Democrats: SBA cuts will cost small business jobs

NEW YORK (AP) — The federal budget cuts that went into effect March 1 will cost the country 20,000 small business jobs because of an expected drop in lending, according to a report issued Monday by Democratic lawmakers.

The report by Democrats on the House Small Business Committee says cuts to the Small Business Administration's budget will result in the agency running out of money to guarantee loans after late August. The committee estimates that $1.5 billion in SBA-guaranteed lending will be lost under the budget reductions.

That's well above the $902 million estimate made by the White House last month, a figure the SBA confirmed on Monday. However, SBA administrator Karen Mills told reporters last month she expects the agency won't run out of money for loan guarantees because demand for one type of loan, the 504 loan, is expected to fall this year. That would leave more money for the SBA to guarantee other loans, Mills says.

There was a sharp increase in 504 loans last year because of a now-expired provision allowing them to be used to refinance mortgages. The SBA guaranteed a total of $30 billion in small business loans in the fiscal year that ended Sept. 30.

The Democrats estimate that reduced lending will mean the loss of more than 2,700 loans and more than 20,000 jobs at small businesses across the country. The findings in the report were based on publicly available numbers and calculations made by the Democratic staff of the committee.

A letter that Mills sent to Congress last month said the budget cuts would mean that the SBA will be unable to guarantee more than 1,900 loans and that 22,600 jobs could be lost. The letter was sent before Mills said the agency might be able to guarantee all the requested loans.

Cuts to the SBA will also result in reductions to programs like the Small Business Development Centers, which include 900 offices across the country that provide counseling and education to business owners, the Democrats say. Programs to help women, veterans and native Americans who own businesses will also be affected, as would SCORE, the organization that provides free advice to small businesses. The Democrats estimate that more than 42,000 businesses will not be able to get assistance under the programs.

Mills' letter put the number of businesses that would not be able to receive counseling at 33,000.

Republicans on the Small Business Committee noted that the SBA, like other agencies, has some discretion to determine where the budget cuts need to be made.

"Every single government agency can find room for targeted savings, and the SBA is no different," said Sam Graves, R-Mo., the committee chairman.

Graves said the SBA should cut programs that duplicate functions at other federal agencies. He noted that a Government Accountability Office report listed a number of these programs, including some that overlap with programs at the Commerce Department that assist business owners.

Budget cuts are expected to lead to worker furloughs at many government agencies, but Mills has said the SBA will not need to furlough its employees because staffing levels have been reduced by early retirements.

"We are not planning a furlough and do not see this as a likely course of action," Emily Cain, an SBA spokeswoman, said Monday.

The Democrats also looked at the impact on small business of budget cuts in other agencies, including cuts in federal contracts.

They estimate that 79,000 small business defense contracts worth $5.3 billion would be lost, along with more than 43,000, or $2.2 billion, in contracts at other agencies. But contracts will also be lost because of $5.5 billion in budget cuts to SBA programs that help small companies train and prepare to get business with federal agencies. Those cuts would leave 1,100 businesses without that assistance, the Democrats say.

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