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How a Regulatory Improvement Commission Can Improve SBA’s Disaster Response

By / 9.4.2013

Last week, New Jersey Governor Chris Christie blasted the Small Business Administration for being a “disaster” in providing disaster relief to New Jersey’s businesses after Hurricane Sandy.

At issue? According to the Governor, SBA’s disaster loan programs were too complicated for residents and business owners that needed a fast, simple funding stream to recover and rebuild. The Star Ledger article noted these words from Gov. Christie to a Jersey Shore crowd:

“Basically, the Small Business Administration is a disaster,” he [Gov. Christie] said to an appreciative crowd. “We should send FEMA to the Small Business Administration to clean up after the disaster that is the Small Business Administration and what they did to small business people in this state.”

“The good news is the Small Business Administration has left New Jersey and we are stationing troopers on every border to make sure they do not come back,” he added.

Does the Governor have a point – are there too many rules and regulations on SBA disaster programs hampering the effectiveness of the federal government’s disaster response?

An effective federal disaster relief system is essential to having economic continuity after a disaster hits. If the disaster loan application process is overly cumbersome, and not being utilized while residents and businesses flounder, it’s worth taking such claims seriously.

A quick look at SBA’s website shows 80 rules (consisting of 7 subparts of Title 13, Chapter 1, Part 123) in the Code of Federal Regulations that apply to their disaster loan programs, and SBA’s Standard Operating Procedure for disaster loans is an impressive 269 pages. Of course, federal loans backstopped by taxpayer money should enforce responsible lending and credit-checking criteria. But in times of disaster it may be sensible to simplify the process.

It’s examples like this why PPI proposed Congress authorize a “Regulatory Improvement Commission” (RIC), an independent Commission with the explicit purpose of reviewing outdated or duplicative federal regulations. The Commission, authorized only on an as-needed basis, could review the rules and regulations that govern SBA’s disaster loan programs and provide suggestions to improve or remove them. Their recommendations would then go to Congress for an up-or-down vote.

In the case of SBA’s disaster loan programs, the RIC could improve the speed at which disaster aid is distributed while still protecting taxpayers. For example, perhaps the number of required application forms – 6 for businesses – and corresponding financial documentation could be consolidated. In times of disaster, especially natural disasters like Hurricane Sandy, local business owners may not have immediate access to all of the required documentation which could impose major delays in aid. Likewise, some legal restrictions on disaster loan eligibility may not be feasible or practical and merit review. For example, requiring borrowers in designated “special flood hazard areas” to purchase flood insurance to be eligible for aid may be prohibitively expensive.

There is currently no effective process in place on the federal level to retrospectively review and improve such regulations. Yet the build-up of regulations over time is plaguing many U.S. businesses, and in cases like this, homeowners, which could have long-term economic affects. The RIC would address this problem, and as an independent body would do so in a politically viable way.