With New Spending Bill, Congress Steers Foreign Assistance Away from Deep Cuts

Last week, Congress completed work on a spending package that funds the federal government through the remainder of the fiscal year. As far as development and diplomacy are concerned, the bill is an unmistakable rejection of the deep cuts proposed by the Trump administration.

Here are a few standouts from CGD’s most-watched list.

Fortifying the base

With a topline of just over $54.1 billion, the State and Foreign Operations (SFOPs) division of the bill comes in slightly higher than last year’s omnibus—though total SFOPs spending falls by just over $3 billion compared to FY 2017, when you take into account the supplemental bill signed into law in late 2016.

Figures in all tables are in millions and include funding from draft appropriations bill released in the House and Senate.

Importantly, the bill shifts a greater share of funding to the base budget, reducing reliance on off-budget Overseas Contingency Operations (OCO) funds—which weren’t intended as an enduring budget option. This move comes at a critical time after lawmakers reportedly agreed to non-defense OCO caps of $12 billion in FY18 and $8 billion in FY19, as part of the two-year budget deal reached last month.

Protecting State and USAID

Congress jettisoned the administration’s proposal to merge a number of bilateral assistance accounts—most notably the Economic Support Fund (ESF) and USAID’s Development Assistance. It also landed on a figure for these functions that is 60 percent higher than the president’s request.

In addition, both the bill text and the accompanying explanatory statement send clear signals that Congress will be keeping close watch over the redesign process underway at the State Department and USAID. Specifically, lawmakers direct the administration to provide detailed descriptions of any planned redesign or reorganization activities, accompanied by assessments of how proposed actions would lead to greater efficiency and effectiveness, the likely impact on broader aims to advance the US national interest, cost estimates, and an accounting of staff involvement.

In a similar vein, the bill and statement include a variety of reporting requirements related to personnel levels, likely reflecting concerns over the failure to fill key vacancies at both agencies and the departure of career diplomatic staff—including a number of top officials—at the State Department.

The bill’s explanatory statement also requests ongoing consultation on USAID’s pursuit of strategic transitions—the agency’s effort to support the development of partner countries’ capacity to finance and manage their own development and eventually transition away from needing aid. Congress clearly wants to be kept in the loop, including about the metrics that will help inform decisions about whether, when, and how to begin transitioning country partnerships, the resources involved in the effort, and descriptions of transition plans. All issues of worthy of early consideration.

Interestingly, Congress provides an explicit allocation of $23 million for USAID’s Development Innovation Ventures (DIV), a venture capital-like unit that seeks to identify and rigorously test new solutions to development problems and help scale those that prove successful. (My colleagues highlighted the work of DIV in this piece on advancing the evidence agenda at the agency.) While DIV is still pursuing a number of evidence-oriented functions, it’s been operating in a more limited manner since last July, when “shifting resource constraints” prompted USAID to stop accepting new applications for funding through DIV. This move spurred conversations on Capitol Hill about the importance of DIV’s work in finding innovative ways to help the poor—and now, it appears, a new spending directive.

Responding to crises

When President Trump’s first budget request arrived, members were quick to decry significant reductions in critical accounts that support humanitarian assistance—cuts which were viewed as callous in the face of multiple complex crises. The funding levels in the final bill passed by Congress better reflect the considerable need for life-saving aid around the globe.

In addition, the bill would allow ESF funding to be used to contribute to the World Bank’s Concessional Financing Facility, which was established to support middle-income countries hosting large refugee populations. As a CGD-IRC joint report notes, active engagement from development actors like the World Bank in this area is a notable change from the past, but a critical one in addressing the complex challenge of protracted displacement.

Meeting the multilateral request

As my colleague Scott Morris has pointed out, the Trump administration frequently exhibits skepticism toward multilateral engagement. While the administration’s FY18 request for US contributions to the international financial institutions largely met existing obligations, it lacked any ambition. Despite a low starting point in the House, Congress ultimately fulfilled the administration’s request and included a bit of additional funding for the Global Environment Facility. But the real test for both the administration and Congress is likely to come over the next couple of years as the World Bank’s International Development Association and a number of regional development banks and vertical funds hold replenishments.

The bill’s explanatory statement includes language that could help pave the way for a future multilateral aid review. Federal agencies will be required to submit a report that includes:

1) a description of the current tools, methods, and resources, including personnel, employed by the Department of State, USAID, the Department of the Treasury, and other relevant Federal agencies, to assess the value of, and prioritize contributions to, international organizations and other multilateral entities; and (2) recommendations for the development of more effective tools and methods for evaluating United States participation in, and contributions to, such organizations and entities.

Restoring global health spending

Proving once again that US global health spending enjoys strong bipartisan support on Capitol Hill, the bill restores funding for global health programs that were shortchanged in the President’s budget request.

The bill also explicitly calls on the administration to bring together actors from across the federal government to produce a global health security strategy. My global health colleagues assure me that an infectious disease outbreak requiring substantial US action and leadership is a matter of when, not if. Advancing a proactive agenda to address the threat of future pandemics is smart policy.

In addition, where the Trump administration’s FY18 budget had zeroed out family planning and reproductive health spending, the omnibus bill ignores that completely providing level funding ($607.5 million) compared to FY17.

Development finance: continuing support, awaiting reform?

The president’s budget request for FY18 indicated the administration planned to wind down the Overseas Private Investment Corporation (OPIC). Thankfully, the administration’s position has evolved considerably since then. The omnibus bill provides a slight boost to OPIC, just as debate heats up on proposed legislation that aims to strengthen US development finance.

With growing talk of reform, the explanatory statement asks the relevant federal agencies to review and report on how best to ensure coordinated development finance that delivers development impact—building off language in the report that accompanied the House bill.