RD69 - Executive Summary of Interim Activity and Work of the Virginia Small Business Commission


    Executive Summary:
    The Small Business Commission held one meeting during the 2012 interim. The meeting occurred on November 20, 2012 at 10:00 a.m. in the General Assembly Building and began with the election of officers. The Commission elected Senator Frank Ruff to serve as chair and Delegate Daniel Marshall to serve as Vice Chair.

    Duc Truong, Senior Operations Manager, provided an overview of the Virginia Jobs Investment Program (VJIP) administered by the Department of Business Assistance (DBA). VJIP is comprised of four component programs: (i) the Virginia New Jobs Program, (ii) the Workforce Retraining Program, (iii) the Small Business New Jobs Program, and (iv) the Small Business Jobs Grant Fund Program. These component programs encompass a total of 511 projects resulting in 6,016 new jobs created and 5,076 employees retrained for a total of 11,091 jobs affected. The regional breakdown of the location of the projects is as follows: Northern--26%, Central--27%, Southwest--9%, Southside--7%, Hampton Roads--8%, and the Valley--23%. The average reimbursement for each job under the program is $730.55 for a total cost of $7,232,382.43. Of the 511 projects funded by VJIP, 328 were small, women-owned, or minority-owned (SWaM) businesses with 55 of the businesses being minority-owned and 40 women-owned. Businesses that qualify under the different VJIP programs are given cash payments for each job created or retrained, subject to program limitations or availability of funds. Grant payments are made to qualified applicants on a first come-first serve basis.

    It was noted that 76% of the projects were located in three regions and that DBA should consider devoting more resources to areas with significant unemployment rates. Several questions were asked regarding how DBA markets the individual programs within VJIP. Mr. Truong stated that strong contacts are maintained with the economic development personnel of most localities and indicated ongoing advertising efforts. The major such effort was the Small Business Appreciation Week. He also noted that the online small business guide developed by the agency had been downloaded 100,000 times. It was suggested that DBA increase outreach and marketing efforts, including web-based products, in order to maximize the use and effectiveness of all VJIP programs.

    Commission members expressed concern regarding how information submitted by grant applicants is verified prior to approval and whether adequate tracking mechanisms were in place to prevent a business from inappropriately receiving a grant for the same position under the different VJIP component programs. It was suggested that DBA could request more information from applicants on the employees filling a particular position to prevent a business from begin awarded multiple grants for the same position. The Employer's Quarterly Payroll Report businesses are required to file with the Virginia Employment Commission was offered as additional verification tool. Chairman Ruff asked staff to determine if there were any legal obstacles to the VEC providing access to the reports. Regular program audits should also be considered by the agency. To ensure that grant recipients were complying with individual grant requirements, it was suggested that all programs include a provision requiring repayment of any funds received for a position that did not remain employed or did not qualify for other reasons.

    Ms. Ida McPherson, Director of the Department of Minority Business Enterprise (DMBE), provided a brief update. As of October 15, 2012, a total of 20,819 SWaM businesses had been certified by the agency. Of this amount 8,922 were small businesses, 5, 272 women-owned businesses, and 6,625 minority-owned businesses. In fiscal year 2012 over $1.4 billion in state procurement funds had been paid to certified SWaM businesses. This amounted to an increase for women-owned of $23 million from fiscal year 2011 and $95 million for minority-owned businesses.

    Director McPherson described several Department initiatives to promote SWaM participation in state procurement including (i) establishing addition satellite offices in Danville, Petersburg, Hampton and Virginia Beach, (ii) matching such SWaM businesses with a procuring agency, (iii) providing assistance in using eVA, the state's electronic procurement program, and creating a pilot program involving 100 businesses over a four month period. Director McPherson noted that the current definition of small business, which establishes a maximum of 250 employees, may not adequately address the needs of small businesses. She explained that the greatest numbers of small businesses have fewer than 16 employees and that small businesses in this range are more likely to hire additional employees. Targeting this smaller subset of small businesses would help to support increased participation by SWaM businesses and increase job creation. Director McPherson indicated that the DMBE requires certified SWaM businesses to provide 941 reports and employer identification numbers (EIN) in order to verify the number of employees and the total gross receipts to ensure that such businesses meet the criteria for certification.

    Several Commission members asked if previous disparity studies conducted on behalf of the state were being used to increase the participation in state procurement of women-owned and minority-owned businesses. Director McPherson stated that studies conducted in 2004 and 2009 did indicate disparity between the state's use availability of women-owned and minority-owned businesses and the utilization of such business by the state and included several recommendations to address the disparity. Small businesses, particularly those with the fewest number of employees, have more difficulty in bidding on large state projects. Director McPherson stated there was a need to establish mentorship programs and to review the current bonding requirements for state projects.

    Public Comment

    Doug Grey, Executive Director of the Virginia Association of Health Plans addressed the Commission on the status of health care reform. Mr. Grey stated that Virginia would likely have to use the federal exchange rather than developing a state exchange. The state will have to decide whether it will retain plan management at the state level by January 2013. For the long term the state must decide whether it will transition to a state level exchange and if so the timeline for the transfer from the federal exchange. It was noted that the availability of federal funding for development of state exchanges expires at the end of 2014.

    Discussion among the commission members then proceeded. Ms. Riley noted that one area of future inquiry for the Commission would be Worker's Compensation. Virginia employers were experiencing an increase in premiums because of rising medical costs. She stated that reform should be considered to set up a Medicare based fee structure similar to what 43 other states have established. She cited examples of how the process could be changed to lower costs including (i) paying discounted rates for multiple procedures performed in one operation, (ii) reviewing the amount of time allowed for filing a claim, and (iii) considering whether physician assistants should be reimbursed at a discounted rate. A review of reform legislation in this area will be included in future deliberations of the Commission.

    Chairman Ruff instructed staff to inform the standing committee and subcommittee chairs that they have proposed legislation reviewed by the Commission to evaluate the impact small businesses. Vice Chairman Marshall suggested that the Commission establish subject matter subcommittees and working groups to develop a uniform method for evaluating and resolving issues and propose legislation.

    Chairman Ruff indicated that the Commission would schedule a meeting in April 2013 prior to the reconvened session to begin its review any proposed legislation that may be referred from the 2013 legislative session.