Exclusive: SBA district office staffing dwindled as costs rose

Small Business Administration field offices have shrunk, even though their role in the pandemic is growing. However, costs are also rising even as the salary budget of the agency has stagnated.

The Playbook obtained a new report that Congress required of the SBA in the Consolidated Appropriations Act for 2023. The report shows the SBA field office staff dropped from 752 during fiscal 2021 to just 678 during fiscal 2022, the lowest level in the last five years. The SBA's district offices budget fell from $5.07 million in fiscal 2018 down to $4.875 millions.

These are only the office budgets -- salaries are paid from a separate, but equally strained fund. The agency was under pressure to reduce costs due to the flat budget and increasing costs, even though it still administered nearly $1 trillion worth of small business assistance.

The SBA report states that 'over the last decade, SBA budgets have remained relatively flat in terms of salary and expenses, but employee pay and cost of benefits coverage have increased over time. This has reduced the number of staff we can keep within budgets. The SBA reported that this trend had intensified in the past year.

A few fluctuations have also occurred. The district offices had about 725 employees full-time in fiscal 2018 and increased to 753 by fiscal 2022, before regressing. This means that some offices did not lose employees. Alaska's district has maintained a staff of about 10 over the past few years. Arizona's district office grew from thirteen to fifteen employees while Colorado's dropped from twelve to eight.

The SBA reported that the amount spent on district offices fell to $3.375 in fiscal 2022 due to a reduction in travel expenditures.

The SBA's report made it clear that this problem was not limited to its district offices but also across the entire agency, as the overall staffing levels fell by 350 positions between 2013-2022 because of the increased cost per employee. In total, the agency contribution to employee retirements has increased from 11,9% of salaries in 2014. to 18,4% in 2023. Meanwhile, inflation was higher than usual, requiring higher-than-normal pay increases.

SBA also cited 'locality-pay' as a contributing factor to rising employee costs. Locality pay refers to the adjustment of government salaries in order to reflect higher costs of living. The agency reported that the number of locality zones has grown from 30 to 50 and the size has grown up to 9%.

The agency also blamed Congress-directed spending. This is when Congress demands that the agency spend a specific amount of its budget. The SBA stated that it had to spend $80 million on directed earmarks in fiscal 2022. This amount grew to $179 in fiscal 2023 without any extra spending. The SBA did not give any details about the purpose of this directed congressional spending, but it stressed that money came from its salary budget.

The agency also requested a large increase in the budget for salaries and expenses. This line item increased from $278.3 millions in fiscal 2020 to $326.9 million in fiscal 2030. The agency has requested an additional increase to $394.9 million, although the final budget level is set by Congress.

This means that the number of employees supported by regular funds will increase from 1,680 during fiscal 2022, to 1,919 during fiscal 2023 and hopefully to 1,944 for fiscal 2024. The number of employees working on disaster loans and temporary workers will decrease by over 1,600. The SBA Inspector General's office saw an increase of 104 from fiscal 2023 to fiscal 2024, bringing the total to 185. This is because it wants to supervise hundreds of billions of dollars in pandemic assistance.

The agency also pulls back in other areas. It has requested $163 million to fund the Small Business Development Center Program. This is a slight drop from $183 million that was requested in fiscal 2023. However, this amount is still higher than fiscal 2022.

Both Democratic and Republican Senators expressed disappointment over the SBA's proposals to maintain field office staffing at current levels in future years and their planned cuts to SBDCs.

Sen. Cardin (D-Md. ), chairman of the Senate Small Business Committee said it was disappointing that these offices were not given a higher priority. He added that lawmakers agreed the field offices needed to be supported.

Cardin stated that 'we recognize that there are more needs in the field with the new Covid program and all the new opportunities'.

Sen. Jeanne Shaheen (R-N.H.), a member of the Senate Small Business Committee as well as the Appropriations Committee, which helps determine government funding for federal agencies, stated that many small businesses have survived in her state only because of the SBA's work and its field offices.

'I'm concerned about proposals I believe the SBA are working on, which would limit funding and staffing to our district offices. Shaheen stated that it appears resources are being concentrated in the central office.

Sen. James Risch (R-Idaho) targeted the SBDCs to show them where the money was going.

He said: 'I'm deeply disappointed by the cuts made, and how money was distributed elsewhere.'

Isabel Guzman, SBA Administrator, stressed during the hearing that programs for small businesses receive more funding overall. It is just distributed over several programs and services. She stated that the SBA must balance these various needs, while expanding its reach to more businesses.

Guzman stated that 'all of that work is critical and the field has been a fantastic customer service arm on the ground that has been with our small business, and that's highly valued'. We want to go further. We knew that the SBA was not in touch with the businesses, and we witnessed that during the first two PPP weeks. We will continue to adapt to their needs and make sure that we are more inclusive in the future.

A move that has been harshly criticized by lawmakers. Lawmakers also criticized SBA’s decision to not collect delinquent loans under $100,000. They worry that this decision also applies to Covid EIDL loan.

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