News From the
Committee on Small Business
Nydia M. Velázquez, Chairwoman

For Immediate Release
February 5, 2007

CONTACT: Kate Davis, Austin Bonner (202) 225-4038

FY 2008 Budget Request Fails to Address Critical Issues Facing the Small Business Administration
75% of SBA’s core programs cut, terminated or flat-funded, failing entrepreneurs

WASHINGTON – As Congress evaluates the president’s FY 2008 budget request this week, the House Small Business Committee examined the budget for the Small Business Administration (SBA), which has seen a 25 percent cut from last year’s request, and is the lowest in proportion to the overall federal budget in 15 years.  Chairwoman Nydia M. Velázquez said this proposal “once again falls short of meeting the needs of this nation’s 26 million small businesses.”

“The funds allotted for this nation’s main job creators continue to shrink,” Chairwoman Velázquez said. “While the cuts may be different this year, the results are the same.  Small businesses are not being provided with the resources they need, and, quite frankly, deserve.”

A number of serious problems have arisen at the agency over the past few years. The proposed budget, however, lacks adequate funding to fix a number of these critical issues.  Since Katrina, the agency has been criticized for its slow response and a lack of preparedness. Despite these issues, the FY 2008 budget proposal failed to request funding to address the management and planning problems within the disaster loan program.  The budget also fails to include funding to address the issue of large businesses receiving small business contracts, which has escalated in recent years.  There is also a lack of funds for the agency’s lender oversight division that has faced challenges in the past in detecting fraudulent loans. 

To address these issues, SBA plans a slight increase in the number of full time employees to watch a $50 billion portfolio, as well as conduct a study ‘next year’ of a problem that occurred last year when large businesses received $12 billion in small business contracts, and again reorganize its disaster loan office without requesting any new funds.  Chairwoman Velázquez stated, “The agency requested less than a percent of its budget to deal with these billion dollar problems.  Clearly, these are not enough resources to address some of the most pressing problems at the agency.”

A number of critical SBA programs received significant funding cuts. Overall, 17 out of 25 of SBA’s core programs received cuts or were flat-funded, which could further impede the agency’s ability to serve small businesses.  The SBA also proposes to make the Microloan program self-financed, which would force start-up businesses to pay thousands of dollars in additional costs. The Women’s Business Centers (WBCs), which provide business development and training to women entrepreneurs also received significant cuts.  This latest proposal cuts seven WBCs nationwide, and will likely prevent the opening of new centers.   These cuts and proposals will ultimately lead to a lack of available resources at times when entrepreneurs are depending on the agency’s services most.

“This request only highlights the agency’s inability to examine past issues and work to address those shortfalls,” Chairwoman Velázquez said.  “Rather than providing solutions, lowering the cost of capital, and investing in these vital programs – this budget fails to provide for several critical initiatives.  It is my hope we can work to address a number of these discrepancies so small businesses can access the tools they need to be successful.” 

###