Lawmakers  on Capitol Hill are attacking President Bush's 2008 budget proposal over the $464 million it allocates for the Small Business Administration, saying the number falls far short of reversing deep cuts to the agency over the past seven years.

For their part, agency officials are hailing the budget as the first funding increase they've seen in years.

Excluding $1.7 billion in extra funding for Gulf Coast disaster assistance, the SBA's total operating budget for fiscal year 2006 was $533 million -- roughly 15 percent more than the proposed 2008 budget. Congress failed to pass a 2007 budget  for the agency.

Yet, agency officials say the 2006 amount included about $90 million in one-time congressional initiatives -- or earmarks -- that falsely inflate the total. Earmarks are individual items added into a budget by lawmakers for specific projects in their own districts.

By subtracting these items, the new budget actually represents a 5 percent funding increase over 2006, said Mike Stamler, an SBA spokesman.

"This is not a drop in funding at all," Stamler said. "It's an increase for the SBA, and it's the first one in a long time."

Since 2001, the agency's budget has been cut by nearly 40 percent.

He said the proposed budget also includes $329 million in carryover funds for disaster loans -- enough to oversee $1.06 billion in loans -- and $21 million in reimbursable revenue, such as loan examination and oversight fees and other inter-agency sources.

The SBA currently has $639 million in its disaster-loan account and expects the balance to be $428 million by the end of the year, he said. 

Among other moves, the increased funds will enable the agency to lower fees on its popular 7(a) financing program, as well as its 504 and SBIC programs, Stamler said. That, and hiring some 86 new employees after years of staff cuts.

Earlier this week, SBA Administrator Steven Preston  called it a "solid budget for the SBA and for small businesses."

In a news conference ahead of a budget committee hearing on Thursday, Preston said the agency has taken steps to improve the disaster-loan program, including teaming up more case managers with borrowers. It also plans to seek help from the private sector in the event of larger-scale disasters like Hurricane Katrina, he said.

Rep. Nydia Velazquez (D-N.Y.), the chairwoman of the House Committee on Small Business, said the proposed budget represents the lowest proportion of the total federal budget in 15 years -- just 0.02 percent of $2.9 trillion. As a result, 17 of the agency's 25 small-business capital and lending programs were cut or flat-funded, she said.

Velazquez chided the agency for failing to request additional funding to fix management and planning problems with the disaster loan program, which she said led to costly delays  in assisting Gulf Coast small businesses in the wake of Katrina.

She also said there weren't adequate funds to improve the agency's lender-oversight initiatives, which have come under attack recently for allowing large corporations to win federal contracts set aside for small businesses.

"This request only highlights the agency's inability to examine past issues and work to address those shortfalls," Velazquez said in statement.

Sen. John Kerry (D-Mass.), chairman of the Senate Committee on Small Business and Entrepreneurship, said the proposal "gives with one hand and takes away with the other."

While reducing fees on the 7(a) program, among other loan and capital programs, the new budget doesn’t offer any new funding, he said.

Kerry said it would also cut or reduce funding for counseling programs, low-income capital programs, and other critical assistance programs, including the popular micro-loan program.

"With no funding, the program will die," Kerry said in a statement. "Microloans should be fully funded, especially given that the Administration is talking about providing microloans in Iraq and spent over $200 million on Microloan Programs in other countries in 2005."