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What Obama's Budget Cuts Really Mean for the SBA

It's true that the Small Business Administration faces big cuts in the 2012 budget proposal released today by President Obama, but it's not entirely fair to say that he plans to slash the agency's funding by 45 percent.

In 2010 the agency received $1.79 billion but built into that 2010 money pot was $962 million in stimulus funding, which was intended to be a short-term deal. Take that padding away, and the 2010 budget looks more like $824 million. Fiscal year 2011, which started back in October, had a budget proposal of $994 million (it didn't pass). Obama's latest proposal would give the SBA $985 million -- only about $9 million less than what the agency has now.

That said, a shrinking budget is still a shrinking budget and the SBA has some belt-tightening to do.

"It's critical as we go forward with our budget that we continue to support small business," Agency Administrator Karen G. Mills said today in a conference call. "We have to tighten our belts and make tough choices."

The agency plans to cut $10 million from its Small Business Development Centers, which are located around the country and give advice to business owners or would-be entrepreneurs who can't afford outside help. (SCORE, the agency's other major mentoring arm, won't see any cuts to its budget.) Streamlining systems and killing redundant programs will cut another $29 million. Cutting salaries and other administrative expenses will save another $7 million.

Meanwhile, the President is asking Congress to add $132 million to the SBA's budget to make new loans, and to help mitigate high default rates in the loan program. The agency's disaster program, which gives loans to small businesses in federal disaster areas, will also grow by about $91 million because of carryover from years past. The agency will still back $27 billion in loans made by commercial lenders for small businesses.

In the last couple of months, Obama has tossed some olive branches to business, from the tax compromise at the end of last year, to a first-ever speaking engagement before the U.S. Chamber of Commerce and promises to cut down on unnecessary regulation. But it's hard to shake the feeling that most of the gestures and policy moves are geared to help big business, and the cuts to the SBA and other budget provisions aren't exactly engendering warm feelings among small business owners.

"We understand there's a strong desire to address the growing national deficit, but at this time, when small-business growth is so critical -- and just now starting to kick-in following the recession -- we think any cuts to the SBA need to be closely examined with a clear understanding of the long-term implications," says Molly Brogan, vice president of public affairs for the National Small Business Association.

Still, had Obama decided to adopt some of the suggestions floated up by his deficit commission in November -- namely, merging the SBA with the Commerce Department, this proposal could have been much harder to swallow.

Now let's see what Congress does with it.

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