It’s Not All Doom and Gloom for the MDBs in the House Bill

If you pay attention to how the World Bank and the other multilateral development banks (MDBs) fare in the US budget process each year, you have by now gotten used to the feeling of despondence over the House bill, followed by great relief in seeing the Senate version. 

This year’s numbers are no exception.  As the table shows, the House numbers spell disaster for the MDBs.  But true to form, the Senate funds these programs at the level the administration requested, which in turn reflects the actual funding commitments the US Treasury has made to each of the MDBs. 

It’s too early to tell what all of this means for a final outcome.  CGD colleagues Erin Collinson and Beth Schwanke point to another continuing resolution as a likely outcome.  Certainly, another continuing resolution (which would scrap the FY2014 House and Senate numbers in favor of a continuation of the FY2013 funding levels) would be a decent outcome, as would an actual FY2014 funding package at the level of the Senate bill.

But rather than delve into those scenarios at this stage of the game, I’m more interested in a remarkably positive step the House authors have taken on a structural issue when it comes to how the US budgets for the MDBs.  Here’s the language I’m talking about:

The Secretary of State, after consultation with the Secretary of the Treasury and the Committees on Appropriations, may transfer funds made available under the headings ‘‘Development Assistance’’ and ‘‘Economic Support Fund’’ in title III of this Act to funds previously made available under the heading ‘‘Multilateral Assistance, International Financial Institutions’’ for payments to the International Bank for Reconstruction and Development (IBRD), the African Development Bank, the Inter-American Development Bank, and the Asian Development Bank for the United States share of the paid-in portion of the increases in capital stock; for payment to the IBRD as a trustee for the Global Environment Facility; for payment to the Global Agriculture and Food Security Program; for payment to the Enterprise for the Americas Multilateral Investment Fund; and for payment to the International Fund for Agricultural Development [Sec. 7029 (d), pg. 95].

Let me translate that for you. The House appropriators are saying to the administration, “We know that we’re eviscerating MDB funding in this bill, but we’re not necessarily opposed to meeting these commitments.  So, when it comes to most of the multilateral programs that Treasury has funded exclusively out of its own budget for many years, you now have our permission to draw on the State department’s budget as well.”

Language of this sort isn’t unprecedented.  In prior years, there have been limited transfers authorized between State and Treasury, for example to fund Treasury’s Office of Technical Assistance or debt relief for Sudan.  But these measures were far more limited in dollars and scope. 

So why does this new House language matter?

There’s the Willie Sutton answer, though I’m not actually suggesting that Treasury “rob” State, so much as take advantage of deeper pockets.

But more importantly, the language could be a driver for a more coordinated approach to foreign assistance budgeting across the executive branch.  As it stands, it is extremely difficult to consider tradeoffs across agencies in the foreign assistance budget, even among the much smaller subset of multilateral programs. 

For example, a multilateral commitment like the Global Fund to Fight AIDS, Tuberculosis, and Malaria, which happens to be housed in the State department’s budget, is never considered in relation to a multilateral commitment like the World Bank’s International Development Association (IDA), which is housed in Treasury’s budget. By virtue of where they sit within the agency budget silos, the Global Fund commitment is only considered in relation to State’s other global health programs (PEPFAR, GAVI, etc.), and IDA is only considered in relation to Treasury’s other multilateral commitments (the African Development Fund, the Global Environmental Facility, etc.). 

Allowing for a transfer of funds from State to Treasury might just mean that the two agencies (and the White House) will begin to do a better job of considering the full range of tradeoffs in putting together the annual foreign assistance budget.  

And maybe, just maybe, with better coordination, we will see better decision making around US funding for bilateral and multilateral programs.  So for example, when the administration rolls out a new presidential initiative like Power Africa, the budget will follow suit by prioritizing the African Development Fund (AfDF) and IDA replenishments, given the critical role both institutions will likely play in meeting Power Africa’s objectives.

As it stands within the limited scope of Treasury’s budget, a bold commitment to the AfDF this year would likely mean that IDA suffers and vice versa.

It’s important to recognize that the House language is a “may” rather than a “shall,” meaning that it allows for interagency transfers but doesn’t require them.  While I think it’s an appropriately light touch in this regard, it also means that the administration is free to ignore it. 

You might also question the seriousness of the House proposal when you look at what the same bill did to the very State programs that are being made available to Treasury.  The House cut the Economic Support Fund by 66% and the Development Assistance account by 30% compared to the administration’s request.  So much for deep pockets.

So as much as I hope the Senate funding levels prevail for FY2014, I also hope that Congress sticks with the more flexible approach reflected in the House bill.  Perhaps the transfer authority won’t be used this year, or even survive in the FY14 appropriations process, but it lays a strong marker for the right kind of reform going forward. 

I particularly hope the administration takes it as a cue to begin thinking proactively about a more coordinated approach to the multilateral programs.