Congress Finalizes FY18 Spending: Rejects “Doctrine of Retreat,” Restores Funding for International Affairs Budget

Six months into the fiscal year, and after weeks of intense negotiations, Congress passed an omnibus appropriations bill for FY18 that will keep the government open through September 30, 2018. The bill passed the House by a vote of 256-167 and the Senate by a vote of 65-32, and the President signed it into law today.

The omnibus is largely consistent with the budget deal Congress agreed to last month, which as previously reported, increased total discretionary spending by $296 billion over two years. Specifically, the budget deal increased the non-defense discretionary (NDD) spending cap by $63 billion in FY18. It also provided $12 billion in Overseas Contingency Operations (OCO) funding – which is not subject to discretionary spending caps – for the International Affairs Budget. The Department of Defense also received significant increases plus OCO funding.

When it comes to funding for development and diplomacy, the omnibus overwhelmingly rejects the deep and disproportionate cuts proposed by the Administration in FY18 – highlighting the strong bipartisan support in Congress for these critical programs. The International Affairs Budget receives a total of $55.9 billion, split between $43.9 billion in base funding and $12 billion in Overseas Contingency Operations (OCO) funding.

  • This represents a $2.1 billion (3.8%) increase compared to FY17 (not including the $5.3 billion approved in FY17 supplemental funding to combat ISIS and provide famine relief.)
  • With the inclusion of these additional funds, this represents a $3.2 billion (5.5%) cut from the total FY17 enacted level of $59.1 billion.

The USGLC released a statement applauding Congress for taking decisive action to restore funding for the International Affairs Budget in FY18.

In a challenging political and budgetary environment, the nearly 4% increase is an impressive display of powerful bipartisan Congressional support against a “doctrine of retreat” and an overwhelming reaffirmation of the importance of development and diplomacy. At the same time, it is clear America is not keeping pace with today’s growing global threats. Whether it is fighting the next Ebola, tackling the nexus of terrorism and famines, or competing in the world’s fastest growing markets, America cannot afford to be left behind.

International Affairs Budget Snapshot

FY17 Enacted FY18 Request* FY18 Omnibus
Base $38.3 billion $32.5 billion $43.9 billion
OCO $20.8 billion $12.0 billion $12.0 billion
Total $59.1 billion $40.5 billion $55.9 billion

* The Administration included an additional $5.8 billion for the International Affairs Budget in an FY18 budget addendum provided to Congress in February after passage of the 2018 Bipartisan Budget Act, which is not accounted for in this chart as the addendum was not a formal budget amendment.

 

HIGHLIGHTS OF INCREASES AND DECREASES

Increases compared to FY17 enacted

  • Food for Peace (PL 480): up $116 million (+7%)
  • Contributions to International Organizations: up $108 million (+8%)
  • International Narcotics Control and Law Enforcement: up $36 million (+3%)
  • Broadcast Board of Governors: up $21 million (+3%)
  • Educational and Cultural Exchanges: up $12 million (+2%)
  • Overseas Private Investment Corporation: up $9 million (+13%)
  • Trade and Development Agency: up $5 million (+6%)
  • Democracy Fund: up $5 million (+2%)

Decreases compared to FY17 enacted

  • Diplomatic & Consular Programs: down $890 million (-9%)
  • Economic Support Fund: down $713 million (-15%)
  • Embassy Security and Construction: down $697 million (-23%)
  • UN Peacekeeping: down $526 million (-28%)
  • Treasury International Programs: down $253 million (-14%)
  • Foreign Military Financing: down $180 million (-3%)
  • Assistance to Europe, Eurasia and Central Asia: down $152 million (-17%)
  • Nonproliferation, Antiterrorism and Demining: down $94 million (-10%)
  • Emergency Migration and Refugee Assistance (ERMA): down $49 million (-98%)

NOTABLE PROGRAM AND POLICY ISSUES

Food Aid: Proposed Eliminations Rejected

Congress forcefully rejects the Administration’s proposal to eliminate international food aid provided through the Food for Peace and McGovern-Dole International Food for Education and Child Nutrition programs. Instead, it provides $1.72 billion for Food for Peace, including what the appropriators describe as a one-time increase of $116 million, resulting in a 7.3% boost compared to enacted FY17 levels.

The McGovern-Dole program receives $207.6 million – slightly above FY17 levels – thanks to strong bipartisan support in Congress. Of this total, $10 million is made available to purchase some food aid locally or regionally – twice the amount permitted in FY17. These funding levels send a strong message about Congressional support for international food aid as both the House and Senate are considering new reforms to these programs this year.

FY18 Agriculture Appropriations International Programs Snapshot

FY17 Enacted FY18 Request FY18 Omnibus
Food for Peace/PL 480 Title II $1.6 billion* $0 $1.72 billion
McGovern-Dole $202 million $0 $207.6 million
Local and Regional Procurement $0** $0 $0***
Total $1.8 billion $0 $1.93 billion

*Does not reflect the Administration’s transfer of $300 million into the Food for Peace program from the International Disaster Assistance account in FY17.
**$5 million of McGovern-Dole funding is included for local and regional procurement.
***$10 million of McGovern-Dole funding is included for local and regional procurement.

Trade Agencies: Strong Funding Across the Board

Trade-promoting agencies fare quite well in the omnibus, showcasing strong bipartisan support in Congress for these programs. The U.S. Trade and Development Agency (USTDA) receives $80 million, a $5 million (6%) increase compared to FY17 levels. The Overseas Private Investment Corporation (OPIC) also gets a bump up of $9 million (13%) for a total of $79 million for administrative expenses. The bill provides $110 million for the Export-Import Bank’s administrative expenses, the same amount enacted in FY17. By contrast, the Administration FY18 budget proposed to cut funding for all three of these agencies, with USTDA and OPIC slated for closure. Interestingly, the Administration’s FY19 budget request reverses course on eliminating OPIC in favor of modernizing America’s development finance tools – an initiative that has support from bipartisan Members of Congress.

Global Health: Funding Remains Flat

Despite proposed deep cuts by the Administration, funding for global health is largely protected – highlighting continued strong bipartisan support in Congress for these programs. The omnibus provides a total of $8.69 billion for Global Health Programs, just $35 million below the FY17 enacted level, and maintains FY17 funding levels for Bilateral HIV/AIDS programs, the Global Fund, Malaria programs, and international family planning. Several programs receive increases, including Maternal and Child Health ($15 million) and Tuberculosis ($21 million).

The omnibus sets out just $73 million for Global Health Security, but includes authority to redirect $100 million in Ebola funds to strengthen countries’ capacity to prevent and respond to outbreaks and $35 million for USAID’s Emergency Reserve Fund to respond to emerging health threats.

Notably, the bill rejects the Administration’s original proposal to eliminate funding for family planning. It also holds funding for polio flat at $59 million, and provides $290 million for Gavi, the Vaccine Alliance, a $15 million increase.

Global Health* FY17 Enacted FY18 Request** FY18 Omnibus
Bilateral PEPFAR $4.32 billion $3.85 billion $4.32 billion
Global Fund $1.35 billion $1.13 billion $1.35 billion
USAID HIV/AIDS $330 million $0 $330 million
Malaria $755 million $424 million $755 million
Tuberculosis $241 million $178 million $261 million
Maternal/Child Health $815 million $750 million $830 million
Vulnerable Children $23 million $0 $23 million
Nutrition $125 million $79 million $125 million
Family Planning $608 million $0 $608 million
NTDs $100 million $75 million $100 million
Global Health Security $143 million $0 $73 million
Total $8.73 billion $6.48 billion $8.69 billion

*State Department and USAID Global Health accounts only, except for family planning.
**The Administration included an additional $927 million for Global Health programs in an FY18 budget addendum provided to Congress in February after passage of the 2018 Bipartisan Budget Act, which is not accounted for in this chart.

Humanitarian Assistance: Steady Funding for Significant Needs

Congress rejected the Administration’s proposed deep cuts to humanitarian assistance for FY18, providing $7.6 billion for these programs in the omnibus. This is a $191 million (2.4%) cut compared to FY17 levels. With 30 million people on the brink of famine and more than 65 million displaced around the world, this funding level may not be sufficient to meet unprecedented needs.

Humanitarian Assistance FY17 Enacted FY18 Request FY18 Omnibus
Disaster Aid (IDA) $4.43 billion $2.51 billion $4.29 billion
Refugees (MRA) $3.36 billion $2.75 billion $3.36 billion
Emergency Refugees $50 million $0 $1 million
Total $7.8 billion $5.3 billion $7.6 billion

*The Administration included an additional $2.1 billion for humanitarian assistance in an FY18 budget addendum provided to Congress in February after passage of the 2018 Bipartisan Budget Act, which is not accounted for in this chart.

Development and Economic Assistance: Mixed Results

Congress rejected the Administration’s proposed deep cuts to development and economic assistance programs as well as its proposal to combine four of these accounts – Development Assistance (DA), Economic Support Fund (ESF), Assistance to Europe, Eurasia, and Central Asia (AEECA), and Democracy Fund – into a new State Department-led Economic Support and Development Fund (ESDF).

However, the omnibus does make significant cuts to several of these accounts. While funding for DA is held essentially flat and the Democracy Fund receives a $5 million (2%) increase, ESF is cut by $713 million (15.2%) and AEECA by $152 million (16.8%). The Millennium Challenge Corporation (MCC) and the Peace Corps are protected, with funding held flat at FY17 levels.

Development and Economic Assistance FY17 Enacted FY18 Request* FY18 Omnibus
ESDF $0 $4.9 billion $0
DA $3.0 billion $0 $3.0 billion
MCC $905 million $800 million $905 million
Peace Corps $410 million $398 million $410 million
USAID OE $1.36 billion $1.18 billion $1.35 billion
ESF $4.7 billion $0 $4.0 billion
AEECA $902 million $0 $750 million
Democracy Fund $211 million $0 $216 million

*The Administration included an additional $575 million for development and economic assistance in an FY18 budget addendum provided to Congress in February after passage of the 2018 Bipartisan Budget Act, which is not accounted for in this chart.

The U.S. Institute of Peace (USIP) receives $37.9 million in the omnibus, the same amount as in FY17. This funding level is a clear rejection of the Administration’s proposal to eliminate the institution in its FY18 request.

International Security Assistance: Overall Cut, but Increases for INCLE and IMET

Congress provided a total of $9 billion for international security assistance in the omnibus, $354 million (3.8%) less than in FY17. Foreign Military Financing (FMF) is cut by $180 million (2.9%), Nonproliferation, Anti-Terrorism, Demining, and Related (NADR) programs are cut by $94 million (9.7%) and non-UN Peacekeeping receives a $121 million (18.4%) cut.

However, funding for International Narcotics Control and Law Enforcement (INCLE) programs sees a $41 million (3%) increase and the International Military Education and Training (IMET) account also receives a $1 million boost. The omnibus rejects the Administration’s proposal to use some FMF funds to provide loans rather than grants.

Peacekeeping: Deep Cuts

Some of the steepest cuts in the omnibus are made to peacekeeping accounts, although they are not as drastic as the Administration’s proposed cuts for FY18. Contributions to International Peacekeeping (CIPA), which covers assessed contributions for UN peacekeeping missions, is funded at $1.38 billion. The omnibus also provides $538 million for Peacekeeping Operations (PKO), which funds non-UN peacekeeping forces and operations. Taken together, the CIPA and PKO accounts receive a $647 million (25.2%) cut compared to FY17 levels.

This total will fall far short of what is needed to cover ongoing peacekeeping needs. The omnibus also maintains the 25% legislative cap on UN peacekeeping contributions rather than the negotiated rate of 28%. This means the U.S. will not be able to meet its peacekeeping obligations in full and will continue to accumulate arrears, which are estimated at $275 million for FY17 alone.

Peacekeeping FY17 Enacted FY18 Request FY18 Omnibus
UN Operations (CIPA) $1.91 billion $1.2 billion $1.38 billion
Non-UN Ops (PKO) $659 million $301 million $538 million
Total $2.57 billion $1.5 billion $1.92 billion

Multilateral Assistance: Deep Cuts to Treasury International Funding

The omnibus cuts funding for multilateral assistance by $253 million (12%) from FY17 levels. Treasury International Programs – particularly International Financial Institutions (IFIs) – are disproportionately targeted. These programs receive $1.52 billion, down $253 million (14.3%) from FY17. Congress largely accepted the Administration’s proposed $290 million cut for IFIs, one of the few areas in the International Affairs Budget where the Administration’s recommendations were heeded.

Compared to FY17 levels, the largest reductions for IFIs are to the World Bank International Development Association replenishment, which is cut by $100 million (8%) and the Asian Development Fund replenishment, which is reduced by $51 million (52%). In line with the FY17 omnibus and the Administration’s FY18 request, the FY18 omnibus eliminates funding for the Treasury Department’s contribution to the Green Climate Fund – although it does not explicitly prohibit contributions to the Fund.

Congress holds funding for voluntary contributions to the International Organizations and Programs (IO&P) account at its FY17 level of $339 million. This account funds voluntary contributions to various UN-affiliated and other international organizations.

State Operations: Substantial Cuts to Diplomatic and Embassy Security

The omnibus includes a total of $6.1 billion for Diplomatic and Embassy Security, $1.6 billion (21%) less than in FY17. This account saw a significant increase in FY17, which was intended as a one-time boost to help address growing threats to America’s diplomatic presence worldwide. Aside from this increase, funding for Diplomatic and Embassy Security is essentially flat compared to FY17.

Overall, Diplomatic and Consular Programs (D&CP) received $8.7 billion in the omnibus – an $890 million (9.3%) decrease from FY17. Embassy Security Construction and Maintenance (ESCM) saw a $697 million (23.1%) cut, receiving a total of $2.3 billion.

Policy Provisions

Oversight and Accountability

The omnibus builds on the strong language included in the FY18 House and Senate State-Foreign Operations Appropriations bills to ensure transparency and oversight by Congress of the State Department and USAID. These provisions are largely focused on reform and personnel decisions and the spending of appropriated funds, which have been the subject of bipartisan Congressional concern over the past year. Specific provisions include:

  • The Secretary of State and USAID Administrator are required to submit reports justifying the reduction of personnel at both agencies in 2017 and to share the status of personnel levels with Congress at regular intervals.
  • The Secretary and Administrator are required to submit a report to Congress detailing the personnel requirements to implement the Administration’s December 2017 National Security Strategy and its February 2018 Joint Strategic Plan for the State Department and USAID.
  • The State Department’s Inspector General is required to review the current status of the hiring freeze and assess its impact on the day-to-day function of the State Department, the morale of State Department personnel, and associated personnel costs.
  • The State Department is prohibited from obligating funds to suspend, eliminate, or downsize programs or offices without providing justification to Congress in advance.

Additional Items of Note

  • The omnibus requires that, within 90 days, the State Department, USAID, and OPIC submit a report to Congress with recommendations for making development finance efforts more effective.
  • It requires the State Department to withhold 5% of funds from any UN entity funded through Contributions to International Organizations (CIO) if the Secretary of State reports that the entity “has taken an official action” that contravenes U.S. national security interests or targets a U.S. ally, including Israel.
  • It does not codify the Administration’s expanded Mexico City Policy (originally in the House bill) that would apply to all global health funding.

Next Steps

With FY18 complete, Congress will now turn to the FY19 budget and appropriations process in full force. The Administration’s FY19 budget, which was released on February 12, proposes once again to slash funding for the International Affairs Budget. Bipartisan Members of Congress have already rejected this budget as “dead on arrival.”

It remains to be seen whether the House and Senate Budget Committees will mark up FY19 budget resolutions since the budget deal has already established topline discretionary spending levels for FY19. With FY19 budget hearings well underway, House and Senate Appropriations Committees will soon begin negotiating 302(b) allocations. These allocations set out the spending levels for each individual appropriations bill, including the State-Foreign Operations bill, which funds the vast majority of the International Affairs Budget.

Once 302(b) allocations have been set, Appropriators will then turn in earnest to drafting and marking up their FY19 spending bills. With the shortened legislative calendar and political realities of an election year, it is unlikely that all 12 appropriations bills will be voted on in Congress before the new fiscal year begins on October 1. In all likelihood, Congress will pass a Continuing Resolution (CR) to extend current funding levels through November and later package the majority of FY19 spending bills into an omnibus for final passage.

Account-by-Account Details

Download the Account-by-Account details of the FY18 omnibus here.