Keeping The Faith

Round Two

Congress and the administration are back in the ring over SBA funding.

Just when small-business owners thought the federal budget process was becoming less of a street brawl and more of an honest debate, along come the proposed SBA Fiscal Year 1999 expenditures.

In August, the Senate and the House of Representatives passed appropriations bills significantly below 1998 SBA allocations and 1999 requests. The SBA requested $724 million for 1999, but the Senate approved an appropriation of $613.6 million and the House, $705.89 million. Congress gave the SBA $716.1 million for 1998.

According to House and Senate appropriations reports, the bone of contention is funding for the Disaster Loan Program, which the SBA administers. "It is unconscionable that the SBA has submitted a request for a 10 percent increase in the salaries and expenses for the Disaster Loan Program while . . . requesting a substantial interest rate increase on loans for those who have been devastated by disasters," the Senate report says.

SBA sources say the agency's intention was to save taxpayer dollars. Currently, there is a gap between the interest rate the SBA charges and the amount the agency pays to borrow the money. In the 1999 budget, the SBA proposed closing that gap by raising the interest rates charged on disaster loans.

"Our overriding concern is that the SBA continue to be an effective agency for small business," says Todd McCracken, president of advocacy group National Small Business United.

Another congressional directive worrying McCracken is proposed personnel cuts. In its report, the House called for a significant staff reduction and decreed these cuts come primarily from SBA headquarters and overhead functions.

"There have been tremendous cuts in the SBA that have been taken disproportionately from the Washington office," says McCracken. "I think additional cuts could ultimately affect the quality of programming."

McCracken expects cooler heads will eventually prevail. In the meantime, small business is destined to emerge from the battle beaten and bruised.

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This article was originally published in the October 1998 print edition of Entrepreneur with the headline: Keeping The Faith.

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