PoliSci: Budget-cutters take aim at MEP

WASHINGTON, Jan. 25 (UPI) -- When the Bush administration announces its proposed fiscal year 2006 budget early next month it appears one of the few programs designed to help small U.S. manufacturing firms stay afloat will be cut.

The Manufacturing Extension Partnership program reaches out to small manufacturing firms, typically those with fewer than 500 employees, working with them to improve their bottom lines. MEP assists with projects such as retooling, implementing lean manufacturing and putting in place costing and quality systems to help the firms compete. The result is a program that contributes significantly to the economy, wrote a bi-partisan congressional coalition in a Dec. 17 letter.

"In (fiscal year) 2002, MEP clients reported sales of $2.7 billion, nearly 42,500 new or retained workers, $699 million in cost savings and $973 million invested in new plant and equipment as a direct result of the MEP projects," the coalition wrote to to Joshua Bolton, director of the White House Office of Management and Budget.

The program has long been the repeated target of some conservatives, who see it as a form of corporate welfare. Now, with Washington under severe pressure to cut the deficit and find more money for the war in Iraq, the pressure is greater than ever to cut federal spending. Congressional staff and experts who follow MEP all said they expect the White House to try to cut the Department of Commerce program again this year.

"The initial budget came back from OMB ... at zero," said Michael Coast, chairman of the board of the American Small Manufacturers Coalition. "The Department of Commerce submitted an appeal as soon as they found out to push the funding back up to the full funding level, which is $109 million. That ball is now in the court ... of (OMB) under the administration of the White House.

President George W. Bush is scheduled to submit his budget to Congress on Feb. 7, at which point the outcome of the appeal will become clear.

"Until we hear that number we don't know," Coast told UPI's PoliSci. "Right now, it stands at zero."

The program has been under the axe before. In FY 2004 it was cut by roughly two-thirds, to $38.7 million, a move that resulted in staff layoffs and office closings.

"When (the budget was cut) regional offices started to close down. For example, in Illinois, they had multiple offices ... some of those offices they closed down and they only supplied services out of one of the centers. Many states approached that model," Coast said. "They lost key staff people (and) they served less manufacturing."

The cut was part of an effort to take the program back to its originally proposed funding plan, said Michael Newman, a spokesman for the National Institute of Standards and Technology in Gaithersburg, Md., the home agency for MEP within the Commerce Department.

MEP was supposed to be fully funded for only the first three years, Newman told PoliSci. The funding was supposed to diminish over the next three years, then the centers were to have become self-sufficient.

"What was hoped was that the states would match the funds -- or the private sector," Newman said.

MEP had been funded steadily at between 95 and $113 million from 1997 forward until it was cut in 2004. In FY 2005 a bi-partisan effort in Congress restored the program to full funding of $107.5 million. Though the money was reinstated, the office closings and staff cutbacks have yet to be addressed.

"They didn't pass the budget until December of last year," explained Coast, so the money is only now filtering back into the system. Coast heads the Michigan Manufacturing Technology Center, MEP's office for the state.

The influx of funds this year should help restore services to some of the firms that could not be assisted last year.

"By securing the ($107.5) million for this fiscal year all the MEP centers will be able to stay open and serve all the clients that they can. So nobody is going to be denied services," said a spokesman for Rep. Joe Knollenberg, R-Mich.

Knollenberg was one of the leaders of the effort to restore the money in FY 2005 and one of 84 signatories to the December letter supporting full funding of $109 million for MEP in FY 2006.

Big business is lining up behind the program, too.

"We will do all we can, working with Congress during the budgetary process ahead to restore as much of that funding as we can manage," said a spokesman for the National Association of Manufacturers in Washington.

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E-mail: ddivis@upi.com