Tough Choices on SBA Budget

The House Small Business Committee doesn’t like much of anything the Small Business Administration has done over the past two years.

This dissatisfaction could cost the agency nearly $100 million. That’s how much the committee recommends be cut from the SBA’s $985 million budget request for next year. These reductions can be made by eliminating duplicative programs and initiatives that show little promise of creating jobs, the committee said.

"The chasm of the deficit requires tough choices," said Republican Representative Sam Graves, of Missouri, who chairs the committee. "Unfortunately a review of the SBA budget shows no effort to make tough choices. In fact, the administrator wants to start new initiatives—initiatives that are unlikely to help small businesses create jobs. Further, the administrator makes no effort at reducing a bloated headquarters operation."

In its letter to the House Budget Committee, the committee recommended eliminating funding for Women's Business Centers and Veterans Business Centers. It contends these counseling programs duplicate services provided by Small Business Development Centers, which operate at 900 locations across the country, and SCORE, a program that provides counseling to business owners from volunteers with business experience.

The SBA proposed cutting SBDC funding by $10 million. The committee recommended restoring those funds.

The SBDC program "produces nearly $3 in federal revenue for every dollar spent," said Representative Nydia Velazquez of New York, the committee's ranking Democrat. "It simply makes no sense to divert money from reputable programs and give it to the agency's untested projects."

These “untested projects” include two new loan programs, Small Loan Advantage and Community Advantage, which are aimed at increasing the number of low-dollar loans made to small businesses in underserved areas. The committee recommended that no money in the agency's flagship 7(a) loan program account be used for any new loan programs.

The committee also recommended eliminating $12 million for the SBA's new program to promote "regional innovation clusters" and $3 million for its "emerging leaders" program, which trains small-business owners in inner-city areas.

New programs created by last September's Small Business Jobs Act also were targeted by the committee. For example, the panel recommended that no funds be allocated for administering a new program that allows small-business owners to refinance their commercial real estate loans through the SBA's 504 loan program if they face a balloon payment before December 31, 2012. The committee fears the program's fees won't cover its costs.

"The risks to taxpayers from this program might be worth it if there was a potential for job creation from the refinancing, but that is not required," the committee wrote.

In addition, the committee recommended cutting $38 million from the SBA's Office of International Trade. This money, which would be spent on promoting export opportunities for small businesses, duplicates spending on services already provided by states and the Department of Commerce, according to the panel.

The committee thinks some of the savings for these cuts should be spent on hiring more procurement-center representatives, who help small businesses win federal contracts.

The panel also recommended eliminating the SBA's 10 regional offices.

Velazquez didn’t agree with all of the committee’s recommendations. For example, she doesn’t favor cutting funding for Veterans Business Centers.

"Veterans, who have a high rate of entrepreneurship, need more outreach, not less," she said.

But the fact that she was nearly as critical of the SBA as Graves was is bad news for the SBA. The agency will have to rely on Senator Mary Landrieu, the Louisiana Democrat who chairs the Senate Small Business and Entrepreneurship Committee, to be its champion in the coming battles over next year’s federal budget.

Those battles, of course, will have to wait for the battles over this year’s budget to be resolved. The House today punted on that issue by passing yet another temporary resolution funding the government, this time through April 8.

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Kent Hoover is the Washington bureau chief for bizjournals.