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Kerry Opening Statement on The President's FY2009 Budget Request for the Small Business Administration

Good morning.  Today we welcome back Administrator Preston, who will provide testimony on the President’s budget for Fiscal Year 2009.

The 2009 budget is, in many ways, a microcosm of the Bush Administration’s misguided economic policies.  Despite continuing signs of a struggling economy and a looming credit crisis, President Bush’s budget shows—once again—that he is either unable or unwilling to recognize the problems facing American small businesses.

Rather than providing much-needed support to the hundreds of thousands of businesses that utilize the Small Business Administration’s programs each year, the 2009 budget for the SBA continues President Bush’s policy of cutting the funding for critical small business programs.  Excluding disaster money, the proposed budget represents a 28 percent decrease in funding since President Bush took office.  If we take inflation into account, this budget represents a cut of 41 percent since 2001.

One of the most unreasonable proposals, and one I expect Congress to reject again, is President Bush’s recycled recommendation to make the microloan program self-financing by raising the interest rate that the intermediaries pay, and to eliminate completely the microloan technical assistance program that supports it.  This would shift the counseling to the Small Business Development Centers and Women’s Business Centers—programs that are being starved of resources and cannot afford to take on more clients.  Since 2005, the Administration has sought more than $400 million for international micro-credit programs.  If we can spend hundreds of millions to help small businesses in Iraq and other countries, we can support microloan programs here at home.

And the need for these programs exists at home:  During the month of January, our economy actually lost 17,000 jobs.  In times of economic growth, we should be adding 150,000 to 200,000 a month just to keep pace with population growth.  At the end of January, the number of claims for initial unemployment benefits rose to 375,000, compared with 317,000 at the same time last year—a huge increase. Yet this Administration now wants to pull back its support for the programs which help the creators of new jobs – small businesses.  The President's budget cuts Small Business Development Centers 10 percent, cuts Women’s Business Centers 9 percent, and level-funds SCORE.  Again, the timing of the cuts is confounding.  At a time of economic uncertainty, when many small firms across the country desperately need support and guidance, the Bush Administration wants to reduce funding for these important counseling programs.

In addition to key program cuts, the Administration’s 2009 budget would also continue to underfund a number of vital small business programs, including the New Markets Venture Capital program and the 7(j) technical assistance program—programs that help small firms located in high unemployment areas and disadvantaged firms.  There is no new funding for Procurement Center Representatives.  The training budgets for the HUBZone and Native American outreach programs continue to be underfunded.  And there seems to be a complete lack of accountability within the SBA, based on the fact that the contract for the 7(j) program was given to a former Administration appointee with absolutely no business counseling experience.

The President’s request for the SBA’s Office of Veterans’ Business Development is woefully inadequate in light of the anticipated troop drawdown in Iraq.  With the number of returning service members expected to rise significantly by 2009, this office requires full funding support to accomplish its mission of helping America’s veterans complete the transition back into civilian life.  More funding is also important to carry out the provisions of the Military Reservist and Veteran Small Business Reauthorization and Opportunity Act of 2008, which was signed into law February 14th.

It’s also hard to understand why the Administration requests no funding or insufficient funding for many programs that currently exist, but proposes to create and fund new projects, such as the “Emerging 200” and the “Rural Lender Advantage” initiatives—ideas that have merit, but overlap, duplicate or remake existing or former programs.

Finally, this budget does nothing to address the concerns being raised about the impact of the looming credit crunch on our nation’s small businesses.  So far this fiscal year, the number of loans made through the SBA’s largest lending program—the 7(a) loan guaranty program—has dropped dramatically.  But instead of trying to address the problem, the President’s budget would make matters worse by raising lender fees to the maximum amount allowed.

Administrator Preston, I think it’s fair to say that during previous hearings I’ve given you credit for your work in improving the SBA’s operations.  But when it comes to these budget issues, it’s very difficult to be complimentary. For example, it is just a misrepresentation to say, as you do in your prepared testimony, that this budget is a 15 percent increase from the Fiscal 2008 funding levels.  That calculation includes new disaster funding—a category of funds that must be excluded from the agency’s budget figures in order to produce a fair, “apples-to-apples” comparison.  When you do that, it becomes clear that the President’s request is actually a 3.4 percent reduction from the Fiscal Year 2008 funding level, and a 28.2 percent reduction from the Fiscal Year 2001 funding level.

I look forward to hearing your views and explanations of the President’s budget proposal, and I hope we can have a frank discussion on the issues.

I now recognize our Ranking Member, Senator Snowe.