Over the past couple years, the Small Business Administration has siphoned money away from some long-standing programs to launch new pilot initiatives intended to support entrepreneurs. Many of those new programs were not authorized by Congress.
Some lawmakers aren’t too happy about that.
Others are flat out furious.
“I’m really baffled by this. Do you not care what Congress thinks?” Rep. Chris Collins (R-N.Y.) asked three SBA officials who were asked to testify before the House Small Business Committee on Wednesday. “Wasn’t it obvious to you that we’re not happy with you and your new programs?”
“We’re not looking for new programs,” he added. “Is that clear?”
Hearing the Republican-led House Small Business Committee take issue with the Obama administration’s handling of an agency is nothing new. Members of the panel have panned a number of departments for implementing onerous regulations, stepping beyond their reach and straying from the direction given to them by Congress.
What makes this instance stand out is the chorus of complaints coming from both sides of the aisle. In fact, Nydia Velazquez, the top Democrat on the committee, has emerged as one of the agency’s most vocal critics.
“Why spend money on initiatives that lack the proven track record and safeguards that other SBA programs have,” she said Wednesday, later arguing that the practice often results in “limited agency resources going to waste.”
“This makes no sense,” she said.
The criticism comes as the agency experiments with ways to keep its services relevant at a time when entrepreneurs, even mom-and-pop business owners, are taking advantage of new funding alternatives, business accelerator programs and private investor networks.
Velazquez and several others on the panel have expressed concerns with four new programs in particular. Of them, the largest is the agency’s new entrepreneurship education initiative, which the agency launched last year and is already looking to triple in funding next year.
Under the program, the agency offers a mini MBA-like course to owners of mid-size businesses (those that have at least $400,000 in revenue and three years in business). SBA officials have said the course is necessary to help growing companies enter new markets and expand their businesses more quickly.
While requesting new funding for that program, the agency last year pulled back on its funding request for its partner network of Small Business Development Centers (SBDCs) and SCORE chapters, which provide basic business training and mentorship to small businesses — a mission more closely aligned with the SBA’s charter, Velazquez said.
Tameka Montgomery, head of the SBA’s office of entrepreneurial development, said the new education program allows the agency to deliver 100 hours of personal training to business owners, more time than an SBDC or SCORE center can devote to one individual.
“But why are you devoting that 100 hours in training to a company that has $400,000 in revenue, proving that it is already successful,” Velazquez shot back. “Why not focus on small businesses that are truly struggling and could benefit from that intensive training.”
In addition, Velazquez took issue with the agency’s new growth accelerators program, under which the department wants to use $5 million next year to support the development of business accelerator programs across the country. She noted that more than 100 accelerators currently exist in the United States, and they have a collective $5 billion in funding commitments from investors — all without any federal assistance.
“Clearly, there’s not a need,” Velazquez said, arguing that the SBA’s infusion would be barely a drop in the bucket for a $500 billion industry and that the money could be better spent elsewhere. “What gap are you filling that the private sector is not?”
Javier Saade, the top official in the SBA’s office of investment and innovation, explained that those accelerators are concentrated in a small number of states. Through the new program, the agency hopes to encourage the development of accelerators in new markets.
As part of that effort, the program initially required private investors to commit four dollars to match every dollar invested into an accelerator by the SBA. Velazquez pointed out that the agency in its latest budget request has dropped that requirement.
She asked why. Saade didn’t know.
“So it’s an unauthorized program, and taxpayers are the ones paying for it after we created an illusion that it’s a public-private partnership,” Velazquez said.
Rep. Judy Chu of California, another Democrat, turned the microscope on another new program, called Boots to Business, which provides business and entrepreneurship training to returning veterans. She noted that the agency already has similar programs for former military members like the Veteran Business Opportunity Centers (similar to SBDCs).
Rhett Jeppson, who leads the agency’s office of veterans business development, explained that the business centers are designed to help former military members once they’re already in the midst of starting a company back home. On the other hand, Boots to Business gives them a crash course in entrepreneurship when they are first transitioning out of the military — a directive he says was given to the agency by Congress back in 2008.
“We believe that we have statutory authority to,” Jeppson started to say before being cut off by Rep. Blaine Luetkemeyer (R-Mo.).
“Obviously, there’s a lot of discussion about that, and we don’t think you do,” Luetkemeyer said, adding that he’s alarmed there “doesn’t seem to be a coordinated effort between the agency and Congress.”
Rep. Kurt Schrader (D-Ore.) echoed the same sentiment. Concerned that the SBA officials on hand have fallen “a little out of touch with the folks y’all are supposed to be representing,” he reminded them that “we’re the people who are elected, you are unelected officials.”
“It’s our job, not yours, to come up with the programs that should be going forward,” Schrader said bluntly. “You have heard uniformly, no one is supporting any of the programs you’ve come up with.”