Snowe, Colleagues, Urge Appropriators to Boost Funds for Key SBA Programs; Jobs, Economic Security at Stake

5/11/2004

From: Craig Orfield of the Senate Committee on Small Business and Entrepreneurship, 202-224-5175

WASHINGTON, May 11 -- U.S. Senator Olympia J. Snowe (R-Maine), Chair of the Senate Committee on Small Business and Entrepreneurship, and four colleagues today called on Senate appropriators to boost funding levels for key Small Business Administration (SBA) programs, an investment she called "essential to make our nation's economic security a priority, create jobs and strengthen the economy."

In a letter to Senator Judd Gregg (R-NH), Chairman of the Senate Subcommittee on Commerce, Justice, State, and the Judiciary and Senator Ernest Hollings (D-SC), the Subcommittee's Ranking Member, Snowe urged the appropriators to add funding above the President's Budget request for Fiscal Year 2005 to help sustain a range of programs critical to the small business community. She was joined by Senator Kit Bond (R-MO), Senator Conrad Burns (R-MT), Senator Mike Crapo (R-ID) and Senator Norm Coleman (R-MN) as co-signers.

"This increase is absolutely necessary to provide the SBA with the resources it needs to serve America's 23 million small businesses, including its vital small business manufacturers," Snowe added, commenting on the release of the letter.

The President's budget request reduces the SBA's overall budget to $678 million -- a 15 percent reduction from FY 2004, mostly from a change in the vital 7(a) Loan Program. The reduction of $119 million in overall SBA funding would significantly affect a range of critical programs and services, including 7(a) Guaranteed Loans, the Small Business Development Center Program, the Microloan Program, Women's Business Centers, SCORE, U.S. Export Assistance Centers and FAST Rural Outreach Program.

"Small Business is the engine of job growth in our economy," Snowe said. "A larger investment in our small businesses will help sustain job growth in this important economic sector and pay dividends in the form of improved growth in the economy overall."

Highlights from Senator Snowe's letter to the CJS Appropriations Subcommittee:

7(a) Loan Program: "Small businesses must have access to a strong 7(a) loan Program to obtain long-term financing that would not otherwise be available. Last year, approximately 67,000 small businesses that could not obtain comparable credit elsewhere were approved for loans in the 7(a) Program. The SBA requested no appropriated funds for the program in FY 2005, and announced plans to raise fees on lenders and borrowers, and reduce guarantee rates, to substitute for appropriations. For FY 2005, Snowe recommended appropriations of $129 million for the 7(a) Program. This is only approximately 15 percent more than the $101 million available in FY 2004, rather than the additional 30 percent that would have been necessary to meet demand in FY 2004.

"You should be aware that the Committee is currently working to construct a solution to further reduce the program's subsidy rate for FY 2005 and beyond. If Congress passes legislation to reduce the program's costs and need for appropriations, it is likely that the full appropriations will not be required. Although this is the Committee's goal, we still recommend you allocate sufficient program funds until a solution is reached. Anything less would risk another shut down or cap on the program and would constrict small business growth, which is vital for the nation's economic growth and job creation."

Small Business Development Center (SBDC) Program: "The SBDC Program is the SBA's largest and most extensive technical assistance program. With more than 11,000 service delivery points nationwide the SBDC Program serves more clients than all other SBA programs combined. The program provided more than 2 million training hours to almost 700,000 clients and helped to create or retain over 146,000 jobs in FY 2003.

"The Administration's budget request for FY 2005 of $88 million is $1 million less than was appropriated for FY 2003 and FY 2004. This amount fails to adequately account for the current state of the economy. Specifically, studies have consistently shown that when people are unable to find jobs, they turn to entrepreneurship, and when people consider entrepreneurship, they turn to their local SBDC for assistance. Given that SBDC services continue to produce impressive results and benefit hundreds of thousands of small businesses, Snowe recommend that SBDC funding for FY 2005 be increased to $93 million at a minimum.

U.S. Export Assistance Centers: "The U.S. Export Assistance Centers (USEACs) are one-stop shops that provide small to medium sized businesses with local export assistance through a partnership with the U.S. Department of Commerce and the U.S. Export-Import Bank. The SBA is the only partner in the USEAC that offers loans that are geared toward small businesses developing or expanding in the export market. The SBA proposes to eliminate the USEAC line item in FY 2005, thereby terminating the SBA's involvement in the program." Noting the importance of small business exports to this nation's economic growth and creation of jobs, and the valuable assistance that USEACs provide to exporters, Snowe recommend the continued funding of the USEAC Program at $5 million.

Microloan Program: "The SBA has stated that the Microloan Program should be terminated and the loans under this program should be approved through the 7(a) Program. However, the Microloan Program is designed to support the needs of very small businesses and self-employed entrepreneurs that have insufficient credit profiles to qualify for 7(a) loans. This point was clearly emphasized at the Senate Small Business Committee's hearing on February 12, 2004, that if the Microloan Program is terminated, these borrowers will find it difficult to secure financing to fund their new or established small businesses.

"The Microloan Program is an important source of financing for entrepreneurs who are not yet considered bankable in the private sector lending community and have no other available option. Therefore, the Microloan Program should be funded at FY 2004 levels at $1.91 million and the Microloan Technical Assistance Program at $15 million."

Federal and State Technology Partnership (FAST): "Technological innovation creates jobs, improves our way of life, and helps American companies maintain their competitive advantage over foreign firms. To capitalize on the small business sector's innovative potential, Congress created the Small Business Innovation Research (SBIR) Program, which directs federal research and development grants to small businesses. Congress later created the Small Business Technology Transfer (STTR) Program to further utilize the innovative potential of the small business sector. Currently, these programs facilitate over $1.5 billion in government research and development grants to small businesses. Moreover, since the inception of the program in 1982, SBIR firms have produced more than 4,100 patents." Therefore, Snowe requested that the FAST Program be funded at $2 million in FY 2005, which is consistent with FY 2004 funding.

Rural Outreach. "The Rural Outreach Program (ROP) provides funding to stimulate greater participation in the SBIR and STTR programs by small firms in rural states with low participation rates. The program benefits small businesses that receive assistance as well as the federal government and the economy because these grants result in better and higher-quality research and development proposals, which are more likely to produce valuable innovations. We recommend that the ROP be funded at $250,000 for FY 2005."

SCORE. "A volunteer-based small business assistance network SCORE is both cost efficient and effective. With its reliance on a cadre of approximately 10,500 experienced volunteers, SCORE provides expert training to entrepreneurs and small business owners each year at a low or no-cost -- and at a fraction of the market value for such services. Under current appropriations, the SCORE Program is unable to expand and update its scope of services." Therefore, Snowe recommend that the SCORE funding for FY 2005 be increased to $7 million so that SCORE can expand into new sectors of the economy.

HUBZone (Historically Underutilized Business Zone) Program: "According to the SBA, in FY 2003, each $1 spent on the HUBZone Program yielded a return of $432 in contract awards and helped to create more than 18,000 jobs in the U.S., approximately 70 percent of which were located in distressed areas. Yet, inconsistent funding hampers the ability of the program to achieve its goals."

In FY 2002, an unexpected omission in the Commerce-Justice- State Appropriations bill deleted the HUBZone Program funding, although in the Defense Supplemental Appropriations bill the Congress subsequently directed that HUBZone funding be restored through a reprogramming request. In FY 2003, the Conference Committee on the FY 2003 Omnibus Appropriations Act once again zeroed out program funding, but in FY 2004, the program was appropriated $2 million.

This year, the SBA has not requested a separate line item for the HUBZone Program, but instead has committed to fund the program as part of the overall Government Contracting/Business Development (GC/BD) Program budget. Snowe requested the appropriators clearly state in report language that $10 million be earmarked from the overall GC/BD Program budget for the HUBZone Program.

Procurement Center Representatives (PCRs): "PCRs work with federal agencies to increase small business opportunities in the federal acquisition process by reviewing agency acquisition plans and making appropriate recommendations to set aside opportunities for small business. However, the number of PCRs has shrunk in the last several years, draining the SBA of valuable procurement knowledge and experience, and diminishing the agency's ability to meet its statutory mandate.

"Therefore, we ask that you allocate $5 million to hire and train an additional 25 PCRs in FY 2005, while replacing attrition among existing PCRs, and include specific language in accompanying reports that clearly states the purpose for which this funding is provided."