The Wall Street Journal Financing and Investing

President Obama's fiscal 2012 budget proposal for the Small Business Administration asks Congress for $985 million—45% less than the $1.8 billion that the agency received in 2010.

"We have to tighten our belt, too," said SBA Administrator Karen Mills on a conference call. "We looked through to see if there are programs that are duplicative or that we could eliminate."

The SBA is chiefly known for its lending initiatives, which provide bank-issued, government-backed loans to small firms. The agency has also, especially in recent years, focused on counseling programs. Its fiscal-year budget typically supports those endeavors, plus salaries and other operational expenses. Some programs, such as disaster assistance, can float from one year to the next if funds aren't used.

Some of the savings in the 2012 budget proposal will be a welcome relief to small-business owners. For instance, the agency will save some $20 million by streamlining loan applications, re-engineering certification processes and generally making loan-management and accounting systems more efficient.

Other savings will stem from staff reductions. The planned elimination of 150 jobs will amount to $8 million.

But in the belt tightening, a few of what Ms. Mills calls "terrific programs"—those that aim to help small firms—were shaved or eliminated. For instance, the agency will save $10 million by reducing support to Small Business Development Centers, one of the programs designated to counseling. (Funding remained steady, however, for SCORE, another counseling outlet.) And SBA will save $8 million by eradicating a technical-assistance program called PRIME, which, Ms. Mills explained, mimicked other programs that deliver similar benefits.

In a few areas, the agency asked for budget increases. Namely, an additional $132 million loan subsidy was requested, which, Ms. Mills said, is needed for the higher default rates on loans that were issued when collateral values, such as real estate during the housing bubble, were inflated.

Mr. Obama's budget for the agency is slightly less than the $994 million proposed in the fiscal 2011 budget, which didn't pass.

In 2010, the last budget that passed, $824 million was originally authorized for the SBA. However, the agency received an additional $963 million after the Recovery Act and the Small Business Jobs Act passed, bumping the budget up to $1.8 billion. Had those supplemental appropriations not existed, the proposed 2012 SBA budget would actually be 20% more—rather than 45% less—than 2010.

It was widely expected that the SBA's budget would be curbed. Ahead of Monday morning's budget release, the president emphasized cutting "excess spending wherever we find it." Several members of Congress agreed, and have openly stated their desires to shave the SBA's coffers.

In January, for instance, the Senate Committee on Small Business and Entrepreneurship sent a bipartisan letter to Administrator Mills, encouraging her to recommend programs that "could be eliminated or substantially reduced" without undermining the needs of business owners. Also last month, the House Committee on Small Business reflected in its oversight plan a desire to investigate a host of SBA programs.

But the president's proposal is just that—a suggested framework based on what his administration believes is suitable. Once debate heats up in Congress, the SBA's budget could shrink further.

"While I am pleased that the President's budget proposal would finally rid the SBA budget of ill-conceived stimulus spending, more must be done to streamline SBA programs and funding," said Representative Sam Graves, chairman of the House Small Business Committee, in a statement.

By historical measures, a $985 million budget for the SBA is relatively in line with the Clinton Administration's budget. Under the Bush administration, the agency's budget was slashed to half of what Mr. Obama has allocated.

"The facts are that this is a president that has supported small business," says Ms. Mills. But, she added, "Everybody is tightening their belts, moving forward in a way that recognizes the severity of the fiscal situation."

Corrections & Amplifications
The SBA's budget calls for a reduction of 150 jobs. An earlier version of this article incorrectly cited a reduction of 850 jobs.