RD31 - Annual Executive Summary of the Small Business Commission


    Executive Summary:
    SMALL BUSINESS COMMISSION EXECUTIVE SUMMARY

    January 10, 2007

    Introduction

    The Small Business Commission was established to study, report and make recommendations on issues of concern to small businesses in the Commonwealth. The powers and duties of the Commission include:

    • Evaluating the impact of existing statutes and proposed legislation on small businesses;
    • Assessing the Commonwealth's small business assistance programs and examine ways to enhance their effectiveness; and
    • Providing small business owners and advocates with a forum to address their concerns.

    The Commission is chaired by Senator J. Brandon Bell II of Roanoke. Jeffrey M. Frederick of Prince William serves as vice-chairman. The other members are Delegate R. Lee Ware of Powhatan, Delegate G. Glenn Oder of Newport News, Delegate William R. Janis of Goochland, Delegate Clarence E. Phillips of Dickenson, Delegate Algie T. Howell, Jr. of Norfolk, Senator Nicholas D. Rerras of Norfolk, Senator Russell H. Potts, Jr. of Winchester, and Senator Frank M. Ruff of Mecklenburg. The gubernatorial appointees are Robert A. Archer of Salem, Lana Ingram Digges of Fredericksburg, Ronald V. Shickle of Winchester, and Marilyn H. West of Richmond.

    2006-2007 Interim Activities

    The Small Business Commission held a meeting and public hearing in Roanoke on October 27, 2006, and a meeting in Richmond on January 8, 2007.

    October 27 Public Hearing

    The Commission convened an afternoon public hearing at the Roanoke Higher Education Center. Five individuals spoke at the public hearing. Topics identified by the speakers included:

    • While the Commonwealth offers incentives for new enterprises, it does little to assist existing small businesses.
    • Funding for the Enterprise Zone program needs to be increased.
    • Management of the Enterprise Zone program should be revised to allow participants to determine, by the end of each year, whether the program has enough money to fully fund the authorized incentives.
    • Encouraging small wineries by allowing direct distribution to stores and restaurants.
    • Greater access to loans, generally of between $100,000 and $250,000, from venture capitalists or "angel" lenders, to finance expansion after a small business has been in existence for several years, which could be accomplished by tax credits targeted at these investors.
    • Targeting "scams" directed at entrepreneurs starting small businesses or seeking to market inventions.
    • Simplifying the paperwork required to qualify for the state procurement program for small, women-owned and minority-owned (SWAM) businesses.
    • The affordability of health care.

    October 27 Meeting

    The focus of the October 27 meeting was the difficulty of small businesses in providing health insurance for their employees. Gordon Dixon of the National Federation of Independent Businesses introduced the issue of the rising costs of health insurance. The NFIB spokesman reported that the organization's members rated health insurance as their most important issue. He urged members to keep the current free market system, which was praised as a better alternative than a single payer. Members were asked to remember, when considering requests for additional mandated health insurance benefits, that mandated benefits account for an estimated 25 % of the cost of insurance, and large companies have exempted themselves from Virginia's mandate laws by self-insuring. Dixon noted that rising costs are causing a decline in the percentage of employers that are offering health insurance to their employees. NFIB member companies providing this benefit for their employees fell from 72 % in 2002 to 65% in 2005. In response to a question from Delegate Frederick, Dixon reported that it was too early to tell if House Bill 761, enacted in 2006 to authorize small business health insurance pooling, has been successful.

    Doug Gray, Executive Director of the Virginia Association of Health Plans, briefed the Commission on health insurance issues. Health insurance affordability is related to the number of uninsured persons and the cost of and demand for health care services. He identified demographics and medical advances as two major factors driving costs. Other drivers include mandates and regulations, litigation costs, and waste, fraud and abuse.

    Gray identified four policy options and marketplace developments that may address the rate of heath care cost increases. To be successful, such developments will require the insured to have some "skin in the game," that is, to have an incentive to hold down costs by bearing a part of the costs of using the system. The options and developments include high deductible health plans, health savings accounts, consumer-driven health care with employer-funded annual allowances for workers' medical expenses, and "mandate-light" plans. Gray observed that marginal change in the marketplace is beginning, and cited the growing acceptance of high deductible health plans and health savings accounts as starting to promote consumer-directed health care in Virginia.

    Nicole Riley, Special Assistant for Legislative Affairs, provided the Commission with an overview of the Attorney General's Regulatory Reform Initiative. The Government and Regulatory Reform Task Force, a 28-member panel comprising business and community leaders, will review Virginia's regulatory framework to find regulations that can be improved or removed. Its goals include ensuring that regulations do not unnecessarily hinder free enterprise or place undue costs on Virginia taxpayers. The process by which regulations are adopted and revised will also be reviewed.

    The Attorney General has established working groups in the areas of Agriculture, Health Care and Small Business. The working groups are charged with making recommendations to the Task Force on reform of regulations in these three areas. The working groups are scheduled to finalize their recommendations to the Task Force by December. The Task Force's interim report on these three issue areas is due to the Attorney General by December or January.

    Joyce Waugh of the Roanoke Regional Chamber of Commerce provided the Commission with the results of the group's annual business climate survey. The top five concerns of members are regional economic growth, quality public education, skill level of the workforce, health care costs, and retaining young people in the region. Other issues identified by respondents included zoning and land use concerns, the cost of air service, unemployment insurance, school safety, and the cost of workers' compensation coverage.

    Waugh also identified several issues raised by the Virginia West Coalition, including the Enterprise Zone Program, funding for the Department of Business Assistance's Workforce Services program, taxes, and immigration control legislation. It was specifically recommended that the Department of Taxation send retailers, by e-mail, notice of changes in rules and rulings pertaining to the sales and use tax. While this information is on the Department's website, it is not presented chronologically. Under the current system, notice of administrative changes may be included in the back of the retailer's coupon book, and may easily be overlooked.

    January 8 Meeting

    The Small Business Commission met on the eve of the 2007 General Assembly Session to provide an opportunity to discuss any legislation that may affect Virginia's small business sector. The initiatives discussed by the members included:

    • The ability of the principal of single-member limited liability companies and other business entities to appear pro se in court proceedings;
    • The requirement that requests for State Police background checks be notarized;
    • Payday lending;
    • Health insurance pooling for small businesses;
    • Tax Department collection notices;
    • Investment tax credits; and
    • The definition of a small business for purposes of eligibility for SWAM programs, as provided in Senate Bill 768.

    The Small Business Commission plans to conduct regional public hearings around the Commonwealth next year in order to fulfill the statutory directive that it provide small business owners and advocates with a forum in which to address their concerns. Northern Virginia and Hampton Roads were mentioned as possible sites. Several members indicated that while it was beneficial to survey issues of concern to the small business community, they would like to focus in greater depth on a single issue.

    The Commission does not intend to submit a further report for publication.