FY18 Budget Blueprint: SBA Funding Decreased

March 23, 2017

On March 16, the President Donald J. Trump released his Fiscal Year (FY) 2018 Budget proposal which details plans for defense and non-defense discretionary spending, while also proposing some adjustments for the current fiscal year. President Trump’s budget does not include any proposed changes to mandatory spending or revenue, nor proposals and cost estimates in the years beyond 2018.D

For FY 2018, the budget calls for a $54 billion increase in defense spending – a full repeal of the cap reductions often referred to as “sequester.” To offset these costs, the budget reduces non-defense discretionary spending by about one-tenth. Relative to today’s level, the budget would cut the State Department by 29 percent ($11 billion), the Environmental Protection Agency by 31 percent ($3 billion), the Health and Human Services Department by 16 percent ($13 billion), and the Education Department by 14 percent ($9 billion). Most other domestic agencies would also see substantial cuts; and nineteen small agencies would be defunded entirely, including the Corporation for Public Broadcasting, the National Endowment for the Arts, the National Endowment for the Humanities, the U.S. Trade and Development Agency, and several commissions, councils, and boards.

Two non-defense departments would see their funding increased under this budget. The Veterans Affairs Department would see a $4 billion (6 percent) boost in funding, particularly for veterans’ health care. The Homeland Security Department would also see a net $3 billion (7 percent) increase, with an increase in funding for the border wall and immigration enforcement and cybersecurity, partially offset by reductions in Transportation Security Administration screening programs and emergency preparedness grants.

The president’s 2018 Budget requests $826.5 million for the Small Business Administration (SBA), a $43.2 million or 5.0 percent decrease from the 2017 annualized Continuing Resolution (CR) level, which ends on Sept. 30.

Specifically for the SBA, the 2018 budget would reduce from $46 billion to $45 billion the cap in 7(a) loan guarantees, SBA’s flagship loan program. This number is merely an authorization level and not a straight appropriation. The 7(a) program is funded by user fees which are calculated each year by OMB using a detailed model to forecast expected defaults, and then the fees are adjusted in order to cover these defaults. Details are forthcoming in how this reduction is likely to be applied, however, the 7(a) program has been highly successful for many years, and a higher authorization level protects against program shut-downs which have occurred in the past and represent a major problem for SBA’s small-business lending clients.

The budget also would cut the microloan program from this year’s funding level of $35 million to $28 million. The remainder of the cuts would eliminate duplicative programs under the technical assistance umbrella, including the Minority Business Development Agency (MBDA), a division of the Commerce Department that promotes the growth of minority-owned businesses. The MBDA duplicates SBA programs aimed at supporting minority-owned businesses including Small Business Development Centers located across the country, the budget proposal said.

The Trump Administration proposal also eliminates Regional Innovation Clusters, 14 networks of companies aimed at supporting small businesses in specific industries; the Program for Investment in Micro-Entrepreneur grants and the Growth Accelerator Fund, which sponsors a competition for organizations that foster startups. Eliminating these programs would save $12 million, the administration said.

To read the full FY18 Budget Blueprint, please click here.