Quietly and without comment from the public, the city of San Antonio removed a rule from the Small Business Economic Development Advocacy program that gave minority and women-owned businesses equal opportunities for municipal contracts. The city discontinued the rule to conform to new federal policies that would stymy the city’s access to millions in federal grants if kept.

The SBEDA program was established in 1992 and was intended to provide equal opportunities for minority and women-owned business enterprises in municipal contracting. M/WBEs accounted for 53% of city-funded contract payments according to a 2023 disparity study. That exceeded the city’s stated goal of the program by 30%. 

The rule was struck down through a directive issued from City Manager Erik Walsh’s office on Sept. 10 without public comment or a vote from the city council. The order directs the Economic Development Department to proceed with contracting support to small businesses without considering race and gender. 

The previous change to the SBEDA program took a year and six months to implement, involving public meetings and a vote.

A little over $150 million of the city’s $4 billion fiscal year 2026 budget comes from federal grants and covers a multitude of initiatives, including airport improvements, health programs and services for homeless people. City officials removed the rule because federal grants now require recipients not to engage in “unlawful discrimination,” which prohibits factors such as diversity, equity and inclusion from being qualifiers in federal grant programs.

This comes as cities across Texas are pausing DEI programs to comply with the new federal policies. The Dallas City Council voted to pause its DEI programs to save $305 million in federal funds and San Antonio has pulled back on promised art grant funding in favor of millions in federal funds.

The SBEDA program will continue to provide contracting support to local and small businesses in a narrower focus and out of alignment with its founding goal.