Good morning. The purpose of today's hearing is to examine the President's funding request for the Small Business Administration for Fiscal Year 2008. We welcome Administrator Preston back to the Committee and look forward to his testimony.

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. As even your testimony notes, the request of $464 million in new budget authority is more than a 30-percent decrease in funding to the Agency since 2001. While the Administration portrays this as a positive, I consider it negative. Borrowers and lenders are picking up the cost of SBA loans, and we aren't reaching as many businesses that need business counseling or need help breaking into the difficult but lucrative world -- $370 billion a year -- of federal contracting. Yes, the budget proposes to add nine procurement specialists, but we need many more to make a difference. We only have one in my state of Massachusetts who is supposed to oversee $9.5 billion in contracts in our state each year.

The Administration also portrays this budget as a five-percent increase over the FY2006 levels, while that may be technically true, it takes some creative math to get there – leaving out disaster loan funding in particular -- and doesn't help our small businesses because the extra funding didn’t go to the services -- counseling and contracting assistance – that our businesses need. It goes to administrative expenses. In fact, if I look at the budget (on page 20, table 4), non-credit programs got $127 million in FY2006 and the President is proposing $106 million for FY2008. That's a 16-percent decrease. Again, this budget doesn't get to the core services that reach our small businesses.

I appreciate that the budget this year does not directly eliminate the SBA's microloans, but this proposal is just not workable. In fact, it's disingenuous. The budget proposes to make the program "self-funding," while eliminating the complementary business counseling or technical assistance grants and sending those borrowers to the SBA's other counseling programs, programs that were cut or flat funded again this year. How can the SBA expect the SBDCs and the Women's Business Centers to counsel those borrowers when these centers haven't gotten additional funding? Taking inflation into account, SBDC funding is 19 percent less today than in 2001.

And there's no incentive for SBA's microlenders to make the loans. They would actually lose money making these loans, and then have to pay back SBA. Why would they take that financial risk? We need to provide funding for the loans, for the technical assistance, and for the micro-entrepreneurship counseling provided through PRIME.

I also consider it disingenuous to portray the SBA's proposal to back $28 billion in 7(a) and 504 loans and SBIC debenture deals as "capacity to lend 40 percent more." These are the same levels that were authorized last year. You have the exact same lending capacity as before.. Especially since you're doing nothing to increase the outreach and actually expand the lending pool to underserved communities.

It is good news to see the Administration propose to reduce fees on 7(a) and 504 loans and SBIC debenture deals. I support that, but I do question why the Administration has proposed only lowering fees on 7(a) lenders and not also providing some relief to borrowers. And I don't know how you will get a fee reduction in the SBIC debenture program and keep it at zero subsidy without having to touch the other fees.

In addition to the budget, I expect to discuss the Agency's implementation of the FY2007 funding resolution. I am concerned about a memo from the Office of Management and Budget regarding the Administration's interpretation of the resolution, and I want to make sure we are clear on how Congress intended for the SBA's programs to be funded. As of yesterday, we had not received the Agency’s legislative package, but I would like to hear what we can expect in the package and to discuss legislative priorities this Committee would like to have enacted this year and SBA's cooperation.

I appreciate the real progress Administrator Preston has made in improving the Agency's dealings with Congress. The relationship is much more cordial and cooperative. I am hopeful that this will extend to moving SBA's reauthorization. There is no reason why we can't reauthorize SBA's programs this year, and I strongly urge the Administration not to have Senators put courtesy holds on our bills this year. If you have objections, I want real give and take. It is not negotiation to come up and tell us the White House's objections, and then to thank us for the compromises we make but say it's not a deal until all of the objections are removed.

The most urgent unresolved legislation is reform of the SBA's disaster loan program. I know you have taken a genuine interest in clearing out the backlog of unprocessed loans from Hurricanes Katrina and Rita, and to disbursing the funds, and I commend you for that. You have shown real leadership. Now, there are some concerns that have been raised – to me and to others – about the agency trying to push numbers over quality of service for those who lost everything to Katrina. I want to work with you to get to the bottom of these charges because I think we can agree that such a policy is unacceptable. While you have made improvements to the program, what happens when you're gone? Administrative changes, while good, are not a substitute for legislative changes that are needed.

Even where we have differences, I think we can work together, and I look forward to discussing these issues with you today.

I now recognize our ranking member, Senator Snowe.