Tug of war for SBA funding: amendment passed but funding still $123 million less than last year.

For the last five years, doing more with less has been a recurring theme at the Small Business Administration. The agency has seen its budget decline steadily from $1.1 billion to $456.5 million. The SBA then received an additional $441 million for disaster assistance as a result of hurricanes Katrina and Rita. It also received $91 million in congressional initiatives.

It could have been worse. But the bipartisan efforts of Senators John Kerry (D-Mass.) and Olympia Snowe (R-Maine) restored funding to some of the programs that the current administration proposed be cut or eliminated (see "Amendment Seeks $78M in SBA Loans," Newspoints, June 2005).

The conference report passed by the Senate by a vote of 94-5 included $12 million for the Microloan Technical Assistance Program; $1.3 million for the Microloan Program; and $2 million for the Program for Investment in Microentrepreneurs, all of which President George W. Bush proposed be terminated. The conference report also restored line items for the HUBZone program, Export Assistance Centers, and the 7(j) contracting assistance program.

"Without our intervention, President Bush would have succeeded in eliminating small business assistance and loans for those who have the least access--America's women-owned, minority-owned, and rural-based small businesses," says Kerry.

According to SBA spokesman Mike Stamler, the administration proposed cutting the microloan and PRIME programs because it felt those services could be delivered more cost efficiently through other programs. "We already spend over $100 million on other technical assistance programs, so that can be provided through existing programs more cheaply," says Stamler. "That said, those programs are still in our budget, so we're going to operate them as we have in the past." Stamler dismisses the line items Kerry and Snowe restored to the budget as housekeeping details. "We proposed to move money into the regular salaries and expenses program because all of the agency's expenditures for those programs are in salaries and expenses anyway, so there's no sense in having a separate line item for it," he says. "Nobody proposed to eliminate the HUBZone program."

Lawmakers failed to provide funding to the SBA's 7(a) guarantee loan program. Since 2004, the program has instead been funded by an increase in fees paid by participating businesses and lenders. In June 2005, SBA Administrator Hector V. Barreto wrote that despite these increased fees, SBA guaranteed a record number of loans through June 10, 2005, up 23% from the number approved during the same period in 2004. According to Barreto, the loan volume for African Americans was up 46%.

That is cold comfort to Rep. Albert Wynn (D-Md.), who heads the Congressional Black Caucus' task force on small business. "To offset the cuts they have to raise the fees on loans, so it becomes more costly to get a loan. That works to the detriment of the minority business community."