S. 1306, SMALL BUSINESS EMERGENCY DROUGHT DISASTER LOAN ACT OF 1977 THURSDAY, JUNE 23, 1977 U.S. SENATE, SELECT COMMITTEE ON SMALL BUSINESS, Washington, D.C. The committee met, pursuant to notice, at 9:30 a.m., in room 424, Russell Senate Office Building, Hon. Floyd K. Haskell, acting chairman, presiding. Present: Senators Haskell and Nunn. STATEMENT OF HON. FLOYD K. HASKELL, A U.S. SENATOR FROM THE STATE OF COLORADO Senator HASKELL. The committee will please come to order. Drought, which started as a regional problem in the West several years ago, is now a national dilemma of major proportions. Almost no part of the United States has been totally unaffected by extremely low levels of rainfall. Most recently, the plight of farmers in the Southeast has received attention. Farmers in Georgia claim they have never seen such dry conditions. Their corn crop is all but destroyed. Their stock will be hurt, because the poor corn crop will deplete their feed supplies. Consumers will ultimately feel the effect in the supermarket. Small farmers and ranchers and small business people in my home State of Colorado have been coping with the same kind of abnormally dry conditions for over 2 years. The Federal Government has provided low interest working capital loans to help these small operations. Senate bill 1306, which we will discuss this morning, authorizes $50 million to be used specifically to aid small businesses and farms in drought stricken areas. If the drought persists, as it appears it will, such measures will be inadequate. Working capital loans only treat the symptom of low rain fall. We must adapt to drought, not just react to it. Today, our witnesses will evaluate the financial needs of the small business person or farmer, who is attempting to adapt to long run drought conditions. They will describe the types of water supply and conservation facilities that may be constructed by affected businesses and farms in drought disaster areas. Already, for example, farmers in Colorado are modifying their planting methods to account for drought conditions. Instead of planting in rows, they plant in concentric circles. A sprinkler system is placed in the center of the inner most circle to irrigate the crops in the outer circles. Underground rivers supply the water for the sprinkler system. Vernon Weaver, the Administrator of the Small Business Administration, Jean Broeren, the Secretary of the Wisconsin Department of Business Development, and Arthur Kurtz, the deputy secretary of the Wisconsin State Agricultural Board will discuss Senate bill 1306 as well as the long run elements that they believe should be part of a permanent drought relief program. Senator J. Bennett Johnston of Louisiana will discuss a bill that he has introduced to provide additional assistance to disaster victims that have been hit by two disasters in rapid succession. Mr. Weaver, you may proceed. STATEMENT OF HON. A. VERNON WEAVER, ADMINISTRATOR, U.S. SMALL BUSINESS ADMINISTRATION Mr. WEAVER. Mr. Chairman, on my right is Mr. J. B. Alexander. I have a rather short statement, and with your pleasure, I will read it. Thank you for your invitation to appear before you today to comment on S. 1306, President Carter's small business emergency drought disaster loan bill of 1977, and SBA's plans to provide assistance for drought victims in the future. On March 23 of this year, the President sent to the Congress a message listing proposals designed to mitigate some of the effects of the severe drought which is affecting widespread portions of the United States. These recommendations included: Establishment of an emergency drought disaster loan program at SBA to provide $50 million in direct 5 percent loans to small business for economic injury resulting from the 1976-77 drought, and shortterm projects to improve water conservation practices, or rehabilitation or replacement of water supply facilities adversely affected by the drought. Temporary authority at the Economic Development Administration and the Farmers Home Administration to make grants and 5 percent loans to communities for emergency water system improvements essential to protect public health and safety. Establishment of a new 5 percent interest loan program at the Farmers Home Administration in which prospective losses can be included for emergency drought assistance. New legislation to authorize the Secretary of the Interior to provide 5 percent interest loans to purchasers of water. Supplemental funds to the Bureau of Reclamation to provide assistance to irrigations on Federal reclamation projects. Supplemental funds to the Agricultural Stabilization and Conservation Service to provide for cost sharing of emergency soil conservation practices. All of these proposals are intended to be temporary in order to ease the immediate burden of the drought on its victims in emergency drought impact areas. I strongly urge this committee to favorably report Senate bill 1306 in order to expedite SBA's assistance for construction, rehabilitation, or improvement of water conservation facilities to these victims. In response to the President's March 23 message, the Interagency Drought Emergency Coordinating Committee was established by the Secretary of the Interior, the Secretary of Agriculture, and the Secretary of Commerce, and me to designate areas eligible for Federal assistance as a result of the present drought. Mr. J. B. Alexander is my representative on this committee. As of today, over 1,500 counties in 25 States and two U.S. territories have been declared emergency drought impact areas by this committee. As you can see, this drought has affected a large portion of the United States, Puerto Rico, and the Virgin Islands. These areas need this emergency assistance immediately. In these Emergency Drought Impact Areas SBA is currently making loans under our Economic Injury Disaster Loan program, but this program does not permit construction of water conservation facilities or rehabilitation, replacement, or augmentation of water supply facilities. Only after a physical disaster declaration can this assistance be provided from SBA under our 7(b)(1) disaster loan program. S. 1306 will provide the necessary assistance for construction and improvement of water conservation facilities without the necessity of a physical disaster declaration. Concerning other assistance which SBA may offer on a permanent basis to small businesses adversely affected by drought: In the case of a natural disaster declaration by the Secretary of Agriculture, or a major Presidential declaration or a physical declaration by the Administrator, our 7(b)(2) (EIDL) program is available to help alleviate the burden of substantial economic injury: In the case of the small businessman who wants to construct water conservation facilities prior to a disaster occurring, our regular 7(a) business loan program is available. Because we do not have authority to make loans for the construction of water conservation facilities under our existing Economic Injury Disaster Loan program, we will use the experience gained if the short-term Senate Bill 1306 is enacted to evaluate the need for long-term legislative proposals. If Senate Bill 1306 is not enacted, we would evaluate data from emergency drought impact areas in terms of the possible need for long-range legislative proposals. Thank you Mr. Chairman. I will be pleased to answer any questions that you might have. Senator HASKELL. Thank you very much, Mr. Weaver. Would you support a permanent non-physical drought disaster loan program? Mr. WEAVER. Yes, sir. As I said in the statement, we would like to evaluate what happens under this one, but it is my impression we would like to support such legislation. Senator HASKELL. Presently are drought areas available for physical disaster loans under 7(b) (1)? Do you think you might open the 7(b) (1) loan program to drought disaster areas in the near future? Mr. WEAVER. Well, we have 7(b)(2). Senator HASKELL. I realize you have 7(b) (2). How about 7(b)(1)? Basically it is for crop damage, that is what it would be for? Mr. WEAVER. We would rather pass this bill, Mr. Chairman. Senator HASKELL. Counsel points out it would not take care of crop damage, so I guess my question is, do you think you might open up the 7(b) (1) for crop damage in drought areas? Mr. WEAVER. We think it would take new legislation to do that Senator HASKELL. In other words, you do not think you could open up 7(b)(1)? Mr. WEAVER. No, sir, not under present legislation. Senator HASKELL. OK. On a drought disaster declaration, what are your criteria? Mr. WEAVER. I will ask Mr. Alexander to answer that. Mr. ALEXANDER. In a drought area, if any small business would be eligible, we can pick up short-term loans. Senator HASKELL. I am asking you, what are your criteria for deciding whether to declare an area? Mr. ALEXANDER. On EIDL, the way it stands now, we never go in unless it is triggered. Either the community has a physical disaster which triggers the EIDL Senator HASKELL. What are the criteria for declaring the disaster? Mr. ALEXANDER. You take the drought area, you have 25 wells that go dry, the Administrator could declare a physical disaster and that would trigger the EIDL program. Senator HASKELL. What I am asking is, do you have any general criteria for declaring an area a drought disaster? Mr. ALEXANDER. A drought disaster? Senator HASKELL. That is right. Mr. ALEXANDER. At this time, we do not; we follow Agriculture's criteria. Under S. 1306, the criteria is as follows, and is based on the average 30-year period on "Palmer's Index": The Committee receives a report on a 2-week basis from Department of Agriculture, which gives us the data on the moisture of the soil. Any county or state that has a -2 is considered a drought area, and the Committee will vote to declare it a drought area. Then a letter is prepared by Disaster Operations Staff recommending Administrator Weaver's signature, declaring said area as drought disaster. Senator HASKELL. Right now you do not have such criteria? Senator HASKELL. How do you get involved if you do not have any criteria? Mr. ALEXANDER. We get involved when a major disaster is declared. Senator HASKELL. But you folks do not get involved ahead of time, or recommend to the President? Mr. ALEXANDER. That is right. Senator HASKELL. It seems to me, Mr. Weaver, it might be helpful if you did. Mr. WEAVER. We have the Inter-agency Committee on Drought Disaster. Senator HASKELL. It seems to me it would be helpful if you developed a criteria in declaring the area a drought disaster. Perhaps you and I can talk about this privately. I think it would be very helpful. Mr. WEAVER. I would like to point out we do have the Interagency Committee, the Secretary of Agriculture, Commerce, Interior, and us, and we meet regularly on the drought problem, and usually the disaster is not declared by us. Senator HASKELL. I realize that, but you might be the folks to kick things off. Maybe we ought to get together privately and discuss this. Thank you very much, Mr. Weaver. Mr. WEAVER. Thank you. Senator HASKELL. I will insert in the record the testimony of the Governor of Colorado. [The testimony follows:] 94-408 - 77 - 2 |