1. House State-Foreign Operations Bill Released: Deep Cut to Topline

This week, the House Appropriations Committee announced $47.4 billion in topline spending for its FY18 State-Foreign Operations (SFOPS) bill, known as the 302(b) allocation. The $47.4 billion is split between $35.3 billion in base and $12 billion in Overseas Contingency Operations (OCO) funding. In particular, OCO funding takes a major cut compared to last year.

There are two ways to compare this funding level to FY17. Both are deep and would have a significant impact on programs, if enacted:

• Compared to the total FY17 enacted level of funding, which includes the supplemental to combat ISIS that Congress passed in December, the House proposal cuts funding by 17.4%, or $10 billion;
• If the ISIS supplemental is excluded, the proposal is 10.7% below current levels, or $5.7 billion.

State-Foreign Operations Budget Snapshot

*Includes $4.3 billion provided in the FY17 Security Assistance Appropriations Act

While an improvement on the Administration’s proposal, compared to the funding allocations for the other 11 appropriations bills, the cut to the State-Foreign Operations 302(b) allocation is disproportionate, with the Financial Services spending bill taking the next highest level cut of about 6%. USGLC President and CEO Liz Schrayer released a statement raising concern that the funding level falls short of current levels and urging the Senate to protect funding for development and diplomacy programs.

It is important to remember that the SFOPS bill funds the lion’s share of the total International Affairs Budget, which was funded at nearly $60 billion in FY17.

Selected Program Highlights

We will share more details when the House Appropriations Committee releases its report to accompany the spending bill (likely next week), but in the interim the bill text and Committee press release provide some detail on specific program funding levels.

• Global Health: The House bill protects Global Health programs compared to the Administration’s request, but funding for the overall account is down 5% ($404 million) compared to FY17. The $8.3 billion provided in the bill is $1.8 billion more than the Administration’s request. More information on specific accounts should be available when the report is released.
  • Similar to the Administration’s expansion of the Mexico City Policy – also known as the Global Gag Rule – in January, the House bill expands the policy to all global health funding.

• Economic and Development Assistance: The House bill rejects the Administration’s proposal to consolidate the Development Assistance, Economic Support Fund, Democracy Fund, and Assistance to Europe, Eurasia and Central Asia (AEECA) accounts into a new State Department-led Economic and Development Support Fund.
  • Notably, the House proposal cuts the Development Assistance account by about 7% ($214 million), far better than the Administration’s proposal but still down compared to current levels.

• Humanitarian Assistance: The bill cuts humanitarian assistance by 24% ($1.9 billion), which is a significant cut although less than the 33% ($2.6 billion) cut proposed by the Administration for the SFOPS humanitarian accounts. Notably, the House Agriculture Appropriations bill also rejects the Administration’s proposal to eliminate the Title II, PL480 Food for Peace program, although it imposes a 13% ($200 million) cut to the program.

• Peacekeeping: The House bill cuts funding for UN Peacekeeping by 22% ($412 million) compared to FY17 levels. It also cuts funding for non-UN Peacekeeping by 30% ($199 million). These cuts, while very deep, are less drastic than what the Administration requested. The Administration proposed cutting UN Peacekeeping by 37% ($711 million) and non-UN peacekeeping by 54% ($358 million).

• Millennium Challenge Corporation: The House bill provides $800 million for the MCC, the same as the Administration’s request but a 12% ($105 million) cut compared to FY17.

• UN and Other International Organizations: The House bill cuts funding to cover U.S. assessed contributions to the UN and other international organizations by 14% ($188 million), roughly half as deeply as the Administration proposed. As the House has done in the past and similar to the Administration’s proposal, the bill eliminates the International Organization and Programs (IO&P) account, through which voluntary contributions are normally funded.

• International Financial Institutions: This is one of the few areas that fares worse in the House bill than in the Administration’s request. Largely reflecting the elimination of funding for the World Bank and climate related programs, the Administration proposed a 16% ($290 million) reduction. The House bill cuts these programs by 50% ($893 million).

• Security Assistance: The House bill cuts funding for security assistance by 7% ($624 million). Notably, one-third of that cut is due to the deep reduction in funding for non-UN peacekeeping operations noted above. The Administration’s budget request protected security assistance and particularly Foreign Military Financing for key allies, including Israel, Egypt, and Jordan.

• Diplomatic Operations and Embassy Construction: The House bill includes somewhat more modest cuts than those proposed by the Administration for diplomatic operations and USAID operating expenses. The bill would reduce the former by 12% ($1.2 billion) and the latter by 7% ($91 million). It would cut funding for embassy construction and maintenance far less deeply – by about 23% ($697 million), compared to 62% ($1.9 billion) in the request.

• Agencies Slated for Elimination: The House bill rejects the Administration’s proposed elimination of five agencies, although supporting them at reduced funding levels.
  • U.S. Institute of Peace (USIP): The House bill includes $35.3 million, a 7% cut compared to FY17.
  • African Development Foundation: The House bill includes $15 million, a 50% cut compared to FY17.
  • Inter-American Foundation: The House bill includes $11.3 million, a 50% cut compared to FY17.
  • Overseas Private Investment Corporation (OPIC): The House bill includes $70.8 million, a 21% cut compared to FY17.
  • U.S. Trade and Development Agency (USTDA): The House bill includes $70.5 million, a 6% cut compared to FY17.

Next Steps

The House Appropriations Committee is expected to mark up the FY18 State-Foreign Operations bill on Wednesday, July 19. House Republicans are considering a range of options for moving spending bills before the August recess, including a 12-bill omnibus package.

The Senate is much further behind than the House and is unlikely to release its version of the SFOPS spending bills until after the August recess, although with an additional two weeks of session in early August the Appropriations Committee could decide to move forward if the bill is ready.

USGLC is strongly urging the Senate Appropriations Committee to maintain current level funding in its FY18 State-Foreign Operations bill and reject deep and disproportionate cuts to the International Affairs Budget.

2. House Appropriations Committee Approves Bump Up for McGovern-Dole Program

This week the House Appropriations Committee approved the FY18 Agriculture Appropriations bill, which, as we reported last week, restores much of the funding for international food aid programs, which the Administration had proposed eliminating altogether. Notably, the full committee approved a managers’ amendment that included increasing funding for the McGovern-Dole International Food for Education and Child Nutrition program by $16.5 million – back to FY17 levels – compared to the subcommittee level to $185 million. The Senate has yet to introduce its version of the FY18 Agriculture spending bill.

FY18 Agriculture Appropriations International Programs Snapshot

3. Nominations and Hearing Update: Green Moves Forward

On Wednesday, the Senate Foreign Relations Committee (SFRC) voted to approve Ambassador Mark Green’s nomination to lead the U.S. Agency for International Development (USAID). The full Senate could vote to confirm him as early as next week, but with the Senate poised to take up health care and other priorities in the coming weeks a vote could be delayed. As conversations on reform at the State Department and USAID continue in earnest, it is more critical than ever for USAID to have a strong leader in place. This week, SFRC also held a nomination hearing for Ray Washburne to lead the Overseas Private Investment Corporation (OPIC). At the hearing, Washburne lauded OPIC as “shining example for what the government can be” and “a great foreign policy tool.”

The House Foreign Affairs Committee also held two budget hearings, one focused on the Middle East and North Africa and the other on the Western Hemisphere. In both hearings, Members of Congress on both sides of the aisle expressed concern about the Administration’s FY18 budget request. Middle East and North Africa Subcommittee Chairman Ileana Ros-Lehtinen (R-FL)noted, “I believe we have many good programs that should not be cut just for the sake of scaling back.”

4. Reform Update – Listening Report Released, Rumors Abound on Shifts in Bureaucracy

In reform and reorganization news, the “Listening Report” – commissioned by Secretary of State Rex Tillerson and based off of interviews with State and USAID employees – has been released to agency staff. Deputy Secretary of State John Sullivan is now tasked with leading a working group to delve into five areas highlighted in the report as needing reform: foreign assistance programs, overseas operations, technology, staffing, and administration – which will feed into the Department’s submission to OMB. Notably, among other findings, the report noted that USAID employees are deeply concerned about the potential for the agency to lose its current autonomy in the proposed reorganization process.

The Administration is rumored to be considering moving the State Department’s Bureau of Consular Affairs (CA) and Bureau of Population, Refugees, and Migration (PRM) into the Department of Homeland Security (DHS), possibly in an effort to streamline the vetting of refugees. Secretary Tillerson is reportedly against such a move. He is joined by Senate Foreign Relations Committee Ranking Member Ben Cardin (D-MD), who recently said that “the State Department should remain the face of America to the world and the entry point for foreigners traveling here, for consular activities and refugee resettlement.”

Finally, the Co-Chairs of the Modernizing Foreign Assistance Network (MFAN) released a discussion paper on a new architecture for U.S. foreign assistance programs. The paper can be found here. This discussion paper is one of nearly a half dozen reform proposals, which range from calling for the creation of an independent cabinet-level director of development programs across the government to consolidating development programs at the State Department to a consensus in the middle with a USAID Administrator as the premier voice on development and a focus on programmatic efficiencies.