Biden officials, Republicans point fingers over exhausted disaster loans program

A blame game between the Biden administration and GOP lawmakers is underway after a key disaster loan program saw its funds run out in the middle of a destructive hurricane season.

The Biden administration said the Small Business Administration (SBA) needs $2 billion in funding after its disaster loan account — which businesses and homeowners rely on for low-interest loans to recover from disasters — was exhausted in the aftermath of hurricanes Helene and Milton.

But Republicans are ramping up scrutiny on the agency’s handling of the disaster dollars and pressing for more information around the circumstances surrounding the funding lapse.

“The agency’s refusal to be transparent made it as clear as mud when SBA was going to run out of money and how it spent the billions in existing disaster funding,” Sen. Joni Ernst (Iowa), top Republican on the Senate Small Business Committee, said in a statement to The Hill on Monday.

“Innocent disaster victims should not be left out in the cold because of a bureaucratic bungle.”

The SBA has pushed back strongly on GOP criticism, saying it's been “highly vocal and transparent” about its loan program funding levels, while noting Congress’s “inaction.”

In a letter obtained by The Hill, the SBA told Ernst last week that the agency has been raising the need for additional funding with spending negotiators since last year.

The agency pointed to previous work with the Office of Management and Budget to ask for supplemental funding, and said it “began regularly briefing the Appropriations Committees in August 2024 about dwindling balances in SBA’s disaster subsidy loan account.”

“As required by statute since 2008, SBA has provided detailed, monthly performance reports to Congress with the overall available subsidy balances, along with data on loan applications, disbursements, activity, disaster declarations, and related activity,” the office said.

“Multiple members of your Committee staff have received these reports. SBA is also publishing these monthly disaster lending reports online,” it continued. “Despite Congress’ inaction, SBA disaster assistance staff are funded and continue to support survivors and process applications.”

It also pointed to the lack of emergency spending in the stopgap government funding bill Congress passed in September to stave off a shutdown before leaving town for recess in October as the 2024 campaign season kicked into overdrive.

The letter comes weeks after Ernst and other Republicans on the Small Business Committee sent their own to SBA Administrator Isabel Casillas Guzman, pressing for reporting regarding the disaster loan program’s spend rate, staffing levels for disasters, documentation and communication related to funding requests and other information.

At the time, the group of GOP lawmakers — which also included Sens. Tim Scott (S.C.), Todd Young (Ind.) and James Risch (Idaho) — also raised concern over what they described as a “failure” by the office “to provide its authorizing committees statutorily required information.”

“We must consider whether SBA’s internal decisions were the catalyst for this unfortunate situation,” they wrote then, while also accusing the agency of failing to comply, or “partially” complying, with reporting requirements to ensure Congress is provided with “sufficient notification and information before any shortfall occurs in its disaster account.”

Scott and Ernst have also since introduced bipartisan legislation along with Sen. Thom Tillis (R-N.C.) that includes emergency funding for the SBA and measures requiring a review of the causes leading up to the shortfall and the identification of administrative actions that can be taken to prevent “any future funding shortfall.”

The push marks only one of the latest instances this year that an agency has faced heat from lawmakers over a request for emergency funds.

The Department of Veterans Affairs (VA) warned earlier this year that benefits payments for veterans were at risk of being disrupted in October absent congressional action due to a roughly $3 billion budget shortfall.

Lawmakers averted the threat of a benefits cliff after passing bipartisan legislation to plug the shortfall — but not without measures requiring the VA secretary to submit reporting to lawmakers detailing ways to improve forecasting and budget assumptions.

Members from both sides of the aisle representing states hard hit by the storms are dialing up the pressure for disaster aid. But some GOP negotiators have signaled potential hurdles over requests for funds for programs like the Education Department and the Environmental Protection Agency tucked in the Biden administration’s broader $100 billion ask for disaster funds.

“It needs to be a very robust package. We understand that. We agree with that,” House Appropriations Committee Chair Tom Cole (R-Okla.) told reporters last week.

“Where we have some disagreement at this point is some of the programmatic … adds the administration wants and there’s some things we think they left out that they ought to consider,” he said.

Meanwhile, Tillis said at a hearing held by the Senate Appropriations Committee last week that he “fully” backs the administration’s request for $100 billion. But he also added “that’s only the beginning.”

“We’ve got to react differently to storms. This may be the first, but it won’t be the last like we’ve seen in North Carolina, and we owe it to the American people to be ready to do better,” Tillis said.

President Biden said SBA’s disaster loan program tapped out of funds in mid-October. The agency said that without additional funding from Congress it is unable to make new loans, but officials say it has continued to process loan applications.

Pressed for comment on Monday following the recent GOP criticism, SBA cited Guzman’s testimony before Senate appropriators last week about what the agency described as “a growing backlog of more than $1 billion in loan offers to survivors of Hurricanes Helene, Milton, and other disasters that the Agency is ready to disburse as soon as Congress provides additional funding.”

“The SBA knows disaster survivors urgently need these funds and stands ready to deliver them as soon as Congress acts.”

Guzman told Senate appropriators that the SBA in fiscal 2024 approved “over 27,000 disaster loans totaling $1.7 billion and 160 disaster declarations” across the nation and territories.

“SBA is currently supporting more than 400 total disaster declarations across the nation and managing a portfolio of 2.5 million loans valued at $285 billion,” she said at the hearing, also noting “there are more than 12,500 disaster victims who are already in the queue.”