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SBA budget cuts viewed with concern

By Victor Godinez
Dallas Morning News
March 12, 2006

DALLAS In a nearly $3 trillion federal budget proposed by President Bush for 2007, $624 million to run the Small Business Administration seems like small potatoes.

But the tiny agency for small companies is getting a lot of attention right now, and little of it is good.

Small-business owners and Democrats in Congress say the agency is starved for funding and has been squeezed tighter in every budget President Bush has proposed since he took office, even though he touts small businesses as the engine of the American economy.

Outside groups say the skimpy spending is part of a larger goal to fold the SBA as a separate agency and eliminate federal small-business contracting requirements.

But the Small Business Administration points to the record number of small-business loans awarded in the past year as proof that smaller budgets don't mean reduced service.

"Is that a budget cut, or is that a savings?" said Mike Stamler, a spokesman for the agency. "When you do something more efficiently, I just don't understand people who say you shouldn't do it more efficiently."

And suggestions that the SBA is on the verge of being shut down are absurd, he said.

"It's ridiculous," Stamler said.

Cathy Dougherty, a smallbusiness owner in Richardson, Texas, said she has seen, though, how a smaller budget has resulted in fewer services for the small-business community.

"They're definitely stretched to the max," said Dougherty, president of Dougherty Sprague Environmental Inc. "They definitely don't have the personnel."

Dougherty's firm, which is helping with the Hurricane Katrina cleanup and identified hazardous chemicals after the Columbia space shuttle crash, was recently certified by the SBA's 8(a) program as a disadvantaged business.

The program is designed to help company owners who can prove they've suffered some form of prejudice or discrimination gain access to federal contracts.

But Dougherty, who won her designation because of gender discrimination, said the SBA doesn't seem to have the resources anymore to effectively administer the program.

"Since we've been involved just the last year and a half, the amount of 8(a) firms that one person has to care for has gone from 20 to about 80," she said. "So I see a very direct effect. They're supposed to mentor us and help us and alert us to bids. But for an entire year, I didn't hear from my person."

Steve Denson, an adjunct professor in the Cox School of Business at Southern Methodist University, said the SBA has a strong role to play.

"SBA is a great training tool, a resource, for emerging entrepreneurs, especially minority entrepreneurs and female entrepreneurs," he said. "Some of their greatest success is in leveling the playing field" for women and minorities.

But Denson, a self-described "rabid Democrat," said that cutting the agency's budget further could result in cutting back those training programs.

Last September, the SBA's Office of Inspector General released a report stating that the Small Business Administration needed to tighten its oversight of federal contracting.

"Flaws in the federal procurement process allow large firms to receive small-business awards and agencies to receive small-business credit for contracts performed by large firms," the report said.

Lloyd Chapman, president of the American Small Business League, which devotes most of its resources to tracking claims of fraud and abuse at the SBA, thinks President Bush's goal is to eliminate the SBA altogether and simultaneously drop the requirement that a certain portion of all federal contracts go to small businesses.

Even if that doesn't happen, the Small Business Administration clearly is operating with fewer resources.

Different groups tally the 2007 budget in different ways, but the overall trend is undisputed. In 2001, the agency had a discretionary budget of $900 million.

For 2007, the administration has proposed a budget of $624 million.

But critics argue that if disaster spending, which was not included in the 2006 budget, is removed from the 2007 budget, the total drops to $429 million, compared with $534 million in 2006.

But Stamler at the SBA said the 2006 number also includes $90 million in congressional earmarks that President Bush had not requested.

So the 2006 budget minus the earmarks is about equal to the 2007 budget minus the disaster spending.



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