Do you consider the Small Business Administration to be your friend in Washington? Well, there may be a lot less of it if budget proposals working through the House and Senate pass in their current form. SBA spokesman Mike Stamler says the proposed cuts, which would knock about 14% off the 46-year-old agency's current $840 million budget, "could permanently disable the SBA." The House wants the agency to cut its 3,157-strong workforce by 75%. The Senate calls for a 32% reduction.

The SBA isn't the only agency to come under duress. The House, for instance, voted a 10% funding cut for NASA -- but the agency argues that it's being unfairly singled out. The House and Senate plans allocate $724 million and $720 million, respectively. That's almost a third less than the $994 million the SBA requested.

Congressional staffers say there's a message in their zeal to slash. The agency is bloated, and its finances are mismanaged. "It's really a mess," says Craig Orfield, spokesman for Senate Small-Business Committee Chairman Christopher Bond (R-Mo.). The SBA's 1998 books still aren't closed. "We don't know the full picture yet because they haven't come up with a clean audit." In recent years, the agency has lost track of -- then found -- millions of dollars used to guarantee small-business loans. Orfield scoffs at the complaints about staff reductions. The SBA added 125 employees last year alone, he claims. "They went on a hiring spree, and they simply cannot pay them."

Another target was President Bill Clinton's much-ballyhooed New Markets Initiative, a program designed to support inner-city entrepreneurs for which the SBA requested $85 million. Republican lawmakers don't want to fund what they see as fuzzy image-building for the Democrats in an election year, says Orfield.

Meanwhile, the SBA waits anxiously for Labor Day, when the congressional recess ends, for lawmakers to develop a unified bill in conference committee. Is Congress really about to cripple the agency, or is this just a preelection warning shot? Snaps Stamler: "If the message they're going to send is close the agency, then that's a harsh message."

By Dennis Berman in New York
dennis_berman@businessweek.com