In a nearly $3 trillion federal budget proposed by President Bush for 2007, $624 million to run the Small Business Administration sounds like small potatoes.

But the tiny agency for small companies is getting a lot of attention right now, and little of it is good.

Small-business owners and Democrats in Congress say the agency is starved for funding and has been squeezed tighter in every budget President Bush has proposed since he took office, even though he touts small businesses as the engine of the American economy.

Outside groups say the skimpy spending is part of a larger goal to fold the SBA as a separate agency and eliminate federal small business contracting requirements.

But the Small Business Administration points to the record number of small business loans it handed out in the last year as proof that smaller budgets don't mean reduced service.

"Is that a budget cut, or is that a savings?" said Mike Stamler, a spokesman for the agency. "When you do something more efficiently, I just don't understand people who say you shouldn't do it more efficiently."

And suggestions that the SBA is on the verge of being shut down are absurd, he said.

"It's ridiculous," Mr. Stamler said.

"There's nothing in this budget that suggests the SBA is being eliminated."

Cathy Dougherty, a small-business owner in Richardson, said she has seen, though, how a smaller budget has resulted in fewer services for the small business community.

"They're definitely stretched to the max," said Ms. Dougherty, president of Dougherty Sprague Environmental Inc. "They definitely don't have the personnel."

Ms. Dougherty's firm, which is helping with the Hurricane Katrina cleanup and identified hazardous chemicals after the Columbia space shuttle crash, was recently certified by the SBA's 8(a) program as a disadvantaged business.

The program is designed to help company owners who can prove they've suffered some form of prejudice or discrimination gain access to federal contracts.

Stretched thin

But Ms. Dougherty, who won her designation due to gender discrimination, said the SBA doesn't seem to have the resources anymore to effectively administer the program.

"Since we've been involved just the last year and a half, the amount of 8(a) firms that one person has to care for has gone from 20 to about 80," she said. "So I see a very direct effect. They're supposed to mentor us and help us and alert us to bids. But for an entire year, I didn't hear from my person."

Steve Denson, an adjunct professor in the Cox School of Business at Southern Methodist University, said the SBA has a strong role to play.

"SBA is a great training tool, a resource, for emerging entrepreneurs, especially minority entrepreneurs and female entrepreneurs," he said. "Some of their greatest success is in leveling the playing field for the entry of minorities and women."

But Mr. Denson, a self-described "rabid Democrat," said that cutting the agency's budget further could result in cutting back those training programs.

He said he's also concerned about reports that large firms are fraudulently or mistakenly applying for – and receiving – federal contracts intended for small firms.

While every federal agency from the Defense Department to the Social Security Administration has small business contracting goals, the SBA oversees the program.

Last September, the SBA's Office of Inspector General released a report stating that the Small Business Administration needed to tighten its oversight of federal contracting.

"Flaws in the federal procurement process allow large firms to receive small business awards and agencies to receive small business credit for contracts performed by large firms," the report said.

Doubting the reasons

Lloyd Chapman, president of the American Small Business League, which devotes most of its resources to tracking claims of fraud and abuse at the SBA, doesn't believe the agency's shrinking budget is due to a desire to be more efficient.

"The Defense Department budget is $400 billion," he said. "The SBA budget is $400 million. That'd be like telling me that, 'Lloyd, I'm going to buy cheaper bubblegum.' "

Mr. Chapman said he thinks President Bush's goal is to eliminate the SBA altogether and simultaneously drop the requirement that a certain portion of all federal contracts go to small businesses.

Even if that doesn't happen, the Small Business Administration clearly is operating with fewer resources.

Different groups tally the 2007 budget in different ways, but the overall trend is undisputed.

In 2001, the agency had a discretionary budget of $900 million.

For 2007, the administration has proposed a budget of $624 million.

But critics argue that if disaster spending, which was not included in the 2006 budget, is removed from the 2007 budget, the total drops to $429 million, compared with $534 million in 2006.

But Mr. Stamler at the SBA said the 2006 number also includes $90 million in congressional earmarks that President Bush had not requested.

So the 2006 budget minus the earmarks is about equal to the 2007 budget minus the disaster spending.

"Given the restraints that we face as a nation in terms of our federal budget, the expense that we have in the war on terror, in conducting actual ground wars elsewhere, in disaster response and all the expenses that go into the federal budget as a whole, I think this is a year that the SBA could expect a roughly straight-line budget, and that's what we got," Mr. Stamler said.

Ms. Dougherty said the SBA probably needs additional funding, though, and she'd like to see the agency succeed, since a small business loan helped her start her company eight years ago.

Dougherty Sprague Environmental now has annual revenue of almost $3 million.