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 September 16, 2019

FY 2020 BUDGET UPDATE - 9/23 

 

 by Tony Wilkinson, NAGGL President & CEO

 

Welcome to another frenzied September finish.  If you have not already done so, it would be helpful to read my August 2 column first as it details the situation leading up to this Government Relations Update.  

Congress returned to DC a week ago and now has only two more weeks to settle on a funding package for FY 2020, which begins October 1.  Since the Senate is just now starting to markup* its FY 2020 appropriations bills, and all of these will need to be reconciled with the versions passed by the House earlier this year, a Continuing Resolution** (CR) appears to be the only short-term option to fund the government

(*Markup: The process by which congressional committees and subcommittees debate, amend, and rewrite proposed legislation.)

(**Continuing Resolution/continuing appropriations - Legislation in the form of a joint resolution enacted by Congress, when the new fiscal year is about to begin or has begun, to provide budget authority for Federal agencies and programs to continue in operation until the regular appropriations acts are enacted.)

While Congress was on their summer break, the NAGGL GR Team led an effort to bring other national trade associations up to speed on the SBA 7(a) subsidy issue. The trade groups we reached out to quickly understood the problem with OMB’s subsidy rate calculation.  As a result of these efforts, we were able to send a strongly-worded letter signed by 11 trade associations to the leadership of both the Senate and House Financial Services and General Government Appropriation Subcommittees (FSGG) and the Small Business Committees.

NAGGL was pleased to be joined on the letter by The US Chamber of Commerce, International Franchise Association (IFA), American Bankers Association (ABA), Independent Community Bankers of America (ICBA), National Association of Manufacturers (NAM), National Small Business Association (NSBA), and several others. There is strength in numbers, and I believe the coalition letter opened some eyes on this critical issue.

How about some good news?!  Shortly after our letter was sent, the White House sent a short wish-list of special requests, called “anomalies,” to be included in the CR to Senate and House appropriators. Lo and behold, there it was on page 12, in the mix with special funding for the Department of Defense Counterintelligence and Security Agency and the Long Range Hypersonic Weapons program ... a request ... from the White House for $99 million to fund the 7(a) program:

“Language is needed to provide the Small Business Administration with a rate for operations of $99 million in subsidy budget authority to cover the cost of loans, and authority to obligate this and other funding provided under the CR formula at a rate for operations necessary to accommodate potential increases during the period of the CR. Without this anomaly, the program will not have sufficient funds to meet loan demand in FY 2020, forcing program shutdown and delaying financing to thousands of small businesses during the CR period."

In last month’s column, I answered the question, “Has OMB issued a formal budget modification to correct its subsidy calculation error?” with a NO.  The answer remains the same today.  But it seems they did make a proactive decision to support an appropriation of the required funds rather than allow further public discussion of how their flawed subsidy calculation will punish 7(a) program users with an unnecessary fee increase. Yes, it is disappointing to realize that the institutional bureaucracy is so entrenched that it can resist the pressure to admit a fairly obvious mistake, even when it costs their political bosses and members of Congress almost $100 million in unnecessary appropriations. 

The House drafted its version of the CR last week and granted the White House appropriation request by including the $99 million anomaly.  Senate Democrats have signaled to NAGGL that they too will be supportive of the anomaly request.

So, is it all good news?  Now for the rest of the story. Senate Republicans will need to cooperate, and we have not yet been able to get a commitment from them on this. The GR team has heard rumblings that some Senators simply do not want to support a credit subsidy appropriation even if the OMB subsidy calculation is flawed.  They also cannot be very excited about having to appropriate money when deficits are soaring and everyone knows the funds will just sit in a reserve account until a future downward subsidy re-estimate returns the money to Treasury.  We have heard that fee increases are still being discussed as an alternative to appropriating the money. But, in light of these concerns about the deficit, why not haul OMB to the Hill and demand that they correct the budget submission so the phantom appropriation would not be required?

CR versus Full Year Appropriation. Should the anomaly language make it into the final CR package, the funds will be available for the length of the CR. The full-year appropriations bill or omnibus language would take over when the CR expires, or when a separate FSGG appropriations bill is enacted, whichever occurs first. It is possible that the CR could be extended for the entire year, but that is an unlikely scenario. That is why the Senate FSGG subcommittee is still important to the entire discussion.  

On Tuesday, September 17, the Senate FSGG appropriations subcommittee will markup their FY 2020 spending bill.  The draft language of that bill has not yet been made available; but when it is, that will be the first indication of a Senate game plan for the full fiscal year, beyond the expiration of the CR.  The Republican members of that Committee are John Kennedy (LA), Jerry Moran (KS), John Boozman (AR), Steve Daines (MT) and James Lankford (OK)Anyone with contacts in those offices should ask these Senators …TODAY… to support the White House anomaly request for the SBA 7(a) program by including it in the FSGG bill Since the Chairman of the Small Business Committee is often consulted on issues like this, contacting Marco Rubio (FL) would be helpful as well. (Get contact information >)

What about the risk of a shutdown?  The answer to this question has not changed since the August column.  A CR must pass before October 1 AND it must include the anomaly language (or, Congress must agree on fee increases, which is extremely unlikely), or the program would shut down on September 30 The odds of the anomaly language being included in the CR have gone up dramatically, but it is not a sure thing until the Senate agrees.

As for the entire CR, I would be surprised if it does not pass, but there are still several sticky issues under consideration (immigration, border wall, etc.) that could throw a wrench into the process. Given that we are heading into an election year, I believe the odds of a CR passing are quite good.  I hope our anomaly language is in it.

After that, the action for the 7(a) program shifts to how the Senate appropriators and authorizers choose to move forward.  If a full year appropriation for a sufficient amount is included in the Senate FSGG bill, we should be in good shape for the year, since the House version of that bill also included funding for 7(a).  If not, we would need to see the House position prevail in a conference or omnibus appropriations bill as the only way to keep the program operating after the CR without a fee increase.  

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