As quietly as it decided to cut millions of dollars in business revitalization aid to distressed cities, the Small Business Adminstration now has decided to maintain full funding of the program, which has been part of President Carter's program to aid the nation's cities.
William Mauk, SBA associate direcotr, told The Washington Post on Friday that the agency tentatively planned to cut appropriations for direct loans to small businesses in distressed cities from $45 million to about $34 million. SBA officials earlier had told Rep. John J. LaFalce (D-N.Y.) that the program would be cut to $25 million, LaFalce said.
Yesterday LaFalce accused the SBA of ignoring congressional intent by planning to cut the appropriation without approval. But after long and pointed questioning yesterday by LaFalce before the House small business subcommittee that he heads, Mauk, slowly puffing a cigarette and leaning back in his chair, said that he never told LaFalce that the SBA wouldn't use the full $45 million.
SBA officials "certainly are not" trying to contravene Congress, and the agency plans to use the full funding "at this point in time," Mauk said.
Mauk then said that the SBA is looking at how the program fits into its priorities, and he said the agency "will either commit all $45 million (to the program) or ask for something different from Congress."
LaFalce said after the hearing that he doesn't know what happened at the SBA over the weekend to make officials decide to maintain the loan program, but he added, smiling, "We just won $20 million."
Mauk told The Post on Friday that money diverted from the SBA direct-business-loan funds might be transferred to other loan programs and that the agency's business-revitalization efforts include other aid such as loan guarantees and technical and managerial assistance.
Sources said it tentatively planned to use the diverted funds for an energy loan program.
The SBA, the Commerce Department's Economic Development Agency and the Department of Housing and Urban Development operate the business revitalization program, and all were represented at the hearing yesterday.
LaFalce criticized HUD's administration of its part of the program because he said the agency planned to cut direct loans to businesses from $10 million last year to about $2.5 million while expanding the program from 33 cities to about 53.
LaFalce, a Democrat, said that the announcement three years ago of the Neighborhood Business Revitalization program "was primarily a campaign tactic that was deceptive in nature." LaFalce said an upcoming announcement that the program will be expanded to include about 20 more cities "would be little more than a campaign tactic deceiving the cities."
LaFalce also said that because of high interest rates, small businesses either must get bank loans at 19 percent interest or forego them, but direct loans from HUD are being cut back.
HUD representative Walter G. Farr defended the agency's action, but said that the agency will think about increasing funding for the program.
Another LaFalce complaint aired yesterday was that the SBA had changed a provision of one of its loan guarantee programs for small business so that the guarantee fee now must be paid by the small business getting the loan rather than the bank.