[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
FIELD HEARING: TULSA, OK: HOW REGULATIONS STIFLE SMALL BUSINESS GROWTH
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ECONOMIC GROWTH, TAX, AND CAPITAL ACCESS
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
JULY 22, 2019
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 116-037
Available via the GPO Website: www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
37-074 WASHINGTON : 2019
HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
ABBY FINKENAUER, Iowa
JARED GOLDEN, Maine
ANDY KIM, New Jersey
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
JUDY CHU, California
MARC VEASEY, Texas
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
ADRIANO ESPAILLAT, New York
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANGIE CRAIG, Minnesota
STEVE CHABOT, Ohio, Ranking Member
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
TRENT KELLY, Mississippi
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
Adam Minehardt, Majority Staff Director
Melissa Jung, Majority Deputy Staff Director and Chief Counsel
Kevin Fitzpatrick, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Andy Kim.................................................... 1
Hon. Kevin Hern.................................................. 3
WITNESSES
Mr. Chad Selman, Owner, Selman Farms, LLC, Skiatook, OK.......... 7
Mr. Chris Jordan, President and Chief Executive Officer, The
Farmers State Bank, Stigler, OK................................ 9
Mr. Howard L. (Bud) Ground, Director of Regulatory Affairs, The
Petroleum Alliance of Oklahoma, Oklahoma City, OK.............. 11
Ms. Elizabeth Osburn, Senior Vice President of Government
Affairs, Tulsa Regional Chamber, Tulsa, OK..................... 13
APPENDIX
Prepared Statements:
Mr. Chad Selman, Owner, Selman Farms, LLC, Skiatook, OK...... 30
Mr. Chris Jordan, President and Chief Executive Officer, The
Farmers State Bank, Stigler, OK............................ 34
Mr. Howard L. (Bud) Ground, Director of Regulatory Affairs,
The Petroleum Alliance of Oklahoma, Oklahoma City, OK...... 59
Ms. Elizabeth Osburn, Senior Vice President of Government
Affairs, Tulsa Regional Chamber, Tulsa, OK................. 63
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
HOW REGULATIONS STIFLE SMALL BUSINESS GROWTH
----------
MONDAY, JULY 22, 2019
House of Representatives,
Committee on Small Business,
Subcommittee on Economic Growth,
Tax, and Capital Access,
Washington, DC.
The Subcommittee met, pursuant to call, at 9:00 a.m., at
Oklahoma State University-Tulsa, North Hall Conference Center,
Room 150, 700 N. Greenwood Ave., Tulsa, OK, Hon. Andy Kim
presiding.
Present: Representatives Kim and Hern.
Chairman KIM. Good morning, everyone. The Committee will
come to order.
I want to thank everyone for joining us here this morning.
First I would like to thank Congressman Hern for welcoming me
to Oklahoma, for putting this all together and making sure that
we have an opportunity here directly for you.
First of all, I will just start by saying it is a real
great honor to be able to be here in Oklahoma. I am glad I
could bring the cooler weather here to you today, and hopefully
we will be able to bring a good discussion as well on what it
is that we can be doing for you.
This is my very first time doing a field hearing, a hearing
outside of D.C., and I will tell you, this is the kind of stuff
that Congress needs to be doing more of in terms of coming out,
meeting you where you are at, hearing from you, understanding
what is happening on your end and not just living in some sort
of bubble in Washington, D.C.
I have the great honor of being able to serve on this
Committee and the Subcommittee with Congressman Hern, and from
the very beginning we had a sit-down just talking through what
it is that we can be doing together, really trying to make sure
that the Small Business Committee is a committee that is
focused on the people, that in this time of divided government,
that it is a place where we can show the rest of Congress, as
well as the rest of this country, what bipartisanship means in
terms of our ability to focus in on where the rubber hits the
road on the issues that matter to individuals and businesses,
especially small businesses, each and every day, and really
trying to have an impact on the tangible things that can be
done to be able to address that.
I remember the very first time when I was sitting in his
office and we were talking about what are some of the issues
that we could be working on, this issue that we are going to be
talking about today was the first thing out of his mouth. He
said, look, we have to find ways to make sure that we are
helping out our small businesses, making sure that we are not
drowning them in paperwork, that they are able to operate in
the way that they need to.
So I am really glad that we have an opportunity to hear
from our witnesses here today, as well as just the broader
community about what it is that we can be doing.
I think for me, this is an issue where we have been
grappling on this over the course of the last six months,
trying to figure out what is the right balance that we are
dealing with when it comes to the regulation side, but also the
promotion of business side. And I think that we really need to
think about this in both ways and try to strike the right
balance.
It is a balance that is hard to strike, but it is a fine
line that we as legislators need to figure out and understand
what it is going to be that we do. It would be irresponsible of
us to simply disregard all regulations, but we also need to
make sure that we are trying to find the right balance,
focusing on the right issues.
In particular for me today, to hear from all of you about
what are the tangible impacts that this is having, either on
the bottom line financially or on personnel or others, that is
helpful for me to take back and understand how does this
actually get implemented. From my end, having been on the
Federal Government side--I was a diplomat before this, worked
at the State Department, Pentagon--I certainly have from my own
experiences troubles where we have been burdened with all sorts
of reports and other things, and it prevented me from doing the
job that I was being asked by the American people to do. So I
understand that there has to be ways in which we can strike
that balance, and small businesses experience that even greater
than what it is that I experienced, and I certainly want to
find ways that we can be focused on it in that way.
We must think about it not just in terms of the impact
today but also the impact over the course of the long term,
what the consequences would be.
Also, just trying to extrapolate and take from the lessons
that you are giving us today, the insights that you will have,
and how that applies more broadly to other businesses, other
industries that aren't represented in this room today as well,
and that is a responsibility that Congressman Hern and I have,
that we have to make sure we are trying to look at the bigger
picture and understand how that all comes together.
We understand the implications as we have seen regulations
and the impacts that that had, as well as the consequences that
happened when they were not having the proper oversight,
whether that was with the financial crisis in 2007 to 2008, or
environmental issues, which I know we will get into. Certainly,
as a district on my end on the Jersey Shore, a district that
got crushed by Superstorm Sandy, where we are having real
environmental problems, whether that is along the shoreline or
in the pinelands, we have a tremendous amount of flooding that
I also heard is something that this community here is
struggling with as well. So just trying to understand how are
we mindful about this while we are also looking out for our
businesses, especially small businesses.
We also need to make sure that we are ensuring that the
regulations are not harming the small firms, folks that are
just trying to get their businesses up and running, not getting
caught up in the red tape, find the right way to right-size our
regulations and make sure that they are actually getting at the
intended purpose. Having read through some of the words that
you will likely be saying in our testimonies, just
understanding what was the intention of this rule or regulation
and is that actually being implemented, because even if it has
the right intention, it could be outdated, it could be
something that isn't just quite getting at the heart of it, and
again putting in burdens while also not serving the function
that it was put in place to do.
Certainly, we see things from our own angle, but having
your perspective and the perspectives of folks and businesses
right here in Tulsa and across Oklahoma is critically important
to that.
During today's hearing we will hear from small business
owners, bankers and farmers about the regulation impacts on
their businesses and local communities, and I look forward to
hearing from each and every one of you about what it is that we
can do to improve our regulatory system, promote economic
growth and job creation, while continuing to protect our
consumers, our families, and our communities.
Again, I want to thank the witnesses all for being here
today, and I would now like to yield to the Ranking Member, Mr.
Hern, for his opening statement and to introduce our witnesses.
Mr. HERN. Thank you, Mr. Chairman.
Chairman Kim mentioned it is his first time to be in Tulsa,
and the way this works--and I am greatly indebted to him
because I told him I would love to return the favor. But to
have these field hearings, you have to have your colleague on
the other side be willing to attend, and he was most gracious
in offering his presence to be here to make this work. I
jokingly said I am wearing my bipartisan tie today. It has red
and blue in it. But this Committee has been really refreshing,
to see a committee where you can work together to find
solutions, because what I have found, and I think the Chairman
would agree with this, is that when you are sitting with
witnesses, at the end of the day they are really not very
partisan at all, they just want things to move out of the way
so they can grow business, create jobs, put Americans to work,
which is exactly why I ran for Congress, was to reduce the
regulations on small business and people with ideas who wanted
to go find capital, create business, create jobs, put Americans
to work.
So this is a very refreshing committee to be on in the
midst of all of the crazy tweets on both sides and all the
messaging going on. But this is very refreshing.
Congressman Kim serves in New Jersey's Third District,
which goes from Pennsylvania over to the Atlantic Ocean. Is
that right?
Chairman KIM. That is right.
Mr. HERN. Yes. So it is great. We both serve on the
Economic Growth and Tax and Capital Access. If you think about
it for a second, it is hard to start, if not impossible, if you
can't get capital to start, take your idea and start a
business. From time to time it is very difficult if you can't
find capital to grow your business. Certainly every one of us,
regardless if you are in business or if you are working for
somebody, we are always dealing constantly with the tax issues,
does it apply, does it treat you fairly, does it prevent the
government from picking winners and losers. At the end of the
day, the regulatory process, we do have to have a certain
amount of regulations to protect from certain things that
happen out there, but it is always the swinging of the pendulum
that sometimes gets us when we make it so overbearing that we
cannot even stay in business.
I understand this very well. I have been in small business
since 1985. I created my first one-person business under then-
President Ronald Reagan and had the fortunate opportunity with
every president since then to create a small business, operate
small businesses for a long time, so I get it.
When you are the last to get paid, every regulation is just
like a tax. It prevents you from growing your business. It
prevents you from being able to create jobs, put Americans to
work.
I spent 17 years on executive bank boards, 13 years on
McDonald's National Leadership Council, working with every
diversity group in America. McDonald's is the most diverse
company in the world. It wins national and global honors for
that every year. It is about listening to ideas, finding
solutions, and growing businesses. That is what it is about. I
would say that we would be better off if we could continue to
do that and have less dependency on Washington, D.C. There is
no gain from that from the standpoint of dependency. Most
Americans, again, if you let people and our witnesses speak in
the Small Business Committee, if you walked in that room after
the first introductions, you probably couldn't tell what party
they belonged to. It has been very refreshing, and I think most
people would recognize that as well.
I served five years as the Chief Financial Officer for the
McDonald's franchisees in the system on our National Leadership
Council, five years on our McDonald's tax policy, so global tax
policy, domestic tax policy, large corporation, small business.
So I have seen it from every perspective, what happens when you
have extenders, don't have extenders, lower the rates so
everybody benefits, and then eight years on their global
insurance board. So I have seen the impact of insurance on
small business when it comes to regulatory processes and what
that does to drive the business.
As the Chairman said, we don't have every small business
industry represented in here. We have a cross-section of four.
Some would argue, Mr. Selman, that you work in the Farm Bureau
but you are also in the other area of agriculture. So as you
are looking at these things, you are talking about how do we
take this information and do we cross-pollinate all the
different industries and say how can we take what we learned
today and be able to help small businesses grow.
The interesting thing about small businesses, we stand at
3.2 percent unemployment in Oklahoma, over 350,000 small
businesses in Oklahoma, and that is about 99.4 percent of all
firms in the state. Nationally, small businesses account for
99.7 percent of all firms in the United States. Think about
that. Only three-tenths, three-tenths, of 1 percent of all
businesses in the United States are what we call large
businesses.
So 28 million small businesses in America. We had a period
of time there when regulations were stifling that we actually
had a net decline in small businesses. When you think about
what we consider as large businesses today, what we consider
McDonald's Corporation, what we consider Walmart Corporation,
what we consider Amazon, what we consider Microsoft, what we
consider Apple as very large corporations, every single one of
them started out in garages as a one-person shop or a two-
person shop.
The point being of that is if our small businesses aren't
growing, how are we going to have big businesses in the future?
We have to have the incubators of the small business men and
women growing their small businesses so that one day some of
them will grow through the cracks and be the large business
that took the right risk at the right time, had the right
access to capital at the right time, found a niche, created
value, and grew a customer base and became a large company. Not
any one large company in this country or around the world
became a large company the next morning. It took a lot of
growth and finding out how to maneuver and get around.
So I wanted to just talk about this issue of regulations,
why it impacts small businesses so much more than large
corporations. Large corporations have banks and banks of
attorneys, outside consultants. I always jokingly say, as a
small business person, you are sort of chief cook and head
bottle washer. You are the janitor, you are the person who
works on your HR issues, your compliance issues. You do it all.
It becomes very burdensome because there is only so much time
in the day, and if you are taking away your time, your
leadership time to deal with those compliance issues, some that
may be extraneous to your business, then you are taking away
from the ability to look at a strategic plan for your business.
Recent data show small business owners spend approximately
$12,000 every year on compliance. That number balloons to over
$80,000 for the start-up companies. Almost half of all small
businesses spend over 40 hours per year complying with Federal
regulations. We expect small businesses to grow, but if we are
having this kind of regulatory burden, it is very difficult to
get started.
I was just reading an article this morning that was talking
about the maneuvering through the regulatory process, and we
are only talking about the Federal issue. We also have the
state and local issues to deal with, as well. We can only talk
about what we call Washington, D.C. Federal regulations, but
there are so many others that we need to recognize, and I think
at times people that are not in the business world tend to
forget the multiple levels of burdensome regulations that we
have, along with everything else you have to deal with.
So I really appreciate you all being here today to share
this information with us.
The Administration has made it a priority to lift some of
those hurdles that stand in the way of progress. When President
Trump became president, he mentioned cutting 2-to-1
regulations. For every regulation introduced, he wanted to take
two out. It is actually up to around 22 regulations that have
been cut.
Again, he is not saying cut them all because there are
needs for certain things, a regulation to protect our
environment, to protect how workers are treated. But again,
there is a swing that has gotten a little bit out of control.
Again, I want to just thank you all for being here today,
to recognize from the Chamber to the representative
organizations to energy, which accounts for so much of our
economy, to our banking industry, and look forward to listening
to what you all have to say today, what we can take back.
Again, I just don't want to leave this opening statement
without saying thanks so much to my Chairman for being here
today, I really appreciate it.
Chairman KIM. Thank you.
Mr. HERN. And we are going to go get some great food after
this, take you to Tulsa Food.
So, I want to talk about our first witness, who is Chad
Selman. Mr. Selman is the owner of Selman Farms, LLC in
Skiatook. Mr. Selman raises cattle and pecans, and is also a
member of the Oklahoma Farm Bureau and the Vice President of
Tulsa County Farm Bureau.
Mr. Selman, thank you for joining us this morning.
Our next witness is Mr. Jordan. Mr. Jordan is the President
and CEO of Farmers State Bank, with multiple locations in
Oklahoma. Mr. Jordan is currently the Secretary of the
Independent Community Bankers Association, or Bankers of
America rather, ICBA trade association, and a previous Chair of
the Community Bankers Association of Oklahoma.
Mr. Jordan, thank you for being here.
Our next witness is Howard Bud Ground. Bud, right? Mr.
Ground is the Director of Regulatory Affairs for the Petroleum
Alliance of Oklahoma. Mr. Ground is a leader in regulatory
issues, with years of experience in compliance and rulemaking
matters.
Mr. Ground, I appreciate you joining us today.
Our last witness is certainly not the least famous, Ms.
Elizabeth Osburn. Ms. Osburn is the Senior VP of Government
Affairs for the Tulsa Regional Chamber, with years of public
policy and legislative experience both in Washington and in
Oklahoma. Ms. Osburn leads all the Regional Chambers' advocacy
efforts.
Ms. Osburn, thank you for joining us today, a great friend
of business in Oklahoma.
So with that, Mr. Chairman.
Chairman KIM. Look, I just want to say that every time I
hear Congressman Hern talk about his experience that he brings
to the table, it just really makes me feel good about what we
are doing on the Small Business Committee, that we have people
who live and breathe this, that understand what it is like to
start something up from scratch. It is just such an incredible
professional experience that he brings to the table, but across
the board in the Small Business Committee. I think his remarks
really reminded me of exactly what you were saying. You were
saying across our country, 99.7 percent of businesses are small
businesses, and that is a voice that gets often just lost in
the mix of things. When we are talking about big-picture
issues, whether that is taxes or whether that is about
different industries or trade or other aspects of that, I know
from personal experience that so many people in Congress on
both sides of the aisle just immediately jump to thinking about
how that is going to impact big tech or big corporations, big
companies.
Our job is to try to make sure that we are making sure that
the voice of small businesses is in that mix, that it is being
considered, it is not some afterthought that people tack on
later on but it is something that is at the forefront of what
it is that we are trying to do.
So again, your voices are the ones that we are trying to
lift up, and I am grateful for you coming out today.
We didn't bring our fancy gizmos and gadgets in terms of
having lighting systems of red, yellow, green, things like
that. But just in general, we are trying to keep folks to about
5 minutes with your opening statements. I am not going to gavel
you to death or anything if you go over. We are going to try to
keep this informal and we just want to make sure that you have
the time that you need to tell us what it is that you want us
to know and take back to Washington.
So on that front, why don't we just jump right in? Mr.
Selman, over to you. Why don't you kick us off with your
remarks?
Maybe you can pull the mic over. I can hear you fine, but I
just want to make sure.
STATEMENTS OF CHAD SELMAN, OWNER, SELMAN FARMS, LLC, SKIATOOK,
OK; CHRIS JORDAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, THE
FARMERS STATE BANK, STIGLER, OK; HOWARD L. (BUD) GROUND,
DIRECTOR OF REGULATORY AFFAIRS, THE PETROLEUM ALLIANCE OF
OKLAHOMA, OKLAHOMA CITY, OK; ELIZABETH OSBURN, SENIOR VICE
PRESIDENT OF GOVERNMENT AFFAIRS, TULSA REGIONAL CHAMBER, TULSA,
OK
STATEMENT OF CHAD SELMAN
Mr. SELMAN. Hello. Thank you for the opportunity to provide
comments on this important topic. I am Chad Selman from
Skiatook, owner of Selman Farms, a pecan growing operation.
Oklahoma is the first in the nation in native production and
fifth in overall production, harvesting around 16 million
pounds annually. I lease around 1,800 pecan acres. We harvest
more than 25,000 trees. Our groves consist of 90 percent native
pecans and 10 percent improved varieties. In addition to my
pecan operation, I have a 120-head cow-calf herd.
I serve as Vice President of the Tulsa County Farm Bureau
and President of the Oklahoma Pecan Growers Association. I
serve on the Board of the U.S. Pecan Growers Council, the
American Pecan Federation Board, and the American Pecan Council
in the alternate broker/buyer position.
Labor makes up the largest percentage of my operating
expenses. I use the H-2A Temporary Agricultural Worker program.
These workers are not immigrants but foreign nationals. My
workers are from Mexico, and most return every year.
Pecan groves require a lot of hands-on caretaking and
physical labor. I contract for two H-2A workers for 10 months
of the year for grove work. During the spring and summer, the
workers trim branches from trees, some of which is done from
the ground and some with a tree trimmer with a hydraulic pole
saw. We manage the ground cover between the trees through
mowing, spraying of the weeds, and baling hay. The hay feeds my
cow-calf herd in the winter. We spray the trees to keep them
free from insects and plant pests. All the fallen branches must
be physically picked up from the grove floor and disposed of,
which is back-breaking work. We must have a clean grove floor
to harvest the pecans. I could not operate my farm without
these workers, as few Americans want to do this difficult work.
During harvest I employ 11 additional H-2A workers,
bringing the total to 13. We have a tree shaker machine that
literally shakes each individual tree. The pecans that fall to
the ground are swept up by a pecan harvester, then transferred
to a trailer for transport.
I have a cold storage facility that holds 2 million pounds
of pecans. In addition to storing my own pecans, I lease space
to commercial pecan shellers. The cold storage facility
requires year-round workers to weigh and bag pecans, drive the
forklift, and load and unload trucks.
Because the H-2A program is so complicated, I would never
try to arrange for workers myself. I use a third-party
consultant who handles the paperwork, including the H-2A
advertising. Workers arriving on different days require
separate contracts. Under the program, I am required to
advertise for workers in three different states, three
different times. This is to provide Americans with the first
opportunity to work for me. If I don't succeed in hiring
Americans, it proves I need the H-2A labor. During 13 years of
advertising in the U.S., we have had only six people apply for
a job. We hired three, and the other three never showed up.
I pay another person to make sure the workers make their
appointments at the consulate and have their documents in
order.
The minimum amount I pay the workers is $12.23 an hour, the
adverse effective wage in Oklahoma. This is required so I am
not displacing Americans who would otherwise work for me. By
comparison, the minimum wage in Oklahoma is $7.25 an hour. What
I pay for the adverse effective wage is more than what my
neighbors pay for similar labor.
I pay the H-2A workers' transportation costs from their
country to my location, a per diem that covers their meals
during travel and consulate fees, before they even begin their
work for me. This year, it cost us more than $500 per worker to
get them to my farm. While they work for me, I provide housing
and transportation to and from the workplace, as well as to the
grocery store once a week. I also pay for their transportation
back to their country.
One of the most challenging aspects of my business is
having the right number of workers when I need them. We are
required to pay 75 percent of the contract hours from the time
they arrive. Because of the weather last year we had a short
crop, and harvest lasted only two weeks. I filed to stop the
contract early due to unforeseen events. That process takes
three weeks to be approved. Knowing that I would receive
approval with the appropriate documentation, I sent the workers
home early so they wouldn't have to stay here with nothing to
do.
There is great value to the foreign nationals who work for
me. I mentioned many of the same workers return to work for me
every year. I couldn't operate my farm without them, as
Americans don't want to do this type of work. I need skilled
workers, not inexperienced ones that I have to train who could
tear up expensive equipment and cost me time and money.
Last week the Department of Labor, Employment and Training
proposed to help America's farmers with rules to modernize and
improve the H-2A program. I am encouraged by this. We need
revision of the H-2A program to remove those things that don't
make sense and that are overly burdensome. The process could be
simpler so it is better for me as the producer and better for
them as the workers. Because things like weather are beyond our
control, production agriculture needs to have H-2A flexibility.
I have some thoughts on how to make the program better.
This could include approving workers' visas for five years at a
time and allowing workers to come and go during the year when
the labor is needed, rather than limiting them to a continuous
stay per each contract.
Again, thank you for the opportunity to share my concerns.
I will be happy to answer your questions.
Chairman KIM. Thank you so much for your testimony, I
appreciate it.
Mr. Jordan, we are going to turn it over to you. You are
now recognized for 5 minutes.
STATEMENT OF CHRIS JORDAN
Mr. JORDAN. Chairman Kim, Ranking Member Hern, and members
of the Subcommittee, my name is Christopher Jordan, and I am
President and CEO of the Farmers State Bank, a $110 million
bank headquartered in Stigler, Oklahoma.
I testify today on behalf of the community banks
represented by the Independent Community Bankers of America.
Thank you for convening today's hearing.
Farmers State Bank was founded in 1908 and has been in my
family since 1969. I am a third-generation community banker.
Today, Farmers State Bank serves four rural communities in
southeastern Oklahoma. Our business model is typical of a rural
community bank, with a mix of small business, agricultural, and
residential mortgage lending.
Like other community banks, we have thrived across
generations by maintaining a simple capital structure,
conservative lending practices, and being dedicated to the
success of our communities.
Community banks play a critical role in providing small
business credit, and yet the vital partnership between
community banks and small business is at risk today because of
the exponential growth of regulation. In a few short years, the
nature of community banking has fundamentally changed from
lending to compliance. I believe the new regulatory burden has
contributed significantly to the loss of over 2,300 community
banks since 2010. With fewer banks, small businesses have less
access to credit.
The local bank may be replaced by the market bank or a non-
bank financial technology company that is less willing to make
a loan in those areas. The good news is that we have readily
available solutions for this pending crisis. ICBA's Community
Focus 2020, or CF 2020, is a regulatory relief agenda that will
allow Main Street small businesses to prosper. A copy of that
CF 2020 is attached to my written statement.
While the CF 2020 includes dozens of recommendations
covering the major threats to community banking, I want to
focus my comments on four areas that would have the greatest
impact.
First is the Bank Secrecy Anti-Money Laundering compliance
that increasingly burdens community banks with identifying,
investigating, policing, and reporting potential criminal
activity. ICBA supports reforms that will ease compliance while
providing more useful data to law enforcement. The Currency
Transaction Report Threshold was set in 1970 at $10,000 and has
not been adjusted for inflation. A threshold of $30,000 would
produce more targeted, useful information for law enforcement.
The Suspicious Activity Report, or SAR, is a way for banks
to provide leads to law enforcement. However, bankers have a
tendency to over-file SARs to protect themselves from examiner
criticism, which dilutes their value to law enforcement. The
SAR process should be reformed to a risk-based system, and the
SAR threshold, which has not changed since 1992, should be
raised to $10,000.
Another aspect of BSA AML compliance is bank collection of
beneficial ownership information on legal entity customers,
including small businesses. This information collection is
onerous and inefficient for both the customer and the bank
employee. For this reason, we support the Corporate
Transparency Act, H.R. 2513, sponsored by Representative
Carolyn Maloney, which would require corporations to disclose
their beneficial owners directly to the Financial Crimes
Enforcement Network, FinCEN.
H.R. 2513 passed the House Financial Services Committee on
June 11th with a strong bipartisan vote, and I would encourage
you to support that bill when it comes to the House floor.
Second, ICBA believes a community bank should be excluded
from the CFPB's forthcoming Small Business Data Collection
Rule. This rule, which will require information reporting on
every small business loan application, will fall
disproportionately on community banks that lack the scale and
compliance resources.
Third, regulatory barriers to capital access for community
banks should be reformed. ICBA supports a higher exemption
level for Sarbanes-Oxley 404(b) for community banks that are
publicly traded, and reforms to SEC Regulation D, which governs
private sales of unregistered securities. These reforms would
help community banks raise capital to deploy in their
communities.
Finally, a safe harbor is needed for banks that serve
cannabis businesses in states such as Oklahoma that have
legalized cannabis for medical or recreational use. Legal and
regulatory uncertainty has curtailed access to the traditional
banking system for cannabis businesses and forced them to
operate mostly in cash, which has created a public safety risk.
Farmers State Bank does not have any cannabis businesses
and at this point doesn't plan to offer that, but the safe
harbor would extend to banks that serve the many ancillary
businesses, such as landlords, accountants, utility providers
and others that may be paid in funds that ultimately were
derived from the cannabis sales. These ancillary businesses are
difficult to identify and create a legal and regulatory trap
for unsuspecting banks.
The Safe Banking Act, H.R. 1595, passed the House Financial
Services Committee on March 28th on a strong bipartisan vote,
and I would also encourage you to support that bill when it
comes up.
Thank you again for the opportunity to testify, and I look
forward to your questions.
Chairman KIM. Thank you so much, Mr. Jordan.
Mr. Ground, we are going to turn it over to you. You are
recognized for 5 minutes.
STATEMENT OF HOWARD L. (BUD) GROUND
Mr. GROUND. Okay, thank you. I want to welcome you to Tulsa
and welcome you to Oklahoma State University. I am the
Regulatory Director for the Petroleum Alliance of Oklahoma, and
the Petroleum Alliance is a non-profit association with about
1,300 member companies that include from very large--Phillips
66--down to the very small mom and pop, but it includes all
aspects of oil and gas, from production, midstream, the
suppliers, the refineries, the whole spectrum of businesses in
the oil and gas industry in Oklahoma, 1,300 companies, with the
average employee size of 12. So we help a lot of small business
in Oklahoma to comply with regulations. That is my position, is
to help them to comply.
So today, what I want to talk to you about is this
tremendous burden of small business just to try to comply, just
to keep up with what they need to comply with. As, Chairman
Kim, you said, they are drowning in paperwork. There are many
instances, and I will go through a few, but just trying to keep
up with the amount of regulations and the constant regulatory
change leads to uncertainty in these businesses. It leads to
uncertainty in their planning, uncertainty in how they go to
the capital markets for money when they want to expand.
I also want to discuss another part of this, which is
actually just agency policies that you may not hear a lot
about. It is not a regulation. It doesn't go through the
regulatory process, but it is policies within the different
agencies in the Federal Government that are changed at their
will. I will put it that way.
So to start with, I want to bring up what is called the
unified agenda of regulatory and deregulatory actions. This is
the Office of Information and Regulatory Affairs within the
Federal Government. I think this is a fantastic organization
because they actually track the regulations and some policy
changes within some 71 agencies within the Federal Government.
I don't deal with all 71, but I brought some examples of what
these agencies are that they deal with.
So 71 Federal agencies, from Cabinet departments to
executive agencies to independent regulatory agencies that
include things like the farm credit system, commodity futures.
There are others that deal with this. But some that I deal with
regularly, the EPA. This report comes out periodically. I think
it is quarterly, but this is from the spring of 2019. It may
only be three times a year. On this it shows long-term actions
from the EPA. There are 20 of them long term--29 of them; I am
sorry. And these include things like underground injection
control, ozone and particulate matter, secondary national
ambient air quality, ecological effects of nitrogen oxide.
These things have been going on, as I said, long term, for
years. We have been tracking some of these issues for years. I
have been doing this type of work for over 30, and some of
these are never-ending.
This is the EPA list on their agency rule list for just the
spring. These are more current issues that are going on right
now. There are 151 on this list. I will go through it, and I am
tracking things that you will recognize immediately, like
Waters of the U.S. that have been going on for years, going
back and forth and doing changes and how they have changed it
from one administration to the next; accident prevention
programs; again, ozone issues.
The Department of Transportation, 214 current regulatory
actions, some of them in the proposed rule stage, some of them
in the final rule stage, and some of them in the proposed rule
stage.
And then the last one--no, I am sorry. The Department of
Interior, 236 current regulatory actions going on, pages, and I
am really glad that this Office of Information and Regulatory
Affairs does this because it helps me, it helps small business.
The last one, Department of Labor, 62 different current
regulatory actions going on that are required to be tracked not
just by large industries but by the very smallest, and that is
just a few of that 71 total.
So there are overall regulatory burdens that even the
smallest company has to comply with, has to track, comply, and
implement that compliance. Organizations like ours and like the
Chamber, we help these small companies by tracking those and
doing it for them, because they do not always have the
personnel. If it is a one- or two- or 10- or 20-person shop,
they don't have the personnel to constantly track these
regulations.
I will give you a few real-world examples of some of these
that actually impact small companies on the same level as your
largest oil and gas companies. In the Department of Interior,
through the Bureau of Land Management, the BLM, there is a
regulation called the commingling rule, and that is when you
commingle oil that comes from different leases, that comes from
a private lease to a Federal lease to potentially even, in
Oklahoma, a Native American or an Indian lease, it goes through
the BIA, the BLM, all this that has to be permitted prior to
going out and drilling, and you have to describe how are you
going to commingle and account for that oil as it comes out and
who gets payment.
Now, that is wonderful they do that, but what we find is
that every BLM office interprets these regulations differently.
So the paperwork is different, the burdens that they have to go
through to actually approve this. It can take months to get
these permits. So then you are, as a small company, trying to
plan and schedule a time when you are going to have, say, a
drilling rig on a site, and it could take months to get these
approvals through from the BLM.
Another one is endangered species, which everyone hears
about endangered species all the time. A couple of them in
Oklahoma that go on in particular is the American burying
beetle and the lesser prairie chicken. Again, these type of
issues--and it is not like we shouldn't protect these, but when
you have a regulatory scheme that requires that you go out and
do tree site monitoring at certain times of the year, you
actually cut your window down of when you can actually do work
in the field, whether it is a drilling site or a pipeline. It
can take months.
Chairman KIM. Mr. Ground, in order that we can have some
good time for questions, would you mind starting to wrap up a
little bit?
Mr. GROUND. Yes, I will.
The last real time the EPA changed the regulations that
were--it is called OOOOa, the permitting of these facilities,
and this was one that changed during the past administration
and then turned around and changed again for the current
administration. So it gets uncertain for these companies.
Now, on the other side that doesn't involve regulatory
change, these are policies, and I will give you one of EPA that
comes through, and I have other examples in the written. It is
called ``Once In, Always In.'' What that means is a facility
that has enough emissions to be considered a major source, if
they change that source later and add control equipment where
they are not emitting at a level that should be a mega-source,
that EPA will not allow them to lower that to a lesser burden
on paperwork. The current administration is going through
changes, but it has taken two years just to go through that
regulatory change.
There are others in there, and I will just say in
conclusion I just want you to keep in mind that there are other
things besides just the regulatory process that small business
has to keep track of, and that is the policies and the hundreds
and hundreds of potential regulations. And on top of that, like
Congressman Hern said, that goes to the state level and the
local level that we are watching as well.
Chairman KIM. I appreciate you walking us through that.
That is very helpful.
Ms. Osburn, over to you.
STATEMENT OF ELIZABETH OSBURN
Ms. OSBURN. Thank you very much. Chairman Kim, Ranking
Member Hern, thank you very much for this opportunity to speak
with you all today.
My name is Elizabeth Osburn. I am the Senior Vice President
of Government Affairs at the Tulsa Chamber. We are a membership
organization that focuses on helping companies of all sizes
grow their businesses, find the workforce that they need, and
essentially improve economic prosperity in northeastern
Oklahoma.
So we have more than 2,100 members from all across the
region, not just exclusive to the Tulsa metro area, and small
businesses are an absolutely integral part of the Tulsa
Chamber. They actually make up over 85 percent of our
membership. So we have about 1,800 businesses that qualify as
small employers. I will get into this a little bit later in my
remarks, but we qualify that as 50 employees or less.
So these businesses range from small manufacturers, small
proprietary consultants, and entrepreneurs even. So we have
programming. Our small business connection engages with these
members annually. We have a small business summit in October. I
describe all of this to let you know about some of the
engagement that we are doing with small businesses.
In my role specifically regarding advocacy, we run a
process by which we invite all of these businesses into a room
not unlike this to sit around and debate and discuss what their
priorities will be policy-wise for the coming year. And so we
gain a tremendous amount of insight into these diverse
businesses, and I would like to share some of those with you
today.
My remarks may be a little bit more general, but I am happy
to answer any questions about the specifics.
I grouped them into a few categories that we tend to hear
most from. The first is reporting and compliance burdens under
the Affordable Care Act; consistency or clarification needed
across all Federal agencies; and then examples of negative
unintended consequences when a regulation is actually put into
practice.
So related to reporting compliance burdens under the ACA,
we continue to hear from small businesses that they have
difficulty navigating some of the requirements of the Act. Our
members have supported efforts to reduce small and mid-sized
providers' costs of providing care such as steps to reform the
health insurance tax, easing reporting requirements, and
revisiting the definition of a full-time employee, which
especially for some of our smaller businesses can be incredibly
burdensome.
Related to health care, many of our entrepreneurs, start-
ups, and single-employee businesses are hindered by the rule
prohibiting their participation in association health plan
insurance plans. What this essentially means is that in the
past couple of years there was a ruling allowing association
health plans offered through a Chamber of Commerce or another
membership association to allow their members to purchase and
provide health care through the association. But if you are a
single-employee business, which a lot of our entrepreneurs
are--I mean, you think about the single-employee business
entrepreneur of today could be the next large business of
tomorrow. You have to start somewhere. So allowing these single
employees to participate in association health plans would be
one regulatory burden and compliance burden that they can tick
off their list.
And the next general category is consistency and
clarification needs. So a common concern from all of our small
businesses is the need for consistency across Federal agencies.
Our members have specifically requested language across Federal
agencies to be updated and clarified so that when working with
different agencies on the different compliance burdens, the
language is similar. There is still some ambiguity about what
actually defines a small business depending upon which
regulation you are looking at.
So specifically what some of our businesses have mentioned
is classification of a worker as an independent contractor
versus an employee, and that is 1099 versus W-2 forms. This
would allow the distinction to be applied equitably across
industries and allow small businesses to more easily classify
their workforce.
Our businesses also report, to my colleague Mr. Ground's
point, that the constant back and forth of regulations or the
ambiguity about the status of some of the rulemaking has hurt
their hiring capacity because they cannot anticipate what the
climate is going to be like. So specifically, Department of
Labor and National Labor Relations Board targeting overtime
pay, independent contractors, and joint employment status,
which is governed under the Fair Labor Standards Act when a
single individual might be employed by--considered jointly by
one or more employers. We increasingly hear that these rulings
disproportionately harm especially the hospitality industry and
the non-profit sector and increase legal liability.
Lastly, negative unintended consequences. We hear a lot of
stories that might be a little too shocking to believe and kind
of get your head around, so I wanted to share one today.
Actually, Mr. Chairman, if you are going to stay in town for a
little bit and eat some lunch, you might want to take note of
this story I am going to share with you, Andolini's Pizzeria.
It is a local pizza place. It is absolutely delicious, and
actually the owner is from New Jersey, but he claims it is not
New Jersey style pizza. It is a blend of New Jersey and
Oklahoma.
Chairman KIM. [Inaudible.]
[Laughter.]
Ms. OSBURN. It means it is good, that is what it means.
Owner and operator Mike Bausch has expanded Andolini's over
the past several years, opening new locations, and he recently
came up with an idea to try to sell a take-n-bake pizza to
another regional grocery store chain, Reasor's Grocery Store.
In attempting this, Andolini's was forced to wade through a
myriad of complex, even conflicting Federal regulations from
the U.S. Department of Agriculture and the U.S. Food and Drug
Administration, not to mention the State of Oklahoma and local
regulations, to move their product into grocery stores, even on
a limited basis.
So Andolini's was not using any raw ingredients with their
take-n-bake pizza. Nevertheless, at the point when a piece of
fully cooked, ready-to-eat, USDA-certified pepperoni comes in
contact with the pizza, a process statement must be gained on
the origin of the flour, the cheese, the water, meaning that
Andolini's must certify USDA or give USDA documentation
certifying that they have clean water from the City of Tulsa,
and tick on down the line.
Well, not only that, but at the point when the piece of
pepperoni is supplied, they have to have a trained inspector be
present while they are making their pizza. And if they are
making it during non-business hours, so when Andolini's isn't
serving customers one on one, if they wanted to make it on a
Saturday or Sunday, they have to pay an inspector $30 an hour
to come in and watch them make the pizza.
Now, if they are just making cheese pizza, this doesn't
apply. If they were putting fish on their pizza, this doesn't
apply. But the way that the regulations have shaken out, when
pepperoni is put on the pizza, non-working hours, $30 an hour
to come in and source the production. So the cost of this
requirement has essentially allowed Andolini's not to expand.
It is just not profitable to be able to carry on with this new
business venture.
In closing, these are some general summaries of concern;
and, as I mentioned, I am happy to answer any more specific
questions.
Chairman KIM. Well, I appreciate it. It sounds like all of
our losses that they didn't go ahead with that type of business
model because it means I won't be able to take any home, but I
will see if I can try that.
I want to just jump right in, and like I said, we can kind
of keep it pretty fluid in terms of the conversation. I just
want to make sure we get it all on the table.
I will ask just a few questions and then turn it over to
Congressman Hern. Then we can go back and forth if needed, if
we have more.
I just wanted to start with you, Ms. Osburn. Off of what
you were just talking about, I am just trying to get a better
sense of what industries in particular seem to be hit
particularly hard, and I think each of the other three can
explain it from their own perspective of their industries, and
that was helpful. I know you mentioned health care, you
mentioned hospitality and non-profits, at least that is what I
gathered from your testimony. Are there other particular
industries that you see? I am interested in your perspective
because you see across a number of different industries and
sectors. What are some of the other ones that we should be
keeping an eye out or we should try to reach out to after this
hearing to be able to get their perspectives as well?
Ms. OSBURN. Absolutely. We have a lot of small-scale
manufacturers. I am looking at your nameplates, so a
manufacturer who might produce something like a nameplate for
outside of someone's office. We are not talking about very
large-scale production but that spends so much time trying to
comply with OSHA, which is I believe the Office of Safety and
Health Administration--I am probably butchering the acronym
there--and EEOC, Equal Employment Opportunity Council,
regulations that we hear a lot, that that takes up an
increasing amount of paperwork and burden time.
Answering your question more specifically, small-scale
manufacturers are another industry that we hear a lot about the
reporting burden.
Chairman KIM. Thank you.
Mr. Selman, I wanted to ask you, you and Mr. Jordan, just
give me a sense of, with these extra burdens that are being
placed upon you, what does that position you to have to do to
be able to make sure you are in compliance? Mr. Selman, you
were saying that some of the work you had to do you are
contracting out to someone else to be able to do. So I would
just like to get a better sense of what does this make you have
to do in terms of hiring an outside firm, or just get a better
sense of the resources and the time that you have to put into
this.
Mr. SELMAN. I hire an outside person to deal with
contracts, and that person costs, with the H-2A advertising, it
costs about $3,000 per contract, and I actually do two
contracts year after year. We have to deal with over three
different agencies, and while we are doing that I need to be
out in the field harvesting our crops or getting ready for it,
which is part of it. That is part of running the business. But
the amount of paperwork that it takes is unreal.
Chairman KIM. And a question that I will ask more broadly
across the board--and, Mr. Jordan, I wanted to turn to you
after this as well on this question. But we were talking about
the inconsistencies, and Ms. Osburn kind of hit it home in
terms of between different Federal agencies, inconsistencies in
wording and other regulations. With the amount of time you have
to invest in compliance and other aspects, how does that stack
up with the Federal compared to the state level and local
level? Are there other types of regulations that you need to
stay within right here at the local level within Oklahoma, and
are there inconsistencies between that and the Federal level
that make it all the more complicated?
Mr. SELMAN. I deal with mostly Federal level.
Chairman KIM. Okay.
Mr. SELMAN. There is some on the state, and that mainly has
to do with some housing and a little bit with the Department of
Labor. But 90 percent of it is Federal.
Chairman KIM. Mr. Jordan, I just wanted to get your
perspective on this in terms of the compliance and the kind of
resources that are needed to be able to do that, just your
thoughts on that as well as the question I just asked Mr.
Selman about how much of your bandwidth when it comes to
compliance and this type of work is geared towards Federal
compared to the state level?
Mr. JORDAN. Just to kind of give you an idea on compliance
costs, it is probably well over $100,000 a year for us by the
time you hire a compliance officer and you have outside
auditors that come in to help you make sure that you are in
compliance. But when the compliance Federal regulators get
there, that is an additional cost there.
And it is just the cumulative effect of the regulations. No
one regulation typically is so onerous that you can't get
around it, but it has just been that cumulative effect over the
years.
You asked about contradictions. There is really not much
between the Federal and the state, other than that cannabis.
That is a big one where you sort of have some things at odds.
But what we find is the difference between the compliance exam
and a safety and soundness exam, sometimes those two exams are
a little bit at odds because in the regulatory environment,
those people don't communicate real well. So that is one of
those things where they kind of put us at odds.
And that compliance cost to us is obviously passed on to
those small business customers that we do business with. We
can't continue to absorb those compliance costs without
offsetting that at some point. So that does make it more
expensive for credit for those small businesses that Ms. Osburn
represents and the service charges and things like that that go
on. That is really where it floods out and affects everybody,
not just mine but all those businesses that we are associated
with.
Chairman KIM. I appreciate that.
I will probably have a few more questions along that
thread, but I do want to hand it over to Congressman Hern to
throw out some other questions and ideas.
Mr. HERN. Thank you.
Mr. Jordan, I would like to start where you just left off.
One of the things we hear a lot--and Congressman Kim and I sit
on the full committee as well, and we hear the witnesses talk
about--one of the big conversations we have been having is
access to capital, small businesses getting loans. There is a
very significant critique of banks across America not loaning
to small businesses anymore--key word ``anymore.'' You just
alluded to why it is so difficult today to do it.
Could you expound on why it is--first of all, let me ask
you this question. This will probably be a simple yes or no.
You are not averse to loaning to small business people with
ideas?
Mr. JORDAN. No.
Mr. HERN. Just expound on that piece. I mean, people come
to you with a business plan, they come to you with hopefully
some collateral and some credit history, and if they don't,
then SBA is always kind of the lender of last resort as an
opportunity to start that business up. But could you expound on
what has happened in the regulatory process over, say--you
alluded since 2009. Could you talk about what burdens have
grown, have changed the behavior or the relationship between
community banks and small business men and women in these
communities?
Mr. JORDAN. The really short answer is you have a regulator
looking over your shoulder, questioning every decision that you
make. A small town where we are from, we know everybody in
town. We know what is going on, we know what is happening. But
the question that typically bankers ask today when they are
faced with a loan application there, one of the first things
they think of is how are the regulators going to look at that
if I approve that loan?
So that is the short answer right there.
Mr. HERN. So the days of a person walking in and saying
they need $100 to start a lawn-mowing business on a passbook
account are long gone; right?
Mr. JORDAN. Well, we do our best to try to still
accommodate that. We have to get fairly creative in working
around that. But that is one of the things, the rules change.
As long as we know what the rules are, a lot of times it is
easy, you figure out a way to get those things done. But
sometimes the rules are a little bit ambiguous.
Mr. HERN. You mentioned in your testimony you have gone
from being a banking business to a compliance business. How has
your compliance officer staff level changed in the last 10
years?
Mr. JORDAN. Well, 10 years ago we didn't have a person that
was called a compliance officer. The compliance issue fell
across several people, which it still does, but you still have
to have a person that is in charge of the compliance function.
What the state alluded to is if you were to come and sit in on
our strategic planning meetings, the focus has changed from
what do we need to do to be making more loans, getting more
deposits, to how are we going to deal with this compliance
issue, how are we going to deal with that compliance issue. So
that dynamic has just completely shifted, and it is aggravating
that your strategic planning has to be centered around
compliance.
Mr. HERN. Which is what you alluded to, that you either
know the person who is asking for a loan in your community, or
you know the parents of the person who is asking, or you know
somebody that knows them very closely, whether that person is
asking for the right reasons or can actually fulfill what they
are saying they are going to do.
Mr. JORDAN. Yes. Like Mr. Selman here, if we were in his
community, we would probably know what is going on down there.
I drive by his trees every day, so I know what is happening,
what he is doing out there. You just don't get that from what
is happening on a piece of paper. So we feel like that there is
just that disconnect and it has just not allowed us to really
get that personal relationship that is so crucial to that small
business success.
Mr. HERN. I would like to ask you one other question. Could
you expound a little bit on the marijuana banking issue? You
shared with the Chairman that that is one of the big
discrepancies between Federal law, state law. The people of
Oklahoma have spoken recently and wanted medicinal marijuana,
yet basically have a cash business right now. Could you talk
about that?
Mr. JORDAN. Yes. Really what you are looking for from the
banking side is just some assurance that you are not going to
get tagged for something that you didn't intend to do. With the
laws in Oklahoma allowing medical marijuana at this point--so
there are dispensaries opening up on every corner--those people
have to have somewhere to bank, and the local bank may decide
that they don't want to do that at this point because it is at
odds with the Federal regulations still at this point.
But the problem for us is it touches all these other
things. I mean, the employee that works for that who is not the
owner, their income is going to be derived from the cannabis
sales. Well, they need to do business with your bank. Well, is
that money laundering? I mean, that raises the question, those
SAR reports that we have to fill out. So an overly protective
compliance officer is going to say, well, if we know that
employee works at that dispensary, we are going to fill out a
SAR every time they come in and make a small deposit.
So we just want to know that we are not going to get tagged
for that inadvertent cannabis-related cash that might be coming
through our institution. Does that answer----
Mr. HERN. It does. Thank you.
Mr. Ground, obviously this is about Congress, what we can
do to change the regulatory environment for each of the
particular industries that we are trying to reference today.
What changes, if you were able to communicate this to us right
now, what changes would you like to see Congress make to
improve the regulatory landscape in the energy industry? Any
particular one that you think is preventing us--under President
Obama's administration, you started working on freeing up the
ability to be energy dominant. We sort of accelerated that now.
What particular regulation today is driving you most crazy in
your role?
Mr. GROUND. Well, there are several.
Mr. HERN. This is what I have learned in Congress in my
short months. We don't deal in multiple things very well. It is
like one at a time, so it takes forever to get anything done.
Mr. GROUND. So I will start with EPA.
Mr. HERN. Okay.
Mr. GROUND. There are changes within EPA that have changed
from one administration to the next, and that has happened with
every administration. Just some consistency in that. And it is
also, like Ms. Osburn said, you have competing Federal agencies
that have tried to regulate the same thing, and they conflict,
or one is more burdensome than the other. And I would say if
you could let EPA do what EPA does, and let BLM do what BLM
does, and not try to cross over between the two, it would be
extremely helpful. That is one issue that has come up within
the last few years, is BLM trying to take on EPA-type
regulations.
Mr. HERN. Okay. That is really good to know.
Mr. Selman, you mentioned in your testimony that the H-2A
program is very complicated, and therefore you out-source the
management of the entire process. If you had to manage the
entire process, how would that impact the way you ran your
farm?
Mr. SELMAN. I probably wouldn't have employees coming to my
house, unfortunately. It is so complicated that it would be
delayed for harvest, and I would end up losing money, and that
would probably be the number-one thing that would be. It would
just be done incorrectly, and every time it is done
incorrectly, anything that is done through the government, it
takes a while, so you want to make sure you have it done right
the first time, and on time.
Mr. HERN. You made a statement a minute ago--and I don't
have it written down. I do have it written down, but I have
heard it a lot in my lifetime, and it is the statement that the
reason we bring in immigrant workers, either seasonal or they
have work visas, is because Americans don't want to do the
work.
Mr. SELMAN. That is correct.
Mr. HERN. Why do you think that is?
Mr. SELMAN. I think we are just--the United States is
evolving to a more electronic labor force. Everything is
becoming more electronic on computers and everything else, and
I think more people are wanting to do that rather than get out
in the field and get their hands dirty and be in the cold and
the heat. It is easier work than that.
Mr. HERN. So the days of hauling hay are over, right?
Mr. SELMAN. The days of hauling hay are just about over.
That is why they build equipment to stack them all by
themselves.
Mr. HERN. I appreciate that. In your testimony you state
that the Department of Labor is proposing a modernization of
the H-2A program. This is a good thing. However, the challenge
of the H-2A program existed for a long time. Is what you are
describing, is that a brand new problem that we are having, and
why does it take so long to address the needs of the farmers? I
mean, the crops come off at the same time roughly every year,
so it shouldn't be like--I mean, the agricultural people--the
Department of Labor that is approving this, or the Department
of State that is approving these, they know when the harvest
season is for the particular industry that needs these workers.
Why is this so difficult, do you think?
Mr. SELMAN. Well, it is all done on an individual basis, if
that is answering your question correctly. Each individual farm
might need them--like watermelons we harvest at different times
than pecans. Pecans are harvested during the winter, and
watermelons are harvested during the summer. So that is one of
the reasons why you can't just put a blanket statement on it,
okay, we are going to get workers in the U.S. from July to
November. It just wouldn't work. So each individual farm is
different and they have different needs.
During the summer we are baling hay and brush hogging. We
don't do that during the winter. So our needs during the
summer, we have different needs during the winter. And these
months during, say, March and April, I don't have as much need
for labor at all.
Mr. HERN. So I think this would go to Ms. Osburn and to
you, since you deal across multiple businesses and you deal
with a particular business, plus you are a member of the Farm
Bureau, so you hear this from your colleagues. Probably the
most important issue that matters to people in the 1st District
of Oklahoma, the State of Oklahoma, and I would say even in
this country, is the issue of immigration. While we don't want
to talk about that a lot of times, when you talk to business
communities they are all for immigration reforms, except the
reforms have got to be able to produce workers that we still
have.
So I would love to get your thoughts if you think that is
factual, first of all, and not just some talk behind the doors.
Is it actually factual that people are very concerned that with
immigration the way it is going right now, that there is going
to be a real shortage of workers, more so than there is right
now, and what am I going to do with my crops? From your
standpoint and what you are hearing from small businesses,
landscaping businesses, roofing businesses and places like
that, just to get your general thoughts.
I will go to Ms. Osburn first and let you think about that
one.
Ms. OSBURN. Certainly I would echo what my colleague has
said, that we hear a lot about the H-2B program, which is for
seasonal workers such as a Christmas tree farm or something
that is not necessarily agricultural but is seasonal hands-on
work, and then also on the H-1B program with more highly
trained engineers or someone like that, that is an absolutely
critical workforce shortage that a lot of our small businesses
have, whether it is in energy, a smaller energy company that
needs some sort of very highly trained engineer or another
company that utilizes an H-1B.
So I would say, by and large, that the inability to predict
what is going to happen with immigration reform year after year
is certainly hurting our businesses in knowing where their
trained workforce might come from and their ability to plan
ahead for the coming year, and their ability to grow.
Mr. HERN. One could even argue that the situation is not
going to fix itself, and the longer we kick this down the road,
the less people are going to want to do the job, Americans, as
you described earlier, that we have got to get this fixed, we
have to come up with a solution that resolves this issue, do we
have people who can actually perform the work that is needed to
be done in the United States to keep our economy growing,
accelerating our economy, at the same time protecting the needs
of those folks that we have here.
Did you want to add anything to that conversation?
Mr. SELMAN. Yes. She is talking about the H-2B. Pretty much
all business owners that I have ever talked to that have any
type of intense labor, hands-on labor workforce is very much
for any type of immigration reform that gets employees to their
doorstep. There is an absolute need for this foreign labor to
come in and do it, especially on a seasonal basis. My guys, I
have one guy that has been working for me for 13 years. I can
walk away from the operation and he can take care of all of it.
He is a seasonal employee. To get seasonal employees here in
the U.S., you are more than likely not going to see them again
the next year. They are going to have another job, especially
if they are a good employee. They are going to go out and find
a full-time job somewhere and be able to provide for his family
very well, if it is seasonal, it is really temporary.
So that is one of the main points, is to be able to have a
good workforce when you need it, a reliable workforce.
Mr. HERN. Thank you.
I am going to pass it back to the Chairman, and then I am
going to come back with one or two in closing. That would be
great.
Chairman KIM. Great. I wanted to kind of continue on the
thread that I was pushing on earlier.
Mr. Ground, I wanted to just get your perspective. During
your testimony, you were talking about how part of your job and
your organization's job is to help small businesses keep up to
speed with the myriad of rules and regulations that you rolled
through, and that was very helpful for you to just kind of lay
out all the different numbers from these different departments
and agencies.
I wanted to dig into that a little bit more. If you can
tell me where the intersection is between some of the work that
you are doing and what your organization provides in terms of
helping small businesses navigate that, how that threads with
what I had heard from Mr. Selman and Mr. Jordan about in-house
compliance or contracted compliance. I am just trying to get a
better understanding myself of the constellation of what has to
occur for small businesses to be able to stay up to speed.
Mr. GROUND. Okay. For our typical small business, we being
the Petroleum Alliance, we help them by tracking the
regulations, the changes, and then communicating that with
them. So from the start of it through the process, we make
comments. I do not go to D.C. I do not lobby there. That is not
part of my job. Everything is done from here in Oklahoma or
with staff. But we do go through that process and try to make
sure that the different agencies at least have our
understanding or our comments, and then we also work very much,
even more so, as you asked earlier, on the state level. So once
that EPA regulation has changed, then the state-delegated
agency in our case, which is the Oklahoma Department of
Environmental Quality for most of the issues--actually, the
Department of Ag here has some, Environmental, the Oklahoma
Corporation Commission has some of them. So when it gets down
to the state-delegated agency, then we work very hands-on in
making sure that the regulation that is developed from that
Federal regulation is something that we can comply with. So
that is where we really get more involved, and that is where I
get the member companies more involved in the regulatory
process, because then they can make comments on the state
level, they can go visit with the regulatory agencies.
But once it gets to the state, it is at a variety of
agencies. So then it is still a little difficult, like with
injection control. Underground injection control is housed
between the Oklahoma Corporation Commission, which does oil and
gas issues, and the Department of Environmental Quality,
because some are just industrial and some are oil and gas. So
there is a process that we go through.
We help them on making sure that the regulations are
something we can comply with and try to lessen that burden on,
say, monitoring and reporting. But we as the Alliance, we do
not do the compliance. Then the small business has to go to,
usually, especially a small business, to a consultant, and that
consultant then helps them develop their plans and their
compliance and helps them with their monitoring and their
testing, and even tells them a lot of times what new equipment
they have to install to meet compliance.
So we have a point that is only through the regulatory
process, legislative regulatory, and then it is turned over,
and that is where the real financial burden starts with the
small business. It is once they have to hire that consultant to
develop their actual compliance plan, permits, or whatever is
required, or equipment to be installed.
Chairman KIM. Great. No, that is helpful.
Just one last question from my end that will kind of open
it up to anyone who wants to speak on this. What I am trying to
think about just sitting here and trying to think about what
Congressman Herd and I can do coming out from this, how it is
that we can try to make the best case for taking some actions
along these routes with our colleagues back in D.C., certainly
it is very helpful to have a deeper understanding of the harm
or the burden that this places on small businesses. But one
other thing that could be helpful just from my perspective is
to be able to explain how taking these steps will alleviate
that and show the positive aspects of this.
So I guess I just wanted to ask the four of you if there is
an example, if one of the regulations Congressman Herd talked
about that recently was either taken away or reduced, some
example of how something of that nature has opened it up, or
you heard directly from small businesses and owners about how
that might be able to help out. For instance, Mr. Jordan, when
we are thinking about how Dodd-Frank might be hitting small
businesses or community banks, now with some of the provisions
that only affect banks that have $250 billion or more, have you
seen benefits from that type of move tangibly, whether in your
own or from other banks? Those are some of the things that will
help me understand, if this were to happen, what are some of
the success stories where it has reduced the burden upon small
businesses and the sky didn't fall and things didn't go crazy.
That would be really helpful if anyone has any specific
examples right now. Anything you can think of?
Mr. JORDAN. Just for us personally, my bank, that BSA AML
stuff that I talked about, that regulation can't go away. That
is something that is very important in fighting terrorism. But
tweaking that, because it was implemented and has just remained
stale, tweaking that makes a difference there.
But again, it is really hard to pinpoint just one
particular regulation because, again, it is the cumulative
effect. It is not just peeling back that one layer, which is
great if you can do it, but that one layer doesn't always have
a significant impact, because it has just been years on years
on years. It just keeps piling on, and that is the big deal.
But like you said, Dodd-Frank, there are so many issues to
Dodd-Frank. The latest, and specifically to the banking
industry, was 2155 a year or so ago. Those were things that
helped right there, and it is a mixed bag with banks. There is
a lot of it that really didn't apply to my bank specifically,
but for banks as a whole it was definitely something that was a
positive for us.
Chairman KIM. That is helpful. If anyone else wants to jump
in, I didn't want to put you on the spot on this one, but think
about it, and if there are other things that come to mind, let
me know, because those are the kind of examples and arguments
that help us make the case, when we can say look what happened
when this regulation was reformed or removed a couple of years
back, these businesses or this sector was able to increase this
or that. You are right, there is going to be a cumulative issue
here, while our conversation has been more systemic about very
specific things. But do keep that in mind, and if there is
anything that comes to mind, I will certainly leave you all my
card. Please let me know. That is the kind of stuff that I
think will be helpful as well.
Mr. Selman, is there anything you wanted to add?
Mr. SELMAN. Yes, real quick. I mentioned that the
Department of Labor is trying to modernize the H-2A labor
program. They came up with one solution that would really help
fix it, and I believe if it is not up for comment, it is going
to be up for comment shortly. But it is taking it where instead
of, like me personally, doing two contracts to bring employees
at two different times, just doing one contract for the year
and being able to bring up the employees when you need them.
Say with all the flooding that happened, I need a couple of
guys for a month to come up and work, I can just call down
there and tell my guys to come up for a month, for however long
I need them. I think everybody in the ag industry would very
much approve of this if it pulls all the way through, and it
would really help.
Chairman KIM. That is helpful.
Well, those are all my questions. Congressman Herd,
anything else you want to follow up on?
Mr. HERN. Sure. I would like to follow up on this banking
marijuana for just a second. Those that are not in the world of
banking, sir, like you have been for multiple generations,
somebody that--I think I understand it pretty well. But I think
I would like to paint this picture one more time, if we could.
By not banking marijuana, will that end medicinal marijuana
in Oklahoma and other states because it is not being banked?
Will that run the marijuana people out of business because it
can't be banked?
Mr. JORDAN. That is a hard question. That is a good
question, though, to ask. I don't think that it will. I think
they are going to find some way, somehow. I think you could
look to Colorado. They have probably been doing it longer than
anybody and still not all--I mean, you would think that every
bank in Colorado banks cannabis, but they do not. A lot of them
have said we are just not going to go into that, and it is just
because of the compliance that you have to do that.
But they are making it right now, they are opening up, so
they are figuring out a way to do it. My thought is even if a
bank says, hey, we want to stay away from it, it is going to
touch you some way, somehow. They are going to figure out a
way, once they know what the rules are, they are going to
figure out a way how to do it. But I can't see it just not
happening.
Mr. HERN. Well, it is not federally required, and we
continue to add states every election cycle--Arkansas,
Oklahoma, the list goes on and on. So it hasn't been a
deterrent to people to open the businesses.
Mr. JORDAN. No.
Mr. HERN. So where is the cash if it is not going into
banks? Where is that at?
Mr. JORDAN. They have it in their back room.
Mr. HERN. It is pretty scary, right?
Mr. JORDAN. Yes. I did see there was an entrepreneur there
in Oklahoma City, though, that he was going to set up a vault
business for those that wanted to just come and bring their
cash to him.
Mr. HERN. So is it plausible that a person with a lot of
cash could lend to other people who need cash and you create a
whole industry of cash lending?
Mr. JORDAN. Yes, that happens today.
Mr. HERN. So what about payroll taxes? If these people are
working for these different dispensaries and the farming
process, they are getting paid, but if you can't take your
payroll check to the bank and cash it, it is a cash business,
so we are going to lose the payroll tax. Social Security and
Medicare, Federal taxes, state taxes, local taxes will never be
charged on any of that money.
Mr. JORDAN. Yes, because it is all cash.
Mr. HERN. So people need to understand the enormity of this
problem, that if we don't bank it--you didn't create the
problem. You are trying to be a solution to the problem.
Mr. JORDAN. We are just trying to deal with it.
Mr. HERN. Yes, thank you.
I have one final question that kind of goes across to
everybody. I could ask questions all day. This is my bailiwick.
This is what I love to hear, and the Chairman knows this. Thank
goodness we are in Washington, D.C. and limited to 5 minutes,
or we would be talking for a long time.
Do you believe that the Federal agencies understand the
challenges that small businesses face in complying with
regulations in their communities?
I will start with Ms. Osburn.
Ms. OSBURN. No. I think that is where--and, Mr. Chairman,
to answer your earlier question, I think that that would be
something that would be greatly beneficial, is some sort of
communication, some sort of leaning on the agencies, maybe to
feel a little bit of pressure to help understand the burden
that a lot of this is placing upon small businesses.
Mr. HERN. Thank you.
Mr. Ground?
Mr. GROUND. I will go just the opposite and say yes. I have
seen in the last couple of years a change in an attitude, and
it is more on the local Federal agency offices, like the local
U.S. Fish and Wildlife Office. They have had a change in
leadership. A lot of times that is all it is, is a change in
leadership, which changes the attitude, which very much changes
now the field of people who work with companies, which in the
past couple of years, few years, has been tremendous.
The same for the local Bureau of Land Management Office in
Norman. It has got to where we actually have industry-agency
periodic meetings where we talk to them about issues. I would
say before we started holding those they did not understand our
perspective, what the burden was. So we have actually started
working through and have a much better working relationship.
And then with EPA Region 6 in Dallas, I hate to call them
bureaucrats, but some of the people, the long-term employees
there do not understand, and you never--someone like me never
gets an opportunity to meet with them. But you have enough of a
change in their leadership where we work with them, and it
really gets back to where there is a better working
relationship.
So to me, any time we can work with the Federal agency, it
helps them to understand. I have seen in the past where they do
not. They say, no, we are not going to--you do what we tell you
and there is no two-way conversation. So I have seen a change
in the last few years.
Mr. HERN. Mr. Jordan, I am going to repeat the question. Do
you believe that Federal agencies understand the challenges of
small businesses, in your case banks, facing complying with
regulations?
Mr. JORDAN. It is a mixed bag. I think from our safety and
soundness regulatory people, they kind of see that. But the
compliance don't seem to see that. But I would echo Mr.
Ground's comments. We have seen a little bit of a change when
you have seen change in the leadership of those agencies. There
is a little bit more cooperative stance today than probably
there was six or eight, 10 years ago. Of course, 10 years ago
we were in the middle of a crisis too, in the banking, so that
was a different environment than it is today. But to me, at
best, it is kind of a mixed bag.
Mr. HERN. You just made a comment--I hadn't thought about
this--in regard to Dodd-Frank and the safety and soundness
versus compliance. Do you think there ought to be--and I don't
know that there isn't, but I am going to assume that there
isn't--a scale that says if you have consecutive quarters of
very safe and sound, your asset levels have been great, you
have hit all your marks on CRA and stuff like that, that maybe
your regulatory meets with OCC and all those various agencies
are spread out farther to give you more breathing room?
Mr. JORDAN. Yes, it would help. There is a little bit of
that going on now on your exam cycle. It went from a 12-month
to maybe an 18-month, which it could probably be even more than
that. But that is what we would like to see, is more of a risk-
based approach to the regulations that you put in.
Specifically, we are just looking at Farmers State Bank. I
mean, we are definitely not a systemically important
institution, but yet we are under the same rules and
regulations that Bank of America is. When you are looking at
that, if you would risk-base that, or if they could on just the
metrics that you mentioned, that certainly would be a welcome
thing in the community banking world.
Mr. HERN. Mr. Selman, thoughts?
Mr. SELMAN. I actually agree with Mr. Jordan here. You have
got your agencies you are working with. Some of them are more
educated on all the burdens that you go through than others.
USDA, we are talking with them quite a bit, so they are very
intelligent on what the farmers do. If you are talking with,
say, the Department of Immigration or Homeland Security, or
maybe even the Department of Labor, they might not understand
what goes on, that you have to deal with these other agencies.
They just see this one agency, this one particular item that
you are dealing with and they don't see everything else. I
think a lot of it is just educating them on what we are doing.
Mr. HERN. Thank you.
Mr. Chairman, I think that is all my questions.
Chairman KIM. That is great.
Again, I just wanted to thank all the witnesses for coming
on out and giving us your perspective, and I think that final
question that the Ranking Member just said I think really sums
it up. We wanted to make sure that those that are in charge of
making these regulations from the congressional side or from
the executive branch side, and implementing them, that they
understand your experience, that they understand the user
experience, for lack of a better word, from the small business
side of how this impacts them.
I think you are right. I think Mr. Selman really hit the
nail on the head, that oftentimes some people in Washington are
only thinking about it from their particular slice, whether
that is issue based or department based or geographic based.
They may not necessarily be thinking about the big picture and
how all of this accumulates from a small business perspective
side or an individual side, so that is really helpful.
I think for me, just a couple of takeaways that I think
about when I think about what it means to be in the shoes of a
small business owner or worker. Certainly, there needs to be a
need for flexibility, some nimbleness in terms of how small
businesses are able to operate for them to be able to deal with
their work, and this is certainly impacted by some of these
rules and regulations.
Two, I think Mr. Selman really hit this home, the need for
expertise and experience, to be able to hire workers, to be
able to have the flexibility that you need, the ability to be
able to bring in the kind of talent that you need to be able to
get the job done, especially if there is a shortage, or
especially if you can't find others that are able to do that.
Third, the need for predictability. There is a lot of
uncertainty in planning, and it is already a difficult business
climate oftentimes for different industries, and businesses
need to be able to plan not just what the next six months or
year is going to look like but what is going to happen two,
three, four, five, 10 years down the road, and be able to do
that type of plan that is very difficult when regulations and
rules are changing and it is hard to keep up with it and you
don't know what direction it is going to go.
I think, again, a lesson that I learned from Mr. Jordan is
that it is not just one specific regulation or issue or
different issues, that it has a cumulative effect, that this is
a systemic problem that we need to address, and there is a
deeper question about what is the importance and what is the
role that these types of rules and regulations play.
And certainly all of us understand there are times and
places when it is important, when it is dealing with the health
and safety of our families, our communities, when it is dealing
with the security of our nation as a whole, or whether it is
dealing with environmental protections in important ways that
deal with our own communities and our commitments to
conservation. There are certainly places that we see it, but we
need to make sure that it is, first of all, the right value
that we are pushing on, and second, that it is dealing with it
in an effective way and that the rules and regulations are
actually getting at the issue and the intent for which it was
created, while also not creating an over-burdensome
perspective.
So I certainly take a lot out from this. I come before you
all here in Tulsa today with a lot of humility. I am not here
thinking that I know what is best for your community. I don't
know all the issues that you are facing here in Oklahoma, what
small businesses face here. I hear a lot of echoes,
similarities with my own community, whether it is with what Mr.
Selman said that sounds a lot like what I hear from cranberry
growers and blueberry growers in New Jersey, or even just the
shore towns that need to hire people to staff the boardwalk and
other places during the season and being able to get the amount
of workers that they need.
So I certainly see a lot of reflections. I think there are
a lot of things that bind New Jersey and Oklahoma, but then
there are also other things that are going to be different, and
that is exactly why Congressman Hern and I need to work
together and work with other members of Congress all across the
country to figure out what are the areas that we feel are
common threads, how do we make sure that things that might be
good for New Jersey aren't going to be bad for Oklahoma, and
vice versa, and those are the types of things.
So what I will tell you is that I feel like I can speak on
behalf of the two of us and the broader Committee, that we are
committed to working for small businesses, we are committed to
working with you doing what we can, and I just greatly
appreciate this opportunity and the hospitality that you have
shown me coming into your community, and I look forward to
coming back around again sometime in the future.
I just want to turn it over to the Ranking Member for some
final words.
Mr. HERN. Mr. Chairman, again, I want to thank you so much
for doing this. I appreciate it. The Small Business Committee
is a nice oasis in Washington, D.C. It is a place where you
hear from witnesses and nobody would know--they could walk in
and listen to your testimony and never know how you ever vote
because it is about one thing, it is about how you make your
businesses better for the people that work for you regardless
of how they vote. That is what it is all about.
I have said this countless times, almost every time that I
have had the chance, which is every time, on our full Committee
when we have witnesses speak, that I wish every committee, the
other 21 committees in the House of Representatives, could have
witnesses like we have, because they come in, they pour their
hearts out, asking us to help them to be able to run a better
business, to start businesses, to be a better employer so they
can do the right things to do their part in making this the
greatest country in the world.
We have a lot of work to do. The pendulum always swings
from no regulation to over-regulation. We have to find that
harmony, as the Chairman said. We can all work together to move
this country forward. When you have almost 30 million
businesses in the United States that are small businesses,
which represent, as I mentioned in my opening statement, 99.7
percent of all business in the United States are considered
small businesses.
We have a lot of work to do. When you think about that,
that responsibility, that size of the entire workforce in the
United States is bipartisan, you would wonder why we couldn't
take what we have here in Washington, D.C. in the Committee and
cross-pollinate that to the rest of Congress to get so much
done.
Just this past week we passed out of Committee six bills
that were specifically to our veterans, directed to our
veterans, to help them start businesses as they come out of the
military that we are sending to the floor for a vote that I am
sure will pass with bipartisan support.
So we have a lot of work to do to listen to you all, get
your respective issues to the respective committees with our
recommendations, our thoughts from all the committee hearings
that we have. We have great staff members here. It has been
video recorded. Everything we do is recorded so we always have
the archives of what was said, who said it, and what the intent
and the passion was behind it.
So with that, I want to thank all of you all. You are great
Oklahomans for being here. I appreciate you taking your time to
be here to do what may not be comfortable for you to do, speak
about who you are, what you are about, your concerns, and with
a little bit of doubt in your mind, am I just talking to a
wall. I get that, I understand that.
But I want you to know, and I speak for the Chairman--I
just want to say this in passing before we leave here. The
Chairman, when we first sat down, the first thing he said to
me, he says I have never been in small business before, but I
want to learn.
You have to have that kind of relationship, because there
are many things that he has done that I have never done. You
have to be willing to sit down. That is what is broken in
Washington, that nobody is willing to sit down and have these
kind of conversations that we are having today. We have to do
that so we can get some things done.
Thank you all so much, and safe travels home. Appreciate
it.
Chairman KIM. Thank you so much.
I would ask unanimous consent that members have 5
legislative days to submit statements and supporting materials
for the record.
Without objection, so ordered.
And if there is no other further business to come before
the Committee, we are adjourned.
Thank you so much.
[Whereupon, at 10:43 a.m., the Committee was adjourned.]
A P P E N D I X
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]