By Albert B. Crenshaw

The Bush administration's budget proposal for the Small Business Administration is not playing terribly well on Capitol Hill.

The proposal would whack the SBA's overall budget by 40 percent -- from $ 899.5 billion to $ 539 million -- but it's not the size of the reduction but the allocation that is drawing the most fire.

One source of unhappiness is the administration's plan to eliminate a $ 114.5 million appropriation for the 7(a) loan guaranty program, and instead fund the program by imposing higher fees for borrowers seeking loans of more than $ 150,000.

The administration's goal is to place the 7(a) program, and several others, on a "zero subsidy basis," meaning that they receive no appropriated funds and instead are self-supporting via fees and other devices.

The 7(a) program, under which the SBA guarantees loans made to small businesses that typically can't get financing through normal market channels, already charges fees, but the Bush plan would boost them by about half a percentage point for loans over $ 150,000.

The SBA argues that the new fee arrangement would allow it to guarantee a record level of borrowing by small business in fiscal 2002 and, as acting SBA Administrator John D. Whitmore Jr. told the Senate Small Business Committee last week, it "will ensure that the 7(a) program will not run out of money if there is a significant increase in demand."

But committee Chairman Christopher S. Bond (R-Mo.) said, "I do not believe the budget request helps our small businesses by eliminating funding for" the 7(a) program at a time when the economy has slowed and borrowers may be under more stress.

"It seems to me that the [administration's] budget is just out of touch," chimed in Sen. John F. Kerry (Mass.), the ranking Democrat.

The two senators, along with their House counterparts, Donald Manzullo (R-Ill.) and Nydia M. Velazquez (D-N.Y.), are also asking the General Accounting Office to study SBA's fees and formulas and to look at whether the agency has been "overcharging" borrowers in the past.

Members are also unhappy with the SBA's plans to eliminate several programs, including the New Markets Venture Capital Program, which is only getting under way this year. The administration views the New Markets program and several others as duplicating other SBA efforts, but backers say they reach constituencies largely missed by the agency before.

The National Federation of Independent Business (NFIB) last week kicked off a $ 145,000 radio-advertising campaign aimed at securing the votes of seven key Senate Democrats in five states to repeal the estate tax.

The targets are Blanche Lincoln of Arkansas, Max Cleland and Zell Miller of Georgia, Mary Landrieu and John Breaux of Louisiana, Max Baucus of Montana and Ben Nelson of Nebraska.

Two slightly different ads will be aired over the next three weeks.

One version tells listeners to call Lincoln, Cleland, Miller, Landrieu and Breaux and urge them to continue supporting the full repeal of the tax. A second version urges Baucus and Nelson to start supporting the repeal, since their positions are unclear, NFIB said.

The ads pull no punches in going after the tax, which is levied at death on assets totaling more than $ 675,000.

As a funeral dirge plays in the background, an announcer says, "Your life's work could be confiscated by the federal government because the death tax is so high, your family will probably have to sell it all just to cover the IRS's tax bill."

"Let's kill it now," the ads say of the tax, "before it kills off everything you've worked for all your life.

For a quarter century now, Congress has been trying to figure out effective ways to keep the laws it writes, along with the regulations those laws generate, from causing collateral damage at small businesses.

At last there seems to be progress. Well, a little anyway.

This year marks the 25th anniversary of the creation of the Office of Advocacy within the Small Business Administration, the 20th anniversary of the Regulatory Flexibility Act, and the fifth anniversary of the Small Business Regulatory Enforcement Fairness Act.

The Office of Advocacy was meant to give small business a voice in government policy deliberations, measuring and stating to policymakers the costs of regulation.

The office did that but -- surprise -- few policymakers listened.

So Congress passed RFA, requiring agencies to consider the impact of their proposals on small business and look for equally effective but cheaper alternatives. A few agencies paid attention, but -- surprise again -- others didn't.

So in 1996, Congress enacted the regulatory enforcement fairness act, which toughened the requirements that small business impact be considered, and gave businesses the right to sue agencies that don't comply.

Now, five years later, some agencies are actually trying fairly hard to work with small business, but results remain spotty, according to the General Accounting Office and the SBA's advocacy office.

Congress or some agency may have to define more precisely various trigger points, such as "significant economic impact" and "substantial number of small entities," the GAO said. Current law doesn't do that and agencies have drawn up their own definitions, which vary, the agency said.

It also is not clear whether economic impact should be measured in terms of compliance costs as a percentage of a business's revenues or of work hours. And what percentage is "significant"?

Bond, chairman of the Senate Small Business Committee, indicated that if problems persist, he might seek further amendments. Both he and Kerry emphasized, though, that a balance is needed, that the laws' goal is not to stop regulation but to stop "stupid regulation."

The Small Business Administration last week announced the four finalists for National Small Business Person of the Year, with the winner to be named tomorrow at the White House.

The finalists are Cindy M. McEntee, president and owner, Mo's Enterprises Inc., a food manufacturer and restaurant chain based in Newport, Ore.; Frank Sarris, president, Sarris Candies Inc., a candy manufacturer in Canonsburg, Pa.; Thornton Stanley, president, Stanley Construction Co., a construction contractor in Huntsville, Ala.; and Brindley B. Pieters, president, Brindley Pieters & Associates Inc., an engineering services company in Altamonte Springs, Fla.

The contest and ceremony are part of the SBA's celebration of Small Business Week.

And the Bush administration is missing no opportunities on that front.

Treasury Secretary Paul H. O'Neill is scheduled to hold a round-table meeting with two dozen small-business owners, along with NFIB President Jack Faris. O'Neill will release data meant to show how small-business owners and entrepreneurs will benefit from Bush's tax cut plan.