Mark Jickling
Specialist in Financial Economics
Jennifer Teefy
Information Research Specialist
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA; P.L. 109-8) included the most significant amendments to consumer bankruptcy procedures since the 1970s. Bankruptcy reform was enacted in response to the high number of consumer bankruptcy filings, which in 2004 and 2005 reached five times the level of the early 1980s. Why did filings increase so dramatically during a period that included two of the longest economic expansions in U.S. history? Because bankruptcy is by definition a condition of excessive debt, many would expect to see a corresponding increase in the debt burden of U.S. households over the same period. However, while household debt has indeed grown, debt costs as a percentage of income have risen only moderately. What aggregate statistics do not show is that the debt burden does not fall evenly on all families. Financial distress is common among lower-income households: in 2007, 27% of families in the bottom fifth of the income distribution spent more than 40% of their income to repay debt.
Following the effective date of BAPCPA, in October 2005, there was a sharp reduction in the number of bankruptcy filings, reflecting the “rush to the courthouse” to file before the new law took effect. Since the 2006 lows, the number of filings has risen steadily. In 2009, personal bankruptcy filings reached 1.4 million, close to pre-BAPCPA levels. Unless there is a sharp postrecession reduction (which has not been the historical pattern), it appears that BAPCPA will not produce the effect its supporters hoped for—a permanent reduction in the rate of consumer bankruptcy.
With the recession that began in December 2007, the long-term upward trend in consumer indebtedness was interrupted. Since the middle of 2008, the amount of debt held by U.S. households has continued to decline for 10 consecutive quarters. In all, households have reduced their debt burden by about $707 billion, or 5.4%. Causes and implications of this trend are discussed in CRS Report R41623, Household Deleveraging: Why Is Consumer Debt Falling?, by Mark Jickling and Darryl E. Getter.
This report presents statistics on bankruptcy filings, household debt, and families in financial distress.
Date of Report: March 23, 2011
Number of Pages: 9
Order Number: RS20777
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Dawn Nuschler
Specialist in Income Security
Social Security reform has been an issue of political debate in recent years. Currently, there is renewed congressional interest in reform in part due to the National Commission on Fiscal Responsibility and Reform established by President Obama in February 2010, which was tasked with making recommendations on ways to improve the long-term fiscal outlook. On December 1, 2010, the President’s Fiscal Commission released its final report, which includes a number of proposed changes to the Social Security program. On December 3, 2010, a majority of commission members expressed support for the recommendations (11 out of 18 members), three short of the super-majority needed to require congressional action on the recommendations.
The spectrum of ideas for reform ranges from relatively minor changes to the pay-as-you-go social insurance system enacted in the 1930s to a redesigned, “modernized” program based on personal savings and investments modeled after IRAs and 401(k)s. Proponents of the fundamentally different approaches to reform cite varying policy objectives that go beyond simply restoring long-term financial stability to the Social Security system. They cite objectives that focus on improving the adequacy and equity of benefits, as well as those that reflect different philosophical views about the role of the Social Security program and the federal government in providing retirement income. However, the system’s projected long-range financial outlook provides a backdrop for much of the Social Security reform debate in terms of the timing and degree of recommended program changes.
The Social Security Board of Trustees projects that the trust funds will be exhausted in 2037 and that an estimated 78% of scheduled annual benefits will be payable with incoming receipts at that time (under the intermediate projections). The primary reason is demographics. Between 2010 and 2030, the number of people aged 65 and older is projected to increase by 76%, while the number of workers supporting the system is projected to increase by 8%. In addition, the trustees project that the system will run cash flow deficits in 2010 and 2011, and again in 2015 and each year thereafter through the end of the 75-year projection period. When current Social Security tax revenues are insufficient to pay benefits and administrative costs, federal securities held by the trust funds are redeemed and Treasury makes up the difference with other receipts. When there are no surplus governmental receipts, policymakers have three options: raise taxes or other income, reduce other spending, or borrow from the public (or a combination of these options).
Public opinion polls show that less than 50% of respondents are confident that Social Security can meet its long-term commitments. There is also a public perception that Social Security may not be as good a value for future retirees. These concerns, and a belief that the nation must increase national savings, have led to proposals to redesign the system. At the same time, others suggest that the system’s financial outlook is not a “crisis” in need of immediate action. Supporters of the current program structure point out that the trust funds are projected to have a positive balance until 2037 and that the program continues to have public support and could be affected adversely by the risk associated with some of the reform ideas. They contend that only modest changes are needed to restore long-range solvency to the Social Security system.
During the 111th Congress, four Social Security reform measures were introduced. None of the measures received congressional action. During the 112th Congress to date, two Social Security reform measures have been introduced.
Date of Report: March 22, 2011
Number of Pages: 36
Order Number: RL33544
Price: $29.95
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Libby Perl
Specialist in Housing Policy
The Low Income Home Energy Assistance program (LIHEAP), established in 1981 as part of the Omnibus Budget Reconciliation Act (P.L. 97-35), is a block grant program under which the federal government makes annual grants to states, tribes, and territories to operate home energy assistance programs for low-income households. The LIHEAP statute authorizes two types of funds: regular funds (sometimes referred to as formula funds), which are allocated to all states using a statutory formula, and emergency contingency funds, which are allocated to one or more states at the discretion of the Administration in cases of emergency as defined by the LIHEAP statute.
States may use LIHEAP funds to help households pay for heating and cooling costs, for crisis assistance, weatherization assistance, and services (such as counseling) to reduce the need for energy assistance. According to the most recent data available from the Department of Health and Human Services (HHS), in FY2007, 52.8% of funds went to pay for heating assistance, 3.4% was used for cooling aid, 17.9% of funds went to crisis assistance, and 10.1% was used for weatherization. The LIHEAP statute establishes federal eligibility for households with incomes at or below 150% of poverty or 60% of state median income, whichever is higher, although states may set lower limits. However, in both the FY2009 and FY2010 appropriations acts, Congress gave states the authority to raise their LIHEAP eligibility standards to 75% of state median income. In FY2008, the most recent year for which HHS data are available, an estimated 33.5 million households were eligible for LIHEAP under the federal statutory guidelines. According to HHS, 5.4 million households received heating or winter crisis assistance and approximately 600,000 households received cooling assistance that same year.
As of the date of this report, LIHEAP is funded through April 8, 2011, as part of a sixth continuing resolution (CR) for FY2011 (P.L. 112-6), which was signed by the President on March 18, 2011, and amends the Continuing Appropriations Act enacted on September 30, 2010 (P.L. 111-242). Pursuant to an earlier CR, the Continuing Appropriations and Surface Transportation Extensions Act (P.L. 111-322), the provisions of which amended the first CR and remain in effect, HHS is required to obligate to states, tribes, and territories the same amounts of LIHEAP regular funds that were obligated during the time period covered by the CR (through April 8) in FY2010. States request their share of LIHEAP formula grants quarterly, and may request as much as 100% of their grants in the first quarter of the fiscal year. State allocations under the CR are therefore based on how each state elected to receive their funds during the time period covered by the CR in FY2010, when the total amount appropriated for regular funds was $4.5 billion. For example, if a state requested all of their LIHEAP funding during the first two quarters of FY2010, then they would receive all of their FY2011 formula grant funding under the provisions of the CR.
On January 13, 2011, HHS issued a press release announcing how formula funds would be distributed through that date, and on January 24, 2011, it announced the distribution of $200 million in emergency contingency funds to all states, tribes, and territories. See columns (a) and (b) of Table A-1 for these distributions.
This report describes LIHEAP funding, program rules, and eligibility.
Date of Report: March 23, 2011
Number of Pages: 33
Order Number: RL31865
Price: $29.95
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Robert Jay Dilger
Senior Specialist in American National Government
Small business size standards are of congressional interest because the definition used determines eligibility for Small Business Administration (SBA) loans and management training assistance as well as federal contracting and tax preferences.
Although there is bipartisan agreement that the nation’s small businesses play an important role in the American economy, there are differences of opinion concerning how to define them. The Small Business Act of 1953 (P.L. 83-163, as amended) authorized the SBA to establish size standards for determining eligibility for federal small business assistance. The SBA currently uses two size standards to determine program eligibility: industry-specific size standards and an alternative size standard based the applicant’s maximum tangible net worth and average net income after federal taxes.
The industry-specific size standards determine program eligibility for firms in 1,158 industrial classifications described in the North American Industry Classification System (NAICS). They are based on one of the following four criteria: (1) number of employees; (2) average annual receipts in the previous three years; (3) asset size; or (4) for electrical power industries, the extent of power generation. Overall, the SBA currently classifies about 99.7% of all employer firms as small.
Since issuing its initial small business size standards in 1956, the SBA has based its industry size standards on economic analysis of each industry’s overall competitiveness and the competitiveness of firms within each industry. However, in the absence of precise statutory guidance and consensus on how to define small, the SBA’s size standards have often been challenged, typically by industry representatives advocating a broadening of the size standards to allow more firms in their industry to be eligible for assistance and by members of Congress concerned that the size standards may not adequately target the SBA’s assistance to firms that they consider to be truly small.
P.L. 111-240, the Small Business Jobs Act of 2010, authorizes the most recent changes to the SBA’s size standards. The act authorizes the SBA to establish an alternative size standard using maximum tangible net worth and average net income after federal taxes for both the 7(a) and 504/CDC loan guaranty programs. The act also establishes, until the date on which the alternative size standard is established, an interim alternative size standard for the 7(a) and 504/CDC programs of not more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes (excluding any carry-over losses) for the two full fiscal years before the date of the application. It also requires the SBA to conduct a detailed review of not less than one-third of the SBA’s industry size standards every 18 months beginning on the date of enactment (September 27, 2010).
This report provides a historical examination of the SBA’s size standards, assesses competing views concerning how to define a small business, and discusses how the alternative size standards adopted under the Small Business Jobs Act of 2010 might affect program eligibility.
Date of Report: March 22, 2011
Number of Pages: 29
Order Number: R40860
Price: $29.95
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Kate M. Manuel
Legislative Attorney
John R. Luckey
Legislative Attorney
Jane M. Smith
Legislative Attorney
According to some reports, federal contract dollars awarded to Alaska Native Corporations (ANCs) and their subsidiaries increased by 916% between FY2000 and FY2008, going from $508.4 million to $5.2 billion. The dollars awarded to ANC-owned firms through the Small Business Administration’s (SBA’s) 8(a) Program, in particular, reportedly tripled between FY2004 ($1.1 billion) and FY2008 ($3.9 billion). This widely reported increase has generated congressional and public interest in the legal authorities governing contracting with these entities.
Federal agencies can presently contract with ANCs or ANC-owned firms under various authorities. The identity of the procuring agency and the small business status of the ANC or ANC-owned firm determine, in part, which authority governs in particular circumstances. First, the Armed Services Procurement Act (ASPA) of 1947 and the Federal Property and Administrative Services Act (FPASA) of 1949, as amended, generally give defense and civilian agencies, respectively, broad authority to contract with any qualified, responsible source, including ANCs and ANC-owned firms. These acts also authorize agencies to make sole-source awards to ANCs or ANC-owned firms in certain circumstances (e.g., single source, unusual or compelling circumstances), although such sole-source awards must be justified in writing and approved by agency officials. Second, Section 15 of the Small Business Act of 1958 authorizes agencies to “set aside” contracts for small businesses by conducting competitions in which only they can compete. Section 15 does not, however, authorize sole-source awards. Third, Section 8(a) of the Small Business Act authorizes set-asides and sole-source awards to small businesses owned and controlled by socially and economically disadvantaged individuals or groups. Under Section 8(a), contracts valued in excess of $4 million ($6.5 million for manufacturing contracts) must be set aside for 8(a) firms and cannot be awarded noncompetitively unless (1) there is not a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers at a fair market price or (2) the SBA accepts the requirement on behalf of an 8(a) firm owned by an ANC, Indian tribe, or, in the case of Department of Defense (DOD) contracts, a Native Hawaiian Organization. Until 2009, such sole-source awards were not subject to justifications or approvals, unlike those under ASPA and FPASA. Fourth, Native American statutes provide for the payment of a 5% bonus to federal contractors that subcontract with ANCs; allow contracts with “large” ANCs to count toward federal prime contractors’ goals for subcontracting with small businesses; and provide that any size ANC counts as a disadvantaged business enterprise for certain transportation contracts. Fifth, various appropriations riders allow DOD to contract out functions performed by government employees to ANCs without going through the competitive sourcing process normally required.
The 111th Congress enacted legislation (P.L. 111-84) requiring justifications and approvals for sole-source contracts in excess of $20 million awarded to ANC- or other group-owned firms through the 8(a) Program. Members of the 112th Congress have introduced legislation (H.R. 598, S. 236) that would generally subject ANC-owned firms participating in the 8(a) Program to the same treatment as individually owned firms. Among other things, this legislation would preclude ANC-owned firms from receiving sole-source awards valued in excess of $4 million ($6.5 million for manufacturing contracts) under the authority of Section 8(a) of the Small Business Act. SBA also promulgated a final rule on February 11, 2011, prohibiting ANC-owned firms from receiving a sole-source 8(a) contract that is a follow-on contract to an 8(a) contract that was performed immediately previously by another firm owned by the same ANC, as well as requiring ANCowned firms to report annually on the benefits provided to Alaska Natives through the ANC’s participation in the 8(a) Program. This rule would also make other changes affecting ANCs.
Date of Report: March 25, 2011
Number of Pages: 28
Order Number: R40855
Price: $29.95
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