News

Many states cut small business center funds

State budget cuts could force some of the nation’s 1,000 Small Business Development Centers to close and lead others to lay off business counselors.

Kent Hoover Washington Bureau Chief

The centers provide management and technical assistance to existing and prospective small-business owners. Federal funds for the centers must be matched by state and private-sector sources.

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Small Business Development Centers

What: Centers provide management counseling, training and technical assistance to current and prospective small business owners

Locations: 1,000 around the country

Small businesses counseled or trained: 650,000 in 2002
Funding: SBA provides up to 50 percent of operating funds; other money comes from states, colleges, foundations, chambers of commerce and economic development corporations
Many states are reducing or eliminating money for the centers as they slash spending to cope with huge budget deficits.

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California Gov. Gray Davis, for example, proposes saving $2.5 million by ending state support for SBDCs. Virginia eliminated $2 million in funding for its centers, and budget cuts in Ohio will force some centers there to close, Wilson says.

These cuts ignore the return on investment that SBDCs provide, says Don Wilson, president of the Association of Small Business Development Centers.

Small businesses who receive SBDC counseling generate more than twice as much additional tax revenue as the cost of the program, according to a study by James Chrisman of Mississippi State University. Employment growth for SBDC clients is 10 times the rate for the average U.S. business, Chrisman found.

"Put your money into things that are making you money," Wilson says.

Closing centers or reducing services to small businesses will weaken the economy and reduce state and federal tax revenues, he says.

"Our failure to invest in small business is like eating our seed corn," Wilson says.

No increase in federal funds likely

The Bush administration wants $88 million in federal funds for Small Business Development Centers next year, $1 million less than Congress appropriated this year.

Wilson pleaded with the House Small Business Committee to ask congressional appropriators to increase federal funding for SBDCs to $125 million a year to help centers cope with lower levels of state support.

The committee, however, declined to push for more money. Its letter to the House Budget Committee stated only that $89 million is the "minimum level of support that is needed for the SBDC program."

The committee’s ranking Democrat, Rep. Nydia Velazquez of New York, agreed with Wilson that SBDCs should receive $125 million in federal funds, the amount authorized by legislation governing the program.

"What is the logic in cutting a program that is actually making money for the federal government?" Velazquez says. "Obviously, the administration wasn’t being logical when they created this budget."

Wilson says he was "extremely disappointed that with all the data, there was a willingness" by the committee "to rubber stamp the budget that came down" from the administration.

SBA Administrator Hector Barreto, however, says the budget provides adequate funding for SBDCs as well as his agency’s other "critically important entrepreneurial development programs," such as the Service Corps of Retired Executives and Women’s Business Centers.

"Now more than ever before, it is important that SBA be able to contribute to the support of these entities that provide access to information and access to counseling," Barreto says.

http://www.bizjournals.com/extraedge/washingtonbureau/archive/2003/03/10/bureau2.html?market=phoenix

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