In a surprise conclusion to months of unsuccessful negotiations, early this morning Congress approved a sweeping budget deal to lift discretionary spending caps for FY18 and FY19 – but only after a drama-filled 48 hours that culminated in a five-hour government shutdown. The bipartisan agreement also includes a six-week Continuing Resolution (CR) extending FY17 funding levels through March 23 and several other priority items, including emergency disaster relief funds and a one-year suspension of the debt ceiling.

Budget Deal Details

Under the budget deal, total discretionary spending will increase by $296 billion dollars over two years, split between:

• Defense: Increased by $80 billion in FY18 and $85 billion in FY19
• Non-Defense Discretionary (NDD): Increased by $63 billion in FY18 and $68 billion in FY19

As part of the budget deal, Congressional leaders agreed that approximately $42 billion (or $21 billion per fiscal year) of the non-defense discretionary (NDD) spending increases would be targeted to support specific domestic priorities, including NIH research, opioids and mental health, veterans, infrastructure, child care, and higher education.

In addition to the spending increases outlined above, the budget deal includes Overseas Contingency Operations (OCO) funding, which is not subject to spending caps. OCO funding is split between:

• Defense: $71 billion in FY18 and $69 billion in FY19
• Non-Defense Discretionary (NDD): $12 billion in FY18 and $8 billion in FY19

Impact on the International Affairs Budget

Nearly one-third of the International Affairs Budget is currently funded through Overseas Contingency Operations (OCO). Under the budget deal, non-defense OCO (i.e. international affairs OCO) is funded at $12 billion in FY18 – an $8.8 billion cut from the FY17 level of $20.8 billion. This cut is in line with the lower non-defense OCO levels outlined in the Administration’s FY18 budget request and the House-passed FY18 State-Foreign Operations Appropriations bill, as opposed to the higher $20.8 billion level included in the Senate’s FY18 State-Foreign Operations Appropriations bill.

In order to maintain current funding levels for the International Affairs Budget if non-defense OCO is funded at $12 billion in FY18, the base budget would need to be increased to compensate for the cut to OCO. The budget deal does not specify funding levels for individual accounts and it remains to be seen how Appropriators will allocate the additional NDD funds. While the deal does include a significant increase in NDD spending, numerous and competing priorities mean Appropriators will have some tough decisions ahead of them – potentially complicating efforts to ensure the International Affairs Budget receives full funding in FY18.

This issue will be compounded in FY19 because even though the budget deal increases the NDD cap by another $5 billion (putting the total increase to NDD spending in FY19 at $68 billion), it funds non-defense OCO at only $8 billion in FY19 – $4 billion less than FY18 and a $12.8 billion cut from the FY17 level of $20.8 billion.

Next Steps

Now that Congress has agreed on topline spending levels for defense and non-defense discretionary spending, the House and Senate Appropriations Committees have six weeks to complete FY18 spending bills.

Appropriators must distribute the additional NDD funds among numerous appropriations bills – including the State-Foreign Operations bill – to determine the new topline spending levels, called 302(b) allocations. Once the new topline spending levels are in place, Appropriators will set spending levels for individual programs.

USGLC’s President and CEO Liz Schrayer issued a statement urging the House and Senate Appropriations Committees to fully fund the International Affairs Budget at no less than current levels in FY18.