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House and Senate Committees Examine FY2005 Budget for SBA

Small Business Administration (SBA) Administrator Hector Barreto testified before the House Small Business Committee on February 11, and before the Senate Small Business and Entrepreneurship Committee on February 12.

In her opening remarks, Committee Chair Olympia Snowe (R-ME) stated, “We must ensure that we continue to build on the successes of SBA’s technical assistance programs. When we know that for every dollar we spend on counseling through Small Business Development Centers creates three dollars in return in the form of tax revenues, while creating 64,000 new small businesses and retaining 68,000 jobs…when we know that SBA’s Women’s Business Center program has helped to create more than 2,000 new small businesses and retain almost 5,000 jobs through its unique training and counseling programs…who could argue that these programs are indispensable.”

In a statement released by his office, Committee Ranking Member John Kerry (D-MA) criticized the SBA budget for eliminating funding for the Microloan and 7(a) programs and for underfunding the Women’s Business Center program by $1.5 million. “We have seen the same mistakes four years in a row,” he stated. “The President talks like a friend of small businesses, but since he took office, the SBA budget has been cut more than any other major agency in the federal government. The Administration’s roadmap for congressional spending has left small businesses stranded.”

Mr. Barreto explained that the FY2005 budget would terminate the Microloan program because an analysis of the program “discovered that every dollar lent under the program cost the taxpayers ninety-seven cents.” He further stated that the 7(a) program is capable of serving the same clientele and “provides an adequate incentive to lenders who feel that risk mitigation is required to make smaller loans.”

Mr. Barreto mentioned the Women’s Business Center program in a list of programs that have proven their effectiveness in meeting the needs of small businesses. All of the programs “have extensive resources and well-developed infrastructures. They can reach more customers and offer higher levels of service to targeted constituencies and, by eliminating the duplicative bureaucracy that is inevitably created by a large number of smaller programs, they can do it far more effectively.”

Testifying on behalf of the Association of Women’s Business Centers, Ellen Golden said that the Women’s Business Center program had grown to 89 centers and provided training and counseling to 106,000 women in FY2003. She explained the history of the program, noting that it was a demonstration project for three years, then was made permanent in 1997 with authorized funding for five years. In 1999, the program was altered to incorporate a sustainability pilot program that would establish sustainability centers, allowing them to apply for additional funding on a competitive basis.

Ms. Golden stated that the Women’s Business Center program had been flat-funded for three years and expressed her concern that the FY2005 budget would reduce funding for the program by $500,000 to $12 million. “In reality, flat funding has meant a reduction in funding for individual Centers. Quite apart from the effect of inflation and increasing costs of operation, Sustainability Centers experienced a reduction of between 12 and 19 percent in their SBA funding, resulting in a reduced staff capacity and services in 2003…Under the current funding model, if the appropriation is $12 million as requested in the President’s budget, the amount of the grants to Sustainability Centers will be cut in half.”

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