Opening Statement

Good morning and welcome to today's hearing on the SBA's Budget proposal for Fiscal Year 2006. Thank you, Administrator Barreto, for being here today and to the small business representatives who will testify as we examine the SBA's proposed priorities for the coming year.

In his State of the Union speech, President Bush said, "we live in a country where dreams are born." And nowhere is that more evident than in America's 25 million small businesses – entrepreneurs who have taken risks and persevered tough times, to fuel the engine of America's economy. Small businesses have propelled our nation's economic growth, producing over 50 percent of our Gross Domestic Product and creating three-quarters of all new jobs.

The Small Business Administration has long been a critical partner in that success – with lending and technical assistance programs that have helped create or retain nearly 4.5 million jobs since 1999 (turn to Chart 1) and that number is growing each year.

Against that backdrop of achievement, the SBA's budget has been drastically reduced by 36 percent over the past five years! (Chart 2)
When you consider that the SBA's budget represents less than 3/100ths of a percent of the total federal budget, there should be no doubt that the time has come to stop these unwarranted cuts, and instead invest in a strong future of economic vitality.

I come here today, for a second year, deeply concerned about the SBA's budget. The Administration's proposed $592 million represents a 13 percent decrease from the agency's 2005 request and a 26 percent decrease from the 2004 request. You've heard the saying, If it ain't broke, don't fix it. Looking at the SBA's clear record of success juxtaposed with endless budget cuts, I am led to ask: If the SBA is working, why would we break it?"

This morning I will be listening intently and carefully analyzing the SBA's request, because we have an obligation to not only maintain, but to strengthen the SBA's proven core loan and assistance programs. (Turn to Chart 3)

The SBA's financing programs which are a crucial source of financing for small businesses, have never been more in demand with both the 7(a) program and 504 program delivering measurable results. The numbers from FY04 spell out that indisputable success, with the 7(a) program providing over $13.5 billion in loans to help small businesses to help create 132,603 new jobs. (Turn to Chart 4) The 504 program lent $4 billion to support the creation of 86,847 jobs.

In addition, the SBIC Program invested more than $2.8 billion in small businesses in 2004, thereby creating over 78,000 new jobs. I am hopeful that we can successfully restructure the SBIC Program this year...to ensure that strong track record continues well into the future.

For the next generation of small businesses, it is also critical that the SBA's financing reaches out to aspiring entrepreneurs. And that's why, in addition to helping established small businesses, Congress wisely determined that the SBA should aid new and fledgling small businesses with the Microloan program. When this program was zero-ed out last year, I and several Senate colleagues worked hard and successfully to restore $17 million in appropriations for the program in the 2005 budget. And once again, I strongly disagree with the Administration's ill-considered request to eliminate the Microloan Program.
What we're talking about is a small, efficient, cost-effective program...that stacks up very well on a jobs per dollar comparison to larger SBA programs. Consider, for example, that in 2004, according to the SBA's Office of Advocacy, the 7(a) program created or retained one job for every $23,600 in loans, the 504 program created or retained one job for every $26,043 in loans, and the Microloan program created or retained one job for every $3,608 in loans!

And in my own State of Maine, Microloans actually created or retained one job for every $3,700 in loans according to SBA numbers. The point is, a little seed money goes a long way when the hunger for economic opportunity is high. So I believe it's clear we should be supporting programs that foster job growth...especially in states like Maine that have been hard hit by manufacturing job losses and need that added economic stimulus.

Moving to contracting, I commend President Bush and the SBA for proposing an increase in the government contracting and business development budget by over $4 million. But with regard to the new PCR proposals, I'm concerned that with the proposed hiring of only 6 new Procurement Center Representatives the agency's e-PCR initiative will not adequately police contract bundling practices. This is especially significant because PCRs are the SBA's competition ambassadors, the sole watchdogs for the interests' of small contractors.

Moreover, many SBA procurement initiatives such as the 8(a) and the 7(j) programs appear to suffer from performance and management deficiencies. We've seen a consistent failure to achieve HUBZone statutory goals, and the SBA's proposal to fold the HUBZone budget into the SBA's general budget only makes matters worse.

In addition, the SBA is proposing, for a second year, to zero out two technology grant programs, Rural Outreach and the Federal and State Partnership. These programs leverage the infrastructure of state technology agencies and non-profit research incubators to increase the geographic diversity and competitiveness of small hi-tech firms for states such as Maine, which have comparatively lower participation in federal R&D efforts. And at a time when business magazines report that China, our key competitor, is aggressively expanding its technological base, ending this public-private partnership seems exactly like a move in the wrong direction.

I'm similarly dismayed with the proposed funding freeze for SBA's resource partners, despite the fact that these programs surpass the SBA's goals, assisting almost 1.5 million start-up and existing small businesses. In fact, the Small Business Development Center (SBDC) program alone served over 725,000 clients and helped create or retain over 168,000 jobs in Fiscal Year 2003. Likewise, the SBA's Women's Business Center program through its unique training and counseling helped to create or retain over 6,500 jobs in Fiscal Year 2003. So clearly results from these funding freezes are lost opportunities for entrepreneurs and would-be employees.

The SBA's freeze also extends to the Veterans Business program. I believe that decision is not only unwise but also uniquely ill-timed, as over 193,000 Guard and Reservists have been deployed since September 2001. An estimated 37% of those service members work for small businesses or are self employed...and many of them are accepting risk and financial hardships in order to answer the call to duty. So I think it's essential that the Veterans Business program is adequately funded with the necessary resources to offer targeted assistance to veteran-owned small businesses.

With that, I look forward to hearing from Administrator Barreto and each of our participants on the SBA's budget proposal, legislative priorities and potential implications for small businesses. Your insight is invaluable as we strive to identify any barriers that may limit small business success. And as Chair of this Committee, I am eager to continue working with the Administration and my colleagues to ensure that every American small business has the best possible opportunity to grow and thrive.