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Small Business Administration Faces 45% Drop in Budget

SBA Faces Deep Cuts Under Obama Budget
Under the Fiscal Year 2012 Budget, the SBA would get $985 million, a cut from 2010 levels. Photographer: Ramin Talaie/Bloomberg News

The U.S. Small Business Administration faces a 45 percent drop in funding under President Barack Obama’s budget request after receiving extra funding in economic stimulus legislation.

The agency, which supports companies through loan programs and disaster assistance, would get $985 million in the fiscal 2012 plan Obama proposed today, a cut from the spending levels of 2010 supplemented by $962 billion in stimulus funding.

While the budget would back $27 billion in loan guarantees for small business, administrative spending and funds for Small Business Development Centers would be cut.

“It’s critical as we go forward with our budget that we continue to support small business,” Karen G. Mills, head of the agency, said today on a conference call with reporters. “We have to tighten our belts and make tough choices.”

The budget designates $1.1 billion in direct loans for disaster assistance, compared with an average of $837 million a year from fiscal 2007 to fiscal 2010. The SBA makes loans to businesses in federal disaster areas and provides assistance to eligible homeowners and renters.

The SBA spending for salaries and expenses would drop to $427 million from $434 million in fiscal 2010.

The agency provides government backing on loans made by commercial lenders. The SBA’s largest program guarantees as much as 85 percent of a loan, which would be paid off in a default.

‘Must Be Done’

House Small Business Committee Chairman Sam Graves, a Missouri Republican, called for more oversight of the agency, which bolstered its $824 million in enacted spending for 2010 with stimulus funding.

“While I am pleased that the president’s budget proposal would finally rid the SBA budget of ill-conceived stimulus spending, more must be done to streamline SBA programs and funding,” Graves said in a statement.

The agency’s guaranteed loan programs posted a $3.7 billion increase in losses and subsidy costs on outstanding loans, excluding interest, in 2011, according to the budget. To shore up the program, the administration will submit legislation “to provide the SBA the flexibility to adjust fees in these programs to enable them to be self-sustaining.”

The SBA, founded in 1953, offers management assistance, help in winning federal contracts and services that target women, minorities and veterans.

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