Key SBA Programs Must be Strengthened to Boost Job Growth, Economy, Snowe Says

3/2/2004

From: Craig Orfield of the Senate Committee on Small Business and Entrepreneurship, 202-224-5175; web: http://sbc.senate.gov

WASHINGTON, March 2 -- Calling the Small Business Administration "one of the most significant resources available to encourage job creation," US Senator Olympia J. Snowe (R-Maine), Chair of the Senate Committee on Small Business and Entrepreneurship, has urged the Senate Budget Committee to adequately fund key SBA programs targeted for substantial funding reductions in Fiscal Year 2005.

In a letter to Senator Don Nickles (R-Okla.), Chairman of the Senate Budget Committee, and Senator Kent Conrad (D-N.D.), the Committee's Ranking Member, Snowe outlined her views and estimates in response to the president's FY 2005 budget.

"To ensure that small businesses continue to play a critical role in our economic recovery, adequate funding for the SBA and its programs is essential," Snowe wrote. "With over 6.2 million jobs created or retained over the last five years, the SBA lending and technical assistance programs have contributed greatly to small businesses' ability to create nearly two-thirds of new jobs and generate about 50 percent of the nation's gross domestic product."

The president's budget request reduces the SBA's overall budget to $678 million - a 15 percent reduction from Fiscal 2004, mostly from a change in the vital 7(a) loan program. The Committee is reviewing proposals that both could allow 7(a) to operate without a loan cap and require significantly less appropriations.

The proposed reduction of $119 million in funding would significantly affect a range of critical programs and services, including 7(a) Guaranteed Loans, Small Business Development Centers, Microloans and Women's Business Centers.

Highlights from Senator Snowe's letter to the Budget Committee:

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) loan program.

"Until Congress arrives at a new method for making 7(a) loans, with less or no appropriations, I request sufficient appropriations to allow at least $12.5 billion in loans, the demand that was demonstrated through the first three months of FY 2004 (before the loan size was reduced). At the current subsidy rate, this would require approximately $129 million in appropriations. Anything less would constrict small business growth, which is vital for the nation's economic growth and job creation."

Microloan Program: "I do not agree with the SBA's request for zero appropriations for the 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 instead. These two programs, however, serve borrowers with unique financing needs and the borrowers currently receiving Microloans have insufficient credit profiles to qualify for 7(a) loans.

The Microloan program is an important source of financing for entrepreneurs who have no other available options, and the Microloan program should therefore be fully funded at $1.91 million and the Microloan Technical Assistance Program at $15 million."

Federal and State Technology Partnership (FAST): "In order to expand and improve participation in the SBIR (Small Business Innovation Research) program, Congress created the Federal and State Technology Partnership (FAST) through the SBA. The FAST program awards competitive state-match grants, which help foster state engagement in innovation on a national level. To fully benefit from the innovative potential of the nation's small business sector, the government needs to encourage participation in the SBIR and STTR (Small Business Technology Transfer) program. The FAST program provides that encouragement. Therefore, I request that the FAST program be funded at $2 million in FY 2005, equal to the level at which the program was funded in FY 2004."

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 in FY 2003. The budget request of $88 million is $1 million less than was appropriated for FY 2003 and FY 2004. This amount, while significant, fails to adequately account for the current state of the economy.

I recommend that the SBDC funding for FY 2005 be increased to $93 million so that SBDC services can continue to produce impressive results that benefit hundreds of thousands of small businesses, the millions of workers they employ, and the national economy as whole."

SCORE: "With its reliance on a cadre of approximately 10,500 experienced volunteers, SCORE provides expert training to hundreds of thousands of entrepreneurs and small business owners each year at low or no-cost and at a fraction of the market value for such services."

"In fact, SCORE is so cost-efficient that the cost per hour of service in the SCORE program is less than the Federal minimum wage - comparable fee-based counseling services are estimated to cost more than $100 million.

The budget request of $5 million is equal to the request and appropriation for the past two fiscal years (FY 2003 and 2004). This amount does not allow the SCORE program to expand and update its scope of services in needed ways. Under current economic conditions, this type of business training and assistance service should be expanded not reduced. Consequently, I recommend that the SCORE funding for FY 2005 be increased to $7 million so that SCORE can expand into new sectors of the economy and new parts of the country."

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 program that offers loans that are geared toward small businesses developing or expanding in the export market.

The SBA proposes in the FY 2005 budget to eliminate the USEAC line item, thereby terminating the SBA's involvement in the program. In FY 2004, the SBA requested $3.1 million to support the agency's presence in 19 USEACs but only received appropriations of $1.5 million for the program. Noting the importance of small business exports to this nation's economic growth and creation of jobs, and the valuable and unique assistance that USEACs provide to those exporters, I recommend the continued funding of the USEAC program at $5 million."

Office of the National Ombudsman: "In the agency's performance plan, the Office of the National Ombudsman (ONO) reports that it was able to increase the level at which Federal agencies respond to small business questions and requests for assistance, and was able to promote its program to 2,000,000 small businesses through a network of contacts, presentations, and outreach to associations.

"In FY 2003, the ONO, through working with OMB's Office of Information and Regulatory Affairs (OIRA) was able to establish baselines of regulatory enforcement activities as mandated by the Small Business Paperwork Relief Act of 2002. In Fiscal Years 2001 through 2004, this program was appropriated only $500,000, making it very difficult to conduct the necessary follow-up to ensure that agencies are responding to the concerns raised through the reports submitted by the Fairness Boards. At a minimum, this allocation should be increased to $1 million. This will permit more meetings of the Regulatory Fairness Boards to be held and more staff to be hired."