By Kent Hoover

The Senate added $264 million to President Bush's $539 million budget request for the Small Business Administration, restoring money that Bush proposed to cut for core programs such as the agency's flagship 7(a) guaranteed loans and Small Business Development Centers.

The additional money for the SBA# was part of the Senate's fiscal 2002 budget resolution, which slashed Bush's 10-year, $1.6 trillion tax cut to $1.2 trillion, and increased funding for debt reduction and government programs.

The Senate's budget resolution is nonbinding and must be reconciled with the House's version, which approved the full amount of the president's tax cut.

The real battle over SBA's budget will occur this summer, when Congress begins to appropriate actual dollars for government programs.

Sen. Christopher "Kit" Bond of Missouri, chairman of the Senate Small Business Committee, and the committee's ranking Democrat, Sen. John Kerry of Massachusetts, co-sponsored the SBA funding amendment.

"I will continue working with my colleagues to secure hard earmarks for these core SBA programs," Bond says. "With a slowing economy, Congress simply cannot afford to ease up on the throttle fueling these programs."

Bush proposes to save $141 million by raising fees for 7(a) loans and increasing surcharges paid by Small Business Investment Companies -- SBA-licensed firms that provide debt and equity financing.

The higher 7(a) fees would apply to loans of more than $150,000 and amount to an increase of one-half of a percentage point on the loan's guaranty amount. The Bush budget also would increase a servicing fee charged to lenders, from 0.5 percent of the guaranty amount to 0.88 percent.

Bond says the increased fees would "drive both the small business borrowers and the lenders from the program."

Around 40,000 small businesses that cannot obtain conventional financing turn to government-guaranteed 7(a) loans every year.

These loans are especially important now, says Kerry, who noted a Federal Reserve Board survey found that 45 percent of banks "have reduced lending to small businesses by making it harder to obtain loans and more expensive to borrow."

The Bush administration's budget proposal acknowledges "some small businesses may have trouble accessing capital," but states this "does not require the government to subsidize their cost of borrowing."

New Markets VC restored The administration's budget proposal also cuts $12 million in spending on Small Business Development Centers and calls for them to make up the lost funding by charging fees of $10 per hour for their consultation services. (The first hour still would be free.)

Sen. Bond opposes this budget cut as well, noting this federal seed money for the centers is leveraged by state, local and private funds. The 1,000 center locations serve nearly 600,000 small businesses a year.

Also included in the additional $264 million for the SBA was $51 million for the New Markets Venture Capital program, a Clinton administration initiative that aims to spark investment in businesses located in low-income areas. President Bush wants to eliminate this program.

Other programs that received additional funding from the Senate include Small Business Investment Companies, microloans, veterans business development, the BusinessLINC mentoring program and Women's Business Centers.

The $264 million addition to SBA's budget "would leverage $13.2 billion in loans and venture capital, and counsel more than 1 million entrepreneurs," Kerry says. "For less than $2 per taxpayer, we can provide access to credit and capital for our nation's job creators."

"Budget helps taxpayers"

The additional funding for SBA was one of many amendments to the budget resolution, as senators added money for their favorite programs.

Ari Fleischer, President Bush's press secretary, says this additional spending "underscores what he has been warning about -- that if you don't cut taxes, the money will be spent. ... The money is proposed to be spent on one meritorious program, another meritorious program, another. It all goes to government spending if it's not cut in taxes."

Vice President Dick Cheney appeared on television to emphasize that the president is "eager" to veto appropriations bills if they exceed his $1.96 trillion budget.

"Washington is known for pork," Bush told reporters as he prepared to go over the budget with Cabinet officials. "This budget funds our needs without the fat. ... The budget puts the taxpayers first, and that's exactly where they belong."