Administration sources say President Reagan has approved the Office of Management and Budget's proposal to abolish the Small Business Administration in the fiscal 1986 budget.
While saying the president believes that small business should continue to be supported as an integral part of the nation's economy, a senior administration official contended this week that "the handouts of the past are not the best way to do that."
Under the OMB plan, $1.2 billion could be saved in fiscal 1986 by abolishing the agency and up to $400 million by selling off some of the SBA's $17 billion loan portfolio. For fiscal 1987 and fiscal 1988 together, the budgeted savings would total $3.7 billion.
Although attrition and transfers might accommodate some of the 4,200 employes, a senior SBA political appointee, who asked not to be named, said the "OMB proposal would call for 2,000 to 2,800 people to be riffed -- fired outright."
Any move to abolish the agency, however, would have to be approved by Congress.
Under the plan now being worked out with senior SBA officials, the agency's direct loans would be halted and those outstanding would be transferred to the Treasury Department. Guaranteed loans would continue to be managed by the banks that made them, while defaulted loans would also be turned over to Treasury, OMB and SBA sources said.
The SBA's minority business support activities, including management assistance and set-aside contracts for minority and disadvantaged small businesses, would be transferred to the Commerce Department. (Three years ago, the administration proposed transferring Commerce's Minority Business Development Agency to the SBA.)
Most SBA-managed disaster loan programs would be turned over to the Federal Emergency Management Agency. Farm lending programs, which Congress forced the SBA to administer, would be transferred to the Agriculture Department, administration sources said.
Still in doubt is the proposed fate of SBA's advocacy office, which champions the interests of small businesses before other agencies. Some sources thought it would be transferred to Commerce, while others said its support was overestimated and it would be abolished.
OMB has been crafting the final proposal without the cooperation of Administrator James C. Sanders or his top aides. SBA sources said Sanders has been on vacation in California the past two weeks, mulling his future.
On Dec. 20, Sanders had a final chance to appeal the death sentence in a meeting with Reagan and OMB Director David A. Stockman.
"It doesn't look like we won," a senior SBA official said. "We were treated like a thorn," added one of Sanders' personal aides. "It was like we were not part of the same administration, loyal to the same president."
Sanders was unavailable for comment, but an aide said: "I don't think he'll quit. He seemed to be ready to get in there and mix it up again."
WORD FROM THE FIELD . . . In 1983, SBA officials decided to survey their employes to determine which regional offices had the worst morale problems. Annette Baker, director of the personnel programs improvement staff, said, "What we learned is the place isn't so bad after all." Baker said that interviews by SBA officials detected "feelings of unhappiness. For the most part, the survey showed attitudes were better than we expected."
Still, the study showed that nearly 28 percent of the 2,800 respondents experienced or knew of incidents of sexual harassment and about one-fourth of the respondents thought the SBA was "not as good" as other places to work.
Baker said that initially the SBA planned to use the findings as a benchmark for surveys every two or three years to monitor changes in attitudes.
"Now we don't have the money, and if the SBA is abolished there would be no need," she said. "This would be a great time to do a survey to watch the changing attitudes."