The next four weeks promise to be action-packed on the budget and appropriations front as Congress and the White House work to: (1) replace the sequester, (2) finalize FY13 funding before the Continuing Resolution (CR) expires at the end of March, and (3) begin action on the FY14 budget.

Sequestration

On sequestration, the Senate will likely vote this week on a Democratic package that will replace the sequester through the end of 2013.  Their package includes $55 billion in revenue increases and $55 billion in spending cuts (evenly divided between cuts to Defense and cuts to agricultural subsidies).  A vote on a yet-to-be released Republican alternative is also anticipated, but neither measure will muster sufficient votes for passage.  House action this week appears unlikely.

Against this backdrop, policymakers are offering various proposals on other areas of the budget to cut rather than through across-the-board cuts.  For example, last week Senator Rand Paul (R-KY) released a plan to achieve $85 billion, in part through a 50% reduction in foreign assistance spending, a freeze on federal hiring, and a 25% reduction in federal travel.

Completing FY13 Appropriations

With regard to finalizing FY13 appropriations, appropriations leaders in the House and Senate are working on measures that would resolve FY13 funding before the current CR expires on March 27.  House Appropriations Committee Chairman Hal Rogers (R-KY) is expected to put forward a modified CR that would last for the remainder of the fiscal year that includes the FY13 Defense and Military Construction-Veterans Affairs appropriations bills.  Senate Appropriations Chairwoman Barbara Mikulski (D-MD) is working on a parallel but slightly different track, as she prefers an omnibus FY13 spending package of all the appropriations bills rather than a modified CR.  Whatever the makeup of this package, it is expected to be the vehicle for moving any agreement that is reached to undo the sequester in its current form — either by reducing the size of the cuts themselves and/or giving agencies flexibility in determining how these cuts should be made.

Beginning Work on FY14 Budget

Despite uncertainty about the timing of the Administration releasing the FY14 Budget request, Congress is planning to move forward with their FY14 budget work in the next few weeks. Normally the President would have released his request the first week of February, but all the “fiscal cliff” and related budget negotiations in recent weeks have delayed the process.  The House and Senate Budget Committees are tentatively scheduled to mark up their respective FY14 Budget Resolutions the week of March 11^th, with floor consideration the following week of March 18^th.  The President could release his request as early as mid-March.

While the Senate has not considered a Budget Resolution since 2009, for the past two years the House adopted Budget Resolutions that cut International Affairs deeply.  House recommendations for FY12 and FY13 averaged $36.6 billion for “base” programs, representing a 17% reduction from current levels – and a dramatic 29% reduction since FY10.  House Budget Committee Chairman Paul Ryan (R-WI) has already promised his FY14 proposal will balance the budget in 10 years, meaning very deep cuts to discretionary programs are likely.

Senate floor action on the FY14 budget resolution is likely to feature several cutting amendments to International Affairs Budget.  In the Senate, floor consideration of the Budget Resolution is often referred to as a “vote-a-rama” because there are no limitations on the germaneness of amendments, with hundreds of amendments brought up for a vote.  As he has over the past several months, Senator Paul – and potentially others – will likely propose cuts to the International Affairs Budget on the floor.

2.    Impact of Sequestration on International Affairs Budget

With congressional action unlikely before this Friday’s deadline for trigger of sequestration, the Office of Management and Budget (OMB) will order $85 billion in sweeping cuts from the FY13 budget.  Divided evenly between Defense and non-Defense, the across-the-board cuts amount to a 5% reduction to non-defense discretionary spending, including $2.9 billion from the International Affairs Budget.  Defense programs will be cut 7.9%.

On February 11^th Secretary of State John Kerry sent a letter to Senate Appropriations Committee Chairwoman Mikulski urging Congress to avert sequestration, citing grave concerns that “cuts of this magnitude would seriously impair our ability to execute our vital missions of national security, diplomacy, and development.”  In the letter, Kerry warned that sequestration would inhibit efforts to fight disease and hunger, as well as curtail America’s ability to respond to security and humanitarian crises.

Secretary Kerry also used his maiden speech on February 20^th at the University of Virginia to layout the case for strong U.S. diplomacy and development programs.  Secretary Kerry declared that “no investment we make that’s as small as what we put toward foreign policy returns such a sizeable benefit for ourselves and our fellow citizens of the world.”

The impact of sequestration was also detailed in a report recently released by House Appropriations Committee Democrats.  According to the report, the cuts under sequestration translate potentially to 1.2 million fewer mosquito nets to prevent malaria deaths, HIV/AIDS treatments for 171,900 people, food or education assistance for 238,500 children, and cuts to basic operations for the State Department and USAID that “directly compromise the ability of the United States Government to help promote U.S. business opportunities overseas, open new markets for U.S. firms… and create a level playing field for U.S. firms to compete for foreign government and private contracts.”

Other reductions that result from the across-the-board cuts include:

• USAID operating expenses cut $68 million;
• Diplomatic and Embassy security cut $154 million;
• Global health cut $411 million, including a $278 million cut to PEPFAR;
• Humanitarian assistance cut $227 million;
• Law Enforcement and Counternarcotics programs cut nearly $103 million; and
• International peacekeeping cut $111 million.

International Affairs Budget Snapshot