September 13, 2013

International Affairs Budget Update, 9-13-13

1. FY14 Continuing Resolution Meets Stiff Resistance in House; Unclear Path Forward 

With only two weeks left before the start of the new fiscal year and little significant progress on FY14 appropriations, House Appropriations Committee Chairman Hal Rogers (R-KY) earlier this week released a Continuing Resolution (CR) (H.J. Res. 59) to fund the government at roughly current FY13 levels until December 15th.  However, disagreement among House Republicans forced the leadership to pull the bill from floor consideration amid calls from conservative members to defund the Affordable Care Act (Obamacare).

The draft CR would provide $986.3 billion in discretionary funding.  If passed, the overall spending level is much better than the levels in the House FY14 Budget Resolution (by $20 billion) but still nearly $72 billion below the Senate’s FY14 Budget level.

In releasing the bill, Chairman Rogers stressed the CR was meant only as a short-term measure to allow time for a broader budget agreement, saying, “Our country desperately needs a long-term budget solution that ends the draconian cuts put into place by sequestration, and that provides for a responsible, sustainable, and attainable federal budget. It is my hope that this stopgap legislation will provide time for all sides to come together to reach this essential goal.”

With only six remaining days in session together before the end of the fiscal year, the situation is highly fluid and House Majority Leader Eric Cantor (R-VA) has warned that the House may have to cancel its recess later this month in order to work out the CR and avert a government shutdown.  In the Senate, leaders are waiting on the House to finish its action on the CR rather than move ahead with their own version.  Discussing the prospect for the House’s CR and further negotiations, Senate Appropriations Chairwoman Barbara Mikulski (D-MD) said, “They [the House GOP] have kind of painted themselves in a box.”

House and Senate leaders met in Speaker John Boehner’s (R-OH) office on Thursday to discuss the CR and other pressing budget issues, including the need to increase the debt ceiling to prevent default (by sometime in mid-October).  The most likely scenario for the fate of the CR is for the House to pass a version defunding Obamacare.  Such a CR would undoubtedly be rejected by the Senate and a clean, short-term CR at current levels would hopefully be passed to avert a shutdown and to allow lawmakers more time to address the remaining budget issues either with a year-long CR or an omnibus appropriations bill.  Given the divisions among House Republicans, however, failure to reach an agreement by October 1st and a shutdown of the government is possible.

What Does this Mean for the International Affairs Budget?
While it is impossible to predict at this point how FY14 appropriations will be finalized, there are a few points worth considering in terms of impact on International Affairs spending:

  • A Large funding gap between House and Senate.  As detailed in section two below, the House and Senate FY14 appropriations levels for International Affairs vary significantly.  In addition to a large difference between international food aid funding in the two Agriculture Appropriations bills, there is a $10 billion (20%) difference between the House and Senate State-Foreign Operations bills.
  • House and Senate do agree on some priority areas.  Both the House and Senate FY14 appropriations bills provide robust funding for diplomatic security, global health, and security assistance, accounts that are likely to be protected whether a full-year CR or an omnibus emerges as the final FY14 vehicle.  In the case of global health, amounts are about the same in FY13 as compared with House and Senate proposals for FY14.  Security assistance would decline by about $1 billion under House and Senate bills for FY14, largely the result of reduced requests for Pakistan and Afghanistan as American troops prepare to withdraw from the latter.  Diplomatic Security resources, which became a top priority for FY14 following the Benghazi attack one year ago, are fully funded in the House and Senate bills at levels beyond what is available for FY13.
  • Senate bill protects base International Affairs programs.  Congress has provided larger-than-requested amounts for the Overseas Contingency Operations (OCO) account (largely funding for war countries) the past two years by shifting some non-war related resources from the base budget to OCO.  (OCO funds for Defense and International Affairs do not count against budget caps.)  The Senate bill attempts to right-size base funding by increasing it 10% over FY13 while cutting OCO 39%.  Unless a full-year CR for FY14 is dramatically altered from FY13 levels, the pattern of under-funding the base while providing more than requested for OCO would continue with enactment of a full-year CR.
  • Any full-year CR will require anomalies for certain International Affairs accounts.  While the default for a full-year CR is to adopt the previous year’s funding levels and conditions, Congress routinely alters this formula by making selected adjustments for a few accounts, something known as anomalies.  Last year, Congress modified FY12 funding levels for FY13 by increasing amounts for humanitarian programs, global health and development assistance well beyond what they would have been otherwise.  It should be expected that Congress would, at a minimum, include an anomaly for Diplomatic Security in a full-year CR, but others could be added in order to address emerging situations such as those in Syria and Egypt.
  • Humanitarian programs would be funded robustly under a full-year CR.  Because of an anomaly in the FY13 CR that pushed levels for disaster aid and refugee relief to much higher levels, the U.S. would be relatively well positioned in an FY14 CR to respond to the growing human tragedy in Syria and elsewhere.  Within an omnibus measure for FY14, the outcome is less certain.  The Senate bill increases humanitarian spending slightly over FY13 levels but the House recommendation is more than one-third less.
  • Unless a deal is reached to undo sequestration, International Affairs spending will likely decline in an omnibus bill, even under the best of circumstances.  Under an omnibus for FY14 in which lawmakers agree to the best possible allocation for International Affairs – the Senate recommended level – International Affairs funding would still fall by nearly $4 billion from FY13, based on CBO’s estimate that sequestration would take 7.2% from every non-defense account.  Considering a more likely scenario that the International Affairs total would fall somewhere in between House and Senate levels, the reduction could be considerably more.  Shifting funds from the base budget to OCO (which is not part of budget caps) would be one way to avoid the impact of sequestration, although it would not come without challenges from some.

2. Recap of FY14 House and Senate International Affairs Appropriations

The House and Senate Appropriations Committees reported out their FY14 State-Foreign Operations Appropriations bills in July with dramatically different approaches in both the total amount of funding provided and the prioritization of many programs.

The Senate bill provides $50.6 billion for State-Foreign Operations, including $44.1 billion for base programs and $6.5 billion for Overseas Contingency Operations (OCO).  These levels in the Senate measure are about the same as FY13 sequestered levels and $10 billion above the House level.  Overall, the Senate bill provides funds at or near the FY14 request for most accounts, but with significant increases for humanitarian programs and sharp reductions for agency operations and assistance in the Frontline States of Afghanistan, Pakistan, and Iraq.

In contrast, the $40.6 billion House bill – $34.1 billion in base funding and $6.5 billion for OCO – falls 19.9% below current post-sequestration spending and 21.4% under the President’s FY14 request.  The House measure concentrates funds in three areas: diplomatic security, global health, and security assistance.  For nearly all other accounts and activities the House plan makes deep cuts, 50% or more in some cases, particularly for multilateral programs such as international peacekeeping and the United Nations (UN).  If Congress enacted the House-recommended amounts, the base International Affairs Budget would decline by 31% in just four years.

The House and Senate also differ significantly on funding for international food aid programs funded in the FY14 Agriculture Appropriations bills, approved by the respective committees in June.  The Senate provides $1.66 billion for P.L. 480, $116 million above current sequestered levels and $21 million higher than the Administration’s request.  However, the House Agriculture bill provides $1.33 billion for these food aid programs, 13.4% below current levels and 18.4% below the Administration’s request.

Among others, some key differences between the House and Senate funding levels include:

  • State Department Diplomatic and Consular Programs: Senate 3.4% higher.  While both Senate and House bills support Administration plans to dramatically increase spending on diplomatic security, post-Benghazi, the impact of House reductions on other activities would be severe.  House allocations for State Overseas Programs would fall significantly, forcing the closure of some posts and limiting the outreach of our diplomatic corps.  Denial of State Department’s request for Foreign Service overseas comparability pay adjustments undermines the Department’s ability to maintain workplace competitiveness.
  • USAID Operating Expenses: Senate 12.2% higher.  At the lower House level, USAID would face significant challenges in pursuing its reform agenda to transform the agency into a more efficient, cost-effective and results-oriented development organization.  House proposed amounts would further jeopardize USAID plans to scale up the Office of Science and Technology in order to undertake transformative approaches to development through enhanced data, analytics, and evaluation.
  • Development Assistance: Senate 20.2% higher.  While the House bill prioritizes basic education, water, and microenterprise programs within this account, the cuts to other development activities would be severe.  Feed the Future, the Administration’s cornerstone food security initiative, would be especially under-funded.
  • Economic Support Fund: Senate 34.8% higher.  Although the House measure provides full funding for Jordan, Mexico, and Colombia, other strategic partners would have their ESF allocations cut dramatically, including those for conflict and post-conflict states like Democratic Republic of Congo, Liberia, South Sudan, and Yemen.
  • Millennium Challenge Corporation: Senate 21.9% higher.  Under the House proposal, the MCC would need to defer one or two of its planned five compacts for next year or dramatically reduce the size of those compacts.
  • Humanitarian Assistance: Senate 35.6% higher.  As the human tragedy in Syria spirals out of control with refugees now standing at over two million, House levels would not allow the United States to respond with adequate food, medicine, and shelter.  Humanitarian crises elsewhere around the world would also suffer from such deep reductions.
  • International Organization Contributions: Senate 58.8% higher.  House cuts to U.S. assessed contributions would reduce our voice in these organizations, hamstring efforts by our diplomats to advance key American interests, and signal a withdrawal by the U.S. as a global leader.  Eliminating all voluntary contributions to organizations such as UNICEF, the UN Development Program, and the UN Democracy Fund is an unprecedented step that would be a major blow to the work of several of these groups.
  • Peacekeeping: Senate 15.4% higher.  House reductions to UN peacekeeping missions would require the U.S. to downsize support to a number of conflict regions, possibly for missions in South Sudan and eastern Congo, as well as jeopardize $50 million in funding requested for a potential UN peacekeeping operation in Syria.
  • International Financial Institutions: Senate 63.9% higher.  The House zeros out funding for most multilateral development banks and cuts amounts for the World Bank’s International Development Association by 30%, causing U.S. arrears to these institutions to grow to nearly $3 billion, the largest deficit ever.  The U.S. voice and vote in these banks would also be diminished.