WASHINGTON – Today Sen. John Kerry (D-Mass.) said the President’s proposed budget for the Small Business Administration (SBA) is insufficient for meeting the needs of Massachusetts small businesses and falls short of repairing the deep cuts to the agency over the last seven years. The proposed Fiscal Year 2008 budget represents a 45 percent cut since the Bush Administration took over in 2001 and a 32 percent decrease when not counting disaster loan funding. The President’s request of $464 million for the SBA is only .02 percent of the entire $2.9 trillion budget.

“Massachusetts small business owners have what it takes to develop innovative technologies and services to make our economy stronger. But what they need is a little bit of muscle from the business counseling and finance programs at the SBA to grow and succeed,” said Kerry, Chairman of the Committee on Small Business and Entrepreneurship. “Unfortunately, the President’s budget proposal still lacks sufficient funding levels to really leverage the resources this agency has to help our state’s entrepreneurs.”

Kerry noted the lack of funding for the Microloan Program and the lack of new funding for the Disaster Loan Program as two areas of concern in the proposed budget. Additionally, this budget proposal will reduce the services and counseling and outreach programs important in Massachusetts, like Small Business Development Centers, Women’s Business Centers, Program for Investment in Microentrepreneurs, and technical assistance programs.

Specifically, the proposed 2008 budget:

  • Lacks funding for loans and venture capital programs. While the proposal reduces fees on 7(a) and 504 loans and SBIC deals, which will be helpful to small firms, the President’s budget still provides no funding for these programs. Last year, through 7(a), 504 and SBIC deals, more than $500 million in loans and venture capital was pumped into some 3,200 Massachusetts businesses.

  • Eliminates all funding for the Microloan Program and Microloan Technical Assistance. For the first time in four years the President has proposed keeping microloans, but he caps the program’s capacity at $25 million, eliminates all funding, and increases the interest rate. This shifts the cost of the loans – which proportionately help more women and minorities than other programs – to eight non-profits in Massachusetts, including the Western Mass Enterprise Fund in Greenfield and the South Eastern Economic Development Corp. on the Cape. The proposal also eliminates the counseling assistance program, Microloan Technical Assistance, which is essential for microentrepreneurs to succeed and repay the loans. Last year, $620,000 in microloans went to the smallest of companies in Massachusetts, out of the $32 million invested nationwide. While the state does well proportionately, the demand is much greater and we should be doing more, not less.

  • Increases Procurement Center Representatives. The proposed budget would increase PCR staff by nine. Currently there are about 50 PCRs nationwide -- although only around 30 have full-time PCR duties -- to monitor contract bundling and break out contracts for small firms. In 2005, Massachusetts received about $9.5 billion in federal contracts, ranking the state in the top 10. $1.5 billion went to small firms. Increasing the number of PCRs is a step in the right direction, but it falls short of the 100 PCRs Congress has been calling for to oversee nearly $400 billion in federal contracts nationwide and falls short of helping to increase Massachusetts’ small firms’ piece of the federal procurement pie.

  • Cuts funding for key counseling programs. The President’s budget proposal cuts grants for Small Business Development Centers and Women’s Business Centers, like the Center for Women and Enterprise in Boston and Worcester. For the seventh year in a row, the President has proposed flat-funding for SBDCs and WBCs which equals real cuts for these centers due to their funding level not keeping up with inflation. In addition, with the elimination of the Microloan Technical Assistance program, the President proposes SBDCs and WBCs would pick up the slack without additional funding. The Program for Investment in Micro-entrepreneurs which provides counseling to low-income entrepreneurs has also been eliminated.

    • There are eight SBDCs in Massachusetts located in Boston, Amherst, Pittsfield, Springfield, Fall River, Salem, Chestnut Hill and Worcester and 48 outreach sites which served 4,079 clients through high quality in-depth counseling last year. In addition, 4,566 individuals attended training sessions in the state in 2006 which helped to create or retain 893 jobs.

    • There are 161,919 women-owned firms in Massachusetts, employing 176,495 individuals. The two WBCs in Massachusetts served almost 2,500 women in 2006 alone. Since 1995, the Centers for Women and Enterprise, which serve Massachusetts and Rhode Island, has trained over 12,000 entrepreneurs and helped secure nearly $30 million in business loans, generating more than 15,000 jobs and $430 million in wages. This is has brought important economic activity and revenue to the state.

  • Provides no new funding for the Disaster Loan Program. This same approach was taken in FY 2006, when the President rescinded his request for Disaster Loan Program funding. As a result of the damage caused by the Gulf Coast Hurricanes, emergency funding was needed on four different occasions to prevent the disaster assistance program from shutting down. The Gulf Coast victims are not the only disaster victims who would be hurt by a funding shortage in this program — as a result of severe flooding in May 2006, the SBA approved disaster loans to nearly 1000 Massachusetts residents totaling some $30 million. In November, an explosion ripped through a Danvers Chemical Plant, requiring loans for more than 20 victims valued at nearly $1.5 million. The SBA’s disaster assistance program needs consistent, on-budget funding to ensure that money is available when a disaster strikes.

  • Cuts funding for critical assistance programs and eliminates line-item transparency. The President continues to propose cuts to funding for the 7(j), Historically Underutilized Business Zones (HUBZones), and Native American Outreach programs as well as roll the funding into the overall budget of the Government Contracting and Business Development office. This reduces transparency and creates uncertainty as to how much funding the programs will receive. There are 16 towns and areas with HUBZones in Massachusetts.