Small business is the backbone of this nation's economy. It has been one of the driving forces behind this country's past economic growth and will continue to be a major factor as we move into the 21st century. According to the SBA, "small businesses are responsible for 75 percent of the new jobs in the economy and employ more than one-half of the workforce." Currently, small business is our largest employer and over 30 percent of all small businesses are owned and operated by veterans.

Today, more than ever before, entrepreneurship is taking on new meaning. In view of the downsizing of the military, the federal government and corporate America, Congress and the SBA must do everything they can to empower, encourage and assist all of this country’s entrepreneurs.

While The American Legion shares Congress’ concern with respect to a balanced budget, we also believe that we must be willing to invest in the future economic well-being of the nation. In our opinion, the best way to achieve that growth will be through providing the resources this country’s entrepreneurs need to ensure that they have the ability to successfully open and operate their small businesses.

Chairman Quinn, in your hearing invitation letter of May 5, 1998, you stated:

Based on The American Legion’s experience with the SBA since 1989, our responses to those issues are: "What assistance?" "What special consideration?" And, "We concur fully with the provisions of PL 105-119 concerning services for disabled veterans."

Between 1989 and 1995, The American Legion became so frustrated by SBA’s lack of interest in fulfilling its responsibility to veterans, its unwillingness to provide special consideration for veterans, and its refusal to meet with representatives of the veterans’ community and discuss our concerns, that the Legion rescinded all of its long-standing policy resolutions mandating the organization to support the SBA and its programs. Before commenting on the services that SBA offers veterans, it is important to review the history of assistance to veteran-owned small businesses and past efforts to improve that assistance.

The first such program dates back to 1944. In that year, Congress passed the Servicemen's Readjustment Act of 1944. Among other things, that monumental piece of legislation established a small business loan program for World War II veterans that was to be administered by the Veterans Administration (VA). Congress later opened the program to Korean War veterans. Because these efforts were so successful, Congress passed legislation in 1953 that created the SBA and transferred the veteran's loan program to the new agency.

Despite the 1974 passage of PL 93-237, which mandated the SBA to provide "special consideration to veterans of the Armed Forces of the United States and their survivors and dependents," little, if anything, was done until 1980 to promote SBA's veterans' programs. Following enactment of that legislation, it was nearly two years before the regulations implementing "special consideration" were printed. Even then, nothing in the regulations established veterans as a special or priority agency concern.

During oversight hearings that were held in the House and Senate in 1980, the SBA was embarrassed into taking steps toward implementation of special consideration for veterans. Although SBA never fully implemented the law, it is interesting to compare how special consideration was defined in the 1982 and the 1997 editions of Code of Federal Regulations (CFR). Both appear below.

1997 Edition

While The American Legion salutes Congress for enacting the legislation that created special consideration for veterans, we are appalled by the fact that it has allowed SBA to thumb its nose at the law by completely ignoring it. The American Legion, along with other veterans’ advocates, has testified at numerous other hearings on this subject. Unfortunately, our concerns and recommendations fell on deaf ears as nothing was ever done to hold SBA accountable for its actions.

In 1981, Congress established a task force consisting of representatives of SBA, VA, the Veterans’ Service Organizations (VSOs) and the Department of Labor. That task force was mandated to define SBA's responsibilities to veterans and make recommendations for future actions. In May of that year, the SBA's Administrator, James Saunders, issued a policy statement which detailed the agency's mission regarding veterans. It established the Office of Veterans’ Affairs (OVA) which was given responsibility for, "providing advice and counsel to SBA management on all legislative, regulatory, economic, and management policies affecting the interests of veteran-entrepreneurs. It also, required the office to perform advocacy duties as defined in PL 94-305 on behalf of veterans. In addition, it included a review of SBA programs and the activities of other government departments and agencies whose policies and regulations affect the interest of veterans in business."

Over the next eight years the SBA demonstrated a sincere commitment to veterans. Unfortunately in 1989, when a new Administrator was appointed, SBA's support for its OVA and its commitment to veterans evaporated. Because of that Administrator's interest in promoting other programs within the SBA, veterans were all but forgotten by the agency.

The next Administrator not only continued the policies of her predecessor, but also went so far as to refuse to reconstitute SBA's Veterans' Advisory Committee. As a result, the representatives of this country's 27 million veterans have not had a formal voice at the agency since June of 1992. We must also point out, Messrs. Chairmen, that every SBA Administrator from 1989 refused to meet with representatives of the veterans' community to discuss our concerns.

The American Legion plans to take the lead in facilitating a meeting between the new Administrator Aida Alvarez and representatives of the various VSOs. It is The American Legion’s understanding that Administrator Alvarez is a fair minded leader who has a sincere interest in making the OVA a viable part of the SBA.

The American Legion commends Administrator Alvarez for her support of Cliff Toulson’s recent appointment as the new Director of OVA. Based on our meetings with Director Toulson, we have been very favorably impressed with his knowledge of small business issues and his ideas for improving entrepreneurial services to America’s veterans.

As stated earlier, because Administrators of the SBA since 1989 have been interested in promoting other programs in the SBA, the resources allocated to OVA have dwindled. While The American Legion does not mean to single out SBA’s Office of Women’s Business Ownership, we believe it is interesting to compare its staffing and funding levels with that of OVA. These figures were obtained from 1979-1997 Congressional Budget Submissions and Federal Financial System Allotment Tables. These figures represent program funds as well as compensation and benefits amounts.

Office of Veterans Affairs Office of Women’s Business Ownership

FY FTE Requested Approved FY FTE Requested Approved

Funding Funding Funding Funding

1997 4.0 $ 340,000 $340,000 1997 7.0 $4,959,000 4,637,000

1996 4.0 724,000 347,000 1996 7.0 4,948,000 3,890,000

1995 8.0 1,002,000 860,000 1995 9.3 977,000 4,918,000

1994 12.3 1,211,000 756,000 1994 8.7 878,000 4,308,000

1993 14.1 1,380,000 759,000 1993 8.0 3,005,000 3,005,000

1992 14.4 1,322,000 744,000 1992 8.2 3,925,000 3,925,000

1991 14.5 896,000 896,000 1991 9.1 2,951,00() 2,951,000

1990 12.7 1,175,000 1,169,000 1990 9.2 2,228,000 2,307,000

1989 14.7 1,460,000 1,188,000 1989 9.9 2,825,000 2,291,000

1988 13.8 1,433,000 1,437,000 1988 11.6 1,008,000 929,000

1987 1.3 189,000 1,277,000 1987 10.6 469,000 937,000

1986 1.4 534,000 526,000 1986 8.4 490,000 356,000

1985 5.0 347,000 3.47,000 1985 10.0 1,187,000 1,187,000

1984 5.0 289,000 1,838,000 1984 10.0 1,188,000 2,887,000

1983 5.0 3,298,000 1,547,000 1983 14.2 1,243,000 1,219,000

1982 1.0 63,620 63,620 1982 11.5 1,468,000 913,000

1981 22.0 13,600,000 13,600,000

1980 22.0 2,500,000 2,500,000

1979 12.0 487,000 487,000

Chairman Quinn, your letter of invitation also stated that you would like The American Legion’s recommendations on how to improve entrepreneurial services to veterans, particularly to those who are disabled. We believe that the following steps must be taken.

• Congress must take responsibility for holding SBA’s feet to the fire with respect to its obligations to veterans. That agency must treat all of its constituency groups as equals and not be allowed to continue treating veterans as second class citizens.

• In addition, the veterans’ community must reestablish an ongoing dialog with SBA’s top management officials. They must be made aware of our concerns and their responsibilities with respect to the law and the empowerment of the OVA. The American Legion recommends reconstituting the SBA’s Veterans’ Advisory Committee.

• Finally, Congress and the Administrator need to evaluate the resources that OVA realistically needs to meet its mission. When shortfalls are identified, Congress and the SBA must be willing to provide those resources, even if an appropriation is required. For example, SBA has authority to make direct loans to Vietnam era and disabled veterans. In reality the program has not been funded and has not been a part of SBA’s funding requests since that program was established in 1994.

Messrs. Chairmen, thank you for allowing The American Legion to comment on SBA’s performance in providing entrepreneurial assistance to veterans. We look forward to working with both subcommittees on resolving the problems discussed today.