WASHINGTON – Today, Senators John Kerry (D-Mass.) and Benjamin Cardin (D-Md.) questioned the Bush Administration’s short-sighted budget that doesn’t address the economic challenges faced by small businesses and fails to invest in lending, contracting and counseling programs. Despite signs that small businesses are facing increasingly difficult market conditions, the Bush budget proposal for the Small Business Administration (SBA) raises fees on loans, provides no funding for microloans, doesn’t invest in more contracting oversight, and cuts funding for key business assistance programs like Women's Business Centers, and Small Business Development Centers.  Excluding disaster loan program funding, the proposed budget for next year represents a 28 percent cut for the SBA since President Bush took over in 2001 – the largest cut of all the federal agencies – and a three percent cut from 2008 funding.

“Cutting funding for small businesses is just another reminder that the Bush Administration has lost touch with economic reality,” said Kerry, Chairman of the Committee on Small Business and Entrepreneurship.  “As credit markets tighten, we need to use SBA’s programs to help small businesses access capital, boost the economy and create more jobs rather than use small businesses as slogans and soundbites while at the same time denying them critical resources.  Inadequate funding for agency staff has opened the door to fraud, waste, and lax oversight – most recently in awarding a business counseling contract to a former Bush Administration official with no experience.”

“The budget we have before us represents a major step backwards. Again, this Administration either underfunds or cuts back on some of the Small Business Administration’s most essential and core programs,” said Senator Cardin. “The proposed budget strips to the bone programs that have proven effective in assisting small entrepreneurs grow their business.  They also come at the expense of technical assistance and support programs that have often meant the difference between success and failure.  It is simply counter-intuitive to cut such programs which dispense essential advice and know-how to young businesses.”

According to the Federal Reserve and the SBA, banks have tightened lending standards for small business loans and government backed loans are down 14 percent from this time last year when historically they’ve increased in times of tight credit. The proposed Bush budget, however, provides no funding for the SBA’s largest loan program – 7(a) – and in fact makes it more expensive by increasing the lender fee.

Kerry has introduced legislation, the Small Business Lending Reauthorization and Improvements Act (S. 1256), which increases access to working capital and to loans for fixed assets such as real estate and equipment, and strengthens the SBA’s micro-credit programs.  To help mitigate the down-turn in government backed lending and encourage lending to small businesses, Kerry introduced the Small Business Lending Stimulus Act (S. 2612) to provide nearly $200 million to cut small business loan fees and double microloan funding.

Kerry also pressed the SBA Administrator for more accountability in federal contracting. After recent reports revealed that a former Bush Administration official received a $1.2 million contract to provide technical assistance to small disadvantaged businesses, Kerry pressed the Administration to explain how the contract was awarded when the official has no experience in business counseling.  Kerry plans to request an investigation by the Government Accountability Office.

The budget also provides no new funding for Procurement Center Representatives (PCRs), who monitor contract bundling and break out contracts for small firms. Currently there are about 57 PCRs -- although only around 30 have full-time PCR duties. This falls far short of the 100 PCRs Congress has been calling for to oversee nearly $400 billion in federal contracts.

For a summary of the Democratic analysis of the SBA's 2009 budget, please see the press release from February 4th by clicking here.