RD124 - Executive Summary of the 2013 Interim Activity and Work of the Virginia Small Business Commission

    Executive Summary:
    Pursuant to the powers and duties authorized under § 30-183 of the Code of Virginia, the Small Business Commission (Commission) held four meetings during the 2013 interim. In addition, the Commission established an HB 2198 Work Group, which held one meeting.

    April 2, 2013

    The Commission received an overview of small business–related legislation from the 2013 legislative session. After the overview, staff presented three bills and issues that were referred to the Commission for study during the 2013 interim; (i) HB 1935, relating to the Self-Employment Assistance Program; (ii) HB 1936, relating to the definition of small business; and (iii) HB 2198, relating to commercial credit reporting. The Commission then proceeded to establish its work plan for the interim.

    Staff also discussed a request for the Commission to jointly study a plan for the restructuring of Virginia's tax code. House Joint Resolution 755 (2013) provided for the Virginia Municipal League, the Virginia Association of Counties, the Commission, and the Manufacturing Development (MDC) to evaluate and develop a plan for a major tax restructuring that would, among other things, provide for the elimination of the BPOL tax, machine and tools tax (M&T), and merchants' capital tax. The resolution was passed by in the Senate Committee on Rules, which requested the Commission and MDC to take on the review of the subject matter it encompassed, including three charges: (i) evaluate the Thomas Jefferson Institute for Public Policy's Virginia State Tax Analysis Modeling Program; (ii) evaluate lowering and broadening the state sales tax, eliminating lower personal income tax brackets, and eliminating the BPOL, M&T, and merchants' capital taxes and consider other tax restructuring plans to accomplish these ends; and (iii) ensure that any proposed plan is mutually beneficial to small businesses, the manufacturing sector, local government, and the Commonwealth and that the provisions are not redundant.

    June 26, 2013

    The meeting began with the presentation of Delegate Michael Watson, the patron of HB 2198. This legislation would establish a procedure through which a Virginia business that is the subject of a commercial credit report may annually view a copy of the report upon request and at no cost. The business could obtain the details of any negative or disputed information and request its removal or correction by filing a summary statement of disagreement with the commercial credit reporting agency (CCRA).

    Delegate Watson explained that CCRAs gather information on companies through various sources to compile a commercial credit report that is sold to third parties interested in the companies' financial health. Purchasers of the information include i) banks, to determine if they will loan money; ii) vendors, to determine if and at what costs they will set up credit terms; and iii) potential customers, to assess the financial health of a company before deciding to do business with it. Negative data puts small businesses in particular at risk of losing the critical ability to purchase goods and services, secure a loan, or obtain new customers. Commercial credit reports routinely include inaccurate and outdated data, and such erroneous data presents a significant obstruction to business activities, leading to loss of revenue or even complete failure of a business without any wrongdoing by the business. Since the federal Fair Credit Reporting Act (FCRA) applies only to consumers, HB 2198 aims to ensure reporting accuracy and prevent erroneous information from inadvertently damaging businesses.

    Chairman Frank Ruff then called for opposition to HB 2198. The first speaker, James Wise, spoke on behalf of the National Association of Credit Management, an organization of business credit and financial management professionals. Mr. Wise stressed that commercial credit professionals have the important responsibility for deciding whether to issue unsecured credit to businesses. He noted that while FCRA pertains only to consumer credit, the Equal Credit Opportunity Act (ECOA) does include some protections by giving a business the right to know why it has been denied credit. Delegate John Cox asked Mr. Wise if he agreed that there were some dubious entities operating in the commercial credit world and, if so, what he would offer as a solution. Mr. Wise agreed that there were some dubious entities but maintained that the solution was to go after such entities and to do so in a manner that would not impede the free flow of credit information. Delegate Cox then asked what was problematic about stopping the flow of fraudulent information. Mr. Wise responded that the manner in which credit information was collected was not an issue until the problems associated with dubious marketing practices arose. Commission member Mr. John E. Gordon noted that while the ECOA provided a remedy, it was not a proactive remedy; rather, it was more a reactive right to be told by a creditor why credit has been denied.

    After hearing from both sides, the Commission determined that additional review of the bill would be necessary and took no final action. The Commission established the HB 2198 Work Group, consisting of Commission members Owen Van Syckle and Robert Marcus. Staff then provided updates on the Joint Study with the Manufacturing Development Commission and the Special General Laws Joint Subcommittee Studying the Public Procurement Act.

    September 10, 2013

    The Commission received a presentation by Mr. Gregory Moulthrop, Chief Executive Officer of Economic Technology Systems, a supply chain management consulting company. Mr. Moulthrop indicated that the company provides its services to businesses in restaurant and retail industry as well as vegetable produce farmers, vineyards, and seafood producers. He stated that his business sought to make local business-to-business commerce more profitable for both the buyer and the supplier through effective supply chain management. According to Mr. Moulthrop, the lack of supply chain management has led many small businesses to fall behind as markets move to a more global economy. Small businesses lack the resources to invest in building and inspecting their supply chain to ensure smooth operations and improved profitability. He stated that there is a need to address this shortfall by providing viable solutions to small businesses to address supply chain management issues, thereby enabling such businesses to thrive, particularly at the local and regional level.

    The Commission then reviewed two bills referred for study over the interim, HB 1935 and HB 1936. Delegate Alfonso H. Lopez, the patron of both bills, presented an overview of the premise of each of the bills. It was suggested that further review of the bills be delayed until the last meeting of the Commission to allow Delegate Lopez the opportunity to revise his proposals. The Commission then received the report of the HB 2198 Work Group, composed of Mr. Van Syckle and Mr. Robert Marcus. This work group met on August 29, 2013, in the General Assembly Building in Richmond, Virginia, with Commission members Delegate Mark L. Cole and Delegate John A. Cox in attendance as observers. After some discussion, it was determined by consensus that the work group would continue its review and report to the full Commission at the last meeting of the interim.

    December 2, 2013

    The Commission received a presentation from the Virginia Small Business Partnership (VSBP) on its Virginia Small Business Summit. VSBP President Tim Ciampaglio stated that the summit consists of structured discussions in five policy areas with the objective of establishing recommendations in each of the areas. The policy areas include (i) workforce development, (ii) health care, (iii) public-private partnerships, (iv) tax policy, and (v) transportation. Mr. Barry E. Duval then presented on behalf of the Virginia Chamber of Commerce on its "Blueprint Virginia" business plan (Blueprint). Mr. Duval stated that the Blueprint was presented at the Chamber's 2013 annual Virginia Economic Summit. Industry councils were used to focus efforts on developing economic develop policy in ten areas: 1) workforce, 2) business climate and economic development, 3) health care, 4) energy, 5) environment, 6) education, 7) transportation, 8) technology, innovation and startups, 9) manufacturing, and 10) military and veterans affairs. Mr. Duval detailed policy recommendations within each of the 10 areas.

    The Commission then received the report of the HB 2198 Work Group. Commission member Van Syckle reported that based on the information that has been developed over the course of the 2013 interim, including the testimony provided at previous work group and Commission meetings and the public comment that has been received, it is apparent that the parties remain substantially apart regarding the basic premise of the legislation. Mr. Van Syckle stated that despite the efforts of the work group, the legislation was being returned to the Commission by the work group without a recommendation. After discussion among the Commission members, the review of the legislation concluded with no action being taken.

    The Commission then completed its review of the two bills that had been referred for study: HB 1935, which seeks to establish a Self-Employment Assistance Program in the state, and HB 1936, which would change the state's definition of "small business" to mirror the definition used by the federal government. Delegate Alphonso Lopez, patron of the bills, presented revisions to each bill designed to address some of the concerns raised by Commission members.

    Regarding HB 1935, Delegate Lopez presented a version of the bill that would change the measure to a pilot program limited to 100 qualified participants. Under the program, up to 100 unemployed individuals would be able to receive unemployment compensation while they are establishing their own businesses and becoming self-employed. The revised version of the bill also provides for the Virginia Employment Commission to report annually to the Governor and the General Assembly on (i) the total number of participants, (ii) the fiscal status of the Program, and (iii) any other information that will assist in determining the viability of the Program. After some discussion, no action was taken by the Commission.

    Regarding HB 1936, Delegate Lopez offered a version of the bill that would change the definition of small business to require the business to have 250 or fewer employees and average annual gross receipts of $10 million or less averaged over the previous three years. As currently defined, a small business is required to meet one or the other of these conditions. Delegate Lopez stated that this change would not affect most current small businesses and would prevent abuses. Delegate Daniel Marshall asked if the proposal had been presented to the business community. Delegate Lopez responded that it had not. Delegate Marshall and other members of the Commission expressed concern that more information was needed regarding the effect of the legislation on the small business community. The Commission concluded its discussion without taking any action on the bill.