The federal government's biggest program to help people rebuild after natural disasters is on the verge of running out of money because of budgeting problems at the agency that runs it, the Small Business Administration.
If Congress does not intervene in the next month or so to cover the administrative costs of the program, it will have to shut down and will not be able to offer new low-interest loans to homeowners or businesses after disasters, according to an internal agency memo given to the New York Times by a critic of the SBA.
Agency officials say, and congressional leaders agree, that Congress will almost certainly act to keep the program running.
But even a temporary shutdown could delay aid to victims of the ice storms in the Midwest and other recent natural disasters, and would further hamper a program that was widely criticized for its slow response to the hurricanes that hit the Gulf Coast in 2005.
The money shortage is related to what agency officials concede was an unusual decision in early 2005 not to ask Congress for any money to pay for running the disaster program in fiscal 2006, relying instead on money left over from previous disasters. The program also ran into financial trouble last year and required an emergency infusion of money in February.
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Longtime critics of the agency said the current problem highlights a continuing pattern of mismanagement and poor planning at the SBA.
"We need to look at a comprehensive overhaul of the agency as well as the disaster loan program," said Nydia Velazquez, the New York Democrat who is the new chairwoman of the House Small Business Committee. "Something has to change in the management of this agency."
After the 2005 hurricanes, the agency did not have enough employees to handle the 423,000 loan applications it ultimately received from homeowners and businesses, and had switched to a troubled computer system that slowed its disaster response. The Government Accountability Office cited the agency's poor planning as a factor in causing "significant delays and backlogs in processing loan applications."
The SBA has approved more than $8 billion in loans to homeowners trying to rebuild after the hurricanes, according to its own data, but has distributed less than half of that amount. Businesses have received loans of about $1.2 billion, although the agency has approved almost $2.6 billion in loans.
The agency also is facing about a $20 million shortfall in its regular budget, which has dropped by about 30 percent since 2001. According to the memo, the shortfall could require the agency to take drastic steps, including furloughing every one of its employees one day a month until the end of September.
