[Senate Report 115-453]
[From the U.S. Government Publishing Office]
115th Congress } { Report
SENATE
2d Session } { 115-453
======================================================================
TO EXTEND THE EFFECTIVE DATE FOR THE SUNSET FOR COLLATERAL REQUIREMENTS
FOR SMALL BUSINESS ADMINISTRATION DISASTER LOANS
_______
December 20, 2018.--Ordered to be printed
_______
Mr. Risch, from the Committee on Small Business and Entrepreneurship,
submitted the following
R E P O R T
[To accompany S. 3554]
[Including cost estimate of the Congressional Budget Office]
The Committee on Small Business and Entrepreneurship, to
which was referred the bill (S. 3554) to extend the effective
date for the sunset for collateral requirements for Small
Business Administration disaster loans, having considered the
same, reports favorably thereon without amendment and
recommends that the bill do pass.
I. INTRODUCTION
A bill to extend the effective date for the sunset for
collateral requirements for Small Business Administration
disaster loans (S. 3554) was introduced by Senator John Kennedy
for himself, and Senator Marco Rubio on October 5, 2018.
Senator Cory A. Booker is also a cosponsor.
This bill amends the RISE After Disaster Act of 2015 to
extend the sunset for collateral requirements for Small
Business Administration disaster loans from three to four
years.
The bill was approved unanimously by a roll call vote as
part of a manager's package.
II. HISTORY (PURPOSE & NEED FOR LEGISLATION)
In August of 2005, Hurricane Katrina struck the
Southeastern United States, significantly impacting the New
Orleans, Louisiana area. The devastation and loss of life left
in its wake was catastrophic, making it one of the worst
natural disasters in U.S. history. In the aftermath of a
disaster of this scale, the recovery process is extensive.
Recovery efforts were prolonged, and thousands of small
businesses were shuttered.
The primary provider of federal disaster assistance loans
for private sector, non-agricultural, disaster victims is the
Small Business Administration's Office of Disaster Assistance.
Following Hurricane Katrina, a series of hearings and
roundtables highlighted shortcomings in the recovery process
following large disasters and found that small businesses
require additional aid in their recovery.
In October of 2012, Hurricane Sandy hit the Northeastern
United States, causing widespread damage to businesses and
residents. A 2014 Government Accountability Office report
assessed the disaster response efforts found deficiencies in
the Small Business Administration's loan processing speed and
staff allocation, as well as various information technology
issues. In an effort to improve the small business lending
system after these disasters, Congress passed the Recovery
Improvements for Small Entities After Disaster Act of 2015, or
RISE Act, to address the shortcomings with disaster loans. The
RISE Act, which was signed into law on November 25, 2015, eased
the credit requirements for small business disaster lending to
ensure that small businesses could quickly access capital after
a disaster. One provision of the RISE Act raised the unsecured
limit from $14,000 to $25,000 for physical damage loans made in
response to disasters that are declared by the Administrator of
the SBA. If the provision is not extended, the collateral
threshold for these loans would revert back to $14,000 on
November 25, 2018.
Towards the end of the 115th Congress several senators,
particularly those from states that had been recently effected
by hurricanes, advocated for an extension, by one year, of the
reduced collateral requirements to help small business owners
in these coastal states that were still in the process of
rebuilding. After the Committee markup, the full Senate passed
the bill unanimously on November 15, 2018. The next day the
full House passed the bill unanimously and President Trump
signed it into law on November 29, 2018 (P.L. 115-280).
III. HEARINGS & ROUNDTABLES
In the 115th Congress, the Committee held a hearing on
September 27, 2017, entitled, ``An Early Review of SBA's
Response to the 2017 Hurricanes.'' During the hearing, Mr.
Daniel Davis, President and CEO of the JAX Chamber of Commerce
in Jacksonville, Florida, stated his concern that small
businesses have less collateral after a disaster, making it
more difficult to obtain loans.
IV. DESCRIPTION OF BILL
This bill would extend, by one year, changes to collateral
requirements for unsecured disaster loans for physical injury
made under the 2015 RISE Act (P.L. 114-88). The disaster loan
collateral section of the RISE Act included a 3 year sunset
clause under Sec. 2102(b), meaning that the changes to the
disaster loan program expire on November 25, 2018. This change
has a minimal impact on subsidy costs.
V. COMMITTEE VOTE
In compliance with rule XXVI (7)(b) of the Standing Rules
of the Senate, the following vote was recorded on October 11,
2018.
A motion to adopt S. 3554, a bill to extend the effective
date for the sunset for collateral requirements for Small
Business Administration disaster loans, was approved
unanimously by a roll call vote as part of a manager's package.
Senators Risch, Rubio, Paul, Scott, Ernst, Inhofe, Young, Enzi,
Rounds, Kennedy, Cardin, Cantwell, Shaheen, Heitkamp, Markey,
Booker, Coons, Hirono, and Duckworth voted for the bill.
VI. COST ESTIMATE
In compliance with rule XXVI (11)(a)(1) of the Standing
Rules of the Senate, the Committee estimates the cost of the
legislation will be will be equal to the amounts discussed in
the following letter from the Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 31, 2018.
Hon. James E. Risch,
Chairman, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 3554, a bill to
extend the effective date for the sunset for collateral
requirements for Small Business Administration disaster loans.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Stephen
Rabent.
Sincerely,
Keith Hall,
Director.
Enclosure.
S. 3554--A Bill To Extend the Effective Date for the Sunset for
Collateral Requirements for Small Business Administration
Disaster Loans
Under current law, the Small Business Administration (SBA)
does not require collateral for loans of $25,000 or less under
its disaster loan program. That threshold reverts to $14,000 on
November 25, 2018, for home or business loans for nonmajor
physical disasters. S. 3554 would extend the $25,000 threshold
for those loans for one year.
Using information from the SBA, CBO expects that
implementing S. 3554 could slightly increase the volume of
loans made under the disaster loan program in 2019. However,
the SBA generally does not deny a loan application if a
borrower lacks the specified collateral, as long as the agency
is reasonably sure that the loan can be repaid. For those
reasons, CBO estimates that the bill would have an
insignificant effect on the estimated subsidy cost of disaster
loans; such spending would be subject to the availability of
appropriated funds.\1\ Using information from the SBA on the
costs of similar activities, CBO estimates that implementing
the bill would cost the agency less than $500,000 to update
program requirements.
---------------------------------------------------------------------------
\1\The estimated subsidy cost is the estimated long-term cost to
the government, calculated on a net-present-value basis. Present value
is a single number that expresses a flow of current and future income
(or payments) in terms of an equivalent lump sum received (or paid) at
a specific time. That value depends on the rate of interest (called the
discount rate) used to translate future cash flows into current
dollars.
---------------------------------------------------------------------------
Enacting S. 3554 would not affect direct spending or
revenues; therefore, pay-as-you-go procedures do not apply.
CBO estimates that enacting S. 3554 would not increase net
direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2029.
S. 3554 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Stephen Rabent.
The estimate was reviewed by H. Samuel Papenfuss, Deputy
Assistant Director for Budget Analysis.
VII. EVALUATION OF REGULATORY IMPACT
In compliance with rule XXVI (11)(b) of the Standing Rules
of the Senate, it is the opinion of the Committee that no
significant additional regulatory impact will be incurred in
carrying out the provisions of this legislation.
VIII. SECTION-BY-SECTION ANALYSIS
Section 1: Extension of sunset for collateral requirements for SBA
disaster loans
This section amends the sunset clause in section 2102(b) of
the RISE After Disaster Act of 2015, by striking ``3 years''
and inserting ``4 years''.