[Senate Hearing 107-339] [From the U.S. Government Publishing Office] S. Hrg. 107-339 REVITALIZING RURAL AMERICA: WHAT CAN THE FEDERAL GOVERNMENT DO TO PROMOTE SMALL BUSINESS GROWTH AND DEVELOPMENT IN RURAL COMMUNITIES? ======================================================================= FIELD HEARING BEFORE THE COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP UNITED STATES SENATE ONE HUNDRED SEVENTH CONGRESS FIRST SESSION __________ AUGUST 16, 2001 __________ Printed for the Committee on Small Business and Entrepreneurship Available via the World Wide Web: http://www.access.gpo.gov/congress/ senate U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 2002 ____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001 COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP ONE HUNDRED SEVENTH CONGRESS ---------- JOHN F. KERRY, Massachusetts, Chairman CARL LEVIN, Michigan CHRISTOPHER S. BOND, Missouri TOM HARKIN, Iowa CONRAD BURNS, Montana JOSEPH I. LIEBERMAN, Connecticut ROBERT F. BENNETT, Utah PAUL D. WELLSTONE, Minnesota OLYMPIA J. SNOWE, Maine MAX CLELAND, Georgia MICHAEL ENZI, Wyoming MARY LANDRIEU, Louisiana PETER G. FITZGERALD, Illinois JOHN EDWARDS, North Carolina MIKE CRAPO, Idaho MARIA CANTWELL, Washington GEORGE ALLEN, Virginia JEAN CARNAHAN, Missouri JOHN ENSIGN, Nevada Patricia R. Forbes, Democratic Staff Director and Chief Counsel Emilia DiSanto, Republican Staff Director Paul H. Cooksey, Republican Chief Counsel C O N T E N T S ---------- Opening Statements Page Wellstone, The Honorable Paul D., a United States Senator from Minnesota...................................................... 2 Witness Testimony Meyer, The Honorable Larry, Mayor, St. Cloud, MN................. 1 Kittleson, The Honorable Paul, Mayor, Benson, MN................. 7 Daum, Edward, director, Minnesota District Office, U.S. Small Business Administration, Minneapolis, MN....................... 11 Wallace, Prince, president, AquaCare, International, Inc., Maple Grove, MN...................................................... 18 Hasskamp, Dave, director, Aitkin County Growth, Inc., Aitkin, MN. 38 Bouta, Dean, general manager, Bennett Office Technologies, and chairman, KandiLink, Willmar, MN............................... 55 Struck, Renae, director of Human Resources, EMR Innovations, St. Cloud, MN...................................................... 60 Stewart, Bonnie, director, Minnesota Women's Business Center, Fosston, MN.................................................... 65 Spang, William, president and chief executive officer, Mountain Iron First State Bank, Mountain Iron, MN....................... 71 Phillips, Mark, president, Iron Range Ventures, Virginia, MN..... 76 Matthews, Mary, president, Northeast Entrepreneur Fund, Inc., Virginia, MN................................................... 81 Alphabetical Listing and Appendix Material Submitted Bouta, Dean Testimony...................................................... 55 Prepared statement............................................. 57 Daum Edward Testimony...................................................... 11 Prepared statement............................................. 13 Hasskamp, Dave Testimony...................................................... 38 Letters........................................................ 40 Kittleson, The Honorable Paul Testimony...................................................... 7 Prepared statement............................................. 9 Matthews, Mary Testimony...................................................... 81 Prepared statement............................................. 84 Phillips, Mark Testimony...................................................... 76 Prepared statement............................................. 79 Spang, William Testimony...................................................... 71 Prepared statement............................................. 74 Stewart, Bonnie Testimony...................................................... 65 Prepared statement............................................. 68 Struck, Renae Testimony...................................................... 60 Prepared statement............................................. 63 Wallace, Prince Testimony...................................................... 18 Prepared statement............................................. 20 Appendix Material.............................................. 112 Wellstone, The Honorable Paul D. Opening statement.............................................. 2 Prepared statement............................................. 5 Comments for the Record Harvey, Keith D., chairman of the board; Spraag, Cheryl, president & CEO, Virginia/Gilbert Mountain Iron Area Chamber of Commerce, Mountain Iron, MN, letter............................ 108 Mercil, Steven, CEO, Minnesota Investment Network Corporations, St. Paul, MN, prepared testimony............................... 110 Wallace, Prince, data prepared by Bruce P. Corrie, Ph.D., Concordia University, St. Paul, MN............................. 112 REVITALIZING RURAL AMERICA: WHAT CAN THE FEDERAL GOVERNMENT DO TO PROMOTE SMALL BUSINESS GROWTH AND DEVELOPMENT IN RURAL COMMUNITIES? ---------- THURSDAY, AUGUST 16, 2001 United States Senate, Committee on Small Business and Entrepreneurship, Washington, D.C. The Committee met, pursuant to notice, at 10:21 a.m., at the St. Cloud City Council Chambers, St. Cloud, Minnesota, the Honorable Paul D. Wellstone, presiding. Present: Senator Wellstone. OPENING STATEMENT OF THE HONORABLE LARRY MEYER, MAYOR, ST. CLOUD, MINNESOTA Mayor Meyer. Hi. I am Mayor Larry Meyer, and welcome to St. Cloud. We are going to get started here just a little bit late. I want to welcome you to our city, and we are going to adjust that mic there a little bit, thank you very much. You are sitting in the old Central School gymnasium. The city of St. Cloud bought this building from the school district sometime ago, so if you felt like you were ready to participate in a basketball game, that is because you are sitting in the first childproof bleachers manufactured in the State of Minnesota, about 1930 sometime. We just put carpet over the top of them. But they were poured concrete, and they were very difficult to get out of there, as we found out when we removed them from the other site and put the City Mayor's office in. But like many of you in rural Minnesota, you know how far you have got to stretch a buck to make things go, and we all know that business is the lifeblood of our communities in outstate Minnesota. St. Cloud has certainly some advantages that many of your communities don't that are out further from the Metro area. Certainly St. Cloud, as many communities have benefited, for instance, with new technology, better telecom resources, better technology, has allowed location not to matter as much as it did before in business development. But we still need the Federal Government's help in so many ways, and as Senator Wellstone knows, St. Cloud is always lurking in the halls out there in Washington, either us or with our lobbyists, because the resources they have are so important, so critical for us, particularly in the area of transportation. For us, that always seems the No. 1 concern: better roads, better highways, better interchanges, and, of course, our airport. Many of you, I realize, have other issues, and we will be sharing those with the Senator and others today. So, Senator Wellstone--and I also want to recognize Representative Schumacher and Representative Opatz--thank you so much for coming and being here with us today, and I hope you have a very productive day here in St. Cloud. OPENING STATEMENT OF THE HONORABLE PAUL D. WELLSTONE, A UNITED STATES SENATOR FROM MINNESOTA Senator Wellstone. Thank you. [Applause.] Senator Wellstone. I want to thank Representative Opatz. I also want to say, you all may have very busy schedules, but if you are going to be here at all for any length of time, please come up here with me. I feel funny with you being out there. Please join me. Mr. Opatz. I am State Representative Joe Opatz, representing St. Cloud and Sauk Rapids, and I also want to welcome all of you here in our community, and also a strong thank you to Senator Wellstone and the Committee for your willingness to come out here and hear some of the difficult issues that we are facing in outstate Minnesota, and lend my support as a State legislator to say that addressing some of these issues as we see a changing economy, whether it is health care or schools or small businesses, needs to be a partnership between the Federal Government and the assistance of the Senate, the State Legislature, as well as individual communities like St. Cloud and many other communities that are here today. So welcome to St. Cloud, and I look forward to an interesting and thoughtful agenda, and I also want to recognize Leslie Schumacher, and maybe she would like to join-- Senator Wellstone. I would love it. Please. Ms. Schumacher. Well, I too want to welcome everyone here. I am glad I was able to come this morning. I had a little bit of short notice, having been on vacation, but I think this is critical to bring these issues to the forefront, and being on the Policy Committee for the agricultural and rural development issues in the State of Minnesota, I am happy to be here, and anxious to hear the testimony and thoughts and forward thinking that is going to come out of today's meeting. So thank you all for being here today. Senator Wellstone. Thank you, Representative Schumacher. Let me thank Joe and Leslie for their remarks, and Larry, as well. Let me just recognize very briefly a few people, and then we are going to go right to the hearing, and I am going to be uncharacteristically brief. I know that brings a smile to some of your faces, but I am going to--because there is a lot of really good testimony, and I realize yesterday we had a gathering, and it was not a formal committee hearing, but just a gathering with the small business community, and I could not believe the number of people that turned out and the number of people who wanted to speak and had things to say and great contributions to make. So I am going to try to move this along. I know John DaSilva has joined us from Senator Kerry's staff on the Small Business Committee and he is going to help keep everybody on track. Perry Lange from my staff came out here from Washington, D.C. Perry is a person who does work in the small business community. Connie Lewis is--I am not going to do justice to everybody--the Director of my Minnesota office out here, works a lot on small business issues. And then Toni Merdan from Colin Peterson's office. Toni, thank you so much. Come up here. No, I am serious, please come up. Come up here. Colleen Landkamer is a Blue Earth County Commissioner. Colleen, please join us up here. I am serious, I would like you to. The other thing I just want to say is, I see Art here, and I see Joe and others. I would like to thank some of the veterans that are here. Your medical facility is extremely important to the veterans community, and the veterans community in St. Cloud and West Central Minnesota I think has a voice of great dignity, so my thanks to all of you for being here. Before we get started, I want to thank Brian and David, who are the interpreters. They wanted to also say something before we get going. Interpreter. We just wanted to check if there are any deaf individuals in the audience who need interpreting services? Anyone? We will wait for a while to make sure. Senator Wellstone. Well, what I would suggest, if you do not mind interpreting, that would be great. I am very pleased that you are here, and I do not think there is any way to ever have a formal hearing without interpreters, so thank you for being here. With that, the Committee is going to come to order, and let me call the first panel. As you are coming up, I will make my 1-minute worth of remarks. Paul Kittelson, Mayor of Benson. You know what? I have got a lot to say about everybody, and maybe what I will do is just be as brief as I can. Instrumental in building a new fire hall, new ambulance facility, new water tower, and also recently Benson has been selected as the site of the Fibrominn generating plant. Ed Daum, who is head of the Minnesota SBA office since 1987. I said this yesterday. I believe that he--and you can think I am being quite the politician here--I think he is the best district director in the United States. We have the most successful programs in our State because of Ed Daum. Ed Daum will be coming up. Prince Wallace, who is originally from Nassau, Bahamas. He came to the United States as a student of St. John's University--I think we all know where St. John's is, am I correct?--and currently owns three businesses in Minnesota, one in the Twin Cities, and then two others. I guess there were more, am I correct? Is that right? Mr. Wallace. Yes. Senator Wellstone. Prince also joined us yesterday, as well. For my own part, I think I could go on and on. I think I will just make two points. One I made earlier as some of us were talking. I am convinced this is the best way for me to summarize the total of my viewpoint about this hearing and about why it is important. Every 2 weeks, I try to be in a school. Usually it is high schools, and all too often in Greater Minnesota I will talk to students, and they will say to me that they have heard the following advice which Sheila and I gave to our children when we were all growing up and who have children themselves: the ticket to getting ahead is getting an education. But in Greater Minnesota, in too many communities in Greater Minnesota, the translation of that is, ``so you can get out of this community, because there is nothing here.'' Colleen is nodding her head. That makes no sense whatsoever. For my own part, I put emphasis on the three E's: education, entrepreneurship, and empowerment. The empowerment piece, by the way, is when young people, and not such young people, decide, listen, what happens in this community is not independent of what we do. For young people to want to stay in our communities in Greater Minnesota, they have to answer the following two questions in the affirmative. First question: Can I afford to live in this community? If I am farming, can I get a decent price? If I am working, can I find a good-wage job? And if I want to be an entrepreneur, can I grow a business successfully? Then the second people ask: Do I want to live in the community? That means quality-of-life issues. All of those issues that have to do with good schools and good health care or good public transportation, or affordable housing, or affordable child care are not just urban issues. In many ways, they are even more vitally important in Greater Minnesota. So to me, this hearing is all about our future. My final point, I would rather that the men and women who make the capital investment decisions that determine whether or not there are going to be businesses and jobs in our communities, live in our communities, and know the people in our communities, and care about our communities, than those decisions be made by a group of people over martinis halfway across the world. We are much more interested in our own homegrown economies, in our own business people, in our own self-reliant, self-sufficient communities, and that is what I think this hearing is about. [The prepared statement of Senator Wellstone follows:] [GRAPHIC] [TIFF OMITTED] T8251.001 [GRAPHIC] [TIFF OMITTED] T8251.002 Senator Wellstone. With that, we will move forward and start out with Mayor Kittelson. Thank you for joining us, Mayor. STATEMENT OF PAUL KITTELSON, MAYOR, BENSON, MINNESOTA Mr. Kittelson. Senator Wellstone, staff, and guests, I am thankful for the opportunity to speak to the health of our rural communities. There is much that is good about our rural lifestyle. My experience is that people from all over the United States cherish the work ethic of their rural populace. There is a reason for this, and it has to do with lifestyle, a sense of community, a sense of family, responsibility and personal pride. In our community, like many others, many of those who have retired from work in the metropolitan areas come out to our towns to retire. They are tired of the hustle and bustle of the cities, and they want a quieter lifestyle. We are continuing to try and meet their needs. We try to have senior housing that will fit the various economic needs. We have an extensive public transit system. We try to keep a hospital going. I think we have done a wonderful job making our community senior- friendly, and we will continue to try harder. We, in our rural communities, try to stimulate and attract businesses, not only for our economic health but also to keep our young families at the center of attention. In order to keep a healthy rural area, we must have young families, and in order to have young families, there must be opportunities for them, either in agriculture or business and industry. It behooves us to try to make our rural areas strong so some of those same values I spoke of continue and, for that matter, ensure that there is a workforce available. It is difficult for us to attract businesses for a variety of reasons. They are not necessarily graded in order, but the first one is, of course, transportation. Many of us are not on the interstate system, and depending on the various highways and byways throughout the State, transporting goods and materials often is not cost effective. Benson was selected to be the site of the Fibrominn project. It is a $110 million project. We happen to be in the center of one thing the metropolitans do not have--turkey litter. This will be the first poultry-burning, electricity-producing plant in the United States, and it will be the biggest in the world. We will have hundreds, if not thousands, of people visiting that plant from everywhere in the world. Are they going to fly into Minneapolis--St. Paul and drive to Benson? I am sure they would prefer to fly to our town. We have a 4,000-foot runway, and many on our airport commission feel we ought to have a 4,500- to 5,000-foot runway. Where do we get the money to build it? I believe improved highways and expanded airports will benefit the rural areas. Communications. I spoke to our biggest employer in the city of Benson, and I asked him: Of all of the points we are talking about, which one is most important? He said communications, the Internet system, that is No. 1. Some say that businesses would relocate in rural communities if they were on the electronic highway, and I think I agree. Large telephone providers haven't to this point found it economically feasible to provide it. We have a few cable companies providing broad band services over fiber, but most of the State still operates on a 56K modem connected to a telephone line. It is slow, and almost prehistoric. Until the Government insists on equal access for all communities, there is going to be this disparity and little opportunity. It seems to me that there are a multitude of businesses that could operate more efficiently in small town USA if they had full and fast Internet capabilities. Finances. Most of our communities operate on a relatively small budget. Our residents want streets, water, sewer, police protection, electricity, fire department, parks, a library, et cetera. When it comes to budgeting for all of this, there is very little left for development. The only thing we, in our rural communities, had going for us was tax increment financing. Some politicians, mostly from large tax capacity districts, want to end this one tool we have had. I believe it was used wisely in most cases, and it appears that tool is disappearing. There seems to be some thought that the rural areas take care of themselves. This is an area filled disproportionately with retired folks, lower-paying jobs, a rural way of life that is in flux, and they seem to tell us, if you want the things that other citizens have, you are going to have to dig deeper. You have problems, figure them out. Our aging population is growing disproportionately in the rural areas of the country for obvious reasons. We in Benson, Minnesota, try to keep a hospital going with Medicare paying 54 percent of the costs. This outmoded system pays us the least, larger cities in the State more, and other States in the United States much more. The hospital is needed in our town. We have had to ask the taxpayers for money to keep it going. Along with the aging, we have the problem with the young people, how to get the best education possible in a declining enrollment era. Good schools and medical services are necessary to afford any business or industry for relocation. At this particular point, I would like to commend Senator Wellstone. I am talking to the converted. He has backed bills, Senate bills 885, 830, 9776, 706, all of which help our rural hospitals. I do not think most of us want to see our rural communities dry up and blow away. I do not believe this is good for our large cities or for America. I do not have the solution, but my sense is that improving transportation, giving everybody equal access to the Internet, making moneys available for business start-ups and relocation, and equalizing the Medicare payments will go a long way toward helping solve the problems of our communities. The farm economy is also basic to us, because for all intents and purposes, our communities do not end at city limits, but they extend for miles around us. I see the things that are being done for Third World countries and wonder: Can we expect less? I believe that if we focus on the problems and muster the tools available to us, as well as initiate others that may be needed, we can solve the problems of rural Minnesota and America. I for one am willing to help find any solution any way I can. Thank you very much. [The prepared statement of Mr. Kittelson follows:] [GRAPHIC] [TIFF OMITTED] T8251.003 [GRAPHIC] [TIFF OMITTED] T8251.004 Senator Wellstone. Thank you, Mayor. Ed Daum. STATEMENT OF EDWARD DAUM, DIRECTOR, MINNESOTA DISTRICT OFFICE, UNITED STATES SMALL BUSINESS ADMINISTRATION, MINNEAPOLIS, MINNESOTA Mr. Daum. Thank you, Senator. Thank you, Senator, for inviting me to testify on behalf of the U.S. Small Business Administration on our role in rural economic development. SBA is beginning a new era, with a new Administration in the White House and a newly confirmed Administrator, Hector Barreto. Our new Administrator is a small business person, and understands the problems and issues that concern small business owners. Mr. Barreto wants to ensure that SBA is meeting the needs of its customers, the 25-million plus small businesses throughout the country. SBA will be working on innovative new ways to meet small business community needs, including those located in rural areas. SBA's initiative is to help people get into business and stay in business, and we accomplish this through a variety of programs and working with many resource partners. One of the newest programs is the New Markets Venture Capital Program. This is designed to combine venture capital in low-income rural and urban areas. Nationally, seven companies were approved during the first round of applications, and there will be another request for more companies to be a part of this program in late spring of 2002. SBA recognizes regulatory compliance is a major concern for small businesses. To address this, SBA has established working relationships with each of the Federal agencies, and this is a high priority for our new Administrator. SBA's financial assistance programs cover a wide range of business needs. They include microloans for very small start-up businesses with loans up to $35,000. In Minnesota, we have six active microlenders; four of those are located in rural areas. SBA has provided $5 million in loan funds and almost $4 million in technical assistance grants. Then the SBA Certified Development Company program, this program is specifically for the purchase of plant and equipment. Over $63 million in loans were made in fiscal year 2000. The 7(a) loan program, which is a loan guarantee program, over $234 million in guaranteed loans were made in fiscal year 2000. Small Business Investment Companies invest in small businesses during their growth stages. Over $66 million was invested by SBICs in Minnesota in fiscal year 2000. Like the finance programs, SBA has several partners that deliver the management assistance programs. Minnesota is very fortunate to have a business partner such as SCORE. It is an all-volunteer organization that conducts management assistance workshops, provides counseling and training for small businesses. We currently have 510 SCORE members statewide. Fourteen SCORE offices are located outside the Twin City metro area, and three are located within the metro area. The Small Business Development Centers are another very important resource for the SBA in program delivery. The SBDCs provide counseling and technical assistance. They are located in 17 different sites throughout Minnesota. Fifteen are located outside the metro area, and two are located within the metro area. The SBA sponsors two Women's Business Centers in Minnesota. These centers specifically provide women-owned businesses with management and technical assistance. One is located in rural Minnesota and one within the metro area. In the area of Federal procurement, the SBA has several roles, including helping small businesses get Government contracts. One program is the HUBZone program. It provides Federal contracting opportunities for qualified small businesses located in distressed rural and urban areas. As for outreach programs, for those that have computer access, SBA's web site and the online classroom is available 24 hours a day. The SBA web site, www.sba.gov, brings SBA into your home or office at the touch of your keyboard. Well, thank you for inviting me here today, and a special thank you to Senator Wellstone who has been such a very strong advocate of small business in Minnesota and as a member of the Senate Committee on Small Business and Entrepreneurship. [The prepared statement of Mr. Daum follows:] [GRAPHIC] [TIFF OMITTED] T8251.005 [GRAPHIC] [TIFF OMITTED] T8251.006 [GRAPHIC] [TIFF OMITTED] T8251.007 [GRAPHIC] [TIFF OMITTED] T8251.008 [GRAPHIC] [TIFF OMITTED] T8251.009 Senator Wellstone. Thank you very much. Mr. Prince Wallace. STATEMENT OF PRINCE WALLACE, PRESIDENT, AQUACARE INTERNATIONAL, INC., MAPLE GROVE, MINNESOTA Mr. Wallace. Thank you, Senator Wellstone, staff, and guests. My name is Prince Wallace. Originally I came from the Bahamas to attend St. John's University, fell in love with Minnesota and its people, and here I am today. As a small business person, I find myself in a unique position, being a minority business owner, as well as a rural business owner, and the fact that my wife runs one of our companies as a woman-owned business. My rural entrepreneurship experience has come largely through West Central Environmental Consultants. We are a small company in Morris, Minnesota. However, credit should be given to the four individuals, the founders who created this entity, to meet the environmental needs of rural Minnesota. In addition, it provided the opportunity for talented students graduating from the University of Minnesota--Morris to work and live in a rural community. Today, West Central employs approximately 40 employees. In addition to my entrepreneurial business experience, I was fortunate to be a part of the Minnesota Rural Entrepreneurship Academy, which was created through a unique partnership between the Ewing Marion Kauffman Foundation and its Center for Entrepreneurial Leadership and Minnesota Rural Partners. Its mission is to build and support a vital rural Minnesota. Minnesota was selected, along with three other States, to receive the Kauffman technical assistance grant. The purpose of the grant and the goal of the academy were to identify challenges to rural entrepreneurs and discuss and recommend potential solutions. Attached is a final report from the Minnesota Rural Entrepreneurship Academy.\1\ --------------------------------------------------------------------------- \1\ This report is located on page 25. --------------------------------------------------------------------------- Why is rural entrepreneurship development vital in our State? Even though the Twin Cities has experienced tremendous growth and economic prosperity, and manufacturing services and trade make up over 50 percent of our State's gross State product, Minnesota's economy is still dependent on agriculture. However, Minnesota's agricultural economy is changing drastically, and this change will no doubt have profound effects on our rural communities. In order to achieve economies of scale, farms, crops, and livestock are becoming larger. This trend will eventually eliminate the small family farms. The question then becomes, where will these families go, and what will they do? Hopefully, we, as a society, will have the vision and the will to reinvest back into our rural communities so that these same families who are being uprooted will experience a new entrepreneurial renaissance. The prime example where we as a society have invested in our society that I would like for us to recall is as follows: After World War II, the United States embarked on what I would consider a new economic investment strategy. It is called the GI bill. This large-scale investment into the education of our young people is one of the main reasons the United States is what it is today--strong, and the most powerful Nation on Earth. We need to do the same for our rural communities. The Minnesota Rural Entrepreneurship Academy Report spells out in detail what the issues are and their solutions. The four areas of significant challenges are capital, technical assistance, infrastructure, and culture and education. However, as a small business person who has experience in the Twin Cities, as well as in rural Minnesota, the most important of the four areas is the need for access to capital. I was fortunate to have time to spend with Senator Wellstone and a group of other minority businesses, and I guarantee you that the most resounding No. 1 issue was access to capital. I would like to talk now about a new look at the farm, and this is somewhat controversial, and that is, I would say, the 21st century look at the farm. The typical view of a farm today is that it produces large-scale crop or livestock. This view needs to change, and view the farm as any other asset on the balance sheet, where one is always questioning how to make this asset produce more. Farming in the 21st century needs to be viewed as an entity which can generate many sources of revenue on a continual 24-hour basis. For example, a 2,600-sow operation's main source of revenue is to generate piglets. What about other sources of revenue, such as manure waste converted to gas that can generate electricity, fuel to power machinery, including automobiles, solids converted to fertilizer to enhance our dying--and I would like to emphasize dying--soils; and liquid fertilizer to grow specialty crops hydro- ponically, such as strawberries, tomatoes, lettuces, et cetera. There is some additional information I would like to add in terms of minority businesses in rural Minnesota. Bruce Corrie stated yesterday, it is probably one of Minnesota's best-kept secrets, in the sense that in rural Minnesota, minority and American Indian businesses are growing. And so I can also make this part of the record. Senator Wellstone. Absolutely. Thank you. Mr. Wallace. Thank you. [The prepared statement of Mr. Wallace follows:] [GRAPHIC] [TIFF OMITTED] T8251.010 [GRAPHIC] [TIFF OMITTED] T8251.011 [GRAPHIC] [TIFF OMITTED] T8251.012 [GRAPHIC] [TIFF OMITTED] T8251.013 [GRAPHIC] [TIFF OMITTED] T8251.014 [GRAPHIC] [TIFF OMITTED] T8251.015 [GRAPHIC] [TIFF OMITTED] T8251.016 [GRAPHIC] [TIFF OMITTED] T8251.017 [GRAPHIC] [TIFF OMITTED] T8251.018 [GRAPHIC] [TIFF OMITTED] T8251.019 [GRAPHIC] [TIFF OMITTED] T8251.020 [GRAPHIC] [TIFF OMITTED] T8251.021 [GRAPHIC] [TIFF OMITTED] T8251.022 A[GRAPHIC] [TIFF OMITTED] T8251.023 [GRAPHIC] [TIFF OMITTED] T8251.024 [GRAPHIC] [TIFF OMITTED] T8251.025 [GRAPHIC] [TIFF OMITTED] T8251.026 Senator Wellstone. Thank you very much, Mr. Wallace. What I am going to do, I mentioned this to Colleen and Leslie, and to everyone up here, what I am going to do is rather than ask questions, there is a really good turnout here today, and I want people to have a chance to speak. So rather than asking questions, I think we won't do that. We will listen to everybody on the panel, and then open it up for discussion and do it that way. The quickest observations, when Prince Wallace talked about access to capital, we in the other room had talked--and, again, we won't make this the focus of the hearing, but for those of you, either vendors of the small business community, how many of you are aware of the fact that there is a proposal now to increase the fees in the 7(a) program? How many of you are aware of that? OK. Well, some. I mention that, because those of you who raised your hand, you know why I asked the question. I think one of the things we want to make sure of--this can be a strong message from Minnesota. I do not hear any complaints about the 7(a) program from borrowers or lenders, so this is critically important, access to capital, and we want to be sure we maintain the funding for that program. Then, Paul, the only thing I want to add to what you have said is I have been interested in the last few years in a real coalition in working on this, and I am determined to get it either in the ag bill or the workforce development bill. I think there is a tremendous potential. Joe, you will probably focus on this, as well. As long as the information technology businesses are doing well, we have to worry some about where the economy is going. I am convinced for Greater Minnesota there is a real potential for many people to telework from their home or from a satellite office. And, you know, if the companies say we need people, people can work for a company in the Twin Cities or a company halfway across the world, and if these companies are looking for people with good work ethic, and they are looking for people who are interested in this, we have it. But we are not going to do it if this digital divide is here. I was remiss in not mentioning the importance of that technology and that infrastructure, and thanks for pinpointing that, because that is a critical, critical issue. The only other thing--I could go on and on, but going back to what Mr. Wallace said again, and when you were talking about family farm, the two things that occurred to me about the 21st century, one is that I think part of the decline of some family farmers has been the inevitability of a stacked deck. I think it has been policies that have been far more weighted toward larger operations and conglomerate sources than the family farm operation, that is, the person who lives on the land and works on the land. But what you said about diversification, in the Farm bill that comes out of the Senate, I guarantee you that there is going to be an energy section that is going to deal with the potential of renewable energy, wind technology, small business, clean alternative fuels, much of which comes from Minnesota. Biodiesel, ethanol, you name it. The other thing is there is going to be much more of an emphasis on conservation and actually giving people credits and incentives for what they are doing with the land in production, above and beyond the Conservation Reserve Program. I think, frankly, that will be all for the better, in terms of the kind of agriculture we want. Well, why don't we--let me just thank you. I have questions and I think other people do also. Can we wait and do that, go through everybody? Thank you so much for your testimony. Let me call up the second panel, Barriers to Small Business Growth. Dean Bouta, general manager of Better Office Technologies, which provide Internet services to the Willmar area. Again, I am not giving you all the proper introduction, but Dave Hasskamp is the director of the Aitkin Growth Alliance since 1987. Renae Struck is the director of Human Resources of EMR Innovations, which is a small business here in St. Cloud, and Bonnie Stewart is co-founder and director of People Connection, Incorporated, and the Women's Business Center in Fosston, Minnesota. Dean, can we start with you? I will wait for everybody to get that--OK. We will go from Dean to Dave to Renae, and to Bonnie. STATEMENT OF DAVE HASSKAMP, DIRECTOR, AITKIN COUNTY GROWTH, INC., AITKIN, MINNESOTA Mr. Hasskamp. My name is Dave Hasskamp. I am from Aitkin, Minnesota. Please excuse my voice, it is going away. I have been fighting it for a long time. It is wearing out. But thank you for asking me here, Paul. Senator Wellstone. Well, you have done great work. Mr. Hasskamp. Well, I do not have a prepared statement that I can refer to, but I have kind of lived this life for the last 16, 18 years, and I think I can--I could go on until tomorrow about the things that I think we could do to improve our rural communities. You are absolutely right, Paul, when you talk about what rural communities need. Everything, absolutely everything that is wrong in rural America has to do with access. Whether it is transportation, workforce, telecommunications, workplaces, hospitals, structure, everything that is wrong is about access. I am from Aitkin County. Aitkin County is known to be the poorest place in the State since 1857 when we were organized. There is no money in Aitkin County. It is pretty simple. But there is a way to grow out of that problem. We do not have to continue to be the poorest place in the State of Minnesota. Today we are the third fastest growing county in Minnesota, but the problem there still is access. The only way that we could grow Aitkin, Minnesota, was for our community to own and operate its tools for economic development. We hear about SBA programs, but they are all operated from somewhere else. The bankers in our community do not have people on staff who do SBA forms, who apply for SBA loans. If we want to do that, we have to go to a distant community and find a Small Business Development Center at a college. The person we work with may be great, but they have no ownership in our community, and so it is not as important, it is not as critical to the service providers that jobs in Aitkin, Minnesota, create development evolve. When we first started doing this, the old regional Government centers are still in place throughout the United States. We are part of the Arrowhead. Five miles to the west is the county line, and we could have been a part of the St. Cloud district, Brainerd district, but we are going to be positioned poorly--we are on the edge of the range, on the edge of the Arrowhead district. All of the tools were owned more central to the range and the Arrowhead district. Why should we believe that some young guy in a suit and tie can drive from Duluth to Aitkin, Minnesota, a remote, deserted place to drive through, get to Aitkin and be excited about creating a few jobs as I am? They may have to be pinched on the way a couple of times, because there is nobody on the highway. But I am supposed to excite that guy and access cash from those people to make my projects work in Aitkin, Minnesota. It just absolutely cannot work. So communities across the United States have got to have their own tools for development. Otherwise, I tell people often, it is like having your car broken in rural Aitkin and all of the wrenches are in St. Paul or Washington. You cannot fix it. You have got to do something to bring those tools to the small communities that want to grow that--that do not want to be the poorest place in the world. It is a long, hard struggle, but you have to do it. You must have local ownership. In Aitkin, our schools population was declining, like every place else in northeastern Minnesota, and today we are the only place in northeastern Minnesota that has an increase in the population. We have young people who can have babies to fill our schools, working in jobs. Our problem now is access to the next level. North of town, just a few miles, we have a power company that has a huge fiberoptic cable running by our community, but we do not have access to it. It is like living on a super highway without an off or an on ramp. You cannot get to it. It is there, but you cannot get to it. We have created a lot of, I call, without any disrespect, grunt kind of jobs, probably about 500 to 650 new jobs in manufacturing during the last 15 years. That has caused a lot of other things to happen throughout the area and our community. We have a business incubator. But we have to take it now to a new level, and the new level has to be attractive to those more educated people, or more sophisticated, more professional group of people, so then we can really build diversity into our economy, not just have jobs available for the run-of-the-mill population. We have to be attractive to those who want more. We need access to do that. So we need your continued support to do that. Not too long ago, I read in the paper $181 million appropriated in SBA funding, and the description that followed was absolutely my community: to be used in the poor places of the State to generate. I guarantee you, none of those dollars have found their way into Aitkin County yet. They are all controlled from someplace else. [The prepared testimony and letter of Mr. Hasskamp follows:] [GRAPHIC] [TIFF OMITTED] T8251.027 [GRAPHIC] [TIFF OMITTED] T8251.028 [GRAPHIC] [TIFF OMITTED] T8251.029 [GRAPHIC] [TIFF OMITTED] T8251.030 [GRAPHIC] [TIFF OMITTED] T8251.031 [GRAPHIC] [TIFF OMITTED] T8251.032 [GRAPHIC] [TIFF OMITTED] T8251.033 [GRAPHIC] [TIFF OMITTED] T8251.034 [GRAPHIC] [TIFF OMITTED] T8251.035 [GRAPHIC] [TIFF OMITTED] T8251.036 [GRAPHIC] [TIFF OMITTED] T8251.037 [GRAPHIC] [TIFF OMITTED] T8251.038 [GRAPHIC] [TIFF OMITTED] T8251.039 [GRAPHIC] [TIFF OMITTED] T8251.040 [GRAPHIC] [TIFF OMITTED] T8251.041 Senator Wellstone. I thank you. One of the things I think would be interesting is for you and Ed Daum to talk, because I think Ed is philosophically where you are. But I think you have extremely important testimony. Thank you. Dean, we will turn to you. STATEMENT OF DEAN BOUTA, GENERAL MANAGER, BENNETT OFFICE TECHNOLOGIES, AND CHAIRMAN, KANDILINK, WILLMAR, MINNESOTA Mr. Bouta. Thank you for allowing me to testify here today. I am here to talk about the aspect of technology and telecommunications. I am here representing two areas: small business and a telecommunications advocacy group. I am the general manager of an office technology service provider and Internet service provider in Willmar, Minnesota. Our company works with many small businesses in West Central Minnesota, providing office and technology tools that are needed to run their business. This includes providing them with the data connectivity internally and externally for their own data communications, and high-speed Internet connectivity. So we see firsthand that our business and as well as our customers' businesses experience many roadblocks in rural America in the area of telecommunications and technology. I am also Chairman of KandiLink, which is a telecommunications and technology advocacy group, in Kandiyohi County. Our group was started about 3 years ago by local business owners and community leaders who were concerned about technology in our rural area. Our focus has been to work with local businesses to educate them about technology services that are available to them, and also educate the technology vendors about area businesses' technology needs. You know, with a consolidated effort, we have shown that there are unmet telecommunications needs in rural Minnesota. Vendors, who are becoming aware of these needs, are starting to bring some new competition to the local market. But one of the largest roadblocks that we see for small businesses in rural America is the issue of LATA, which is the Local Access and Transport Area boundaries that were established in 1984 due to antitrust breakup of AT&T. This was to encourage competition in the long-distance market, and thereby preventing the RBOCs, which is the Regional Bell Operating Companies, which is Qwest in our area, from providing long-distance services. For an RBOC to move customer wireline- based telephone traffic into a different LATA, it must be passed off to a third party long-distance carrier, which results in additional charges, which are eventually paid by the customer. With the current LATAs in Minnesota--and this is throughout the country--it can oftentimes triple the cost of data circuits for a business to connect across LATA boundaries. The Telcos are required to pass the circuit off to a long-distance carrier, when oftentimes the local Telcos could have handled that traffic. This restricts affordable circuits from outstate Minnesota connecting to the metro Twin Cities area, also to other parts of the State, and even connectivity within counties themselves. Counties like Renville County happen to have three LATAs in one county. An example that I heard is the library system in southeastern Minnesota has a connection through a grant from Rochester to Owatonna and Rochester to Red Wing. The Rochester to Owatonna is in one LATA, and their circuit charges for the year are $4,200. When they connect Rochester to Red Wing, it crosses a LATA, and their initial bid for that was $37,000; it is about the same distance. They got a real deal for $22,000. That is just an example. But this restricts small business owners and entrepreneurs from expanding to rural America. We locally see many instances of small manufacturing firms, banks, insurance agencies, accounting firms, medical clinics and hospitals that could expand or share resources in neighboring communities, but because of these costs of telecommunications, they are reluctant. This is especially evident with firms that have home offices in the Twin Cities metro area and would like to expand to rural Minnesota to tap into our workforce and lack of congestion. They cannot always justify the cost of high-speed connectivity to rural Minnesota when they are located in different LATAs. Some of the positives of high-speed connectivity in rural America are the ability for medical facilities to provide fast diagnostics through data communications, eliminating the need to transport personnel. In 1996, the Telecommunications Act attempted to help this situation by allowing more competition and allowing the RBOCs the opportunity to reenter the long-distance business. The competition has helped some in bringing new vendors to the area, but the issue of data circuit costs between LATAs has not improved. LATAs were created at a time when main revenue for Telcos was long-distance charges for voice traffic, and this is still the case. But times now have changed, and data circuits are needed in rural America, and everyone expects to pay more for voice traffic between LATAs, but to have the same restrictions as on the high-speed data traffic impedes business growth and restricts competition. Another roadblock is the issue of redundancy, which at times is maybe more of a State issue, but, for example, in Willmar, all of our traffic goes up one line between Willmar and St. Cloud, and so when that line is cut, we lose connectivity to the outside world. This does not encourage companies to expand out here, because more and more is dependent on the e-commerce activity. Finally, in most rural areas of the country, the largest employer and users of telecommunication are Federal, State, and local governments. These include municipal hospitals and educational facilities. What hurts the rural economy the most is services are not provided by local vendors to these entities. Often, local vendors could provide these services at less cost, and the remaining business customer base that is left after you take those away do not entice vendors to invest in additional services that would benefit other local businesses. So, in conclusion, the LATA issue in regards to data circuits and data circuit redundancy and a lack of public entity telecommunication customers is inhibiting the local economic development. [The prepared statement of Mr. Bouta follows:] [GRAPHIC] [TIFF OMITTED] T8251.042 [GRAPHIC] [TIFF OMITTED] T8251.043 [GRAPHIC] [TIFF OMITTED] T8251.044 Senator Wellstone. Wow. I tell you, I need to learn more. Thank you for your testimony. I have to be honest, there are some parts of what you said that I need to grasp better. We are going to move on. Jim is here, and please come down. I really would love it if you would. What we are going to do is, rather than ask a lot of questions, we are going to wait until the end, we are going to have three panels open up for discussion, people are going to ask questions, make comments. Please join us, seriously, and please come down. Renae. STATEMENT OF RENAE STRUCK, DIRECTOR OF HUMAN RESOURCE, EMR INNOVATIONS, ST. CLOUD, MINNESOTA Ms. Struck. My comments will focus on workforce development, particularly for the small business in the rural community. As a human resources professional, I would like to focus my comments in three areas. First is the training of the workers of the future. We need to continue building partnerships between schools and businesses to assure programs are developed and students are encouraged to pursue areas of job development. Too often, students consider only jobs they have had contact with, either in their community or through the media. Students need to be encouraged to broaden their horizons on how many different types of jobs are out in the work world. One program that had recent success here in the St. Cloud area was called ``Outreach to Schools.'' This program placed college interns in eight different high schools. These interns worked in the high school career placement office on a daily basis, up to 12 hours each week. The focus of their one-on-one interactions or group presentations to the students involved use of the Internet for post- secondary planning, including finding a college or a career. This program was sponsored by the St. Cloud WorkForce Job Service through the State Minnesota Youth Program funds. We need to continue to look for ways to connect with high school students early in their high school years as sophomores or juniors rather than wait until their senior year. With cutbacks in education, many educators and counselors are swamped. The intern in this program allowed students to focus on career development issues that could otherwise be overlooked. This is one example of a low-cost program that has seen early success. It would be great to continue this program and develop similar programs to connect students with available jobs and careers. We also need to focus on training for that dislocated worker: those individuals who are laid off from their jobs. When one loses their job through no fault of their own, unemployment provides a partial weekly wage for up to 6 months. However, the Federal programs that previously provided funding for the incumbent workers have been drastically reduced. The benefits of retraining a dislocated worker so he or she can become a productive, tax-paying citizen are obvious. Secondly, I belief that workforce development in the rural areas must be tied to housing. There must be housing strategies to provide an affordable place of residence for workers. There have been numerous businesses in rural areas that have experienced a direct impact over lack of affordable housing. They have had a situation of having viable jobs that could not be staffed because the worker could not find affordable housing. Recently, the St. Cloud HRA approved a program which will develop low-cost housing in the St. Cloud area. Although I am not personally familiar with what type of Federal assistance is currently available or has been provided in the past, this continues to be an issue which must be addressed for additional workforce development to occur. The final area I would like to touch on is the FUTA Tax-- the distribution of this dedicated tax for the purpose for which it was intended--which is funding the public employment system. Each business pays the Federal Unemployment Tax of $56 per employee each year. These dedicated funds are to support unemployment insurance and public employment service. However, even though the annual amount paid by businesses has increased over the years, the return to the States from the public employment system has consistently been low. In Minnesota, under 50 percent of the dollars paid into the system are returned to the State. In 1998, Minnesota employers paid $132 million in FUTA taxes, with only $56.3 million returned to fund services to employers. Nationally in 1998, employers paid $6.5 billion to this dedicated fund. Only $3.4 billion, or 52 percent, was returned to the States for the purpose for which it was intended. I think all businesses like to see reduced Government spending; however, this is a case where the money paid by employers has not been reduced, only the benefits returned have been reduced. This is important for workforce development because a small business needs a resource for a multitude of employment-related issues. A small business does not have a full-time human resources person dedicated to employment, benefits, training, compensation and the numerous laws related to employment. In the past, the local Job Service office, now called the local WorkForce Center, has served as that needed resource for many small businesses, particularly in the rural areas. The WorkForce Center Job Service is funded by the FUTA taxes. As an example, time and money has been spent to develop America's Job Bank, and locally Minnesota's Job Bank. This has provided an automated system for both those searching for employment, also for the small business employer. It allows the employer to both post an available job and also search for candidates independently. Many small businesses are unaware of this system or are unfamiliar with how to utilize it. The WorkForce Center has been that resource. Additionally, WorkForce Centers sponsor, or co-sponsor, employer educational sessions on unemployment, lawful hiring, employment law, and a variety of other topics. The WorkForce Centers sponsor, or co- sponsor, Job Fairs across our State. In the fall of 2000, the St. Cloud Area Job Fair hosted 120 employers and was attended by over 2000 individual job seekers. Additionally, the WorkForce Centers sponsor special job fairs in situations of plant closure in small communities, such as one recently held in Willmar following the closing of the AGCO plant, which left 270 individuals unemployed. These services and many more have already been paid for by the employer through their FUTA taxes. However, with budgets that have been reduced steadily for the past 20 years, employers are being shortchanged on their return from their FUTA taxes. I would like to see a change in the Federal Government policy and a release of all FUTA tax dollars available. Employers have paid this dedicated tax, and they deserve to receive the dollars back through services at the local public employment service, known as the Workforce Center. I thank you, Senator Wellstone, and the Committee on Small Business and Entrepreneurship for allowing me to provide my comments on the topic of Workforce Development. [The prepared statement of Ms. Struck follows:] [GRAPHIC] [TIFF OMITTED] T8251.045 [GRAPHIC] [TIFF OMITTED] T8251.046 Senator Wellstone. I think what you are saying is that people want their money's worth. Eventually when we throw this open for discussion for everyone, we will make this a giant seminar with lots of people speaking. I want to go back to the high school students, especially those that are going on to higher ed, and the connections we can make, you know, with the training and the work that they are doing. Quite often they have the idea that they will get a job, you know, but the job is not necessarily related to where eventually they are heading, and I think we can do a much better job of apprenticeships at that age level. Bonnie. STATEMENT OF BONNIE STEWART, DIRECTOR, MINNESOTA WOMEN'S BUSINESS CENTER, FOSSTON, MINNESOTA Ms. Stewart. My name is Bonnie Stewart. I am director of the Minnesota Women's Business Center, which is in Fosston, Minnesota. We serve a 13-county region in northwest Minnesota. Fosston, for those of you who do not know, is 200 miles northwest of St. Cloud. I want to thank you, Senator, and the Small Business Committee for inviting me to be here today. I want to thank the City of St. Cloud for hosting this hearing. As a former St. Cloud resident, I love to come back here. Senator Wellstone. This is a beautiful place. It really is. Ms. Stewart. I moved back to Minnesota, my home State, in 1986 from another State, and I also moved back to my home town, the main reason being a rural community seemed like a great place to raise a family, and it has been. But in the past 15 years, I have been involved in a wide range of economic and community development programs and activities throughout the region, and I have witnessed a dramatic change in business in northwest Minnesota. In addition to my activities with the Minnesota Women's Business Center, I am also a member of the Northwest Minnesota Health Care Alliance, and I serve on the Northwest Minnesota Telework Partnership, and I am also a small business owner. So those are the four components that are focusing on my issues, the development issues that I believe impact small businesses. No. 1 is the loss of our family farms; they are vanishing at a dramatic rate. The global market has created a universal food market, providing competition for local small farmers from places as far away as Africa, South America, Russia and places beyond. Due to the lower prices created by these markets, farm families are forced to subsidize their production by looking for jobs in their communities. Some of these farm families are also starting their own businesses. Also, the next generation of farm families does not see farming as a viable economic opportunity. Another issue is underemployment. New jobs in rural areas are dominated by low-wage industries, resulting in underemployed workers who often seek higher-paying jobs in metro areas. Poverty. Poverty remains persistent in rural areas. Business development can be a viable economic option for rural families, but only after the issues of poverty are addressed. Health care. The quality, availability, and affordability of health care services for small business owners, their employees, and families are eroding while costs are escalating. Telecommunications. In addition to the knowledge of how to use it, small businesses must have access to broad band capacity. These issues and others impact clients of the Minnesota Women's Business Center, and I am going to focus now on business development issues that pertain to women. In 1989, the Small Business Administration established the Office of Women's Business Ownership and through congressional funding was able to launch the pilot project that formed six Women's Business Centers across the country. In the past 12 years, continued growth in this funding source has enabled over 90 Women's Business Centers to be operating across America, and I believe it is through this program of empowering women business owners, along with other public and private investment, that has created a vast impact to our economy. For example, from 1987 to 2000, the number of women-owned firms more than doubled, from 4.5 million to more than 10 million businesses. In 1997, revenues from women-led firms reached $818 billion. That is up 33 percent from 1992. Jobs created by women-owned firms reached 27 million in 1999. That is up from 9 million in 1996. So even though women have showed measurable success as entrepreneurs, we still have some issues that need to be addressed. These include access to bank financing and venture capital. Women-owned businesses currently receive only 4 to 6 percent of all venture capital invested, while more than 40 percent of new businesses are started by women. Networking. Rural communities have a sparse network of other businesses doing the same thing. This results in fewer mentors for aspiring women entrepreneurs. Education. We need to educate women-owned businesses with the critical knowledge needed to take advantage of financial opportunity and growth. Visibility. The impact of women business owners is underrepresented in the business media, business teachings, and policy groups. As previously mentioned, we are funded through the Small Business Administration Office of Women's Business Ownership. It is our mission through the Women's Business Center Program to empower women to become economically self-sufficient through entrepreneurship. We need to focus on the issues that include increasing education to our local vendors. They need to be aware of and be able to manage SBA and other statewide and regional funding resources. Educating women business owners on capital investment, and try to bring investment networks to rural areas. Increasing mentoring opportunities and leadership development. Expand training offerings, create awareness of women business success, advocate for affordable health care for all small businesses, and to promote business growth opportunities through technology, and this includes telework, community technology centers, and adequate training and access. Successful business development growth in rural areas relies on partnerships between agencies, local, State and Federal units of government, and the private sector. In Minnesota, we do have strong partnerships and alliances that have been formed, and they are working, but we must continue to be acutely aware of the barriers that we face. Thank you very much. [The prepared statement of Ms. Stewart follows:] [GRAPHIC] [TIFF OMITTED] T8251.047 [GRAPHIC] [TIFF OMITTED] T8251.048 [GRAPHIC] [TIFF OMITTED] T8251.049 Senator Wellstone. Thank you. I will tell everyone that is here--because we are going to the last panel of the session-- listening to you speak, I have got like 20 questions, and it is frustrating, but I still think the next thing is to go to the next panel. I understand. We will go to the next panel, and then we will open it up for discussion for everyone. Thank you so much. It was just superb testimony. By the way, those that are here in discussion, any questions that people have or any comments for 10 more days, if you get them to us in the next 10 days, we will just make it part of the written record. OK. We will move to William Spang, who is the president/CEO of Mountain Iron Bank and also chair of the Minnesota Business Finance Corporation. Mark Phillips is the president of Iron Range Ventures, and vice president of Northeast Ventures. Then Mary Matthews. Since 1989, Mary has been the president of Northeast Entrepreneur Fund. Again, much more can be said about each of you, but I want to just get to your testimony. If we could start with you, William, that would be great. STATEMENT OF WILLIAM SPANG, PRESIDENT AND CHIEF EXECUTIVE OFFICER, MOUNTAIN IRON FIRST STATE BANK, MOUNTAIN IRON, MINNESOTA Mr. Spang. Thank you, Senator. Our bank is in rural northeastern Minnesota. We are located in four communities. All of the populations are under 2,000 people. We are a small business as a bank. Our bank is currently involved with the SBA utilizing both the 7(a) and 504 programs. Additionally, we work with the USDA Rural Development, the Bureau of Indian Affairs, and many other local and regional economic development programs. Our bank is located on the Iron Range, which has seen the economic roller coaster ride over the past decades. Most recently, our area has been hit with the devastation of the LTV Mining Company closure, which has cost our area 1,400 jobs, due in part, if not entirely, to the importing or dumping, if you will, of foreign steel. Our area experienced a depression 15 years ago, as well, when the steel industry was virtually shut down. This time period saw massive unemployment, depressed real estate prices, and the exodus of over 15,000 people. Although economic conditions eventually improved, the permanent jobs that were lost never returned, and our area, much like other rural America, saw a loss of population that would never return. The good to come of this time period was a surge of entrepreneurialism and the recognized need to diversify our economy. I often say, I would rather have 10 dimes than a dollar, because if I lose a dime, I still have nine more. These dimes, if you will, represent small business. In spite of the recognition given to the giants such as General Motors or General Electric, small business is the backbone of our country. Small business provides jobs and stability to our rural communities. But in order for small business to succeed, they will need access to capital. Since most people starting or expanding a business are not wealthy, they need to borrow money. As a banker, this is where I come in. However, when I loan money, it is not my money; it belongs to the depositors of my bank. I am therefore entrusted with a fiduciary responsibility to minimize risk. Inherently, there is more risk associated with small business, and even more so with a start- up business, for success is yet to be proven. But consider how many major firms in the United States started off this very same way. The SBA, through both its guarantee and debenture program, provides mitigation to higher-risk commercial borrowing. As mentioned earlier, much of small business is in rural areas which are typically served by locally-owned community banks, which, incidentally, are also small hometown businesses. Small banks lack the vast networking the super regional banks may have, thus lending issues often come into play. Again, both the 7(a) and the 504 programs provide avenues where capacity of the local lender is increased, and thus total access to capital remains local and ensures spinoff jobs as well. I hope I have pointed out a brief outline of the benefits provided to rural Americans with the SBA. Now to look at some of the impacts of the potential cuts in these programs. Besides being a banker, I am also currently chairman of the board of the Minnesota Business Finance Corporation. We are a 501(c)(3) corporation and a certified development company for SBA 504 loans. We are one of seven development companies in the State of Minnesota, and our territory is all non-metro, with the exception of St. Cloud and the Duluth markets. Our company currently administers 458 small business loans representing total outstandings of $117,045,735. Considering these are subordinated second mortgages, it is safe to conclude that the participating banks carry a like amount, which brings the total impact to over $250 million, and we are one of seven counties in the State of Minnesota. These are all small businesses. Again, 10 dimes rather than a dollar, this capital outlay represents hundreds of jobs, productivity, and wealth generation in our smaller communities. The elimination or reduction to this access to capital would be every bit and more devastating than the closure of a major steel plant. Let's also consider the impact to our local schools and municipalities, the State, and the Nation. These small businesses pay taxes, and the people who work for small business pay taxes. When you consider this, funding for the SBA programs becomes an investment, and the dollars leveraged by this investment are returned many times over. Investment in small business is a good investment for America, and just like my bank, the local hardware store, or the U.S. Senate, sufficient staffing is needed to make the program run smooth and efficient. If we are committed to investing and reaping the rewards of small business, sufficient staffing will be needed going forward. As I said earlier, typically small business lacks substantial capital. One alternative to funding the programs is by increasing fees to the small business borrowers. At the time when they are borrowing, they can at least afford to pay the additional fees. Are we not better off to enhance the ability to be successful in their more vulnerable years by reducing the fees with the thought that these folks will repay many times over with the taxes from their success? In closing, the SBA is not corporate welfare, as I sometimes hear. It is an investment in America. As the term ``investment'' implies, a return is expected. We have seen a return, let us not throw a good thing away. [The prepared statement of Mr. Spang follows:] [GRAPHIC] [TIFF OMITTED] T8251.050 [GRAPHIC] [TIFF OMITTED] T8251.051 Senator Wellstone. Thank you, Mr. Spang. I am especially appreciative of the fact that you did zero in on the 7(a) and 504, and I think that one of the things that you at least implied, if you were not explicit about, is that not only are small businesses not likely to get access to this kind of capital through the banks in general without these programs, but I think as we see the downturn in the economy, even less likely. So this is like a cut-off pipeline; absolutely critical, which, as far as I am concerned, we just cannot cut this program. Cannot do it. Mr. Phillips. STATEMENT OF MARK R. PHILLIPS, PRESIDENT, IRON RANGE VENTURES, VIRGINIA, MINNESOTA Mr. Phillips. Thank you, Senator Wellstone. Senator Wellstone. Ten dimes is better than a dollar. Have I got that? Mr. Phillips. I made a note of that myself. Good morning. My name is Mark Phillips. I am president of Iron Range Ventures in Virginia, Minnesota. Iron Range Ventures is a community venture capital fund, and it is a certified Community Development Financial Institution, which is commonly referred to as CDFI. I am also the vice president of Northeast Ventures, an affiliated community development venture fund, which is also a CDFI. Iron Range Ventures and Northeast Ventures have roots going back over 13 years of time, when our region of northeastern Minnesota was suffering the effects of the restructuring of the American steel industry. This region of Minnesota lost 25 percent of its gross regional product virtually overnight in the mid-1980s. These two community development venture capital funds were established as an effort to partly diversify the regional economy by establishing home-owned and home-grown businesses. Our region had a variety of economic development programs providing primarily technical assistance and debt financing, but no venture capital. This was true for most rural areas in the United States at that time. These funds were established to provide a permanent source of competent venture capital to our rural region of Minnesota. To date, approximately $15 million has been raised, primarily from philanthropic foundations, utilities, and the Federal Government. The factors that were established to measure the funds' success were as follows: First, we were looking for local wealth creation, and local control of these businesses. Second, we were looking for sustainable enterprises with good employment practices and quality jobs. Third, we were trying to attract market-driven venture capital to our region. Fourth, we were trying to foster self-sufficiency and entrepreneurial spirit in the region. And, finally, the investments in these companies that provide satisfactory financial returns and jobs for our targeted population of low- to moderate-income people. We refer to this as the double bottom line. Iron Range Ventures and Northeast Ventures are mission- driven organizations that operate within the geographic region of northeastern Minnesota. This limits the investment opportunities that are available. Our funds may look at transactions that are smaller, with less up side and lower technology than a traditional venture fund. We also have to invest in companies at an earlier stage, hold our investments longer, and experience higher transaction costs than traditional funds, but still our return on investment is very attractive. Over this 13-year period, Iron Range Ventures and Northeast Ventures have invested nearly $12 million in 28 companies. These investments leveraged another $100 million in additional financing. We have attracted co-investors, many from the traditional venture capital community. Unlike lenders, community development venture funds are intensely involved with the companies they invest in. Northeast Ventures has become a leader in the community development venture capital industry, and our model has been replicated throughout rural America. Our fund's senior management was part of the leadership that formed the Community Development Venture Capital Alliance, CDVCA. It is headquartered in New York City. CDVCA is the trade association of the community development venture capital funds, with over 110 members worldwide representing over 50 funds. As the Nation's leading practitioners of community development venture capital, the CDVCA and its organizations have begun to establish a strong record of effectively promoting investment in growth companies that will succeed financially and make a profit, as well as providing jobs, entrepreneurial capacity and wealth among economically disadvantaged populations and distressed communities. It appears that community development venture capital is a critical element of revitalizing rural America, and CDVCA is training and advocating for these new funds. This movement has depended on very limited philanthropic and Government funding. Among its primary goals is the development of the knowledge and human capacity that will make these funds successful. Iron Range Ventures and Northeast Ventures recommends that the Federal Government proceed with the following: No. 1, continues and expands the Community Development Financial Institution (CDFI) funding that creates a unique source of capital for the CDFIs. We ask that you resist efforts to reduce and eliminate this valuable program. No. 2, support the legislation that you introduced, Senator Wellstone, that earmarks funds for the capacity-building investments in rural community venture capital funds and the companies they invest in. The investment in human capital will pay the largest dividends. No. 3, retain and improve the New Markets Venture Capital Fund under the SBA. We urge that the SBA work with the IRS to coordinate with the New Market Tax Credits program as a method to provide the matching funds required under the venture program. We also urge the program shift from a geographic focus to a mission-driven focus, to help low- and moderate-income individuals become employed. And, finally, retain and improve the New Market Tax Credit program that is administered by the IRS. These rules need to be made friendlier to venture funds. I find it somewhat ironic that the very forces that brought our funds into existence over 13 years ago are looming even larger at this time. That is why it is critical that the limited sources of funding for rural venture funds are not deteriorated but expanded, so they can play a vital role in revitalizing rural America. I thank you very much. [The prepared statement of Mr. Phillips follows:] [GRAPHIC] [TIFF OMITTED] T8251.052 [GRAPHIC] [TIFF OMITTED] T8251.053 Senator Wellstone. Well, thanks, Mark. Northeast Ventures has been a model for me. And the capacity bill, we are hoping to put that in the commerce bill. We are not giving up on that at all. I think we have got a shot at it. Very much appreciate it. Mary Matthews. And when Mary testifies, we will then throw this open, starting with the Commissioner. I have handed out cards, and there are 20 people who have cards right now that want to speak, and so we are going right to, if that is OK with everybody up here, discussion. Ed, I do not know what--we might need you up here because there may be some questions directed to you, as Director of SBA as well. Mary, thank you so much for joining us. STATEMENT OF MARY MATTHEWS, PRESIDENT, NORTHEAST ENTREPRENEUR FUND, INC., VIRGINIA, MINNESOTA Ms. Matthews. Thank you, Senator Wellstone, and guests. Good morning. Thank you for this opportunity to testify this morning. My name is Mary Matthews. I am here in two capacities, first as president of the Northeast Entrepreneur Fund in Virginia, Minnesota. The Entrepreneur Fund is a microenterprise and small business development organization. We provide training, technical assistance, and financing to emerging and existing small businesses in seven counties in northeastern Minnesota and Douglas County in northwestern Wisconsin. I am also a board member of the National Association of SBA Microloan Intermediaries. The purpose of my testimony this morning is to talk about the Microloan Program and the role it has played in our work in rural Minnesota and central Wisconsin. When the idea for the Entrepreneur Fund was conceived in the early 1980s, we focused on the idea that local residents, if given tools, could help rebuild the rural economy. Northeastern Minnesota's economic future has always been determined by large natural resource-based companies whose ownership lives elsewhere. We needed solutions that would build local entrepreneurship and create local economic opportunity. We believe that if our region's skilled workforce, who had long considered themselves employees rather than employers, were taught business skills and principles, given encouragement, and provided with small amounts of capital, they could learn to create their own jobs by starting and growing their own businesses. In the last 12 years, the Entrepreneur Fund has provided business development training and technical assistance to over 4,700 men and women, all local residents of our region, and for many of whom this is their first---- Senator Wellstone. You might want to repeat that figure. Ms. Matthews. Four thousand and seven hundred people. It is over 2 percent now of the adult population in the Arrowhead area. For many people, this is their first exposure to business concepts. In our region, this is. So far, this has resulted in the start-up, stabilization, or growth of 561 businesses. We have made loans to 168 of those businesses, totaling $2.6 million. Over 85 percent of these businesses, mostly start-ups, are still operating 2 years after receiving assistance. These are small businesses, but each is owned and managed by a local resident who is creating their own economic opportunity. As a group, they generated a significant level of employment for themselves and others--over 1,200 jobs created or retained so far. Here is an example. Colleen and Tom Ray purchased a Christmas tree farm in Eveleth 5 years ago. Tom Ray is a part- time furniture maker, with a veteran's disability pension. Colleen Ray was a part-time waitress. They had an idea to expand Ray Family Farms by making decorative wreaths out of dry twigs using natural materials like pussy willows. They successfully test-marketed the wreaths through local craft shows and gift shops. A $5,000 microloan last December financed their participation in the Atlanta International Gift and Home Furnishing Market. That show produced over $26,000 in orders for that company. They have hired two employees and, with an additional $5,600 dollar loan in May, purchased dry twigs from local suppliers, rather than the Rays' continuing to harvest their own raw materials. One of the twig suppliers is a former LTV employee who started his own brush cutting business. The SBA Microloan Program provided the capital for Rays' loan. That capital would not have been available from any other source. It also provided the funding for the training and technical assistance that the Rays received that has helped them grow their business. Colleen took our CORE FOUR Business Planning course, and both Tom and Colleen meet regularly with their Entrepreneur Fund business consultant. The SBA Microloan Program was created in 1991 to help small business owners get various amounts of capital that were not yet bankable. The SBA Microloan Program has grown from a small pilot with 35 intermediaries in 1991 to a permanent program with over 170 intermediaries today, with the SBA adding new intermediaries each year. As Ed Daum testified, there are now six intermediaries in Minnesota. The SBA Microloan Program is the single largest funding source for the microenterprise programs. The SBA Microloan Program Intermediaries have made over 12,000 microloans totaling over $125 million since the inception of the program. The Microloan Program, as you well know, Senator, has two parts. There is low-interest 10-year loans that are made to the intermediaries who reloan the money to microentrepreneurs. The SBA also provides intermediaries with an annual technical assistance grant that helps support the cost of training and technical assistance to borrowers. The grant is calculated at up to 25 percent of the capital the intermediary has borrowed from the SBA. Microloans are high-risk loans, usually to start- up and early-stage companies. The technical assistance protects the Federal Government's investment, and it increases the entrepreneurs' potential for success. Senator Wellstone, the first time you and I met was in 1994 when you invited me to testify before this Committee in Washington. You were then and continue to be one of the strongest supporters in Congress for this program. I am here today to ask you to be our champion one more time in seeking additional funding for the technical assistance portion of this program, before the bill goes to the Senate floor for consideration next month. As you well know, the President's budget and the House and Senate appropriation bill call for $20 million for technical assistance in 2002 for the Microloan Program. There just is not enough money to maintain the current level of activity, and the SBA continues to add new intermediaries. Let's do the math. By the end of 2001, intermediaries will owe the SBA over $100 million. To provide 25 percent for technical assistance grants to intermediaries, the SBA needs $25 million just to serve the current loans. In addition, there are 30 non-replicating providers who annually receive $125,000. That is another $3.75 million. We have not yet talked about program growth. As the demand for the Microloan Program continues to grow, if we can continue to grow it, the investment and technical assistance dollars each year will increase. So what is the bottom line? Over $28 million will maintain the technical assistance funding at its current level of 25 percent without new loans to intermediaries to the program. In 1996, when funding levels were cut last time, the SBA indicated that they realized that funding levels of less than 20 percent put the program at risk. Without more funding, the Federal Government's $100 million investment today is at risk if farmers do not receive technical assistance. We also know that another intermediary's plan is to return their capital to the Federal Government if, in fact, the TA grants are reduced. This is and has been indicated to us that the program is too high a risk to continue with fewer TA dollars. Without a higher level of funding, this program is in jeopardy, and its future is in jeopardy, and the Senate floor, it appears to us, is the last opportunity to raise the level above $20 million. Please help us. Thank you. [The prepared statement of Ms. Matthews follows:] [GRAPHIC] [TIFF OMITTED] T8251.054 [GRAPHIC] [TIFF OMITTED] T8251.055 [GRAPHIC] [TIFF OMITTED] T8251.056 [GRAPHIC] [TIFF OMITTED] T8251.057 Senator Wellstone. Thank you. Well, I am honored that you ask, and absolutely committed to doing everything I know how to do between now and when it hits the floor. Absolutely. Or when it is on the floor. Not even any question about it. Thank you. What I would like to do is, very quickly we are going to now go to just general discussion. In case I forget, because I think it is really important to thank people, Suzanne Hagen is a court reporter, and I would like to thank you, Suzanne, for your help. John, who has been running all around and helping us try to stay more or less on time, has been great, and thank you for coming out and helping us, John. If it is OK, Tony and Leslie and Colleen and everybody, what we will do is, let me refresh everybody's memory. Paul Kittelson testified, and, Paul, maybe some of these questions will go to you, OK? So if you feel like you want to respond, please do. The same thing for Ed Daum. I am sure there is going to be questions that will be put to Ed. The same with you, Prince Wallace. I mean, it could be that you all are going to want to respond. Dave Hasskamp, same for you. Dean Bouta, Renae, Connie Stewart, and then the last panelists. If somebody--and we would like everyone to try to keep their comments--we are going to try to keep everybody under 2 minutes, if that is OK, so we can be sure everybody has a chance to speak, but if some of the panelists--if you have spoken, you feel like it is a response to something you said, then just jump in, and that will also apply to all of us up here. But I think out of respect for his important notice, we will start out--everybody has got cards, but the first card I am giving to the Commissioner, OK? Mr. Berstein. Senator, thank you very much. You are very generous. I want to thank Senator Wellstone for inviting me to be here this morning. I want to thank everybody here for taking the time to come and do this. I work for Governor Ventura. Governor Ventura is going to be spending much of the next 60 days on the road traveling all over the State of Minnesota talking to folks about all of these issues. But the fact is that maintaining a healthy economy in rural Minnesota is a high priority for this Administration, like it is for Senator Wellstone and Senator Dayton. The question becomes, What can we do? My interest in this as Commissioner of Commerce is many of the things that have come up here today are things that my department regulates. The things that are important are for companies to locate in rural Minnesota and, most importantly, to stay and expand in rural Minnesota are access to insurance. Insurance is pegged to how well local fire departments operate. These are small things, folks, but this is the kind of thing that companies look for when they are going to come into rural Minnesota. Access to capital has come up a number of times today. Banking, microlenders, and, again, Mary, I appreciate your testimony. I have got lots of great stories about what microlenders have done in the State of Minnesota. Telecommunications. A huge issue in Minnesota. Folks, we are falling further and further behind. Part of this is the State's responsibility. Much, however, is the responsibility of local telephone companies. We have been trying to change the laws in Minnesota. We are doing it slowly. I do not know how many of you know, but our telecommunications laws in Minnesota have not changed since 1930. Many of us were not even born in 1930, and many of us here remember telephones with rotary dials and party lines. We still regulate under that kind of assumption, and we all know the technology is radically different. Access to the Internet is a huge issue in rural Minnesota. Access to the entire level of the communication system. Commissioner David Fisher, from the Department of Administration, is in charge to connect Minnesota with a new telecommunications initiative to link all of rural Minnesota. That is now underway. The question is always going to become funding, and we have to change some of the laws in Minnesota to open up networks. A real issue is, even when small rural phone companies install fiber or wire, only about 5 percent of the people sign up for it. Delivering high-speed access is expensive, whether it is in the Twin Cities or any other part of Minnesota. But when you have such small take rates, it becomes very difficult for small phone companies to actually go ahead and build the services. I also want to talk about energy very briefly. Minnesota's energy future is very secure, at least for the next decade or so, but much of the energy development is not going to take place in the Twin Cities but in rural Minnesota. We are going to continue to develop and build lots of new energy, lots of technology. Folks, the time has arrived. I go to public meetings, particularly in western Minnesota, like this. When we are talking about building coal plants, we are talking about building nuclear plants, there are lots of signs out there saying do not. When we are talking about wind, I have landowners saying, ``How many of these can you give me? I will take as many towers I can get.'' That is one of the differences, folks, between the traditional kinds of energy and the new energy technologies that are being developed. Minnesota is going to be looking at this Administration, the legislature, our friends there in Congress are looking at programs like micro turbines. These are the kinds of things that distribute generation. We were at St. Cloud about 3 months ago, 300 communities across the State. Every one of them wants to have control of its own energy future. This is a critical thing to do. If it is going to take place in rural Minnesota, it is going to take bankers, it is going to take the Small Business Administration, it is going to take this Administration and the legislature to fund those kinds of programs. But whether we are building energy for small communities or large communities or energy to supply much of the State, it is going to take place in rural Minnesota. Northeast Minnesota says, ``We will take all of the power plants you want to send up here.'' They haven't talked yet about some of the negatives about that, but they want those plants, they want those jobs. That is the only part of the State that wants to do that, and we are looking to give it. Two areas that haven't come up. One is health care. A huge issue for folks who want to build businesses in rural Minnesota or expand businesses. They need to have employees that have access to health care. We are losing physicians, and we are losing health care facilities in rural Minnesota. We have got to reverse that trend. I do not have answers for that, but I want everyone here to be aware of it. We need to look at this. How we are going to fix this problem in rural Minnesota? It is very difficult to locate a business and to expand a business if the employees do not have access to health care in that community. Finally, workforce issues. We are merging the Department of Economic Security, which would provide workforce training, into Trade and Economic Development. Well, that is government at work, but the fact of the matter is the legislature and the Administration recognize that workforce development is economic development. And the two ought to be done separately. The two ought to be combined, and the focus should be on workforce development. I am here to listen, by the way. That is why I snuck up and sat in the back, but I do want to hear what everybody else has to say. Senator I want to say thank you publicly, because I do not know if I have done it. We have in this State gone through not an energy crisis, but we went through an energy spike last winter. Almost every one of us here felt that. I think everyone here spent two or three times more on heating costs. Folks, I have still got all over the State of Minnesota hundreds of families, mostly seniors, who couldn't take those price hikes. We have a program called the Low Income Heating Assistance Program. We had to go to Washington to get more money, and it was Senator Wellstone who led that fight to get that money back to Minnesota to help folks who really needed the help so they could pay their energy bills. Again, Senator, I want to thank you publicly for spiriting that effort. It is much appreciated. Senator Wellstone. Very nice of you. Thanks for your words. OK. Card No. 1. Does that make sense? We will just do it that way, but everyone, please, for the record, when you speak, do not say, ``I am card No. 1.'' Ms. Spraag. Good morning, my name is Cheryl Spraag. I am president and CEO of the Virginia, Mountain Iron, Gilbert Area Chamber of Commerce in northeastern Minnesota. Mr. Harvey. My name is Keith Harvey. I am the chairman of the board with Virginia, Mountain Iron Area Chamber of Commerce. I am also the chief financial officer of the Virginia Regional Medical Center, so the Commissioner's comments about health care hit me right here, so thank you. Ms. Spraag. On behalf of our Chamber, Senator Wellstone, we commend you and the U.S. Senate Small Business Committee for initiating these discussions about the revitalization of rural America businesses, which I think, at this point in time, we are reaching a crisis point, and these discussions from here, we hope we will come through with some solutions that are going to be quick, and offer the help that is needed now. Mr. Harvey. We represent about 300 businesses in northeastern Minnesota. About 290 of those businesses are the dimes that Bill Spang referred to, and about five of them represent the dollars. Unfortunately, we experienced losing one of those dollars in February of this year when the LTV mine closed. That cost us 1,400 jobs, about $60 million in payroll, and the economic impact on the region is about $400 million. So we sense an incredible urgency on the issues that we are about to talk about. I would like to request that this letter and the following declarations be entered into the official record with the U.S. Senate Small Business Committee today, and I would like to submit the following resolutions to you. Ms. Spraag. These resolutions are based on discussion, a membership survey, and the results of the round table discussion we had with your staff, Senator Wellstone. First of all--and these are taken verbatim from our membership--we feel that as far as Small Business Administration Program and loans, institute SBA loans which will assist existing small businesses with refinancing for technology improvements, daily operations, and management restructuring, such as partnership buyouts, et cetera. Increase SBA staff to provide reliable and prompt service to assist financial lenders in determining loan recipients and loan distribution. Utilizing the SBA for community development grants. Reduce rates and fees on SBA loans. Become more of a GAAP financier, and reduce documentation requirements on SBA loans. Mr. Harvey. We would like to allocate funds specifically for small business research. Ms. Spraag. Designate a larger portion of Federal work projects and material orders to rural contractors. Mr. Harvey. I think this is one of the biggest ones: develop plans and earmark funds for advanced telecommunications and Internet access. Ms. Spraag. Ensure that natural resource industries, such as forestry and mining, particularly in our area, can compete fairly with foreign companies on national trade market. Mr. Harvey. Review regulatory guidelines which may prevent business development in rural areas, such as U.S. Forest Service. Ms. Spraag. Create more venture capital. Mr. Harvey. Provide Federal loan and grant dollars for rural economic development. Ms. Spraag. Assist in the restoration of rural communities to our downtown districts and infrastructure. Mr. Harvey. And reduce Federal red tape. Ms. Spraag. That was a verbatim. Another verbatim, offer tax incentives which will inspire business to relocate to rural areas. Again, we appreciate your time and your efforts in researching and finding solutions to these dilemmas, and if you have any further questions, we have submitted this letter for the record of this hearing, and we would be willing to answer any more that you have.\2\ --------------------------------------------------------------------------- \2\ Letter is located in the appendix. --------------------------------------------------------------------------- Thank you. Senator Wellstone. Thank you for your very crisp policy recommendations. I agree with almost all of them. Ms. Spraag. Thank you. Senator Wellstone. No. 2. If you all know your cards, just go ahead. Mr. Grimlund. Thank you for letting me come. My name is Pete Grimlund. I am the CEO of Rural, Inc. We develop regional technology cooperatives in rural Minnesota and across the country to deliver technology, particularly consulting services, and a host of software applications to communities in the business, and residents within the community. In thinking about what I want to say today, I think enough has been said about the digital divide and the issues related to connectivity. I would like to suggest we move beyond that and think about what happens when connectivity is available to everyone. The challenges that we have seen amongst the businesses in rural areas is not so much one of connectivity, it is an issue of what do you do with it once you have got it. The skills do not exist at the rural areas to support the type of sophisticated infrastructure like you see around here in St. Cloud and the metro area and California and wherever. If the businesses are to survive in a virtual economy, a global economy that we are in right now, they need to have access, local access, to the sophisticated people and individuals who can support that infrastructure, who can consult with the businesses to help them in the changes that they need to be competitive, and to bring to the table the various sophisticated software tools and services that they need, and need to integrate into the bows of their entity to be able to survive in the local marketplace. Then and only then will they be able to be fully engaged in the economy. The one recommendation that I would like to suggest that comes out of this and goes back to Washington is that we go back into the past and take a look at what happened when a new technology in the last century--or the two new technologies in the last century were going out into the local areas: electricity and telecommunications. The solution at that point in time was to create a funding mechanism to support the development of these cooperatives to aggregate demand, to aggregate capital, to be able to build that out into the rural areas. That same style, that same old financing mechanism, needs to be put in place today, but put in place today so that it is not asset-based, because the assets that are out in rural America that need to be financed are intellectual assets and they are software assets. They are not traditional assets that you can go to a bank or go to the SBA or go any place else and get traditional funding for. That, frankly, has been the biggest impediment to our being able to go out and solve the problem. Thank you very much for your time. Senator Wellstone. Yes, thank you. I think part of this fits into the discussion we were having about workforce development earlier. Mr. Grimlund. Correct. Senator Wellstone. OK. Thank you. Card number three. You know, actually, people can--if you know you are going to be like fourth, if we can get a couple of people lined up and move along quicker. Card three? Card four? Five? Six? We are moving along really well now. Seven? Eight? Well, as soon as we get through these, we will go right to others. Yes? Mr. Bauerly. Senator, thank you for being here today. My name is Rick Bauerly, and I live in Sauk Rapids. I work for Venture Allies, a small business consulting firm, here in St. Cloud. I want to tell a story about venture capital in Minnesota. We all know that venture capital creates jobs. The National Venture Capital Association reported that last year, venture-backed companies created 4.3 million jobs in this country. A little math would suggest that that is a large share of all job growth in this country. The second part of the story is that venture capital in Minnesota lives in Minneapolis and St. Paul, and the seven- county metro area. There are 25 venture capital funds there, and, to my knowledge, there is not one largely capitalized venture capital fund in Greater Minnesota. By largely capitalized, I mean $50 million or more, which is sort of the critical math that you need for a venture capital fund. So venture capital creates jobs, venture capital lives in the Twin City metro area. The worst part of the story, though, is that the venture capital in the Twin Cities metro area flies to the coast. By that I mean that last year, 12 percent of Minnesota venture capital was invested in Minnesota. The majority of it flew to Silicon Valley, to Wall Street, to Texas and so forth. So we hear reports that there is quite a bit of venture capital in Minnesota, but it is in Minneapolis, it is spent on the coasts, and it is not in Greater Minnesota. That is the problem. There is a great solution. Ed and Mel know about it well. It is the small business investment company that the SBA sponsors, it has sponsored for 40 years, and we think that is a great solution for this problem for Greater Minnesota. It provides $3 of debt for every dollar of private equity that we can raise. We think there is enough demand for such a fund in Greater Minnesota with Central Minnesota as its anchor. As evidence of that, if you look at the SPSs in the country, and there are 300 of them, there are 30 of them in cities that are smaller than St. Cloud, and in regions that are smaller in central Minnesota. So a full 10 percent of them are in lesser economic areas. We think that Venture Allies has the management team to do this, the investors are ready to invest. We have one barrier. The barrier to an SBIC in Greater Minnesota is this, this is the barrier: I flew to Washington, D.C., and I sat down with the license administrator of the Small Business Administration, and I said, ``What does it take to get licensed from a management team perspective?'' He said, ``Well, here's the regulation. You have to have a senior partner who has produced investment returns in the top 50 percent of venture capital.'' That is an extremely high hurdle, and those people live in the big cities. We have tried to recruit them here. We cannot, and so we are going to try to make the application ourselves. But we need support, and we need your support as we make this application, and we need Leslie's support, and we need Joe's support, and we need to look at the spirit of the spirit of the matter, which is that we have a capable team interested in investors, and a strong demand for this, and to try to focus on the spirit of the matter. Senator Wellstone. I appreciate your testimony, and, as you know, we do want to help. I mean, it is not unreasonable to sort of want to say, ``Look, we want to make sure that whoever is going to be doing this, we have got some record success on what they are doing.'' On the other hand, your point is well taken, too. Let us just sort of see what we can do with this. Thank you so much. Mr. Bauerly. Thank you. Senator Wellstone. Where are we now? Nine? Ten? Eleven? I feel like I am doing an auction, here. Mr. Brian. I will take the time and the money from the folks that haven't shown up. Senator and staff, I am Tim, the Soup Guy, and I started a frozen soup company a number of years ago. It is my fourth start-up, but I also, after having success with it, looked around and wanted to help some other folks. Some of our profits go to homeless kids and family violence issues, and so I started a group called Bread Board. You may have heard of it. It has been written up in the paper. It is an informal--or was supposed to be an informal networking group, but the Department of Ag has asked if we would hold it there, and we are. So it has kind of taken on a life of its own, and I haven't been available to sell soup, so it is available at Colborne's, if you live here. We found out, as we go around, that Bread Board is a group of CEOs and executives from small food start-up companies, and statistically 99 percent fail, fall off the cliff. And that is a real number. Now, after looking at that, I started to look around, wondering what could help me along the way--and I started really studying it with some other folks, and I have come up with the Minnesota Ag Club, which I faxed to your office, Senator, and I have a copy here for you also. It has been developed with the help of--here goes the acronyms, AURI, MBA, USDA, and I do not need to go on. But anyway, input from everybody. What I have found is we do not need money. I am the one here to say we are not asking for spending. What I am saying is that I have found through talking to everybody there that we need to spend money more efficiently. There is a reason I didn't use any Government programs to start my business. I didn't know about them, and it was very hard to understand them at the time as a start-up. The resumes of the people who were going to counsel with me didn't have a marketing background. The idea behind it, in a nutshell, since I am out of time, is it looks like a cooperative, and there are many cooperatives, but my concern is that on the Bread Board, we have a buffalo cooperative, for instance. Everybody in the cooperative knows the same thing. How do you help each other? You pool resources, but if everybody is poor and doesn't have resources, what good is that? Even a dairy cooperative. The reason there are so many subsidies going out is because everybody just knows dairy. I really believe the model I have built here will help the farmer--the difference of this cooperative is there are farmers and hunters, which is myself, a food marketing entrepreneur, and there are many of us who will come together. Now, when I looked at it, the No. 1 reason that has never happened before is trust. You know, we are total opposites in personality. So it is like any other group. You know, the needs and strengths of the farmer are inversely related to the needs and strengths of entrepreneurs. They have the ag product, and I need ag product. We have experience in marketing, and they need value- added marketing. My concern is the USDA grants, millions of dollars, are going to farmers who, as somebody from the USDA said, are living off the grants, because they do not have marketing experience. It would be like saying, ``For your soup company, we have money, but you have to now milk cows and raise cattle and your own carrots and things.'' So the current system I think has some opportunity to be refined a bit, and I would love to lead the way on that with some of this research. Thank you. Senator Wellstone. We would love to have your help. Thank you. We are up to 12, 13? For some of you, there will be some follow-up. We would just like to talk more. Thank you. Ms. Purvis. Good morning, my name is Lisa Purvis, director of the Owatonna Chamber of Commerce and Tourism, and I appreciate the opportunity to speak with you this morning. Senator Wellstone. Thanks for coming. Ms. Purvis. Owatonna is located at the junction of I-35 and Highway 14. We have recently gained notoriety, with Cabela's in our own backyard. Development continues to expand on the I-35 corridor with the new health care campus, industry, retail and education coalition. Owatonna's population is approximately 22,000. Our demographics are becoming increasingly diverse, including a growing Somali and Hmong population. This diverse workforce grows with the largest manufacturing and industrial base. However, as in many rural communities, there is a disproportionate amount of affordable housing. Owatonna grows success. We are the home of Federated Insurance, Josten's, Winger Corporation, the King Company, and the Owatonna Tool Company. However, several recent mergers by multinational corporations that do not possess the same community values that you spoke of earlier necessitates additional resources to continue to grow our human feasibility by fostering a positive environment for the entrepreneur spirit. Access to capital is a problem in this State. Economic development tools for rural communities and development corporations are limited. Tax increment financing legislation intended to enable and empower local municipalities has been attacked year after year. In 1995, Minnesota even went so far as to discontinue a State Main Street program. Therefore, towns like Owatonna must look to you not only to continue, but to enhance three specific programs. The first one is the Small Cities Development Corporate Program funded by HUD, whose purpose is to provide decent housing, a suitable living environment, and expand equal living opportunities for persons of low-income and moderate income. The second program is Main Street, which has been incredibly successful, making it one of the most powerful economic development tools in the Nation. The total amount of public and private reinvestment in major communities is $15.2 billion. The average redevelopment per community is $9.3 million, and the number of new businesses generated is 52,000. In addition, the Liveable Communities Initiative, created by the Clinton administration, is a model of intergovernmental cooperation of the highest and potentially most effective level. I believe these Federal programs have the greatest impact on the continued success of Owatonna, as well as many other communities in Minnesota. Thank you. Senator Wellstone. Thank you. I--it is not to be outside of it. Any number of different people today have talked about affordable housing. As in not metro, but Greater Minnesota, as well, and I think it is a long story. One of the things that I am looking at, and there are other people, but I--we did away with some of the tax credits and tax breaks in the 1986 tax bill that was really actually critical to the private sector involvement in affordable housing, and then we didn't replace it with anything else. I think we really need to go back to some of those, and we need to make sure--I really think this is critically important in our State, and I really appreciate it. All of the things you said about Owatonna, I always thought about Owatonna as being a suburb of Northfield. I just ended all of my chances in Owatonna. Fourteen, fifteen, and sixteen. Mr. Fuhr. My name is Dave Fuhr. I am the President and CEO of a company, Airborne Data Systems, out of wabasso, Minnesota. We build an airborne, digital, multispectral camera system. We are the only company that does it. We are an international company. One of the things that Minnesota doesn't play very high in, is like an old military presence, we have never had any bases, never had anything like that, and we play in the market that is dominated by Government agencies, military, and things like this. We are just totally unheard of. We can walk into the best things, like sliced bread. They do not care. If you are not growing, you do not exist. There has got to be some kind of a way, whether it is just--we are so specialized, the only thing we need to do is say, ``Senator Wellstone, go right up to Forest Service''--we have got a system on the bench, and we can sell this thing at a regional level to the lower echelon in Forest Service. We cannot touch the national level. Actually, we are a see front. We have got full broad band Internet due to a rural telephone company. Anybody looking for broad band international office space, we have got it, we will rent it out. But when it comes to our markets, we cannot touch that stuff. I do not know how to fix it. I work with Minnesota Technologies, and they are great. They have got some things that they could improve on. They can provide some resources for people that little companies cannot provide. We work with that since we started our business. That is the comment I would like to make. I do not know how to fix that, and I have heard nothing from anyone else on how to fix that project. Senator Wellstone. Thank you. I have two very, very quick reactions. One is, without trying to make any promises that cannot be followed up on, I do wish that you would talk to me, because sometimes what happens is there are just ways that we can, you know, go to work for companies and entrepreneurs that can be helpful. And then the broader question you raised, which I think is the question that was brought up in the Twin Cities, as well, the overall question of procurement and contracting and subcontracting, and how small businesses get a fair shake in the competition is the other question which I think is extremely important. Mr. Fuhr. Especially when you get into technical conferences. I was in a conference, How to Do Government Contracting, in one of the hotels a couple of months ago, and that was good, but if you get into technical markets and things like that, it is--it just wasn't designed. There was just no way to take something like that and just direct it to a higher echelon level. We do not have the retired generals on our staff. We do not have access to those people, because they never retired to Minnesota because we do not have the bases. And it is--you just do not have--you just do not have the clout. You do not have the touch to people. Senator Wellstone. Yes, this reminds me, just for a moment, if you will think of the levity of Al Franken, who is from Minnesota, who can be quite hilarious. I once heard him say at a gathering that--he is Jewish, and I am Jewish, and he said that he was trying to figure out when we would have the first Jewish President. He said he has decided that the only time that will happen is if it is a Jewish person that is a military man or woman. He said that is the way it is going to happen. He said, but the problem is--I then did my research, and I found out that the highest-ranking Jew in the military was Comptroller General of the Coast Guard. Anyway, I do not think that is true. But that is another story. Mr. Fuhr. Well, thank you very much. Senator Wellstone. Yes, and please make sure that we talk afterwards. Mr. Fuhr. Thank you very much. Senator Wellstone. Yes, do we have any more card numbers? Anybody with cards--and, by the way, please, your comments as well. Mr. Babcock. Good morning. My name is John Babcock. I am an attorney and certified public accountant. I practice here in St. Cloud, and I have dealt with Jim previously on various issues. Access to capital is a real problem for rural businesses in Minnesota. I want to give you a very specific example of something that occurred in my experience, and I think Leslie may have some reaction to this. There is a large turkey plant in the City of Detroit Lakes that produces over a hundred million pounds of turkeys per year, and the company that operated that decided to leave the State. I worked with a bunch of turkey farmers who were interested in acquiring that facility and keeping it running, and they produced the turkeys, the turkeys would go into the processing plant, and they were going to sell these turkeys as finished products. They had a certain amount of capital, and we wanted to leverage that. We wanted to get some venture capitalists to come in and join us in that acquisition. The problem was, the venture capitalists were based out of Minneapolis, they just didn't understand an agriculturally-based business. Agricultural businesses are fundamentally different than a manufacturing business. You are selling at large volumes for low margin, and that takes a lot of capital that you wrap up in equipment. If you invest in that type of business, you have to realize there is going to be fluctuations that the market may impose on you, and you have to live through those fluctuations, you have to be patient, you have to strive for that long-term return. They just didn't understand that, and I think that the need is critical that we have an outstate venture capital fund that does understand those concepts, that can make intelligent decisions, and I think Rick, with Venture Allies, is certainly part of that. Another tool that I think is available is the Small Corporate Offering Program that enables small businesses to make direct sales to the public of up to $1 million of their stock. I think that is a viable program. I have worked with Jim on trying to bring some of those businesses under that program and bring that to the table. Thank you for allowing me to make some of my comments. Senator Wellstone. Thank you for your excellent comments. We will just move right along. According to Bill, we are a little bit over time, but I want to hear from others, if that is OK, and I also want to comment--I want you to, if you do not mind, take some time, Connie. Some to you, Leslie. Mr. Wood. Senator Wellstone, thank you for the opportunity. My name is Ron Wood. I am president of the Minnesota West Community and Technical College. I also serve on the Granite Falls Economic Development Authority and the Worthington Regional Development Corporation. Minnesota West serves 20,000 square miles of southwest Minnesota, so I get to see an awful lot of ground as I travel to our campuses. We have no community over 15,000 people within that 20,000 square miles. Most of them are in the neighborhood of 800 to 3,000 people. Two issues I would like to talk about are access to capital and access to technology. Boy, it is hard to stay under 2 minutes, too. OK. One of the problems that I find sitting on the Economic Development Board is we do not have enough capital to work in our communities to really help them. Being active is not enough in a small community. In a larger community, they are going to generate some revenue to do some real good things, but it is hard in a small community of 2,000 or 3,000 to make that work right. We run into problems. I mean, I just had a meeting for 4 hours Monday night, and we run into problems where the State and the Federal bureaucracy is so slow, where we find that it takes too long. When you are in a business and we are trying to move a business through, timing and use is the most important thing. It is timing. It is not 2 months later, not 6 months later, not 12 months later. The solution that I offer is we have to have some more trust and flexibility in lieu of the money down to lower levels. I am going to just skip quickly forward to the banking industry. We are still in the 1930s and 1940s and the 1950s in the regulations. They have got to look at collateralization in a different way. It has to be done in a different way. As the gentleman from Rural Inc. said, we are not talking about intellectual resources, we are talking about software. When we look at technology one other solution is, we have got to stop talking about land lines. We have got to talk about satellite use in rural America. It is not going to work with land lines. It is too long, it will take too long. It will be 10 years before we land line this State. Ecostar, Dish, they now have a commercial solution that gives you the high speed. Minnesota West, at this point in time, we use IP voice for my senior staff. I do not have long-distance calls, but my senior staff, we use IP voice over our T1 lines. But we cross our land lines without problems doing that. That is something we need to look at with technology. When you write and speak, it seems longer. One of the examples I would like to give, Rural Inc. was up here a little bit earlier. I didn't know Pete was going to be here today. That is an example of what Granite Falls has done. It has taken a tremendous risk in its capital, in terms of its available capital to do that, but there is an amazing demand out there for IT services. Not full-time IT workers, but a quarter of a worker, a half a worker. You have the co-ops concept; it is a concept that really can be applied in rural America. It works over and over and over. But we have to find ways to fund these kinds of operations so that they can be successful, because rural businesses cannot compete with cities unless they know how to use that technology. It is not just access to it. It is how to use it, also. I want to thank you for this opportunity. Good luck in what you are doing in Washington. Commissioner, I thank you, also. Senator Wellstone. Yes, thanks for your comment. We will get two more people, and if there is anyone else, we are going to end within about 10 minutes. Mr. Herges. I am John Herges, president of Stearns Bank in St. Cloud. I want to thank you for your support with the SBA program, and I am here today as a big supporter of the SBA program. Our bank is an independent bank. In addition to the one in St. Cloud, we have five rural banks, and you might say that we make a living making small business loans in rural America. We are a big user of the SBA program, and both the 7(a) program and the 504 program are wonderful programs and really are a big aid to the banking community, and to small business people out there in rural America. With the success the program has had, both 7(a) and 504, I think we ought to be looking at ways to increase the SBA budget and increasing the SBA program rather than decreasing it. I would also like to throw in a word of caution. Please do not increase the fees. It puts a real burden on the small business person, and what ends up happening is that the SBA program becomes a lender of last resort. There are other options. The other program that I would ask you to continue on with your support with the SBA program--it is a very, very important program. I would also ask for you to look at the USDA program, the USDA Rural Development, BNI program, which is another guarantee program that is more specifically zeroed in on rural development and rural economic development, and it also allows larger laws to be made in rural America. Thank you very much, Senator. Senator Wellstone. Well, thank you. The whole question of rural economic development, I think, will go with this ag bill to the family farm bill, but will also be undergoing--Bill also mentioned this. For the record, your testimony on the 7(a) and 504 is extremely important, and I wholeheartedly agree with you. I wish we weren't in the position of, you know, trying to keep it sort of where it is and say,``no.'' I wish we would extend, but I think there are any number of us that are going to push very hard. I know that John Kerry is certainly--this is a huge priority. I know what is in Minnesota; I do not think we can emphasize it enough. It is so successful, and it is critically important. Mr. Herges. As you pointed out earlier, the SBA office in Minnesota is one of the best offices--is the best office, in my opinion. Senator Wellstone. I think so. Let's give Ed Daum a hand. The other thing that will--it is not part of the subject matter of our official hearing, but I cannot resist saying it because of what you said earlier. I also feel very strongly that there is an important distinction, and I do say everywhere, most of you will agree, but I can say it everywhere. There is an important distinction that is also involved between independent and community banks, and I am very--I will only use the word ``saddened.'' I think we have made a terrible mistake by just simply going forward and saying so little about the mergers and the acquisitions and the concentration that has taken place in the industry, because just as people were talking about small business, you are talking about people who live in the community and know people. I think the same distinction can be made between your kind of a bank versus some of these large branch banks. It is completely different, and I find myself very much in opposition to some of the legislation that has passed, and I think it has just encouraged more mergers. Anyway, I am done. I am off my soapbox. Ms. Johnson. Good afternoon. I am Susan Johnson, director for the Nursing Service Department at St. Cloud University. I am also from southern Minnesota, grew up on Century farm. I am here just to mention that rural development is contingent on good health care, and nurses do represent the backbone of the health care industry. We currently have a severe international, national, and regional and State nursing shortage, and rural areas will be mostly severely impacted by this issue. Again, I would like to encourage better funding to go to nursing education, and State funding. We currently have-- I am acutely aware of this. We are starting, we are trying to start, and we have over 700 students on an interest list. Senator Wellstone. You have what? Ms. Johnson. Over 700 students on an interest list, and that is without even having--this is just word of mouth, this is just coming to our office, and we have a lot of agencies crying for nurses, but we do not have the funding for the educational program to provide the education. So I would urge you to think about increasing funding for nursing education and making sure that some of that funding flows to rural areas. Senator Wellstone. Absolutely. Ms. Merdan. Susan. Oh, my mic is not on. Susan, I was just going to say, there is not a nursing program now? Would you talk about that? North of the Twin Cities--I am sorry. I am Toni Merdan. Ms. Johnson. Yes. We did our research looking at access to nursing education. What we discovered was if a student is interested in a generic, just a degree in a nursing program, there are currently only three in the State of Minnesota in the public sector: one in Mankato, one in Winona, and one at the University of Minnesota. So if you live north of the Cities, you do not have access to nursing education. When we look at that, part of the reason is funding; nursing education is expensive, or universities, and so we need to figure out some incentive, some university incentives to provide nursing education. Part of it, I think, is just looking at the problem and getting the money to an interested student. Mr. McLean. I am Bob McLean. I am in beautiful Pequot Lakes in Minnesota. First I would like to say something to you, Senator Wellstone. I genuinely appreciate the integrity and intellect that you bring to the Senate. It is so vitally important, and I think not in the mainstream, and it is really appreciated. I wanted to address one area that I think is being touched on in almost every person's comments, but it concerns me it is not getting more emphasis. If you want to increase the rate on technology, if you want to mitigate risk in capital, if you want to increase the confidence of loan officers and venture capitalists, I think you need to increase education. Especially--and I will start, I think in particular, with your group, Ed. The SBA and SBDCs are doing an incredible job in Greater Minnesota. You cannot imagine, when a loan officer has to look at two different loans, and they have gone through an SBDC program, there is such a heightened confidence in looking at that loan. But these people are terribly overworked and the demand for their work is growing. Not just in start-up, but in the ongoing emerging. I think, too, in their host--generally in our universities, we have got some wonderful entrepreneurial programs in the University of Minnesota. They need to be supported more strongly. I didn't come with an agenda, but I do think that a key point to our economic development is our education, and the way that we fund education, that necessarily is in a traditional form, but with technical assistance, like Mary, who was talking about up in the Northeast, with--if you are getting an increase in entrepreneurialism, you cannot expect somebody who is a farmer to all of a sudden be an outstanding business person. Or if they worked in a mine, they are not an instant MBA. So whatever we can do to try and help get at the grass-roots level and bring more of that kind of technical support and kind of business support to our people, I think that is going to draw the capital, I think that is going to increase the confidence of our loan officers, I think it is going to help the process of economic development in Greater Minnesota. Senator Wellstone. Absolutely. I think that is what Renae was saying earlier, as well. Jim, I am sure you agree with me. One thing I am sure of is that all of this is of the definition of K through 1. A number of people talked about what has been outdated. That is another outdated--I mean, education is pre-K through, I think, 65, and a lot of our students today are not 18 or 19, and many of them are trying to make this transition. The human capital piece and the way in which you link that to small business or entrepreneurship or ongoing development is critically important. You couldn't be more right. Mr. McLean. A key point, too, Senator Wellstone, is we do not have to invent it. We already have good programs that exist. We need to support that and increase it. So it is not a matter of having to start over or starting anew. It is a matter of taking what we have and making it available and supporting it strongly. I always say, if you think education is expensive, try ignorance. If you think a loan is a dangerous thing, if someone doesn't know what to do with money, that costs you a whole lot more. Thank you. Mr. Berstein. Senator Wellstone, in Minnesota we have a terrific technical education system that needs to be preserved. Much of what is going on in the workforce is going on in technical colleges as well. There are difficulties, however. Is there anyone else from technical colleges here? There is, again--adapting to changes in the workforce, and so many of the--it used to be that communities after 23 years--anybody go to a technical college? Three or four, OK. That is because of the change in the economy and having to go through the retraining. So they need access--businesses to help them with providing what we need in our workforce, but we also have to provide the funds, and that is where the legislature comes in and the Administration comes in to make sure that those systems are what are funding it. Senator Wellstone. Sonja. Ms. Berg. Good afternoon. I want to welcome you, Senator Wellstone, and all of the rest of you as individuals. My name is Sonja Berg, and I am a city council member here in St. Cloud, I am an educator, and just interested in this hearing. I didn't hear about it until yesterday morning at the local Economic Development Partnership meeting. I happened to be down at the National League of Cities Steering Committee for Information Technology, and some of the comments today sparked my interest or sparked--I wasn't asked to speak on behalf of anybody, but I am--I put up my own hand. I think some of the issues that were talked about are really important, and one is that what is happening in the Federal Government right now in terms of not having--thinking about selling off broad band for our safety police and fire departments, rather than leasing it. Are you aware of that, the spectrum digits? OK. Another one that someone else talked about is the digital divide. I think getting our schools and our libraries wired, and then training our teachers so that they can teach at preschool through grandparents, because many of these people want to have and need to train to communicate with business, through business, and so on. This will not have any popularity whatsoever, but it has been on the--hardly has hit the radar screen locally or in State government. We won't have any--we do not currently have any taxes on goods purchased through the Internet, and that while as a small business owner, one might think, oh, that is wonderful, I can go and get my books that way, and not be taxed. You are replacing what happens in that the State collects and the Federal Government--I mean, State tax collects, and you won't then have the police and fire safety that you need in order to come back to the communities, and you will take away the small businesses that once we went to the local John Deere, we went to the local hardware store, we went to the local book store. Those will be gone, because why would you do that, unless you had a special book that was only--I mean, there are more available through the Internet than otherwise. So those are the things that I wanted to add, and I appreciate you coming and being here, and I appreciate the chance to get to speak and listen. Senator Wellstone. Thank you so much. The last issue you raised is very much on the radar screen. There are many people who are thinking along the same lines. We are going to have one final comment. Ms. Leonard. I am 55. Senator Wellstone. No. 55. This better be great. You are the conclusion, Jane. Ms. Leonard. Thank you. My name is Jane Leonard, chairman of the Minnesota Rural Partners, and also co-owner of Community Technology, which is a very small business but helps lots of communities with their community technology planning. I wanted to take this opportunity, Senator Wellstone, to publicly thank you and your staff for supporting the National Partnership Development Act. We have worked very hard on that, and your staff has been a great help, and so I wanted to publicly thank you for that. I wanted to just echo what I have heard here today, both in energizing the entrepreneurs and closing the digital divide. Those are two of the five areas that Minnesota Rural Partners has been working on for the last 2 years, really, and we have already heard about the Rural Entrepreneur Academy, and I want to just let people know that, as we have heard today, there has been a lot of collaborative efforts at the grass-roots level to try and get the digital divide closed, and we have heard a lot about infrastructure not being there. I think infrastructure is there, there is a lot of activity in Minnesota, and we are doing pretty well. The problem, I think, as has been pointed out, is a lack of market development, especially for the new technologies, like DSL, and a lot of folks will tell you that they installed DSL, and they get 4 customers or 11 customers. I think that one of the things that we do need to emphasize is education. Technical training, but also leadership training, and I would just like to invite anybody here, and including your staff, the University of Minnesota, Minnesota Rural Partners, League of Cities, Association of Small Cities, and other regional cooperators are putting together regional leadership seminars this September all across the State in each of the six initiative fund regions, and we invite people to come out to this. It is a way to help community leaders understand the multi-dimensions of what we have talked about here today, the regulatory issues, the leadership issues, and in 3 hours. So we will see if it works. Senator Wellstone. I think that what you all are going to be doing this fall is so important. I think it is just critical. What I would like to do is, first of all, I have some remarks that I would like to have included in the record, and there are 10 days for additional remarks that I know you might want to make. At the front door, there are instructions about how to submit your testimony. I wanted to ask Representative Schumacher, Leslie, and Toni and Colleen whether you all have any final comments to make. We will all try to be relatively brief. I have had a chance to speak more than enough, so I would like to thank everyone. I thought it was a great hearing, and I take it to heart, and it is not just symbolic. Owatonna is not a suburb of Northfield. Leslie. Ms. Schumacher. I am Representative Leslie Schumacher. I would like to thank you, Senator Wellstone, for conducting this hearing today. I learned a great deal and have a ton of questions. I have been taking notes, and I am hoping that you will provide us with the names and titles, and how to contact the individuals that testified here. I see lots of faces in the crowd that I would like to take time out to talk to, and intend to. Unfortunately, I have another appointment that I am running late for, so I am going to have to exit very quickly. But this was a fantastic meeting. I have some concerns, and as well as some questions, and some partnerships that I would like to form with individuals that testified here to talk about how we can collaborate work out of--I think out of the box. I think there are some changes that need to occur, and we need to better work together to provide services to rural Minnesota that they need. So thank you for giving us this opportunity to listen and participate. Thank you all for being here. Senator Wellstone. Thank you for giving us your time. It is much appreciated. Toni, please go next. Colin is all over the district and is absolutely committed to these issues, and so I am so glad you are here. Ms. Merdan. Thank you, Senator, for having me here today. I really appreciate this, and I appreciate you being in the St. Paul District. My name is Toni Merdan, and I am Senior Economic Development Officer for Congressman Colin Peterson. As you said, Senator, this is an issue that is vitally important to the Congressman. He was the first U.S. Congressman to appoint a full-time professional economic developer to his staff, and since he has done that, and since he has had me, there are quite a few other Congressmen in the U.S. House of Representatives that have also followed suit. I appreciate you having us today. It has all been excellent testimony, and I will take back everything I have heard to the Congressman for his consideration. Also, one thing I might mention is that he is on the Agriculture Committee, and he continually needs information and feedback from what policy changes there should be, and so anytime, please get hold of us, let us know what your thoughts are. We are especially interested right now in USDA rural development and any policy changes or ideas that could come in front of the Committee on those issues. So like we talked about, this is a program in rural development, and all of the wonderful community development programs they have, and so if there is anything there that we can take information back to him, I would appreciate it. So, again, thank you, Senator. Senator Wellstone. Thank you for coming. Colleen. Ms. Landkamer. I am Colleen Landkamer, and I am a Blue Earth County commissioner, and I have been a chair of the Rural Caucus of the National Association of Counties. I just think it is great you had this hearing today. You know, too frequently, we do not get this information in the district, and it is nice for you to bring people out to the State to hear the ideas here and to make a difference. We all know that all good ideas do not start in Washington. They start here, and you know that. So bringing it out here and getting the ideas that are important, and the people who put the programs actually in the ground, the people who work in the dirt and make things happen out here, that is what is important, and that is what we heard today. It all shows how interdependent everything is. We talk about health care, talk about technology, talk about living in a knowledge economy, and the importance of bringing all of that together and looking for new solutions and new ways to do things. In that way, encouraging resilient communities--and that is what this is all about, making sure that rural Minnesota has resilient communities, places for people to live and grow and have good jobs. So I just want to thank you for doing this. I want to thank you for letting me sit up here and learn so much from all of you, and I look forward to working on this with you for a long, long time. Thank you. Senator Wellstone. Thanks Colleen. I think you are being a little modest. I think economic development is one of your great areas of expertise, much less national. Commissioner, before you finish up, Ed, you are getting the final word. Since people put all of this praise on you, it is only fair that you do. But, Commissioner, one of the things we talked about, and I agree with you more on the other piece, the one thing that you did say, although I think everybody knows it, is that this clean technology is also much more small business intensive. We have got so much potential. The other thing is, it is a no-brainer for Minnesota, because we have got over a $10 million a year energy bill. We are a State at the other end of the pipeline, and so when we import the barrels of oil and gas, we export dollars. Whereas wind, biomass--this is a big part of our future. Mr. Berstein. Yes, we have wind, we have the technology in Minnesota, I think, and some of the big companies like 3M have been instrumental. All are developing micro turbines. I want to thank everyone here for your time today, and honest issues. I also have a lot of notes on follow-ups, and if I can grab a couple of cards, here, as well. I came from a food marketing background, and the soup man and some of his ideas, and Bread Board, but what is our largest tax supporter? Does anyone know? It is agricultural products, and we do not just have to send out corn or raw wheat. We can send out processed or manufactured foods. There is also huge development in the food industry. People do not always want to buy Campbell's Soup or Progressive Food. This is the future of Minnesota, market niches and, again, Minnesota is an energy- producing State. Not with oil, not with traditional technologies, but with the next generation of technologies, whether it is wind, whether it is biomass, and whether it is micro turbines. So thank you, everyone. Senator Wellstone. Thank you, Commissioner. Ed Daum, thank you for having us, by the way. Mr. Daum. Yes, thank you very much. I have taken lots of notes today. I took lots of notes yesterday. Senator Wellstone held meetings last week in several cities--Two Harbors, several other ones. Our staff are taking notes. The reason I am saying that is next week I am meeting with our Administrator in Washington, and I will certainly take this and present this to him, as well. I would like to introduce someone, Karen Honz. Karen, can you raise your hand? She flew in from Washington, D.C. She works with the Senate Ag Committee, as well. So we are taking notes. Again, Senator, thank you very much for inviting us here today. Senator Wellstone. This was a superb hearing. Thank you. Some of you traveled very far, and for all of you who came and sat through several hours of testimony, it is much appreciated. Thank you everybody. The hearing is adjourned. 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