Three years ago, after watching the budget for the Small Business Administration's disaster aid program swell with the seasons of floods and drought, Congress in effect barred most farmers from the low-cost loan program until this October.
Now, as the day farmers could again become eligible for farm disaster loans draws near, the Reagan administration wants them barred from all SBA programs.
The move would save not only the $1 billion that the disaster aid program paid farmers annually during the Carter years but an estimated $80 million in other types of SBA assistance.
The plan, however, has run into stiff opposition on Capitol Hill. The House and Senate Small Business Committees have virtually ignored the administration's legislation so far, arguing that SBA programs should be available to farmers.
Farmers were not eligible for SBA disaster assistance until 1977, when they could qualify if they experienced a crop failure. The next year the SBA ruled that droughts were "natural disasters." The floodgates opened, and more than $1 billion in loans were made.
In the three years that followed, 60 percent of the SBA's disaster funds went to farmers. Until then, SBA disaster spending had averaged $250 million a year. In 1978, it jumped to $2.5 billion.
In 1980, Congress passed legislation that, in effect, suspended that aid to farmers through this Oct. 1. However, alien, corporate and tenant farmers, who were not eligible for disaster aid from the Agriculture Department, could still qualify.
The Reagan administration wants to terminate the SBA aid to those groups as well.
"This may be the first time in memory that an agency wanted to lose some of its turf entirely," said Bernard Kulik, deputy associate administrator of the SBA for disaster assistance. "I would have to duplicate their [the Agriculture Department's] operations and their knowledge, and I don't want to buy the expertise."
But Alan L. Chvotkin, chief counsel for the Democrats on the Senate Small Business Committee, said that there is a "great deal of concern about the [Farmers Home Administration's] ability to adequately take care of the needs of the farmer . . . and the SBA was frankly doing a very good job."
In response to Kulik, Chvotkin said that the SBA "doesn't know the ins-and-outs of the farm business any more or less than it knows the newspaper or the hardware business."
Under current law, farmers may turn to the SBA for a disaster loan only if the agency's interest rate is lower than FmHA's. Currently, the SBA rate is 10.5 percent and the FmHA rate, 8 percent. A bill introduced by Rep. Parren J. Mitchell (D-Md.) would set the SBA disaster loan rate at 8 percent for non-creditworthy borrowers and 4 percent for creditworthy borrowers.
"Members just want to make sure that farmers have a place to go," Chvotkin said, suggesting that Congress is trying to find a compromise between banning the farmers from SBA loans and making it the agency they turn to first.
Complicating that task, however, is this year's budget reconciliation act, which will force the small business committees to reduce lending authority by $3 billion over the next four years.
"This can be met if the committee ensures that farmers don't come back into the program," said R. Michael Haynes, chief counsel of the Senate Small Business Committee.
Thomas G. Powers, general counsel to the House committee, agreed, "The instruction does not specify the source of savings. . . ."
But, he said, if Congress were to continue to ban disaster loans to farmers for three years, the Congressional Budget Office would say the committees had met their budget target.