Congress is proposing cuts to the Small Business Administration’s budget that may force the administration to fire 75 percent of its workers and scale back services, officials said. The Senate proposes to slash $38 million from the SBA’s $820 million fiscal year 1999 budget, while the House plans to cut $87 million. Lawmakers will resolve the difference in an upcoming conference.
While the SBA has faced budget cuts before, these are the deepest seen in years, officials said. The difference between the House and Senate versions of the budget is also greater than it has been in previous years – especially given the late date, they said.
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”This year is unique in that the cut is bigger than we’ve seen before,” said Greg Walter, deputy chief financial officer for the administration. “I would say it’s a lot more serious than it ever has been before because of those conditions.”
Under the Senate version of the appropriations bill, the administration would have to fire a third of its workers; under the House version, it would have to cut 75 percent, Walter said. That means that the Providence district office of the SBA might have to fire as many as 12 of its 17 employees, said Joseph Loddo, the SBA’s acting chief financial officer and the former head of the Providence district office.
”For us in Rhode Island, this is very serious,” Loddo said, “and it’s very serious across the nation.”
The Small Business Administration, founded in 1953, works with local lenders to guarantee business loans. It also offers technical assistance and low-interest disaster recovery loans. Its loan portfolio is $50 billion.
While both the House and Senate versions of the SBA budget provide adequate funding for the programs, they slash the funding for staff, leaving the department with no one left to run the programs, officials said.
“When you look at the SBA budget it looks like all the programs are fully funded,” said Debra Silimeo, associate administrator for the SBA Office of Communications & Public Liaison. “But there are not going to be people to administer them.”
Over the years, the SBA has been adjusting to working with fewer and fewer people. In 1990 the department had 4,100 workers nationwide; today it has 3,100. The Providence office has cut its staff by 30 percent since the early 1990s, said Mark Hayward, acting director of the office.
Despite the cuts, the Providence office guaranteed 641 loans totaling $107 million in fiscal year 1999. It was one of only three offices nationwide to meet or exceed all its goals for lending to minorities, Hayward said.
Though the office has continued to do more with less over the years, the latest proposed cuts would allow the office – and the administration nationally – to do little more than service its current loan portfolio, as opposed to serving new businesses, officials said.
“We maintain our pride in customer service,” Hayward said. But he added: “It will be very difficult to do that with considerably less than we have now.”
Grafton H. Willey III, a member of the SBA advisory council, said politics is behind Congress’s reason for slashing the SBA budget. President Clinton, through SBA Administrator Aida Alvarez, has been pushing his “New Markets” initiative, a program that directs money to inner cities and traditionally under-served areas. Some Republicans see the program as designed to garner votes for Democrats, Willey said.
“They’re nice programs if money were no object, but money is an object,” Willey said. “The Republicans don’t really want to support programs that are geared toward getting votes for Democrats.”
Willey also charged that Alvarez has taken money from other parts of the SBA budget to fund the New Markets initiative. But Walter, the deputy chief financial officer, said this is not the case. Every department has seen a budget cut over the years because of the administration’s budget cuts as a whole, he said. “But there was no specific taking of money and giving to anybody else’s budget,” he said. “That’s absolutely false.”
Rhode Island has been known for depending heavily on small businesses, and, nationwide, small business is the driving force behind job growth, according to national statistics. Twenty-three million small businesses operate today, employing more than 50 percent of the country’s workforce, according to the administration.
“Small business is big everywhere in the United States, and it’s important that we have an advocate like the SBA in Washington and locally,” said Gary Ezovski, president of Lincoln Environmental Inc. in Smithfield, which has been helped by SBA loan guarantees over the years. “I don’t understand the logic of (Congress) doing this. I am a proponent of controlling government spending, but the SBA has found a way to help small business.”
Mark S. Deion, a Warwick small business consultant, said some perceive the SBA to be welfare for small business. Also, small businesses lack the lobbying clout of bigger groups such as the AARP, he said.
“Small business people are too busy running their business, and paying taxes, to do much lobbying,” Deion said.
That’s not to say that the SBA does not have its friends on Capitol Hill. U.S. Sens. John F. Kerry, D-Mass., and Olympia J. Snowe, R-Maine – both members of the Senate Small Business Committee – support restoring the SBA’s budget to last year’s levels, spokesmen for the senators said.
The battle may likely come to down to a test of wills between Congress and the President, Willey said. The SBA budget is one item in one of 13 appropriations Congress is considering. Each side will be looking for compromise on a number of items, including the SBA, he said.
“How strong the President’s going to back it is anybody’s guess, and how strong the Congress is going to fight it is anybody’s guess,” he said. “My expectation is that the SBA is going to survive.”
After a moment, he moderated his statement. “My sincere hope is that it’s going to survive,” he said.
