WASHINGTON – Today Sen. John Kerry (D-Mass.) questioned the head of the Small Business Administration (SBA) on the President's small business priorities for next year, noting the inadequate funding for core programs and services and a strong need to enact bipartisan disaster loan legislation this year. The proposed budget for the agency for Fiscal Year 2008 is only $464 million, more than 30 percent less than it received in 2001. The proposal would cut funding for key business assistance programs like Women's Business Centers, Small Business Development Centers, Microloan counseling, 7(j) technical assistance, the Program for the Investment in Microentrepreneurs, and SCORE.
In addition, with skyrocketing costs of health care a top concern for small business owners, Kerry asked Administrator Steven Preston to commit to help educate small business owners about the State Children's Health Insurance Program (S-CHIP). A new Urban Institute report shows that 2 million children out of a total 9 million uninsured are eligible for enrollment in the S-CHIP program. Many of those children are dependents of small business employees and self-employed workers.
"As someone who has been a longtime advocate of robust funding for SBA's programs, I'm disappointed in the funding level proposed for the agency," said Kerry, Chairman of the Committee on Small Business and Entrepreneurship. "Borrowers and lenders are picking up the cost of loans and we aren't reaching as many businesses that need counseling or assistance breaking into the $370 billion federal contracting market."
Kerry and Sen. Mary Landrieu (D-La.) called on Administrator Steven Preston to support comprehensive legislation to reform the Disaster Loan Program. Kerry promised action on such legislation in the near future. The Small Business Disaster Response and Loan Improvements Act of 2007 (S. 163), introduced by Kerry, Ranking Member Olympia J. Snowe (R-Maine), Landrieu, and David Vitter (R-La.), would create a new expedited disaster loan program, allow banks to make loans directly to victims, establish a new presidential declaration of Catastrophic National Disaster to provide nationwide economic injury loans to businesses, and increase government accountability.
"The most urgent unresolved legislation is reform of the SBA's disaster loan program," Kerry said. "Administrator Preston has taken steps to improve the program. I commend him for that. But when he's gone there's no guarantee those improvements will remain in place. Administrative changes, while good, are not a substitute for legislative changes that are needed."
Kerry called the SBA's characterization of the budget proposal as creating a 40 percent increase in lending capacity as misleading. The budget proposal would back $28 billion in 7(a) and 504 loans and SBIC debenture deals – the same levels proposed and authorized as last year. "You have the exact same lending capacity as before, but you’re doing nothing to increase the outreach and actually expand the lending pool to underserved communities," Kerry said.
While the President has for the first time in three years not sought to eliminate the Microloan Program, the proposed budget would raise the cost on loans and eliminate the complementary business counseling component to the program. Unless the lenders get the grants to offer counseling to the micro-borrowers, they will not make loans. Kerry called the proposal unworkable and disingenuous.
Sen. Carl Levin (D-Mich.), a senior member on the Committee, advocated to expand the Microloan Program, not cut it.
"Over the years, the SBA has financed more than 23,500 Microloans worth $280 million creating more than 64,000 jobs at the cost of only about $4,400 per job. That's a pretty good return on investment if you ask me. I'd like to see this program grow. At a time when the Nobel Peace prize was recently granted to an international innovator in micro-credit we should be celebrating the fact that the United States government runs an extremely effective Microloan Program out of the SBA," said Levin.
To read Sen. Kerry's opening statement from today's hearing, please click here.
For a summary of the Democratic analysis of the SBA's 2008 budget, please see our press release from February 6th by clicking here.