The Small Business Administration says a spending bill passed last week by the House would endanger its loan guarantee programs.
According to the SBA, cuts to the agency's administrative budget would force it to fire 75% of its 3,100 employees, prohibit prudent monitoring of its loan portfolios, and prevent it from guaranteeing new loans by any but the largest banks.
"If we had a cut of this size, most of the staff would be, for six to eight months, fully devoted to doing a layoff," said Fred P. Hochberg, the agency's deputy administrator. "We'd essentially be shutting down the normal operations of the agency."
The House bill would also cap the guarantee authority for SBA's 7a loan program at $9.6 billion for fiscal 2000, or $400 million less than in fiscal 1999.
Critics said the agency is exaggerating its plight in order to pad an already bloated staff.
Rep. Harold Rogers, R-Ky., chairman of the appropriations subcommittee that oversees the SBA, said the agency has "continued to raid" its disaster loan budget over the past three years in order to boost salaries and expenses. "This is the second year we have been required to send them a message," he said Wednesday on the House floor.
"We're nowhere near having the problems that they're expressing," said Paul H. Cooksey, deputy chief counsel of the Senate Small Business Committee and a former second-in-command at SBA.
But supporters said the agency is more streamlined than ever and would be crippled by the House-passed cuts.
"It's the field offices that are going to be hit the hardest," said Rep. Nydia Velazquez, D-N.Y., the House Small Business Committee's ranking Democrat, in a statement. "They're the ones that provide the service" on 7a loans, she said.
Banking lobbyists on Friday were still trying to get a handle on the situation.
"As the appropriations process continues, we certainly hope that there is a recognition of the needs of SBA to continue to administer the guaranteed loan programs," said Floyd E. Stoner, deputy executive director for government affairs at the American Bankers Association.
The House bill, approved 217-210, budgets $321 million for SBA's administrative expenses in fiscal 2000, $70 million less than in fiscal 1999 and $87 million less than the Clinton administration requested.
The Senate's appropriations bill would cut slightly more funding but is considered less damaging by SBA because it contains fewer restrictions on spending.