Yesterday the House State-Foreign Operations Appropriations Subcommittee released its FY12 State-Foreign Operations Appropriations Bill, which includes deep cuts to the International Affairs Budget.  The Subcommittee will mark up the bill this morning at 10:00 a.m. in H-140 of the Capitol.  The $47.2 billion measure, authored by Committee Chairwoman Kay Granger (R-TX), includes $39.6 billion for non-war related “core” State Department, USAID and other programs, and $7.6 billion for Afghanistan, Pakistan, and Iraq within the Overseas Contingency Operations (OCO) account.

While the bill fully funds the President’s OCO request for the Frontline States, with some new restrictions on this assistance, it contains dramatic reductions to many non-war related programs. Overall, non-OCO accounts are cut $5 billion (-11%) below FY11 levels and an alarming $9.7 billion (-20%) below FY10 levels. Bearing the brunt of these cuts are State and USAID operations and multilateral and development assistance.  Specific cuts, as detailed below, range between 16% and 35% below current funding (FY11) levels.  Additional areas of impact include the Millennium Challenge Corporation, Feed the Future, U.S. Institute of Peace, and others as detailed below.

USGLC released a press statement expressing serious concern about the impact of these deeply disproportionate cuts to America’s development and diplomacy capabilities, highlighting   the calls from America’s top business and military leaders for a strong and effective International Affairs Budget.  Today’s Subcommittee markup is expected to be somewhat pro forma, as members on both sides are expected to hold off on offering amendments until the full Committee markup, currently scheduled for next Wednesday.

On a related matter, following last week’s House Foreign Affairs Committee’s passage of its FY12 State Department-Foreign Relations Authorization Bill, Secretary of State Hillary Clinton sent a letter to Committee members criticizing the bill for its restrictive language on foreign assistance spending and warned she would urge the President to veto it if it reaches his desk.

Highlights of the House’s State-Foreign Operations Bill

Multilateral Assistance Cut; Replenishments Not Funded:  The bill cuts multilateral assistance by $803 million (-35%) from FY11 and by nearly $2.2 billion (-59%) from the President’s FY12 request.

• Fully denied are requests for general capital increases for the World Bank, the Asian, Inter-American, and African Development Banks – institutions that depleted much of their lending capacity sooner than anticipated due to assisting countries during the global financial crisis.  These funds are aimed primarily at middle-income countries and are lent at near market rates.
• Resources for the concessional loan arms of these Banks, lending that goes to low and low-middle income nations, are also trimmed significantly in the bill.  Of special note is the World Bank’s International Development Association (IDA) that receives a $941 million allocation, $24% less than FY11 and 31% below the FY12 request, which is the same amount of the U.S. contribution to IDA in FY08.

State Department and USAID Operational Capacity in Question:  Operation expenses for both the State Department and USAID are substantially reduced.  While the full dimension of the impact is hard to fully assess at present, the possibility of a staff furlough would seem possible for both State and USAID.

• State Department:  The combined core and OCO operating expenses amount in the bill is $227 million higher than FY11.  But with a significant surge for civilian presence in the Frontline states, and specially Iraq, the House mark falls $1.9 billion (-16%) less than requested for both core and OCO.  With the OCO account fully funded for State Department operations, the cut to the overall request appears to fall totally on core State operations outside of Iraq, Afghanistan, and Pakistan.
• USAID: The $985 million appropriation, including $85 million from the OCO operating expenses account, would be the smallest funding level for the Agency since FY08 when the Bush Administration launched an initiative to double the number of USAID Foreign Service Officers.  The bill’s allocation falls 27% below FY11 enacted amounts and 34% below the FY12 request.

Development Assistance Programs, Including Feed the Future, Cut:  The Development Assistance account, through which most bilateral aid to low-income countries flows for agriculture education, water and sanitation, microenterprise, and the environment activities, is reduced to $2.07 billion, 18% less than FY2011 and 29% under the request.

• While the bill fully funds basic education within this account ($288 million) and amounts for water and microenterprise exceed levels requested across all Foreign Operations account, it poses significant challenges for other development activities.
• In particular, one of the Administration’s signature initiatives – Feed the Future – would likely be squeezed.  With a 29% cut to the overall account, Feed the Future under Development Assistance, if proportionally applied, would fall to $673 million (from the request level of $922 million).

Global Health Reduced But Limited Details on Activity Allocations:  Although avoiding the size of cuts made in other areas of the bill, Global Health – another major initiative of the Administration’s – would face cuts of 9% compared with FY11 and 18% compared with the FY12 request.  The bill, however, includes few details of Subcommittee priorities in the health area making it difficult to assess exactly these reductions would be applied.  Policy provisions related to global health include:

• Global Gag Rule:  The bill prohibits assistance to foreign non-governmental organizations that promote or perform abortions, except in cases of rape, incest or to save the life of the mother.
• UN Population Fund (UNFPA):  The bill prohibits funding for the UNFPA and caps family planning/reproductive health activities at FY08 levels.
• The bill further requires the withholding of 20% of U.S. contributions to the Global Fund to Fight AIDS, TB, and Malaria.  These funds would be released only upon a certification from the Secretary of State that the Global Fund has taken a number of steps to strengthen transparency of its operations and maintains the full independence of its Inspector General.

Humanitarian Aid:  At a time when the world is focused on the growing famine and the potential devastating human tragedy in Somalia, Kenya, and Ethiopia, the House Subcommittee bill slashes both State-Foreign Operations accounts that address such disasters.

• The combined funding for USAID disaster and State Department refugee programs — $2.26 billion — falls 12% below current levels.  This would be on top of the nearly one-third cut to emergency food aid appropriation funded in the Agriculture spending measure, already passed by the House.

Security Assistance and Democracy Programs Largely Protected:  In contrast to most other areas of the bill, several security assistance and democracy promotion accounts are funded at or near FY11 levels.

• The combined $7.65 billion total for Foreign Military Financing, International Narcotics and Law Enforcement, Non-Proliferation, Terrorism, Demining and Related programs is about 1.6% below both the FY11 enacted and FY12 request.  Two democracy accounts, including the National Endowment for Democracy, receive a combined $233 million, the same as in FY11.  Under military assistance, the Subcommittee measure fully funds aid to Israel ($3.075 billion), Egypt (1.3 billion), and Jordan ($300 million).

Impact on Other Selected Accounts

• Millennium Challenge Corporation (MCC): $898 million, about the same as FY11, but 20% less than the request; this comes on top of a 27% reduction to MCC funding in FY11 compared to FY10.
• U.S. Institute for Peace: $25 million, 36% below FY11 and 42% less than the request
• Contributions to International Organizations: $1.34 billion, 15% below FY11
• Contributions to International Peacekeeping: $1.69 billion, 10% less than FY11
• Economic Support Fund (ESF): $5.3 billion (combined core and OCO), 11% less than FY11 and 26% below FY12 request; although not specified in the bill, at this level, it is likely that the Administration’s ESF request for Afghanistan and Pakistan that fall in the core portion of the bill would face cuts
• East-West Center: receives no funding

Oversight and Management

The bill takes several steps to increase transparency and accountability of foreign assistance dollars, including assessments, certifications and annual reporting requirements for direct government assistance as well as fully funding agency Inspector Generals.  It also limits how long funds are available and requires tougher reporting requirements on spent funds, and it requires the Administration to justify to Congress any multi-year funding commitments before announcing them publicly.

FY12 International Affairs Budget Snapshot

(as of 07/26/11)

* International Affairs totals also include about $85 million appropriated in the Treasury spending bill for the International Trade Commission and the Foreign Claims Settlement Commission.  These amounts are included in the totals shown here.  There is also $300 million for the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria, included in the Labor-HHS bill.  Since that bill has not been released, the $300 million for the Global Fund has been removed from the totals.

** All figures for FY2011 core funding levels are estimates.  Consultations between Congress and the Administration over the specific allocations for FY2011, including OCO amounts, have not been completed.  As results, no estimates have been made for Foreign Operations and State Operations regarding the core and OCO amounts.