1. Budget Deal in Depth: Impact on FY16 and FY17

The Budget Deal announced earlier this week quickly made its way through Congress and is headed to the President’s desk for signature.  The House passed the deal by a vote of 266-167 on Wednesday and the Senate followed suit early Friday morning, passing the bill by a vote of 64-35.  The bill, the Bipartisan Budget Act (BBA), not only suspends the debt limit until 2017, but sets the U.S. Government on a solid funding path for the next two fiscal years.

As we mentioned in our analysis earlier this week, the bill increases total discretionary spending by $66 billion in FY16. And for the second year of the deal (FY17) it increases spending by $46 billion.  Excluding the Overseas Contingency Operations account, the deal increases discretionary spending by a total of $80 billion over two years. As a reminder, the additional funding—which is offset by cuts to mandatory programs and revenue increases—is divided evenly between Defense and Non-Defense Discretionary programs:

• Non-Defense Discretionary (NDD): Increased $25 billion in FY16 and $15 billion in FY17
• Defense: Increased $25 billion in FY16 and $15 billion in FY17
• Overseas Contingency Operations (OCO): Increased $16 billion in FY16 and FY17 to be split evenly between Defense and Non-Defense Discretionary

The table below summarizes the budget deal’s impact on the NDD portion of the budget, which includes the International Affairs Budget.

Non-Defense Discretionary Funding Under the Budget Agreement

*FY15 is enacted, FY16 is requested, and FY17 assumes funding would be held flat.

The House and Senate Appropriations Committees have already begun the process of conferencing the different appropriations bills; however, after the BBA is signed by the President, the Committees will release new allocations for each funding bill—known as 302(b) allocations. As we highlighted earlier this week, there are two key unknowns that will be resolved during the final appropriations process:

• How dependent will the International Affairs Budget be on OCO versus base funding? If, as has sometimes been done in the past, Appropriators use the OCO account to free up funding for other NDD programs, it could lead to a cut in base International Affairs funding. This is concerning because — given the temporary nature of the account — an over-reliance on OCO significantly threatens funding for programs that address long-term, enduring challenges.

• Second, how much flexibility will be permitted in the use of OCO funding? Initially, OCO funds were used solely for operations and programs in Iraq, Pakistan and Afghanistan. Congress has since allowed funds to be used for other emergencies or extraordinary circumstances. But additional flexibility to use OCO to address the Syrian humanitarian crisis and other emerging crises will be needed.

As the BBA moves into the appropriations process, we will provide additional Budget Updates and analysis. We will, in particular, be closely watching to see whether the International Affairs Budget receives at least a proportional increase in its allocation compared to the rest of NDD and what types of programs will be funded in the expanded OCO account.

2. Ex-Im Moves Through House; Foreign Aid Transparency Bill Reintroduced

Export-Import Bank Reauthorization Passes the House

On Tuesday, the House voted 313-118 to renew the Export-Import Bank for another four years via a discharge petition, a rarely used procedural tactic that forced a vote on the floor.  The authorization for the Export-Import Bank expired on June 30th after Congress failed to approve its reauthorization in the wake of opposition from several conservative Republicans, prohibiting the agency from making new loans.

Despite this movement, getting the reauthorization to the President’s desk will still take more work.  The Senate passed the reauthorization as part of its long-term version of the highway bill in July.  The path forward for the reauthorization appears to be a combined House and Senate highway bill that would be voted on next month.

Foreign Aid Transparency and Accountability Act Reintroduced

Last week, Representatives Ted Poe (R-TX) and Gerry Connolly (D-VA), and Senators Marco Rubio (R-FL) and Ben Cardin (D-MD) reintroduced the Foreign Aid Transparency and Accountability Act of 2015 (H.R. 3766, S. 2184).  The bill seeks to enhance the accountability and effectiveness of U.S. foreign assistance programs, as well as to ensure that these programs continue to be transparent and results driven.  The bill would help codify the game-changing reforms undertaken by multiple Administrations in the past decade, and particularly those embraced by USAID.  USGLC issued a press release in support of the bill last week, stating that the “bipartisan legislation will contribute to strengthening America’s global leadership, and advancing our interests and values around the world.”