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Why Obama's proposed Small Business Administration spending cut isn't really a cut

SBA chief Maria Contreras Sweet
SBA chief Maria Contreras Sweet
Mark Wilson/Getty Images

Yesterday, I did a post about the winners and losers in the Obama administration's budget proposal based on a pretty simple metric. I looked at each non-defense discretionary agency and compared how much money Obama wants them to spend in Fiscal Year 2016 versus how much money was actually appropriated in FY 2015.

This led to the conclusion that one of the biggest cuts was going to the Small Business Administration. As far as it goes, that's accurate. But as a few helpful individuals pointed out to me it's a very incomplete look at how the proposal works.

Two things account for the proposed reductions in discretionary SBA funding, neither of which reflect a proposed decline in SBA activity.

  • Loans: One has to do with the SBA's loan programs. The performance of these loans is improving, which under current accounting rules registers as a reduction in spending.
  • Disaster: The White House is proposing that a significant sum of money be shifted out of the SBA's regular appropriation process and located instead in a disaster-relief line item that's treated differently.

The loan thing is simple enough. The disaster piece needs some background. Back when Congress structured the Budget Control Act of 2011 that created spending caps for various agencies, they also created a mechanism for disaster relief money to be allocated outside the framework of the caps. (For years there's been non-capped FEMA money, for example, through this mechanism.)

Since the SBA has, among other things, a disaster-relief mission, the White House has repeatedly proposed shifting that disaster-relief money into the uncapped side of the ledger.

Congress keeps saying no. This year's budget proposal reflects that disagreement. The White House is proposing less capped money, and then wants to put the money outside the cap. So if you just look at the agency funding levels (as I did), it looks like a cut to the SBA. But the SBA gets that money back through the disaster-relief mechanism. On an apples-to-apples basis, it all comes out to an approximately 2 percent increase in SBA spending.