Budget Cut, SBA Will Press On
Even with a 45% cut in its 2012 fiscal year budget proposal, the SBA said it will still be able to support small businesses.
The SBA's budget request is $985 million, which is a 45% decrease from 2010 enacted funding, that included $962 million in supplemental appropriations, the agency said. Excluding supplemental funding, the 2012 request is $161 million higher primarily due to increased estimated subsidy costs while its administrative costs dropped $19 million compared to fiscal year 2011.
It expects to save $20 million through more efficient loan management and accounting systems. There is also a proposed $10 million cut in the reduction of support to small business development centers and an $8 million decrease through the elimination of a duplicative technical assistance program. The SBA said it will also save $8 million due to reduction of 850 core staff of disaster employees and $1 million by eliminating a duplicative drug-free workplace program.
One of the two largest requested increases in budget authority is $132 million in loan subsidies to make new loans and to account for higher than estimated historical default rates in part due to loans made based on inflated collateral such as real estate, the SBA said. The other is $91 million for the disaster loan program due to a significant decrease in carryover funding from prior years, according to the agency.
Of significance to credit unions and other lenders, the SBA has proposed $27 billion to support small business capital, which includes $130 million in subsidy to support $16.5 billion in 7(a) loans, $82 million to support $7.5 billion in 504 loans and $3.8 million to support $25 million in microloans.
"It's critical that we continue to support small businesses as they find ways to grow, innovate and create jobs as we come out of recession. That said, even agencies like SBA that provide them with access to capital, contracts and counseling are being asked to tighten our belt and make tough choices," said SBA Administrator Karen Mills.
Like all financial institutions, the SBA has seen the impact of the recession on its portfolio and defaults have risen, in part, due to the fact that commercial property values, which small businesses often use as collateral, were inflated during the real estate bubble of the prerecession years, Mills acknowledged.
The agency is also requesting additional support for its disaster loan program due to the fact that funds from previous years' supplemental appropriations had dropped dramatically, Mills said. Other smaller funding requests include efforts to increase government contracting opportunities including implementing the women's contracting rule and to continue removing waste, fraud, and abuse in contracting programs, she added.
"Already, we've shown that with a relatively small budget and a full-time staff of just 2,200, we can deliver a big bang for the taxpayer buck," Mills said, pointing to efforts under the Recovery Act and the Small Business Jobs Act.
The agency said it delivered more than $42 billion in lending support at a cost of $1.2 billion in subsidy. Nearly one-third of Recovery Act contracts went to small business, which was above the annual goal of 23%, Mills said.
"As you've probably heard from the White House, there is an overall focus in this budget on not making reckless and indiscriminate cuts that could hurt our biggest job generators-small businesses," Mills said.