Operating results.-Funds made available to carriers but not used to pay claims in the current period are carried forward as special reserves for use in subsequent periods.

OPM maintains a contingency reserve, funded by employee and Government contributions, that may be used to defray future cost increases or provide increased benefits. OPM makes payments to carriers from this reserve whenever carrier-held reserves fall below levels prescribed by OPM regulations or when carriers can demonstrate good cause such as unexpected claims experience or variations from expected community rates.

Statement of Operations (in millions of dollars)

Identification code 24-9981-0-8-551

1998 est.

17,543 -17,499

44

[GENERAL PROVISIONS]

[SEC. 421. The first sentence of section 1304(e)(1) of title 5, United States Code, is amended by inserting after "basis" the following ", including personnel management services performed at the request of individual agencies (which would otherwise be the responsibility of such agencies), or at the request of nonappropriated fund instrumentalities".]

[SEC. 422. Paragraph (1) of section 8906(e) of title 5, United States Code, is amended

(1) by striking the last sentence of that paragraph and redesignating the remainder of that paragraph as (1)(A);

(2) by adding at the end of paragraph (1)(A) (as so designated) the following:

"(B) During each pay period in which an enrollment continues under subparagraph (A)—

"(i) employee and Government contributions required by this section shall be paid on a current basis; and

"(ii) if necessary, the head of the employing agency shall approve advance payment, recoverable in the same manner as under section 5524a(c), of a portion of basic pay sufficient to pay current employee contributions.

"(C) Each agency shall establish procedures for accepting direct payments of employee contributions for the purposes of this paragraph.".] (Independent Agencies Appropriations Act, 1997.)

0101 Revenue

0102 Expense

0109 Net income or loss (-)

The budget provides $701 million in new budget authority for the Small Business Administration (SBA). When combined with anticipated carryover and decreased loan subsidy costs, this funding level allows SBA to continue to expand assistance to small businesses at a reduced cost to the Federal taxpayer.

In 1998, SBA proposes to continue to increase its reliance on its private sector partners. Three initiatives will allow SBA to complete its transition from physically servicing and liquidating its $36 billion loan portfolio to overseeing its private sector partners. First, 7(a) General Business lenders will be required to service and liquidate all loans approved after FY 1997. Second, SBA will sell its $10 billion portfolio of defaulted guarantees and direct loans beginning in FY 1998. Third, SBA requests $18 million to improve its portfolio monitoring capabilities. These proposals will allow SBA to focus its limited resources on expanding assistance to small businesses while relying on its private sector partners for "backend" activities. The budget estimates that these proposals will lead to lower credit, administrative, and subsidy costs. The budget proposes growth in programs to expand access to capital, assist disadvantaged small businesses, and provide education and training. As part of SBA's goal of stretching taxpayers' dollars, the budget also assumes that (1) Small Business Development Companies will charge counseling fees to substitute for a reduction in federal grants and proposes that (2) disaster loan borrowers pay an interest rate equal to the rate on Treasury securities of comparable maturity. Federal Funds

General and special funds:

SALARIES AND EXPENSES

For necessary expenses, not otherwise provided for, of the Small Business Administration as authorized by Public Law 103-403, including hire of passenger motor vehicles as authorized by 31 U.S.C. 1343 and 1344, and not to exceed $3,500 for official reception and representation expenses, [$223,547,000, of which $1,000,000 shall only be available for obligation and expenditure for projects jointly developed, implemented and administered with the Minority Business Development Agency of the Department of Commerce] $246,100,000: Provided, That the Administrator is authorized to charge fees to cover the cost of publications developed by the Small Business Administration, and certain loan servicing activities: Provided further, That notwithstanding 31 U.S.C. 3302, revenues received from all such activities shall be credited to this account, to be available for carrying out these purposes without further appropriations: Provided further, That [$75,500,000] $57,500,000 shall be available to fund grants for performance in fiscal year [1997] 1998 or fiscal year [1998] 1999 as authorized by section 21 of the Small Business Act, as amended. [In addition, for expenses not otherwise provided for, of the Small Business Administration, $11,500,000, of which: $3,000,000 shall be available for a grant to continue the WVHTC Foundation outreach program to assist small business development; $7,000,000 shall be available for a grant to the Center for Rural Development in Somerset, Kentucky, for small business and rural technology development assistance; $1,000,000 shall be available for a grant to Indiana State University for the renovation and equipping of a training facility, to assist in creating small business and economic development opportunities; and $500,000 shall be available for a continuation grant to the Center for Entrepreneurial Opportunity in Greensburg, Pennsylvania, to provide for small business consulting and assistance.] (Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1997.)

This appropriation funds salaries, other administrative expenses of the Small Business Administration (SBA), and business education and training programs. The SBA provides assistance to small businesses and to victims of natural disasters through these primary program areas:

Economic Development. The Associate Deputy Administrator (ADA) for this function exercises direction over the following SBA program offices: Financial Assistance; Surety Bond Guarantees; Investment; International Trade; Women's Business Ownership; Small Business Development Centers; Veterans' Affairs; Native-American Affairs; and Business Initiatives, which includes the Service Corps of Retired Executives.

These offices are responsible for the administration of all SBA credit and business education training programs. In 1998, SBA plans to continue providing business management training and tools for the small business community through U.S. Export Assistance Centers, and Business Information Centers. In addition, through new programs such as LowDoc, FASTRAK, and the Export Working Capital Programs (EWCP), SBA has begun targeting financial assistance to segments of the population that have historically been under represented in SBA's credit programs. The SBA's efforts to reduce unnecessary paperwork and make the agency more customer-friendly have attracted new banks interested in establishing partnerships with SBA.

Government Contracting and Minority Enterprise Development.-The Associate Deputy Administrator for this function exercises direction over the following SBA program offices: Government Contracting; Minority Enterprise Development; Technology; and Size Standards. These offices are responsible for effectively advocating for small businesses in the area of government contracting. Government contracting activities are aimed at ensuring that small businesses receive a fair share of Federal procurement awards. The Minority Enterprise Development programs provide assistance to socially and economically disadvantaged small business concerns, primarily in the areas of business development and Federal procurement. Through this office, SBA assists firms that are owned by disadvantaged persons to help them develop into viable competitive businesses in a reasonable period of time. Disaster Assistance.-The Associate Administrator for the Office of Disaster Assistance oversees the Disaster Loan Program which provides physical disaster loans to individuals and businesses of any size, and economic injury loans to small businesses unable to obtain credit elsewhere. In addition to Presidentially-declared disasters, the program provides loans when a declaration is made by the SBA Administrator. Program eligibility is based on financial criteria and interest rates are set according to statutory formulas. In recent years, the average interest rate on disaster loans has been about four percent. The budget proposes to reduce the cost of disaster loan subsidies by increasing the interest rate on disaster loans to the Treasury's cost of borrowing.

Advocacy. The Chief Counsel for Advocacy is charged by law to be an independent voice for small business within

the government, and to: (1) examine the role of small business. in the economy and its contribution to competition; (2) evaluate financial markets and the credit needs of small business; (3) measure the costs of regulation on small business; and, (4) monitor agency compliance with the Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA).

Program Performance

Small Business Development Centers (SBDCs).-The SBDCs provide long term counseling to small businesses at about 1,000 locations in 50 states. In FY 1996, nearly 600,000 customers were helped of which roughly 40 percent of the customers were women and 17 percent were minorities.

Service Corps of Retired Executives (SCORE).-Using oneon-one counseling and workshops SCORE reaches about 270,000 business owners annually using approximately 13,000 counselors through approximately 400 chapters located across the country. Counseling costs to the Government are less than $3 per hour. For 1998, the budget proposes a funding level of $3.5 million for this program.

Microloan Technical Assistance.-The Microloan Program helps support the Administration's initiative to put those on welfare to work by providing opportunities to start up small businesses using SBA-guaranteed microloans. Microloan Technical Assistance grants ensure that microloan borrowers are provided the necessary education and training needed for them to succeed. The budget provides $16.5 million in Microloan grants.

Outreach Initiatives.-The SBA is actively involved in fostering the development of entrepreneurial skills and economic development opportunities involving veterans, women and businesses engaged in international trade. The budget proposes a 1998 funding level of approximately $1 million to support veterans, women, and international trade outreach initiatives.

Women's Demonstration Program.-Through this program the SBA makes awards to private entities to deliver entrepreneurial training programs for women business owners or those interested in starting a business. In 1996, 54 demonstration sites, or business centers, were operating in 28 states and Washington, DC. Each offers financial, management, marketing and technical assistance to current and potential women business owners. This budget proposes $4 million for this program in 1998 to establish 10 to 12 new sites, and to continue two initiatives begun in 1996: the Women's Business Intranet (which links all of the demonstration sites) and a virtual demonstration site on the Internet, which will allow women nationwide to have access to these services.

Business Information Centers (BIC).-These centers offer self-help hardware, software and reference materials, and onsite counseling provided by SCORE volunteers. Individuals who are in business or are interested in starting a business will find many resources specifically targeted at helping businesses grow or find new market niches. For 1998, the budget proposes $500 thousand for this program.

Native American Affairs.-This program supports the economic development needs of reservation communities. In 1996, over 400 loans were made to Native Americans under the agency's 7(a) program, amounting to more than $66 million in loans. The agency also opened 15 new Tribal Business Information Centers (TBICs) to deliver business education and training on reservations.

Business Assistance Publications.-The SBA provides publications on a self-funding basis and distributes an estimated 300,000 items to the public each year.

One Stop Capital Shops (OSCS).-One Stop Capital Shops are located in Empowerment Zone, Enterprise Community, and Rural Economic Area Partnership communities. The objectives of these programs are to stimulate and sustain eco