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116th Congress   }                                      {       Report
                        HOUSE OF REPRESENTATIVES
 1st Session     }                                      {      116-115

======================================================================



 
ACCESS TO SUFFICIENT CAPITAL FOR EVERYONE IN NATURAL DISASTER AREAS ACT 
                                OF 2019

                                _______
                                

 June 13, 2019.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Ms. Velazquez, from the Committee on Small Business, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 277]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Small Business, to whom was referred the 
bill (H.R. 277) to adjust collateral requirements under the 
Small Business Act for disaster loans, and for other purposes, 
having considered the same, report favorably thereon without 
amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
   I. Purpose and Bill Summary........................................2
  II. Background and Need for Legislation.............................2
 III. Hearings........................................................3
  IV. Committee Consideration.........................................3
   V. Committee Votes.................................................3
  VI. Section-by-Section Analysis for H.R. 277........................5
 VII. Congressional Budget Office Cost Estimate.......................5
VIII. Unfunded Mandates...............................................6
  IX. New Budget Authority, Entitlement Authority, and Tax Expenditures 6
   X. Oversight Findings..............................................6
  XI. Statement of Constitutional Authority...........................6
 XII. Congressional Accountability Act................................6
XIII. Federal Advisory Committee Act Statement........................6
 XIV. Statement of No Earmarks........................................7
  XV. Statement of Duplication of Federal Programs....................7
 XVI. Disclosure of Directed Rule Makings.............................7
XVII. Performance Goals and Objectives................................7
XVIII.Changes in Existing Law, Made by the Bill, As Reported..........7


                      I. Purpose and Bill Summary

    The purpose of H.R. 277, the ``Access to Sufficient Capital 
for Everyone in Natural Disaster Areas Act of 2019,'' or the 
``ASCEND Act of 2019,'' is to make permanent the temporary 
increase of the unsecured loan limit to $25,000 for physical 
damage loans in SBA agency disaster declarations.

                II. Background and Need for Legislation

    H.R. 277 was introduced by Rep. Nydia M. Velazquez (D-NY) 
and Rep. Steve Chabot (R-OH) on January 8, 2019 after a hearing 
held in the 115th Congress examining SBA's disaster response to 
the 2017 disasters. As part of that hearing, the Committee 
received a report and heard testimony from SBA's Office of 
Disaster Assistance regarding a temporary increase in the 
unsecured credit threshold that applies to certain disasters. 
In the report and in testimony, SBA recommended making 
permanent the $25,000 unsecured credit threshold.

              A. BACKGROUND ON SBA'S DISASTER LOAN PROGRAM

    Disaster Assistance has been part of SBA's mission since 
its creation in 1953. Through the agency's Office of Disaster 
Assistance (ODA), SBA provides low-interest loans to 
homeowners, renters, businesses of all sizes, and private, 
nonprofit organizations following a disaster. The impact of 
natural disasters on small businesses is typically two-fold--
direct physical damage to their business, and loss of customers 
who were also impacted by the storm. Commonly, the electric 
grid and surface transportation infrastructure are severely 
damaged, preventing owners and customers from resuming 
operations quickly. With an expectation of reduced sales due to 
outside forces, coupled with increased costs to rebuild 
structures and inventories, SBA disaster loans can be the 
critical lifeline that helps small business survive the 
physical and economic impact of a natural disaster.
    The first few months following a natural disaster are a 
critical period for small businesses. According to a recent 
survey of small businesses, nearly 75 percent do not have a 
disaster recovery plan, yet 70 percent indicated they felt 
vulnerable to a natural disaster.\1\ The Federal Emergency 
Management Agency (FEMA) estimates roughly 40 to 60 percent of 
small businesses never reopen following a natural disaster.\2\ 
For those that reopen, recovery costs are exorbitant. For 
example, about half of respondents to one post-Superstorm Sandy 
survey indicated they spent between $101,000 and $250,000 on 
recovery costs.\3\
---------------------------------------------------------------------------
    \1\Cynthia Scarinci, A Post-Superstorm Sandy study of Small 
Business Disaster Preparedness and Perspectives on Planning for Future 
Incidents, 3 J. Int'l & Interdis. Res., 61 (2016).
    \2\Federal Emergency Management Agency, Make Your Business 
Resilient, (Sep. 2, 2015).
    \3\See supra note 1.
---------------------------------------------------------------------------
    SBA has responded to hundreds of natural disasters over the 
past twenty years, including several major storms. In 2017 
alone, the U.S. experienced three of the five costliest 
hurricanes on record.\4\ After insurance proceeds, SBA serves 
as the primary source of financing for affected businesses and 
homeowners. In many instances, however, the agency's response 
to these major events has not been uniform. Furthermore, in 
recent years, the SBA Disaster Loan Program has been the 
subject of congressional interest because of concerns expressed 
about the time it takes for SBA to process disaster loan 
applications, and the agency's failure to implement statutory 
provisions enacted to quickly disburse disaster funds.
---------------------------------------------------------------------------
    \4\National Hurricane Center, Costliest U.S. tropical cyclones 
tables updated, (Jan. 26, 2018).
---------------------------------------------------------------------------

            B. THE NEED FOR THE CHANGES OUTLINED IN THE BILL

    H.R. 208, the Recovery Improvements for Small Entities 
After Disaster Act of 2015 raised the collateralization 
threshold on disaster loans from $14,000 to $25,000 to make it 
easier for victims to obtain capital to rebuild their homes and 
businesses. That provision was set to expire in 2018. However, 
a one-year extension was enacted in December 2018, making the 
new expiration December 2019. Without action, the unsecured 
loan limit for agency declarations will revert to the lower 
limits and create an unfair discrepancy for disaster survivors 
in areas of an SBA declaration and that of a Major Disaster 
declaration. Permanency guarantees that disaster funds will 
apply equally to disaster victims no matter the declaration 
type.
    In a report assessing the SBA Disaster Loan Program since 
the enactment of the RISE After Disaster Act (Pub. Law No. 114-
88) and in Congressional testimony, SBA stated that an increase 
in the unsecured loan limit for disaster loans should be made 
permanent to assist disaster survivors faster. H.R. 277 would 
permanently raise the minimum disaster loan amount that the SBA 
may require collateral from $14,000 to $25,000. Raising the 
unsecured loan amount will guarantee disaster victims can 
continue to receive a $25,000 loan--rather than just $14,000--
within 5 days of closing to speed up a reconstruction project.

                             III. Hearings

    In the 115th Congress, the Committee held a hearing 
examining SBA's oversight and management of its Disaster Loan 
Program. On September 5, 2018, the Committee on Small Business 
met for a hearing titled ``Surveying Storms: A Deeper Dive into 
SBA's Disaster Response.'' This hearing continued the 
Committee's longstanding oversight over the effectiveness and 
efficiency of SBA's Disaster Loan Program. Specifically, 
program performance was evaluated in the context of the serious 
challenges the Office of Disaster Assistance faced in 2017, 
with a combination of three major hurricanes impacting the 
United States and its territories, a series of devastating 
wildfires in Western states, and others.

                      IV. Committee Consideration

    The Committee on Small Business met in open session, with a 
quorum being present, on May 1, 2019 and ordered H.R. 277 
favorably reported to the House. During the markup, no 
amendments were offered.

                           V. Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the recorded 
votes on the motion to report legislation and amendments 
thereto. The Committee voted by voice vote to favorably report 
H.R. 277 to the House at 11:49 A.M.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                   VI. Section-by-Section of H.R. 277


Sec. 1. Short title

    This section designates the bill as the ``Access to 
Sufficient Capital for Everyone in Natural Disaster areas Act 
of 2019'' or the ``ASCEND Act of 2019''.

Sec. 2. Collateral requirements for disaster loans under the Small 
        Business Act

    This section permanently raises the minimum disaster loan 
amount for which the SBA may require collateral from $14,000 to 
$25,000 (or, as under existing law, any higher amount the SBA 
determines appropriate in the event of a disaster). This is in 
response to the SBA's request to make the threshold increase 
permanent.

             VII. Congressional Budget Office Cost Estimate

    The Congressional Budget Office pursuant to 402 of the 
Congressional Budget Act of 1974, submitted a cost estimate for 
H.R. 277 that stated enacting the legislation would not 
increase net direct spending or on budget deficits in any of 
the four consecutive 10-year periods beginning in 2030.

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 14, 2019.
Hon. Nydia M. Velazquez,
Chairwoman, Committee on Small Business,
House of Representatives, Washington, DC.
    Dear Madam Chairwoman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 277, the ASCEND 
Act of 2019.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Jon Sperl.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

    Under its disaster loan program, the Small Business 
Administration (SBA) does not require collateral for loans of 
$25,000 or less. For home or business loans provided in 
response to certain disasters, that threshold will revert to 
$14,000 on November 25, 2019. H.R. 277 would make the $25,000 
threshold permanent.
    Using information from the SBA, CBO expects that 
implementing H.R. 277 could slightly increase the volume of 
loans made under the program in each year after enactment. 
However, under current SBA regulations, the agency typically 
does not decline an application if the borrower lacks the 
specified collateral. CBO therefore estimates that enacting 
H.R. 277 would have an insignificant effect on the estimated 
subsidy cost of disaster loans. Such spending would be subject 
to the availability of appropriated funds because the disaster 
loan program is considered a discretionary credit program under 
the Federal Credit Reform Act of 1990. In 2019, Congress 
provided a subsidy appropriation of $10 million for the 
disaster loan program.
    On May 1, 2019, CBO transmitted a cost estimate for S. 862, 
the Rebuilding Small Businesses After Disasters Act, as 
reported by the Senate Committee on Small Business and 
Entrepreneurship on April 3, 2019. The two bills are similar 
and CBO's estimates of the budgetary effects are the same.
    The CBO staff contact for this estimate is Jon Sperl. The 
estimate was reviewed by H. Samuel Papenfuss, Deputy Assistant 
Director for Budget Analysis.

                        VIII. Unfunded Mandates

    H.R. 277 contains no intergovernmental or private sector 
mandates as defined in the Unfunded Mandates Reform Act, Public 
Law No. 104-4, and would impose no costs on state, local, or 
tribal governments.

 IX. New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House, the Committee provides the following opinion and 
estimate with respect to new budget authority, entitlement 
authority, and tax expenditures. While the Committee has not 
received an estimate of new budget authority contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to Sec. 402 of the Congressional Budget 
Act of 1974, the Committee does not believe that there will be 
any additional costs attributable to this legislation. H.R. 277 
does not direct new spending, but instead reallocates funding 
independently authorized and appropriated.

                         X. Oversight Findings

    In accordance with clause 2(b)(1) of rule X of the Rules of 
the House, the oversight findings and recommendations of the 
Committee on Small Business with respect to the subject matter 
contained in H.R. 277 are incorporated into the descriptive 
portions of this report.

               XI. Statement of Constitutional Authority

    Pursuant to clause 7 of rule XII of the Rules of the House 
of Representatives, the Committee finds the authority for this 
legislation in Art. I, Sec. 8, cl. 1 of the Constitution of the 
United States.

                 XII. Congressional Accountability Act

    H.R. 277 does not relate to the terms and conditions of 
employment or access to public services or accommodations 
within the meaning of Sec. 102(b)(3) of Public Law No. 104-1.

             XIII. Federal Advisory Committee Act Statement

    H.R. 277 does not establish or authorize the establishment 
of any new advisory committees as that term is defined in the 
Federal Advisory Committee Act, 5 U.S.C. App.2.

                     XIV. Statement of No Earmarks

    Pursuant to clause 9 of rule XXI, H.R. 277 does not contain 
any congressional earmarks, limited tax benefits, or limited 
tariff benefits as defined in subsections (d), (e), or (f) of 
clause 9 of rule XXI of the Rules of the House.

            XV. Statement of Duplication of Federal Programs

    Pursuant to clause 3 of rule XIII of the Rules of the 
House, no provision of H.R. 277 establishes or reauthorizes a 
program of the federal government known to be duplicative of 
another federal program, a program that was included in any 
report from the United States Government Accountability Office 
pursuant to Sec. 21 of Pub. L. No. 111-139, or a program 
related to a program identified in the most recent catalog of 
federal domestic assistance.

                XVI. Disclosure of Directed Rulemakings

    Pursuant to clause 3 of rule XIII of the Rules of the 
House, H.R. 277 does not direct any rulemaking.

                 XVII. Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XII of the Rules of the 
House, the Committee establishes the following performance-
related goals and objectives for this legislation:
    H.R. 277 includes a provision designed to increase access 
to capital for small businesses and homeowners who have been 
impacted by a natural disaster.

      XVIII. Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House, changes in existing law made by the bill, as 
reported, as shown as follows: existing law proposed to be 
omitted is enclosed in black brackets, new matter is printed in 
italic, and existing law in which no change is proposed is 
shown in roman:

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets and 
existing law in which no change is proposed is shown in roman):

                    RISE AFTER DISASTER ACT OF 2015




           *       *       *       *       *       *       *
DIVISION B--RECOVERY IMPROVEMENTS FOR SMALL ENTITIES

           *       *       *       *       *       *       *


TITLE I--IMPROVEMENTS OF DISASTER RESPONSE AND LOANS

           *       *       *       *       *       *       *


SEC. 2102. COLLATERAL REQUIREMENTS FOR DISASTER LOANS.

  (a) In general.--Section 7(d)(6) of the Small Business Act 
(15 U.S.C. 636(d)(6)) is amended in the third proviso--
          (1) by striking ``$14,000'' and inserting 
        ``$25,000''; and
          (2) by striking ``major disaster'' and inserting 
        ``disaster''.
  [(b) Sunset.--Effective on the date that is 4 years after the 
date of enactment of this Act, section 7(d)(6) of the Small 
Business Act (15 U.S.C. 636(d)(6)) is amended in the third 
proviso--
          [(1) by striking ``$25,000'' and inserting 
        ``$14,000''; and
          [(2) by inserting ``major'' before ``disaster''.
  [(c) Report.--Not later than 180 days before the date on 
which the amendments made by subsection (b) are to take effect, 
the Administrator of the Small Business Administration shall 
submit to Committee on Small Business and Entrepreneurship of 
the Senate and the Committee on Small Business of the House of 
Representatives a report on the effects of the amendments made 
by subsection (a), which shall include--
          [(1) an assessment of the impact and benefits 
        resulting from the amendments; and
          [(2) a recommendation as to whether the amendments 
        should be made permanent.]

           *       *       *       *       *       *       *


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