BY Jennifer Gordon

Lawmakers at a Senate panel hearing Tuesday blasted the White House's proposed cuts in the Small Business Administration budget.

Under the plan President Bush submitted to Congress March 1, the agency's budget would be cut by $114.5 million. The cutbacks would be paid for by increased guarantee fees for loans greater than $150,000. Industry groups have argued that this would serve as a tax on small businesses, and would deter banks from making guaranteed loans under the agency's 7(a) program.

"The budget is just out of touch with what the small-business needs of the country are," said Sen. John F. Kerry of Massachusetts, the ranking Democrat on the Small Business Committee. He complained that raising fees would "eliminate and freeze funds for loans" that conventional lenders would opt not to make without them in a slowing economy with tightening lending standards.

On April 6, the Senate approved an amendment introduced by Sen. Kerry to the chamber's budget resolution that would give the agency $264 million more than the President had requested.

Senators expressed concerns that increasing fees for lenders and borrowers would substantially curtail participation in the business loan program.

"Now is not the time for the SBA to pull back from its mission," said the committee's chairman, Missouri Republican Sen. Christoper S. "Kit" Bond. The committee has requested that the General Accounting Office review the issue of SBA fees. The report, which is expected this summer, will be used to push for appropriate budget changes, he said.

SBA Acting Administrator John Whitmore downplayed the proposed fee increases for the 7(a) program, arguing that the businesses most in need of funds would not face increases.