Small Business Administration FY 2018 Budget Observations

Last month, the Office of Management and Budget (OMB) submitted an updated and complete FY 2018 budget request with detailed spending plans for each Executive Branch department and agency, including the Small Business Administration (SSA).

Total Discretionary Funding

The SBA’s total budget request for FY 2018 is $826.5M. Of this amount, $156M is for business loan administration and subsidy and $192M is for entrepreneurial development programs. The $826.5M is about $5M (-0.6%) less than the SBA’s estimated FY 2017 discretionary budget.

Total IT and New Development Budgets

For FY 2018, the SBA is seeking $97.6M for IT spending, down $283K (-0.3%) from the enacted FY 2017 level and down $263K from the final FY 2016 level. So SBA’s IT budget remains effectively flat. I looked back at last year’s FY 2017 budget request and the SBA had requested nearly $101M for FY 2017 and reported an enacted FY 2016 IT budget of $95M, so they spent nearly $3M more than estimated in FY 2016 and are now estimating they’ll spend $3M less than originally requested for FY 2017. A 3% variance in FY 2016 estimated-versus-final IT budget is not huge, in my opinion, but it does signal that SBA tends to spend less than they requested but more than they estimate at this point in the fiscal year. Something other agencies struggle with as well, so if the pattern hold we may see the SBA spend closer to $100M or above in FY 2017.

Looking at how the SBA allocates their IT dollars across steady state or Operations and Maintenance (O&M) efforts compared to Development/Modernization/Enhancement (DME) funding shows a greater fluctuation. After a significant bump in FY 2017 the SBA is looking to trim its DME funding back to around FY 2016 levels. (See table below.)

Noteworthy IT Programs

Looking at the specifics of the SBA’s IT investments and initiatives provides insight into the agency’s immediate priorities and future direction. Here are some initiatives that stand out among others due to relative size, budget growth, and/or proportion of new development spending.

IT funding highlights include:

• IT Infrastructure – The IT Infrastructure investment provides the IT framework to support SBA's mission of helping Americans grow businesses. At $21.5M for FY 2018, this item receives $653K (+3%) more than in FY 2017 and 25% of this line item’s budget is for DME. This budget line accounts for more than 22% of the SBA’s overall IT budget for FY 2018.
• Capital Access Financial Systems (CAFS) – CAFS supports originating and servicing the SBA's $188B loan portfolio of Disaster, 7a, and 504 loans as well as SBIC and surety bond guaranty. For FY 2018 the initiative receives $19.8M – a $556K (+3%) increase over FY 2017. It also consists of 24% DME funding and accounts for 20% of the SBA’s overall IT budget.
• Disaster Credit Management Modernization (DCMM) – This investment automates processing and approval for disaster loan assistance by making electronic files available regardless of disaster location. It also provides multiple interaction methods for users, decreasing the cycle time between loan submission, approval, and disbursement. After a 10% budget increase from FY 2016 to FY 2017, the investment line sees a slight $22K reduction for FY 2018, coming in at $17M compared to $17.1M for FY 2017. DME funding makes up 17% of this amount.
• Financial Systems – The investment is a consolidated portfolio of the OCFO’s Financial Systems that support the agency's collections, disbursements, administrative accounting, funds control, consolidated general ledger and financial reporting. Slated for $7.3M (+2%) in FY 2018, this investment is 100% O&M work.
• IT Security and Compliance – The SBA’s IT Security Program consists of security solutions, operations, situational awareness and incident response, and training and FISMA requirements. Coming in at $6.9M for FY 2018 it receives a 20% increase from the FY 2017 level of $5.7M and is 100% O&M funding.

The above IT initiatives are the five largest budget lines in the SBA’s FY 2018 IT budget and together account for nearly 75% of the agency’s total IT budget.