May 9, 2012

International Affairs Budget Update, 5-9-12

This morning the House State-Foreign Operations Appropriations Subcommittee approved its FY13 State-Foreign Operations Appropriations Bill by voice vote, with no amendments offered. The $48.3 billion measure, authored by Subcommittee Chairwoman Kay Granger (R-TX), includes $40.1 billion for base funding and $8.2 billion for Overseas Contingency Operations (OCO) programs in Afghanistan, Pakistan, and Iraq.

In yesterday’s release of the bill, Chairwoman Granger stated, “This bill reflects principled funding decisions that give the United States the flexibility to respond to a rapidly changing world while making sure our foreign aid is not a blank check for foreign governments who do not support our national security priorities.”  House Appropriations Committee Ranking Member Norm Dicks (D-WA) criticized the bill for “underfund[ing] our nation’s diplomatic efforts, overall development initiatives, and multilateral obligations” and called on Republicans to “give the State and Foreign Operations bill the same funding priority that it gives to other bills that address our national security.”  Subcommittee Ranking Member Nita Lowey (D-NY) expressed her concerns about the bill, saying: “The proposed funding levels are insufficient for our nation to respond to health, education, and security challenges; make critical investments in diplomacy and development; and ensure robust oversight over taxpayer funds.”

The Subcommittee faced the difficult challenge of writing a bill with an appropriation allocation that fell 9.3% below current levels and 11.6% less than the Administration’s request.  The result is a measure that is a mixed bag for development and diplomacy programs, notably less draconian compared to many of the cuts contained in last year’s FY12 Subcommittee bill.

Despite a significant overall cut in base spending for State-Foreign Operations compared with current levels, a number of accounts are funded at or near FY12 levels.  The Subcommittee achieved this in part by denying the State Department’s $800 million request for the Pakistan Counterinsurgency Capability Fund (PCCF) and reducing State Department operations in the Frontline States by $1.6 billion (38.2%).  Programs effectively flat-funded include Development Assistance, Peace Corps, Foreign Military Financing, the World Bank’s International Development Association, and the Asian and African Development Funds. Global Health programs are cut 1.8% ($150 million) from current levels, but exceed the Administration’s request by 2% ($168 million).  This is in sharp contrast from last year when the House Subcommittee mark for FY12 slashed funding for Development Assistance by 18% and Global Health by 9%.

Not all State-Foreign Operations base accounts avoided significant reductions, however.  Several multilateral and international organization accounts fell sharply compared with FY12, as did funding for humanitarian assistance programs, a number of foundations, and the U.S. Institute of Peace.  Funding for some multilateral development banks are cut by as much as 50% from FY12 and funding levels for international organizations would put the U.S. in arrears at the United Nations (UN).  In addition, the Subcommittee denied the Administration’s $770 million request for a new Middle East and North Africa Incentive Fund and provided nothing for Sudan debt relief, proposed at $250 million.

Many details regarding foreign aid sector and country directives that the Subcommittee may have assumed are not yet available until the full House Appropriations Committee approves the bill and releases an accompanying report explaining much more specifically the Committee’s intent.

Highlights of the House’s State-Foreign Operations Bill

  • No Funding for Administration’s Major New Initiative to Support Political Change in the Arab World:  The House Subcommittee does not include $770 million requested for a new Middle East and North Africa Incentive Fund (MENA-IF).  As one of a very few new initiatives for FY13, the Fund is intended to serve as an additional foreign policy tool in responding to continuing turbulence and opportunities for democratic reform in the region.  While not all of the MENA-IF represents new funding, without the additional resources of roughly $500-$600 million, the State Department and USAID would need to channel funds away from other programs if it chooses to prioritize needs in the Middle East and North Africa.
  • State Department Operations Cut Sharply; USAID Expenses Down:  Operation expenses for both the State Department and USAID are reduced, although the reductions are far greater for State.  While the full dimension of the impact is hard to fully assess at present, it appears that the brunt of the cuts will impact State Department operations in the Frontline States and could complicate USAID advancing its agency reform agenda.
    • State Department:  The combined base and OCO operating expenses in the bill total $8.95 billion, 18% less than current funding.  With base funding down about 5% but OCO resources cut by 38%, it seems likely that the Subcommittee intends to dramatically down-size costs in Afghanistan, Pakistan and Iraq.
    • USAID: The more modest 5.4% cut to USAID expenses would likely keep the agency from undergoing a furlough of staff but could constrain USAID from hiring additional personnel to undertake an ambitious procurement reform system.  The Subcommittee further denied a working capital fund requested by USAID.  With such a fund, the agency would have greater flexibility for implementing its reform agenda.
  • Development Assistance Programs Flat-Funded:  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, remains at $2.5 billion, the same level appropriated annually since FY10.
    • The bill maintains funding at current levels for basic education ($800 million), water and sanitation ($315 million), and microfinance ($265 million).
    • One of the Administration’s signature initiatives – Feed the Future – receives much of its funding within Development Assistance.  The bill, however, does not specify how much is available for this food security initiative and it is unclear whether the Administration’s $32 million increase over FY12 could be accommodated.
  • Global Health Slightly Cut but Exceeds Administration’s Request:  Overall, Global Health levels fall by 1.8%, including combined flat funding for the President’s Emergency Program for AIDS Relief (PEPFAR) and the Global Fund for AIDS, Tuberculosis (TB), and Malaria (Global Fund).  What is not clear, however, is how these funds are allocated among the various health areas.  The Administration has proposed cuts to PEPFAR but a significant increase in the U.S. contribution to the Global Fund.  The Committee’s report, expected next week, may specify how this pot of global health funds would be allocated.  The Administration further recommended reductions in FY13 for malaria, maternal and child health, TB, neglected tropical diseases, vulnerable children and nutrition, and it appears that the Subcommittee bill restores some, if not most of these requested cuts.  While overall the House measure is $19 million less than the budget request for these programs, the bill also caps family planning funding at $461 million, $182 million below the request.  This leaves about $163 million to shore up other USAID health accounts slated for cuts in FY13.  As with PEPFAR, details may be provided in the Committee report.  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.
    • Global Fund:  The bill further requires the withholding of 10% of U.S. contributions to the Global Fund.  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.
  • Multilateral Assistance and International Organizations Cut Overall, But Mixed Impact on Specific Institutions: The bill cuts multilateral development banks assistance by $662 million (-25%) from FY12 and the Administration’s request.  Combined accounts for UN payments and peacekeeping decline by $211 million (-5.7%).
    • Fully denied are requests for the International Clean Technology Fund and the International Strategic Climate Fund.  Funding for the Global Environment Facility falls by 28% and non-concessional facilities of the World Bank and the Inter-American, Asian, and African Development Banks decline between one-third and one-half.
    • Voluntary contributions to international organizations would fall by nearly 21% compared to FY12, including the elimination of funds for UNFPA and the Intergovernmental Panel on Climate Change/UN Framework Convention on Climate change.
    • For Contributions to Internationals Organizations, the account from which the U.S. pays its assessed dues to the UN and other bodies, the Subcommittee reduces payments by 10% from current levels, pushing the U.S. into arrears.  The Subcommittee also said in statement that legislation includes no funding for the UN Educational, Scientific and Cultural Organization (UNESCO) despite a $120 million request for FY13.
    • A few multilateral institutions, however, are protected from deep cuts. Funding for the World Bank’s International Development Association is set at FY12 levels, as are appropriations for the concessional loan facilities of the Asian and African development banks.
  • Humanitarian Aid Reduced: The combined funding for USAID disaster assistance and State Department refugee programs – $2.5 billion – falls 12% below current levels.  The other major humanitarian account – food aid – is included in the Agriculture Appropriation, a bill not yet marked up by the House Committee.
  • Security Assistance and Democracy Programs Largely Protected, With Exceptions:  In contrast to many other areas of the bill, several security assistance and democracy promotion accounts are funded at or above FY12 levels.
    • For the two largest security assistance accounts – Foreign Military Financing (FMF) and International Narcotics and Law Enforcement (INCLE) – the House Subcommittee sets FMF funding at FY12 levels and INCLE 15.3% higher than current levels.  How much of these totals will support the Administration’s Frontline States request, however, remains unclear.  FMF for Israel ($3.1 billion), Egypt ($1.3 billion, with conditions), and Jordan ($300 million) is fully funded.
    • The House bill includes a new provision setting a target of $2.839 billion for democracy promotion.  While the bill does not specify exactly which accounts comprise this global target, funding for the National Endowment for Democracy ($123 million) grows by 4.2% and the Democracy Fund account ($120 million) increases by about the same.
    • Funding for two security assistance accounts, however, was not provided by the Subcommittee.  As noted above, $800 million for the PCCF was denied, although the draft bill permits the transfer of FMF and INCLE appropriations within the OCO title for the PCCF.  The Subcommittee further excluded funding for a recently established program, the Global Security Contingency Fund.  First launched in FY12, the Fund receives appropriations from both the State Department and Department of Defense, undertaking a variety of programs to enhance the capabilities of foreign military and security forces.  The $25 million State Department share is not included.
  • Impact on Other Selected Accounts
    • Millennium Challenge Corporation (MCC): $898 million, the same as FY12 and the FY13 request.
    • U.S. Institute of Peace: $37 million, 5% below FY12
    • Contributions to International Peacekeeping: $1.828 billion, the same as for FY12, but 13% below the requested level
    • Economic Support Fund (ESF): $5.2 billion (combined base and OCO), 9.6% less than FY12 and 11.5% below the FY13 request.  While the bill provides funding as requested for Egypt ($250 million) and Jordan ($360 million), it is unclear which countries would be cut, although Afghanistan and Pakistan are possibilities
    • Regional foundations face significant cuts although funding for most are set at levels requested by the Administration
      • Asia Foundation ($15 million) falls 11.8% but funded at the request level
      • Inter-American Foundation ($18 million) drops 21.7% but remains at the requested amount
      • African Development Foundation ($24 million) falls 20% but is set at the requested figure
      • East-West Center: receives no funding compared with $17 million and $11 million in FY12 and the FY13 request, respectively

Next Steps

USGLC will provide more details in preparation for the Full Committee markup of the bill scheduled for next week.  In Full Committee, amendments on the Global Gag Rule and debate on assistance to Pakistan are likely.  Floor action on the State-Foreign Operations bill has yet to be scheduled, but it could potentially be considered as part of a four-bill security “minibus” along with Defense, Military Construction and Veterans’ Affairs, and Homeland Security.  The Senate Appropriations Committee is scheduled to take up its FY13 bill the week of May 21st.


FY13 International Affairs Budget Snapshot 
(As of 5/9/12)

International Affairs 150 Account* 

FY13 House N/A**
            of which OCO             $8.2 billion 
FY13 Request $56.24 billion
            of which OCO              $8.2 billion 
FY12 Enacted $54.94 billion
            of which OCO             $11.2 billion 

Foreign Operations Account 

FY13 House $32.72 billion
            of which OCO             $5.36 billion
FY13 Request $36.07 billion
            of which OCO             $3.88 billion 
FY12 Enacted $35.52 billion
            of which OCO             $6.58 billion 
FY13 House from FY12  -$2.8 billion (-7.9%)

State Department Operations & Related Accounts 

FY13 House $15.52 billion
            of which OCO             $2.89 billion
FY13 Request $18.51 billion
            of which OCO             $4.36 billion 
FY12 Enacted $17.69 billion
            of which OCO             $4.62 billion 
FY13  House from FY12  -$2.17 billion (-12.3%)

International Agriculture Programs 

FY13 House $N/A**
FY13 Request $1.58 billion
FY12 Enacted $1.65 billion
FY13 Increase from FY12  $-0.07 billion (-4.2%)

* 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.
** Funding levels for international food aid programs, provided by the Agriculture Appropriations bill, have not yet been released.  As such, a precise calculation for the total House FY13 International Affairs Budget is not available.