million over four
years. Seventy-five percent or $15 million will be used as grants to
intermediary organizations--the private, nonprofit organizations with
the most experience and skill in making venture capital investments in
poor communities--to provide hands-on technical assistance to the new
and emerging venture funds springing up in low-income communities
around the country. In addition to providing technical assistance,
intermediaries will be able to use the grants to fund the start up and
operating costs of new CDVC organizations. Grants to intermediaries
will be matched $1 for $1 with funds raised from non-Federal sources.
Twenty-five percent or $5 million will be used as grants to
developmental organizations--public or private firms--to create and
operate training programs, intern programs, a national conference, and
academic research and study of community development venture capital.
I hope that my colleagues in the Senate will support these reforms
and new initiatives in the name of good jobs, entrepreneurship and
responsibility to community.<bullet>
Mr. CLELAND. Mr. President, I thank the Senator from Massachusetts,
Senator Kerry and the Senator from Missouri, Mr. Bond, for their
continuing leadership on behalf of small businesses. The legislation
before the Senate, S. 3412, contains many important programs that will
enable small businesses to continue to be a vital part of the nation's
economy. This omnibus small business legislation is the result of
bipartisan commitment to a number of worthy goals.
Today I wish to address specifically two important initiatives that I
proposed earlier in this session: the disaster mitigation pilot program
and the Small Business Administration Women's Business Center
authorization. I am extremely pleased that both are included in this
bill.
On June 11, 1998, Senator Kerry and I introduced the S. 2157, the
Women's Business Center Authorization bill. There was broad bipartisan
support for this initiative, with seventeen cosponsors. I was
especially pleased when Senator Bond included an increased
authorization for women's business centers in the pending bill. Funding
for these important centers is increased from $8 million to $12 million
in fiscal year 1999 and thereafter.
The women's business center legislation, simply stated, recognizes
the outstanding contributions that women's business centers have made
to women entrepreneurs across the Nation. These centers are the only
organization, nationally, which focus exclusively on entrepreneurial
training for women. Increased funding will allow for new centers and
subcenters to be established and for continued funding for existing
centers, including the on-line women's business center. Increased
funding would achieve the goal of expanding centers to all 50 States.
On March 26, 1998, I introduced a disaster mitigation pilot program,
S. 1869. This legislation would permit SBA to establish a pilot program
(using up to $15 million of existing disaster funds) to provide small
businesses with low interest, long-term disaster loans to finance
preventive measures before a disaster hits. In response to the
increasing costs and personal devastation caused by disasters, the
Administration has launched an approach to emergency management that
moves away

[[Page S11209]]

from the current reliance on response and recovery to one that
emphasizes preparedness. The Federal Emergency Management Agency (FEMA)
has already established administratively a program to assist disaster-
prone communities, one in every state, in developing strategies to
avoid the crippling effects of natural disasters. My proposal would
allow the SBA to begin a pilot program that would be limited to small
businesses within those communities which are eligible to receive
disaster loans after a disaster has been declared. Currently, SBA
disaster loans may only be used to repair or replace existing
protective devices that are destroyed or damaged by a disaster. In
connection with repairs, funds may also be used to install new
mitigation devices that will prevent future damage. My legislation is
necessary to authorize SBA to establish this pilot program to provide
mitigation loans prior to the occurrence of a disaster.
Mr. President, I believe that this disaster mitigation program will
address two areas of need for our small businesses--reducing the cost
of recovery from a disaster and reducing future disaster costs for
small businesses. It also addresses the opportunity for small
businesses to contract work during a period when market forces haven't
driven up the prices for these services, thereby ultimately reducing
the cost of disaster assistance to the taxpayers.
I thank my colleagues on the Small Business Committee for including
both of these initiatives, which I think will serve the needs of so
many, in this bipartisan legislation. I look forward to its prompt
enactment. Thank you, Mr. President.
Mr. SHELBY. Mr. President, I ask unanimous consent that the amendment
be agreed to, the substitute amendment be agreed to, the bill be
considered read a third time and passed, the amendment to the title be
agreed to, the title, as amended, be agreed to, the motion to
reconsider be laid upon the table, and that any statements relating to
the bill be printed in the Record.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment (No. 3674) was agreed to.
The committee amendment, as amended, was agreed to.
The bill (H.R. 3412), as amended, was considered read the third time
and passed.

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