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International Affairs Budget Update
August 24, 2018

Administration Readying Unprecedented Proposal to
Rescind Billions from the International Affairs Budget

The Administration is readying a proposal to rescind or cancel up to
several billion dollars in congressionally approved funding for
America's development and diplomacy programs. Such an effort
- targeting no more than 0.07% of the federal budget - is
widely seen as a political move to draw down overseas resources
leading up to the midterm election. The Administration's
proposal could be sent to Capitol Hill as soon as next week -
just one month before the end of the fiscal year - though we
understand legal, legislative, and political concerns may mean the
Administration presses pause on the effort.

This latest effort by the Administration - the fourth time in
two years - to slash the International Affairs Budget is not
only another example of the Administration disproportionately
targeting these programs for cuts, it is also an unprecedented attempt
to circumvent Congress's constitutionally mandated power of the
purse. If released, the proposal could have far-reaching legal
implications for discretionary spending and the separation of powers.

Below we outline some of the rumors surrounding the proposal, certain
legal implications of such a proposal, the precedent-setting nature of
this move by the Office of Management and Budget (OMB), and the
reaction on Capitol Hill. Please note that that the descriptions of
legal precedent below have been simplified and should not be
considered a legal opinion.

The Proposal

While the package is not final, OMB is drafting a rescissions proposal
that would target funding from the previous two fiscal years
(2017-2018). The programs affected directly advance America's
security and economic interests, and reportedly could include the
following:

* Development assistance programs supporting children like those
operated by UNICEF;
* Security programs, potentially including military assistance to
partners and programs helping fight the opioid crisis; and
* Peacekeeping and other UN programs, which could directly impact
America's reform agenda at the UN.

According to the Budget and Impoundment Control Act of 1974
("Impoundment Act"), the Administration can only propose
to rescind unobligated funding, i.e. money that has not yet been
formally spent or obligated to projects. As such, as the State
Department and USAID are continuing to obligate funding before the
rescissions package is sent to Capitol Hill, the programs being
targeted and funding levels proposed for rescission could and very
likely will change.

Timing Concerns

As discussed before, the Impoundment Act permits the Administration to
send packages of funding cancelations, or rescissions, to Congress for
consideration. Lawmakers then have 45 days to approve, deny, or ignore
the rescissions package, during which time the funding in question is
frozen.

http://action.usglc.org/site/R?i=5j10G2O-Gs0G7tctQzW-eQ

As we understand it, OMB is specifically targeting funding that would
otherwise expire at the end of the current fiscal year (September
30th). In so doing, and given the very short period of time before the
end of the fiscal year, the funding proposed for rescission could very
well expire without Congress having time to appropriately consider the
proposal.

Setting Precedent

If the Administration initiates the rescissions process by submitting
its proposal next week, Congress - and the Government
Accountability Office (GAO) - will face uncharted territory as
there is no case law governing a rescissions package proposed so close
to the end of the fiscal year.

Per the Impoundment Act, GAO is the arbiter of rescissions. When the
Administration submits its proposal, GAO also reviews the package to
determine the legality of the individual funding cancelations. Once it
has made those determinations, Congress may consider the proposed
rescissions deemed valid.

There are several legislative and legal hurdles associated with a
proposed rescission package this close to the end of the fiscal year.
Two examples include:

* Prudent Obligation: Under deferral case law, GAO has found that
deferrals of funding are illegal if funding is deferred for so
long that an agency does not have time to "prudently
obligate" funding. Because there is no precedent for this
rescissions package with regards to timing, GAO would likely
refer to deferral case law - thereby bringing prudent
obligation into play.

* 45-Day Freeze: Current precedent under the Impoundment Act
allows the Administration to hold or freeze any funding proposed
for rescission for 45 days while Congress considers the
proposal. However, it is unclear and without significant
precedent as to whether the Administration can hold the funding
for the 45-day period after Congress acts. If this were the
case, even with Congressional action, the Administration could
hold funding long enough for it to expire at the end of the
fiscal year.

Reaction on Capitol Hill

Members of Congress across the aisle and on both sides of the Capitol
are speaking out in opposition to this proposed package, expressing
concerns not only over the disproportionate targeting of development
and diplomacy funding but also with executive overreach regarding the
separation of powers and Congress's "power of the
purse."

Senate Foreign Relations Committee Chairman Bob Corker (R-TN) has
called OMB's rescissions plan a "breach of trust"
with Congress and said "we certainly look forward to seeing how
to counter that." Ranking Member Bob Menendez (D-NJ) has
questioned the legality of OMB's actions, saying "that will have
consequences." Senate State-Foreign Operations Appropriations
Subcommittee Chairman Lindsey Graham (R-SC) has criticized the
rescissions proposal, saying, "I think it's a bad idea. I
think it will blow up the body, and I hope it dies."

Other leaders, including Senate Appropriations Committee Chairman
Richard Shelby (R-AL), are also publicly expressing concerns and
Senate Majority Leader Mitch McConnell (R-KY) and House Foreign
Affairs Committee Chairman Ed Royce (R-CA) are involved in discussions
with the Administration on this effort.

Next Steps

While we understand the rescissions package could be sent to Congress
next week, there remains a chance the Administration will choose to
abort their plans and not send the package to Capitol Hill. In the
event the proposal is released and sent to the Hill, Congressional
leaders are working behind the scenes on several options to respond to
the issues raised by this potential rescissions package, including a
legislative solution that would possibly extend the targeted funding
past September 30th. However, this is not an easy fix.

USGLC remains heavily involved and engaged both with lawmakers on
Capitol Hill and with Administration officials. We will provide
further details as they are available.


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