Yesterday leaders of the Budget Conference Committee announced an FY14 and FY15 budget agreement ahead of the December 13 deadline as part of the October agreement to end the government shutdown.  The agreement, announced by Budget Committee chairs Senator Patty Murray (D-WA) and Representative Paul Ryan (R-WI), revises sequester cuts, boosts discretionary spending, and provides appropriators with time to negotiate an FY14 omnibus appropriations bill before the current CR expires on January 15, 2014.

For FY14 the agreement raises discretionary spending to $1.012 trillion—splitting the difference between the House level of $967 billion and the Senate level of $1.058 trillion.  Non-defense discretionary spending, which includes International Affairs programs, will increase $22 billion from current levels while defense spending increases $2 billion.

The agreement includes cuts to mandatory spending and increased user fees to offset the additions in discretionary spending, including:

• Extending sequestration for mandatory programs in 2022 and 2023;
• Extending customs and airline security user fees;
• Limitation on allowable government contractor compensation costs;
• Higher contributions from federal employees to their retirement; and
• Increased premiums paid by companies to the Pension Benefit Guaranty Corporation.

The House is expected to take up the agreement on Thursday or Friday, with Senate action to follow next week.  There is some opposition from conservative Republicans over the increased spending levels, but House leadership has expressed confidence the bill will pass with bipartisan support.

Impact on International Affairs

While the budget agreement will provide a welcome increase in FY14 discretionary spending from current levels, whether International Affairs programs will benefit from the $22 billion boost in non-defense discretionary spending is uncertain.  If the final allocation for base International Affairs receives close to the same proportion of non-defense spending as it did under the FY13 full year CR (about 8.8%), that would translate to an increase of between $1.5 billion to $2 billion for base International Affairs programs – just under a 5% increase.  However, due to the demands facing other non-defense discretionary programs, base International Affairs programs could receive a lower proportion of non-defense spending.  The allocations are likely to be set early next week.

The final funding level for Overseas Contingency Operations (OCO) also will be a key determinant in the total funding for International Affairs programs.  In recent years, Congress has used an increased OCO level to cover emergency issues beyond Afghanistan, Pakistan, and Iraq—such as the humanitarian response in Syria and embassy security.  Current OCO funding is $10.6 billion, but the Administration requested only $3.8 billion due to drawdowns in the Frontline States.  The House and Senate both provide $6.5 billion in their draft FY14 bills, and it is unlikely that the final OCO allocation would exceed that.  Therefore, this reduction in OCO funding could result in a decrease in total International Affairs funding.

International Affairs Budget Snapshot