The Small Business Administration is quietly planning to cut millions of dollars in direct business revitalization loans authorized by Congress and incorporated by President Carter as part of his program to revitalize the nation's cities.
Congressional sources said yesterday that the SBA has already told field personnel to expect the cutbacks of about $20 million in the $45 million direct loan program. They said those funds will be diverted to loans for energy-saving devices, but not necessarily in urban areas.
But SBA Deputy Administrator William Mauk said yesterday that no definite cuts in the program have been decided and the SBA fully intends to ask Congress for the change.
Mauk also said that SBA officials are considering diverting the money to other loan programs, possibly for minorities and women. An SBA spokesman said the agency is considering cutting the program to about $34 million, not $25 million.
"We would not use this money for anything but what we have approval from Congress for," Mauk said.
However, Rep. John J. LaFalce (D-N.Y) scheduled hearings next week after learning that the SBA planned to divert the funds.
"I'm greatly distressed by what on its face appears to be an effort by SBA to undermine this program, by underallocating and misallocating the direct funds that Congress has made available for it," LaFalce said in a letter to SBA Administrator A. Vernon Weaver. "I cannot understand why your agency has made what in effect amounts to a unilateral determination to reduce support to this program by over 44 percent of Congress' expressed intent."
Mauk denied the SBA was planning a devious diversion of funds. He said that their consideration of cutbacks "is not a reflection of lack of commitment in the program. Mauk said the SBA has the right to scrutinize its programs and determine where funding best can be used.
Despite assertions by Mauk that the revitalization program can succeed with a funding cut, sources said that the three-year-old program, "still in its infancy" would be "devastated."
What would be slashed is loan money funded through local development companies started by state and local govenments.