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The SBA's 2008 Budget, Half Full
 

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A couple weeks ago it looked, to the untrained eye, like Congress was heading toward an appropriation for the Small Business Administration, one that placed a lot more value on the agency than the Bush Administration's budget request had.

The White House had proposed a budget of $463 million, but the House of Representatives had countered with $582.5 million. In addition to more money for the agency's various counseling programs, the House provided $80 million to subsidize losses in the SBA's flagship business loan program, the 7(a). This would have resulted in lower fees for borrowers. (Congress had appropriated a loan subsidy for the 7(a) to offset fees for most of the program's history, but the Bush Administration took the program "off-budget" beginning in 2005.) The Senate Appropriations Committee, meanwhile, offered no loan subsidy, but it did fatten the agency's wallet with walking around money: it proposed an appropriation for salaries and expenses of $412.3 million, a whopping $100 million more than the Bush Administration had requested. To be fair, it's worth pointing out that this sum included $36 million in earmarks that had nothing to do with the SBA. But that still left another $64 million to make sure that the copiers work and that when a field representative is traveling her territory, she doesn't have to leave home at the crack of dawn and return home at midnight to avoid an overnight stay -- common practices of late in many SBA offices.

Either way, it seemed like the SBA was going to end up with at least $100 million more than the Administration had wanted. So when I found myself on the phone with SBA head Steven Preston a couple Fridays ago, I put the question to him: if asked, what would he suggest the president do with the legislation, sign it or veto it?

"The president's budget for the SBA was my budget for the SBA," he told me. "And I don't support subsidy for our loans. I don't think that it's money well spent for the taxpayer, and I think our loan programs work well without subsidy, and frankly, I don't think it's going to make dent in things." But Preston didn't think it would come to a veto. "I also don't know necessarily that that's going to survive an omnibus bill that comes from the House," he added. "So I think ultimately what the president gets on SBA programs may be pretty close to what he asked for. And if it's pretty close, I think he will sign it."

What can I say -- Preston called it. Nine days after we talked, the House came back with an omnibus appropriation that eliminated the loan subsidy and whittled down the salaries and expenses offered by the Senate. (The earmarks, thank God, survived as a separate allocation -- $69 million in constituent favors from both the House and Senate.) Still, the bill, which has passed both House and Senate and is likely to get the nod from President Bush, is a victory for supporters of the SBA. It provides $36 million more for the SBA than the Administration wanted -- excluding disaster aid, it's the first increase in the SBA's budget since the President took office, as John Kerry, chair of the Senate Small Business Committee, noted in a statement.

Most of the additional money will go to programs that provide counseling and other technical assistance to actual entrepreneurs -- programs like SCORE and the Small Business Development Centers. (The latter will get more money than they've ever received.) Moreover, the appropriation will ensure that the microloan program, recently praised by Fed Chairman Ben Bernanke, will soldier on. When the Administration couldn't kill the program outright, it proposed to eliminate funding for technical assistance to these most fragile of borrowers by raising the fees on their loans, but Congress balked. Instead, Congress raised technical assistance funding from $13 million in 2007 to $15 million, and the amount of capital available to borrowers from under $13 million to $25 million.

The microloan program at the Treasury Department's Community Development and Financial Institutions Fund will thrive: Congress appropriated a healthy $90 million for CDFI, up from $55 million in 2006. The Bush Administration had proposed to zero it out and roll it into the Community Development Block Grants, and then cut the consolidated program's funding. This year's appropriation puts funding for the CFDI fund, which also supports affordable housing and financial services in poor communities, back at Clinton Administration levels.

For the entrepreneurs who need, and deserve, the most help, it should be a merry enough Christmas.

Last updated: Dec 20, 2007




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