450 Community & Regional Development:Eliminate the Small Business Administration Disaster Loans Program

Savings in Millions of Dollars
  • 2016
  • 2017
  • 2018
  • 2019
  • 2020
  • 2021
  • 2022
  • 2023
  • 2024
  • 2025
  • 2016-2020
  • 2016-2025


Savings are expressed as budget authority as reported on page 369 of “Analytical Perspectives, Budget of the United States Government, Fiscal Year 2015, Table 29-1. Federal Programs by Agency and Account.” Budget authority is not provided for 2025, but is assumed to increase at the same rate as the geometric mean of the previous nine years.


Technical Notes on Scoring

CBO Baseline

Unless otherwise noted, calculations for savings for each recommendation relies on the most recent Congressional Budget Office baseline, as found in “An Update to the Budget and Economic Outlook: 2014 to 2024,” published August 27, 2014, has been used.

Savings “Totals”

While totals for the five and 10 year savings are provided by section and for the complete set of recommendations, there are two reasons they should not be viewed as representing total savings for The Budget Book.

First, as noted in the introduction, The Heritage Foundation would recommend that the savings realized in the Function 050 Defense section would stay within the Department of Defense to strengthen the nation’s defense capabilities.

Second, the numbers cannot be deemed to represent the realized savings if every single recommendation were adopted because policy changes made in one program can impact spending levels in other programs.  Thus, the numbers in the table do not reflect any potential interactions between the various policy changes affecting spending or savings.


Heritage Recommendation:

Eliminate the Small Business Administration’s (SBA’s) Disaster Loans Program (DLP). This proposal saves over $33 million in 2016, and $354 million over 10 years. Actual savings could be significantly higher as spending amounts vary significantly based on the number of declared disasters. For example, budget authority for the Disaster Loans Program totaled $887 million in 2013, while estimated at $230 million and $187 million, respectively, for 2014 and 2015.


Taxpayers shouldn't be on the hook for insuring business against disaster.

After federally declared disasters, SBA disaster loans offer taxpayer-funded direct loans to assist businesses, nonprofit organizations, homeowners, and renters in repairing damaged and replacing destroyed property. Unfortunately, the generous federal disaster relief offered by the DLP creates a “moral hazard” by discouraging individuals and businesses from purchasing insurance for natural catastrophes. Currently, SBA disaster loans are awarded regardless of whether the beneficiaries previously took steps to reduce their exposure to losses from natural disasters.

While SBA disaster loans are intended to help applicants return their property to the same condition as before the disaster, the unintended consequence of this requirement is that borrowers are forced to rebuild in disaster-prone locations. For example, instead of moving from a town sitting in a major flood zone, applicants are required to rebuild in the exact same location. Thus, applicants are still located in a high-risk area. In many cases, the loans fail to offer a long-term solution.

Taxpayers shouldn't be on the hook for insuring business against disaster.

Contributing Expert

David B. Muhlhausen, Ph.D. is a leading expert on criminal justice programs in The Heritage Foundation's Center for Data Analysis. A Research Fellow in Empirical Policy Analysis at the think tank, Muhlhausen has testified frequently before Congress on the efficiency and effectiveness of law enforcement grants administered by the U.S. Justice Department.

See publications by David B. Muhlhausen, Ph.D.

David B. Muhlhausen, Ph.D.Research Fellow in Empirical Policy Analysis

Additional Reading