STATEMENT
of the
Honorable Nydia M. Velázquez, Chair
House Committee on Small Business
Markup on Views and Estimates of SBA Budget for Fiscal Year 2011
March 4, 2010, 10 a.m.

Washington, DC – Rep. Nydia M. Velázquez (D-NY), the Chairwoman of the House Committee on Small Business, delivered the following statement today at a markup of the Committee’s Views and Estimates on the Small Business Administration’s (SBA) FY 2011 budget submission:

“Today, the Committee meets to consider its Views and Estimates of the Small Business Administration’s Fiscal Year 2011 budget.  This discussion comes at a time when the economy is beginning to turn a corner. Most Americans, including the President, are looking to entrepreneurs to maintain that momentum. By providing robust funding for small business programs, we can further that progress and keep our recovery strong.    

“Needless to say, I was pleased to see President Obama boost funding for the SBA. However, I have concerns about how that money will be spent.  As of now, 89% of SBA’s new resources will go to unauthorized programs and agency overhead.  This leaves a mere 2.6% increase for core programs. It is my hope that, through the adoption of these views, we can change that trend and redirect funds to the programs that entrepreneurs have always relied on. 

“Just as the downturn has forced small firms to make smart choices, SBA should do the same. That means spending wisely and investing strategically. This is why we need to support programs like the New Markets Venture Capital program, which is making the government money.  Even amidst the worst investment climate in decades, that initiative--which receives no funding in this budget -- has managed to generate revenue for the Treasury, helping reduce deficits.  But, rather than providing any resources to NMVC, this proposal instead invests in riskier ventures, like SBA Express, which  could cost tax payers as much as $128 million in FY 2011.

“More than anyone, small business owners understand the importance of fiscal restraint. The views before us take a page from those entrepreneurs, and do more than simply increase spending. On the contrary, they offset new investments by cutting unnecessary costs and terminating six underperforming programs.

“Entrepreneurial Development programs have a track record of solid returns. In fact, every $1 spent on these efforts puts another $2.87 back into the Treasury. Most of these programs--such as Small Business Development Centers-- are catalysts for job creation. Unfortunately, the FY2011 budget would flat fund virtually all of them. It instead invests in unproven efforts like the Emerging Leaders program, which does essentially the same thing as SBDC’s, only at twice the cost. The end result is spending $6,000 on each job created when we could be spending $3,000.

“Everyone agrees we need to get capital flowing to small businesses. In doing so, it’s important for the lending process to be as accessible as possible. While it is never a good thing to increase costs on small business loans, this is particularly true during an economic downturn. So the agency’s proposed increase in lending fees is ill-timed to say the least.

“In the last two years, we’ve seen considerable declines in private industry. The one sector that has grown is the federal marketplace. Between the year 2000 and 2008, it more than doubled in size. Historically, SBA’s contracting programs have helped small businesses tap that expanding world of opportunity. However, following a recent wave of fraud, not all of these programs are running at full capacity.

“The committee is well aware of this problem, and is making fraud protection a top priority. However, the $2 million that this budget suggests for fraud controls won’t even put a dent in the $500 million in HUBZone and Veteran Disabled fraud that GAO has uncovered -- let alone waste that hasn’t been identified. In these views, we provide the agency with a blueprint for fighting fraud. That plan will ensure only honest entrepreneurs-- not large corporations -- receive small business contracts. 

“After eight years of neglect, it’s time to rebuild the SBA, and the overall funding level proposed in the president’s budget is a welcome sign. But the agency needs to be judicious in its spending. These Views give the SBA the direction and support it needs to make sound investments and promote its core mission--strengthening our nation’s small businesses.”  

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