Capping off a week of high-stakes negotiations between House Speaker Nancy Pelosi (D-CA) and Treasury Secretary Steven Mnuchin, on Monday night the Administration and bipartisan Congressional leaders announced a landmark budget deal to raise discretionary spending caps for FY20 and FY21. The agreement, which also includes a two-year suspension of the debt ceiling, provides relief from the final two years of strict spending caps imposed by the 2011 Budget Control Act.

Congress is expected to approve the deal before leaving town for the August recess, paving the way for Congress to finalize FY20 spending and avoid a government shutdown in September.

Budget Deal Details
Under the budget deal, total discretionary spending will increase by $320 billion over two years, split between:

• Defense: Increased by $90.3 billion in FY20 and $81.3 billion in FY21
• Non-Defense Discretionary (NDD): Increased by $78.3 billion in FY20 and $70.4 billion in FY21

In addition to these spending increases, the budget deal includes an extra $2.5 billion in NDD funding for the census in FY20, and Overseas Contingency Operations (OCO) funding, which is not subject to spending caps. OCO funding is split between:

• Defense: $71.5 billion in FY20 and $69 billion in FY21
• Non-Defense Discretionary (NDD): $8 billion in both FY20 and FY21

The deal provides for $77.4 billion of these spending increases to be offset. Additionally, as part of the deal, the Administration and bipartisan Congressional leaders agreed that there will be no “poison pills” included in FY20 or FY21 appropriations bills and to work together to ensure “orderly and timely consideration” of appropriations bills to “avoid a government shutdown, and a 12-bill omnibus.”

Impact on the International Affairs Budget

While the budget deal increases non-defense discretionary (NDD) spending by $27 billion (4.5%) in FY20 alone, funding requirements for veterans’ healthcare, the census, and other domestic priorities could complicate efforts to ensure the International Affairs Budget is fully funded. The deal does not set funding levels for specific programs or agencies, instead leaving those decisions to the House and Senate Appropriations Committees.

Overseas Contingency Operations (OCO) funding accounts for 14% of the total International Affairs Budget and, importantly, the budget deal maintains non-defense (i.e. international affairs) OCO at the FY19 enacted level of $8 billion in both FY20 and FY21. As a result, Congress and the Administration have ensured that the International Affairs Budget is not facing dangerous cuts before negotiations on final spending levels even begin.

USGLC President and CEO Liz Schrayer released a statement applauding Administration and Congressional leaders for reaching a new bipartisan budget deal and urging Appropriators to fully fund the International Affairs Budget at $60 billion in FY20 to advance our nation’s interests and values.

Next Steps

Over the past 48 hours, Administration officials and Congressional leaders have been working to shore up bipartisan support for the budget deal. The House is expected to approve the deal later today, followed by a Senate vote next week.

House and Senate Appropriators will then be tasked with reaching an agreement on the final topline spending levels – or 302(b) allocations – for individual FY20 appropriations bills. To do this, lawmakers must decide how to distribute the non-defense discretionary spending increase among numerous appropriations bills – including the State-Foreign Operations bill, which funds the vast majority of the International Affairs Budget.

Congress has until September 30 to enact final FY20 spending bills or pass a short-term Continuing Resolution (CR) to buy more time for negotiations. Given that the Senate Appropriations Committee is not expected to begin mark-ups on its appropriations bills until early September, a stopgap measure may be necessary to keep the government open while spending bills are being finalized.