“This is the James Frey version of a budget if ever I saw one,” said Kerry. “While President Bush brags about government costs going down for the Small Business Administration, he fails to tell the truth that slashing federal resources over the years raises costs for small business owners. And not just for small businesses: The Administration is proposing to increase costs for homeowners and businesses devastated by disasters like Hurricane Katrina. A president’s budget defines priorities. But the President’s rhetoric on keeping America competitive doesn’t match reality when it comes to key programs that foster small business innovation. This budget cuts or eliminates key programs that meet the needs of small businesses.”
Following is a brief overview of the impact of the President’s budget on small businesses:
1. Overall – While the President’s FY2007 request of $624 million is an increase of $31 million over last year’s initial request of $593 million, overall since Bush took office it amounts to 41 percent cut to the SBA. The increase is largely meaningless because it doesn’t go to the capital or counseling programs.
2. Raises Costs of Disaster Loans – the FY07 budget raises the cost of disaster loans for homeowners and businesses by eliminating the low interest rate cap, raising other interest rates and eliminating 50 full time staff from disaster operations.
3. Raises Costs of Small Business Loans – the FY07 budget raises the cost of small business loans by charging borrowers higher fees on loans of $1 million or more. In addition, the Administration provides no funding for the SBA’s largest loan program (7(a)).
4. Eliminates Microloan and Microloan Technical Assistance Programs – the FY07 budget would eliminate the microloan program which proportionally serves the most minorities and women out of all small business assistance programs. Last year, more than 2,400 small businesses across the nation received over $31 million in microloans.
5. Enables Continued Culture of Corruption – The President’s budget slashes staffing at the SBA by 24 percent exacerbating serious management and oversight problems at the SBA as identified in two Inspector General reports. According to a May 2005 IG report, approximately 87 percent of bundled contracts were not reviewed for small business contracting because the SBA did not have enough staff. The IG estimates that this lack of oversight has cost small businesses at a minimum, $384 million.
6. No Support for “Competitive Edge” Programs – The President is abandoning the very programs designed to help small firms keep America competitive. The FY07 budget request seeks to cut the Manufacturing Extension Partnership (MEP) by 56 percent from what Congress appropriated for FY06. Last year’s appropriated level was $104.6 million. The President’s budget request is for $46.3 million. Additionally, the President seeks to eliminate the Advanced Technology Program (ATP) which greatly helps small firms develop technologies leading to new products and services.
7. Cuts Business Counseling – The FY07 budget cuts Women’s Business Center grants. It also cuts grants for Small Business Development Centers from last year. While the Administration has been essentially flat-funding the centers over the last five years, their purchasing power has declined because their funding level has not kept up with inflation. The Program for Investment in Micro-entrepreneurs which provides counseling to low-income entrepreneurs has also been eliminated in the President’s budget.
