The past several days have seen significant action on the International Affairs Budget, giving a much clearer picture of how development and diplomacy programs are faring in FY18. The Senate Appropriations Committee released its spending allocations, the House Budget Committee marked up the long-awaited FY18 Budget Resolution, and the House Appropriations Committee approved its State-Foreign Operations bill. There is still a long way to go before final spending bills are sent to the President’s desk, but this week saw significant progress when it comes to protecting America’s development and diplomacy programs.

The analysis below dives into each of these developments and also notes recent activity around efforts to reform and reorganize the State Department and USAID.

1. Senate Funding Guidance Released—International Affairs Budget Protected

This week, the Senate Appropriations Committee announced $51.2 billion in topline spending for its FY18 State-Foreign Operations (SFOPS) bill. The $51.2 billion is split between $30.4 billion in base and $20.8 billion in Overseas Contingency Operations (OCO) funding. When compared to FY17, this represents a:

• 1.7% ($859 million) cut, excluding the ISIS supplemental passed in December and famine relief in the FY17 Omnibus, or
• 10.8% ($6.15 billion) cut if you include the ISIS supplemental and famine funding.

It is important to note that, as has been done in the past, Appropriators cut base funding, but largely made up that funding deficit through increases in the OCO account. This shift has led to a number of long-term programs being funded through an account that was meant to be temporary in nature and USGLC continues to call on Congress and the Administration to address this issue.

The topline funding level proposed by the Senate is exponentially better than the Administration’s proposal and significantly more than the House proposal for the International Affairs Budget. USGLC President and CEO Liz Schrayer released a statement praising the Senate’s strong SFOPS allocation and urging Congress to follow the Senate’s leadership when negotiating final funding levels for the International Affairs Budget. Note: the chart below shows funding levels for the entire International Affairs Budget.

International Affairs Budget Snapshot

*Includes $4.3 billion provided in the FY17 Security Assistance Appropriations Act
**Based on CBO’s re-estimate of the Administration’s request

This week the Senate Appropriations Committee also approved its FY18 Agriculture Appropriations bill. The bill provides $1.6 billion for the Food for Peace (PL 480/international food assistance) program, $200 million more than the House and equal to the FY17 enacted level. The bill funds the McGovern-Dole International Food for Education and Child Nutrition program at $206.6 million, $4.6 million (2%) more than the House and the FY17 enacted level, and includes $15 million to purchase some food aid locally or regionally. As a reminder, the Administration zeroed out the Food for Peace and McGovern-Dole programs in its budget request.

FY18 Agriculture Appropriations International Programs Snapshot

*$5 million of McGovern-Dole funding included for local and regional procurement
**$15 million of McGovern-Dole funding included for local and regional procurement

2. House State-Foreign Operations Bill Moves Forward

This week, the House Appropriations Committee approved its FY18 State-Foreign Operations (SFOPS) bill, setting it up for a potential—but unlikely—vote on the House floor in September. See the above chart comparing the topline allocations for the International Affairs Budget.

During the markup of the bill in full Committee, members offered 16 amendments on a variety of issues, including restoring funding for UN agencies, peacekeeping, the Peace Corps, disaster assistance, and family planning programs. Other amendments centered on global environmental concerns, policy relating to Cuba, and the Mexico City Policy or Global Gag Rule. A few amendments of note:

• An amendment offered by Rep. Charlie Dent (R-PA) to change the quorum rules for the Export-Import Bank. Passed by voice vote.
• An amendment offered by Rep. Ken Calvert (R-CA) expressing disapproval of UNESCO’s designation of Hebron as a Palestinian heritage site. Passed by voice vote.
• An amendment offered by Rep. David Price (D-NC) to ensure the Bureaus of Population, Refugees, and Migration (PRM) and Consular Affairs (CA) remain part of the State Department. Withdrawn.

Selected Program Highlights

Below are some additional details on program funding gleaned from the House SFOPS report.

Global Health

As we reported last week, the House bill protects Global Health programs compared to the Administration’s proposal, but still cuts overall funding by approximately 5%. A few accounts to note:

• The Maternal and Child Health account includes $290 million for Gavi, the Vaccine Alliance, a 5% ($15 million) increase compared to FY17 levels – an amount the Administration believes puts it on track to meet a four-year, $1 billion pledge.
• Funding for Polio eradication is held flat from FY17 levels at $51.5 million. The bill also holds flat funding for Malaria programs by redirecting $250 million of remaining FY15 Ebola balances.
• The Global Health Security account is cut by 93% ($133 million), which is partially offset by using $73 million in Ebola balances.
• The bill provides $142 million in global health funding without a specified purpose, although some of this funding will likely be designated for Neglected Tropical Diseases (NTDs).

Global Health Funding*

*State Department and USAID Global Health accounts only, except for family planning.

Development and Economic Assistance

The House bill cuts economic and development assistance across the board, although less than the Administration had requested. The Committee also rejects the Administration’s proposal to consolidate several accounts into a new Economic Support and Development Fund, noting that any decision to consolidate accounts should be made after the State Department and USAID complete their reorganization plan and authorizing committees have a chance to weigh in. The report similarly rejects the Administration’s proposal “to eliminate or significantly reduce development programs in the least developed countries” and states the Committee’s intent that these programs continue.

Development and Economic Assistance Funding

Humanitarian Assistance

The House bill proposes steep cuts to humanitarian assistance compared to total FY17 spending, although less than those proposed by the Administration. Notably, the Committee leaves open the possibility that additional funding could be added for famine relief as the appropriations process moves forward.

Humanitarian Assistance Funding

Peacekeeping

The House bill cuts funding for UN and non-UN peacekeeping operations compared to FY17 levels. Consistent with the Administration’s request, the House bill limits assessed contributions for UN Peacekeeping to the 25% statutory cap. It also supports the Administration’s efforts to reduce the U.S. assessment rate and curb the number and duration of peacekeeping missions.

Peacekeeping Funding

International Security Assistance

The House bill cuts security assistance from current levels. In particular, it provides $6.1 billion for Foreign Military Financing (FMF), a 4% ($226 million) cut from FY17 levels but $965 million more than the Administration requested. It also rejects the Administration’s proposal to change FMF assistance from grants to loans, noting the Committee could consider such authority on a country-by-country basis in the future.

Reform and Reorganization

The House bill builds on the requirement in the FY17 Omnibus that requires the Secretary of State to submit a report to the Appropriations Committees before taking action to reorganize the State Department or USAID per the Administration’s March 2017 executive order. Unlike the Omnibus, the House bill requires the report to be submitted to “appropriate congressional committees”, which includes authorizing as well as appropriations committees. The bill also directs the report to include detailed justifications and cost-savings projections for any reorganization plans.

Next Steps

House Republican leadership has announced it is packaging four spending bills as a “national security minibus” for a vote before the August recess. The minibus will include the FY18 Defense, Energy and Water, Legislative Branch, and Military Construction-VA bills. With this announcement and the upcoming August recess, the State-Foreign Operations (SFOPS) bill will not see further action until at least September.

And while the Senate released its guidance on topline spending levels for the 12 appropriations bills as reported above, we are not likely to see the full State-Foreign Operations bill until the fall.

3. House Budget Resolution Introduced—Steep Cut to the International Affairs Budget

After months of delay, House Budget Committee Chairwoman Diane Black (R-TN) released the FY18 Budget Resolution this week, which was approved by the Committee on a largely party-line vote of 22-14. The resolution sets out $511 billion for non-defense discretionary spending, which is about $5 billion below the Budget Control Act (BCA) cap for FY18. It provides $48.3 billion for the International Affairs Budget, including $36.3 billion in base and $12 billion in OCO funding.

This $48.3 billion topline for the International Affairs Budget represents an 18% ($10.8 billion) cut compared to total FY17 enacted funding and is roughly $600 million less than the House Appropriations Committee’s allocation. Traditionally the budget resolution provides important guidelines for topline spending, but given that the House Appropriations Committee has already approved its own allocations, the resolution holds less weight in this regard.
The Republican Study Committee (RSC) also released its budget this week. In the past, the RSC’s budget has been considered as an amendment when the budget resolution moves to the House floor. The RSC’s budget mirrors the Administration’s budget request and calls for a reduction in foreign assistance. Notably, the budget would:

• Eliminate the International Organizations and Programs (IO&P) and Emergency Refugee and Migration Assistance (ERMA) accounts,
• Withhold funding for the Organization for Economic Cooperation and Development (OECD), and
• Shutter the East-West Center, U.S. Institute of Peace, U.S. Trade and Development Agency (USTDA), Inter-American Foundation, Asia Foundation, and the African Development Foundation.

4. Reform Update – Deputy Secretary Sullivan Testifies, Former Diplomats Speak Out

In reform and reorganization news, on Monday Deputy Secretary of State John Sullivan testified before the Senate Foreign Relations Committee on the FY18 State Department Authorization bill and the Department’s reorganization plans. Senators on both sides of the aisle pressed Sullivan for details on the reforms under consideration, specifics on the process, and the role of Congress. Throughout the hearing, Sullivan reiterated that there are “no predetermined outcomes” when it comes to the review process. In response to concerns expressed by multiple Senators about the potential merger of USAID into State and the shift of both the Consular Affairs (CA) and Population, Refugees, and Migration (PRM) Bureaus into the Department of Homeland Security, Sullivan stated that this is not an intention of the Department. The Foreign Relations Committee is expected to mark up its FY18 State Department Authorization next week, but is unlikely to consider any significant reform proposals until the Administration’s review is complete.

On Sunday, 58 former diplomats and national security advisors from Republican and Democratic administrations sent a letter to Secretary Tillerson urging him to sustain and strengthen PRM’s role and mission at the State Department. The letter argues that, “the elimination of PRM’s assistance functions would have profound and negative implications for the Secretary of State’s capacity to influence policy issues of key concern to the United States.”

Next week, another reform proposal will be put forward. On Monday, Senators Todd Young (R-IN) and Jeanne Shaheen (D-NH), co-chairs of the CSIS Congressional Task Force on Reform and Reorganization of U.S. Development Assistance, will participate in an event to release the Task Force’s report identifying actionable recommendations to improve the efficiency, effectiveness, and accountability of U.S. foreign assistance programs.