The Administration is readying a proposal to rescind or cancel up to several billion dollars in congressionally approved funding for America’s development and diplomacy programs. Such an effort – targeting no more than 0.07% of the federal budget – is widely seen as a political move to draw down overseas resources leading up to the midterm election. The Administration’s proposal could be sent to Capitol Hill as soon as next week – just one month before the end of the fiscal year – though we understand legal, legislative, and political concerns may mean the Administration presses pause on the effort.

This latest effort by the Administration – the fourth time in two years – to slash the International Affairs Budget is not only another example of the Administration disproportionately targeting these programs for cuts, it is also an unprecedented attempt to circumvent Congress’s constitutionally mandated power of the purse. If released, the proposal could have far-reaching legal implications for discretionary spending and the separation of powers.

Below we outline some of the rumors surrounding the proposal, certain legal implications of such a proposal, the precedent-setting nature of this move by the Office of Management and Budget (OMB), and the reaction on Capitol Hill. Please note that that the descriptions of legal precedent below have been simplified and should not be considered a legal opinion.

The Proposal

While the package is not final, OMB is drafting a rescissions proposal that would target funding from the previous two fiscal years (2017-2018). The programs affected directly advance America’s security and economic interests, and reportedly could include the following:

• Development assistance programs supporting children like those operated by UNICEF;
• Security programs, potentially including military assistance to partners and programs helping fight the opioid crisis; and
• Peacekeeping and other UN programs, which could directly impact America’s reform agenda at the UN.

According to the Budget and Impoundment Control Act of 1974 (“Impoundment Act”), the Administration can only propose to rescind unobligated funding, i.e. money that has not yet been formally spent or obligated to projects. As such, as the State Department and USAID are continuing to obligate funding before the rescissions package is sent to Capitol Hill, the programs being targeted and funding levels proposed for rescission could and very likely will change.

Timing Concerns

As discussed before, the Impoundment Act permits the Administration to send packages of funding cancelations, or rescissions, to Congress for consideration. Lawmakers then have 45 days to approve, deny, or ignore the rescissions package, during which time the funding in question is frozen.

As we understand it, OMB is specifically targeting funding that would otherwise expire at the end of the current fiscal year (September 30^th). In so doing, and given the very short period of time before the end of the fiscal year, the funding proposed for rescission could very well expire without Congress having time to appropriately consider the proposal.

Setting Precedent

If the Administration initiates the rescissions process by submitting its proposal next week, Congress – and the Government Accountability Office (GAO) – will face uncharted territory as there is no case law governing a rescissions package proposed so close to the end of the fiscal year.

Per the Impoundment Act, GAO is the arbiter of rescissions. When the Administration submits its proposal, GAO also reviews the package to determine the legality of the individual funding cancelations. Once it has made those determinations, Congress may consider the proposed rescissions deemed valid.

There are several legislative and legal hurdles associated with a proposed rescission package this close to the end of the fiscal year. Two examples include:

• Prudent Obligation: Under deferral case law, GAO has found that deferrals of funding are illegal if funding is deferred for so long that an agency does not have time to “prudently obligate” funding. Because there is no precedent for this rescissions package with regards to timing, GAO would likely refer to deferral case law – thereby bringing prudent obligation into play.

• 45-Day Freeze: Current precedent under the Impoundment Act allows the Administration to hold or freeze any funding proposed for rescission for 45 days while Congress considers the proposal. However, it is unclear and without significant precedent as to whether the Administration can hold the funding for the 45-day period after Congress acts. If this were the case, even with Congressional action, the Administration could hold funding long enough for it to expire at the end of the fiscal year.

Reaction on Capitol Hill

Members of Congress across the aisle and on both sides of the Capitol are speaking out in opposition to this proposed package, expressing concerns not only over the disproportionate targeting of development and diplomacy funding but also with executive overreach regarding the separation of powers and Congress’s “power of the purse.”

Senate Foreign Relations Committee Chairman Bob Corker (R-TN) has called OMB’s rescissions plan a “breach of trust” with Congress and said “we certainly look forward to seeing how to counter that.” Ranking Member Bob Menendez (D-NJ) has questioned the legality of OMB’s actions, saying “that will have consequences.” Senate State-Foreign Operations Appropriations Subcommittee Chairman Lindsey Graham (R-SC) has criticized the rescissions proposal, saying, “I think it’s a bad idea. I think it will blow up the body, and I hope it dies.”

Other leaders, including Senate Appropriations Committee Chairman Richard Shelby (R-AL), are also publicly expressing concerns and Senate Majority Leader Mitch McConnell (R-KY) and House Foreign Affairs Committee Chairman Ed Royce (R-CA) are involved in discussions with the Administration on this effort.

Next Steps

While we understand the rescissions package could be sent to Congress next week, there remains a chance the Administration will choose to abort their plans and not send the package to Capitol Hill. In the event the proposal is released and sent to the Hill, Congressional leaders are working behind the scenes on several options to respond to the issues raised by this potential rescissions package, including a legislative solution that would possibly extend the targeted funding past September 30^th. However, this is not an easy fix.

USGLC remains heavily involved and engaged both with lawmakers on Capitol Hill and with Administration officials. We will provide further details as they are available.