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SBA's Budget Cut -- Again

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Nov. 21, 2005--The Small Business Administration will have to continue doing more with less, as its budget is expected to be slashed again.

On November 4, Congress set the 2006 SBA budget at $456.5 million in an appropriations bill, which now awaits President Bush's signature. Its 2005 budget was $579.5 million. In 2001, the final year of the Clinton administration, the budget was $1.1 billion.

Democrats and some moderate Republicans pushed to increase funding for the SBA, the federal agency that offers loans and training to entrepreneurs. Sen. John Kerry (D-Mass.) and Sen. Olympia Snowe (R-Maine) called for $23 million more for microloans and training programs for low-income entrepreneurs. Rep. Nydia Velasquez (D-N.Y.) proposed a $79 million subsidy for 7(a) loans, which is the SBA's most popular program. The subsidy would have decreased borrowing and application fees for the loans.

The Republican-led Congress ultimately cut these amendments from the final commerce, justice, and state appropriations bill, in an effort to curb federal spending.

The Bush administration, for its part, has requested less funding for the SBA than the Clinton administration did. But while the SBA budget has shrunk, the federal agency has managed to give out a record amount of loans, in smaller amounts, during fiscal years 2004 and 2005. Last year, it provided nearly $12 billion in 7(a) loans. This year, it has provided more than $14 billion.

SBA Administrator Hector Barreto told the Senate Small Business Committee in February that his agency has become more efficient with the cuts, noting that streamlined administrative processes have allowed for record loan levels despite lower government funding and increased fees for SBA programs. "It's difficult to imagine strongly supporting a program without continually increasing its budget, but SBA has proven that it can be done," Barreto said.

Kerry, the ranking Democrat on the Senate Small Business Committee, and other Democrats have said that the cuts move more of the burden to small businesses. The funding increases that Kerry backed would have gone to programs that mostly benefit women, minority and low-income entrepreneurs.

"The favorite target for President Bush's budget axe is small business, Kerry said in a statement after the amendments to increase funding were rejected.

Last updated: Nov 21, 2005




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