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International Affairs Budget Update December 16, 2014

Detailed Analysis of International Affairs Funding in Final FY15 "CROmnibus" Appropriations Agreement

Following extensive last-minute negotiations and near defeat in the House, the $1.014 trillion FY15 CROmnibus appropriations agreement was passed by the House on Thursday (219-206) and the Senate on Saturday (56-40). The measure, which includes full-year funding for 11 of the 12 annual appropriations bills (including State-Foreign Operations), was signed into law yesterday by the President.
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As reported last week, the overall FY15 funding levels for the International Affairs Budget fared relatively well in the final spending package - but the
continued erosion of base programs is a major concern. Overall, the total FY15 International Affairs appropriation, including Overseas Contingency Operations (OCO) and international food aid funding in the Agriculture bill, comes to $50.9 billion: $41.6 billion in base funds and $9.26 billion for OCO. Taken together, this is an increase of $300 million (0.6%) over current FY14 enacted levels. Separately, the final spending package includes $2.5 billion for International Affairs programs to combat the Ebola crisis in West Africa. USGLC's press statement on the bill is found here.
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Despite the relatively strong overall funding level for International Affairs accounts, the final agreement heightens concerns about the continued erosion of base International Affairs accounts. FY15 base appropriations fall $2.5 billion (5.6%) compared with current levels and are 16% below base
funding in FY10. To make up for this shortfall, the appropriation increases OCO by $2.8 billion. OCO is the off-budget account that largely funds U.S. support for the Frontline states of Afghanistan, Pakistan, and Iraq, but it is increasingly being utilized to address other emergency contingency issues.

Included in this Update:

1. Highlights of Increases and Decreases
2. Notable Program Funding and Policy Issues
3. Account-by-Account Detail of FY14 International Affairs Appropriations
4. Additional Information and Resources

1. Highlights of Increases and Decreases

Given that overall FY15 funding remains basically flat at FY14 levels, many International Affairs accounts are funded at the same level or close to current
amounts. In a few cases, however, there are notable increases and decreases. These and other major outcomes for the FY15 International Affairs Budget are discussed below.

Highlights of Increases Compared with FY14 enacted (figures include base and OCO)

State Department Operations and Related Accounts:
* State Department Inspector General: up 9.2% (+$11 million)
* Educational and Cultural Exchange Programs: up 3.6% (+$21 million, increases primarily for Academic Programs and Professional and Cultural Programs)
* Contributions to International Organizations: up 9.9% (+$133 million, no funding for UNESCO)
* Contributions for International Peacekeeping: up 20% (+$353 million, see below for more)

Foreign Assistance:
* USAID Operating Expenses: up 6.7% (+76 million, see more below)
* International Disaster Assistance: up 5.2% (+94 million, see more below)
* Transition Initiatives: up 17.5% (+$10 million)
* Complex Crisis Fund: up 25% (+10 million)
* Peacekeeping Operations: up 8.7% (+$38 million)

Investment Assistance:
* U.S. Trade and Development Agency: up 9% ($5 million)

Highlights of Decreases Compared with FY14 (Figures include Base and OCO)

State Department Operations and Related Accounts:
* State Department's Capital Investment Fund: down 27.7% (-$21 million, but at FY15 request)
* Embassy Security: down 13.1% (-$350 million, but in line with FY15 request)

Foreign Assistance:
* World Bank's International Development Association: down 4.9% (-$67 million, but in line with FY15 request)
* Global Agricultural Food Security Program: down 100% (-$133 million, but at FY15 request)

Investment Assistance:
* Overseas Private Investment Corporation Program Account: down up 7.4% ($2 million, OPIC is authorized through FY15)

Programs Requested for FY14 but Not Funded

* Peacekeeping Response Mechanism: $428 million requested (see more below)
* Counterterrorism Partnership Fund: $1 billion requested
* Multilateral Debt Relief Initiative: $93 million requested
* Middle East and North Africa Fund: $5 million requested
* International Monetary Fund: $315 million requested (see more below)

2. Notable Program Funding and Policy Issues

Humanitarian Aid Programs: Bipartisan Support for a Strong U.S. Response to Growing Emergency Demands

2014 continued the unprecedented escalation of global humanitarian emergencies in decades, including the conflict in Syria, the havoc
brought by the Islamic State in Syria and Iraq, the human and economic devastation caused by the Ebola outbreak in West Africa, conflicts in the Central African Republic, South Sudan, and Ukraine, and crises elsewhere. For the first time ever, USAID has had four Disaster Assistance Relief Teams (DARTs) deployed simultaneously, severely stretching the capacity of American efforts to respond to these multiple disasters.

The final appropriations agreement provides for a strong U.S. commitment to assist victims of strife and natural disasters (excluding Ebola) by increasing USAID's International Disaster Assistance program by 5% and maintaining robust budgets for the State Department's Migration and Refugee Assistance and the Food for Peace programs that had grown considerably in FY14 appropriations. Combined, these three accounts receive $6.4 billion in FY15, exceeding the Administration's request by $2.9 billion, or 83%. The spending measure further directs that a significant portion of this increase be used to address needs in the Middle East. State Department and USAID officials believe amounts appropriated will be sufficient to address current emergencies, although as recent years have shown, global crises can erupt rapidly and without advance warning.

One issue of concern, however, is that humanitarian aid budgets are now primarily funded through the OCO account and not within base funding. For the first time, more than half (54%) of emergency humanitarian spending comes through OCO. For FY14 the amount was only 35%. As lawmakers review future budgets and consider projections to decrease OCO significantly as U.S. combat troops are withdrawn, it will be critical to either transition large amounts of humanitarian resources to base accounts or redefine the purpose and nature of OCO to go beyond the Frontline States focus of its current configuration.

Significant Funding Provided to Address Ebola Crisis

Congress was equally responsive to the Administration's package to respond to the Ebola crisis, both at the source in West Africa and in the United States, with an eye towards strengthening global health care systems more broadly. While the final appropriations agreement reduces the $6.2 billion request to $5.5 billion, the cuts primarily fall on the recommended "contingency" funds. In fact, Congress moved about half of the requested "contingency" resources to the "emergency" category, thereby increasing Ebola resources that are immediately available.

For International Affairs programs, the final measure provides $2.5 billion in emergency spending, about $400 million more than proposed (not including requested contingency funds). Importantly, the appropriation increases resources under the ESF account from $211 million requested to $711 million.
These funds are available to mitigate some of the broad and potentially long-lasting impacts of the Ebola tragedy with a focus on economic recovery, governance, and crisis management and preparedness in the affected countries. Although Congress denies funding for a few elements of the Ebola request, including contributions to international organizations, the legislation allows transfers to these unfunded accounts should they become high priorities. Moreover, the Centers for Disease Control (not an International Affairs Budget account) receives about $600 million to strengthen weak health systems in roughly 18 countries. Fighting the disease at its source is critical not only to save lives but also to protect American interests by increasing the likelihood that Ebola and other diseases will not turn up in the United States.

Global Health: Virtually Flat Funding but with Some Redistribution Among Programs

As approved, the FY15 agreement provides $8.45 billion for the State Department and USAID Global Health account, 0.2% ($15 million) more than in FY14. The most significant change within the State Department portion of Global Health was the shift of $300 million from the U.S. contribution to the Global Fund to Fight AIDS, TB, and Malaria to bilateral PEPFAR activities. The U.S. can only account for one-third of total contributions by all donors under the most recent replenishment agreement. With a smaller replenishment, the U.S. can only transfer $1.35 billion in FY15 rather than the $1.65 billion provided last year under a previous replenishment.

As shown in the table below, most FY15 Global Health programs are frozen at current amounts. None are reduced except for the Global Fund. Maternal and Child Health receives a small increase while bilateral PEPFAR expands due to the transfer from the Global Fund.

Development Assistance: Flat Funding

Development Assistance (DA), the account that funds most bilateral non-health programs, is identical to FY14 at $2.5 billion. This continues roughly the same amount for DA since FY10 (excluding a one-time increase in FY13). Several development sectors funded largely out of the DA account also receive the same allocation under the final FY15 appropriations measure as shown in the table below. Some - biodiversity, trafficking in persons, wildlife trafficking, and water/sanitation - receive increases over current amounts.

USAID Operating Expenses and USAID Forward: Increased Funding

In 2010, USAID Administrator Raj Shah announced a series of ambitious reforms - that later became known as USAID Forward - to strengthen the Agency's ability to deliver more impactful results, create stronger partnerships with the private sector and local development partners, and to identify and scale up innovative solutions to challenging development problems. In 2014, the Agency broadened its reform package by creating the Global Development Lab that consolidates USAID efforts to bring together diverse partners to discover, test, and scale breakthrough solutions with the goal of ending extreme poverty by 2030. An important part of continuing to implement USAID Forward is the extent to which Congress supports USAID's Operating Expenses (OE) account.

The final spending measure includes $1.22 billion for USAID OE, nearly 7% higher than FY14. This total is augmented by other, non-appropriated resources drawn from reimbursements, trust funds, and unspent money brought forward from the prior year. Combining appropriated and non-appropriated amounts, USAID will have about $1.43 billion to fund its operations in FY15.

Beyond funding levels, the measure further encourages USAID to continue its reform efforts. The legislation funds the Global Development Lab and urges the Agency to proceed with innovative solutions to global development challenges. It also directs USAID to develop a plan that will strengthen Foreign Service Officer training that incorporates local sustainable development practices, another key element of USAID Forward. USAID OE funds, however, will not permit any increase in Agency positions.

Peacekeeping Operations: Increased Congressional Support

For the past several years, House and Senate spending bills have been in sharp disagreement over spending levels for U.S. contributions to global peacekeeping operations, especially those undertaken by the United Nations. The FY15 debate was no exception with the House providing only $1.77 billion for UN operations compared with Senate and Administration proposed amounts of $2.52 billion.

While the appropriations outcome in previous years has created shortfalls in the degree to which the United States could contribute to global PKO missions, it appears that final FY15 appropriations will allow the U.S. to respond much more robustly to existing peacekeeping operations and to those that may emerge during this fiscal year. Despite not funding the Administration's Peacekeeping Response Mechanism proposal, something intended to grant greater flexibility in responding to unanticipated PKO requirements between budget cycles, the $2.12 billion appropriation for UN peacekeeping missions represents a 20% increase over FY14. Additionally, although it does not meet the Administration's request of nearly $3 billion UN missions and
the Mechanism, the appropriations bill provides important transfer authorities that will bolster PKO funding needs throughout the year. The final appropriations measure allows the State Department to transfer $588 million of FY14 unobligated Diplomatic and Consular Program funds to the UN PKO account. The bill permits a further transfer of up to $380 million from OCO bilateral economic assistance. This potentially makes available over $3 billion for UN peacekeeping missions, roughly the current need.

Frontline States funding levels: Amounts to be determined later

U.S. resources for both diplomatic and foreign assistance activities in Afghanistan, Pakistan, and Iraq have dominated the International Affairs Budget for a number of years, with the Global War on Terror as the top U.S. national security priority. As recently as FY12, American investments in the Frontline States totaled $11.2 billion -- representing 19% of the entire International Affairs Budget.

For FY15, the Administration had proposed about $5 billion for State Department operations and foreign assistance in Afghanistan, Iraq, and Pakistan. Instead of setting specific directives on amounts available for the Frontline States in the final FY15 appropriations package, as has been the practice in past years, the appropriation instructs the Secretary of State to submit funding amounts for each country in the required report to Appropriators showing how the Administration plans to allocate FY15 funds. The report, which should be submitted to Congress in a few months, will be the source of consultations between the two branches and may lead to modifications of State Department decisions.

Middle East Response

In recent years, the Administration has sought funding and authority from Congress for a flexible mechanism that could address various opportunities and challenges emerging in the Middle East. Called the Middle East and North Africa Incentive Fund, the proposal was not supported by Congress in either FY13 or FY14. For FY15, the Administration did not propose a separate Fund for these purposes but rather included $225 million explicitly within the ESF and INCLE accounts for a Middle East and North Africa Initiative. The final appropriations measure appears to more than double amounts for the same general purposes of the Administration's request by specifying that $530 million is available across four security assistance accounts for a "Middle East Response."

Central America Migration

Earlier this year, there was significant attention focused on a surge of unaccompanied minors crossing into the United States illegally. The Administration sought $300 million for International Affairs programs in a much larger FY14 supplemental submission to address the surge, both in the region and for capacity in the U.S. to process and care for these immigrants and to strengthen our borders. Congress did not act on the supplemental before leaving for the August break and as the number of unaccompanied minors diminished, the response for additional resources shifted to regular FY15 appropriations.

Final FY15 appropriations require the Administration to develop a strategy to address factors in Central America that contribute to the migration of unaccompanied children to the United States. In order to fund the strategy, the measure increases by $130 million the Administration's request for El Salvador, Guatemala, and Honduras. Moreover, the legislation provides $148 million more than proposed for Mexico in order to strengthen border security initiatives.

Counterterrorism Partnership Fund and Ukraine Crisis: Key Amendments to the FY15 Request

In a June 2014 speech at West Point, President Obama outlined a $5 billion initiative to join with partner countries to strengthen the ability to fight terrorism globally. Subsequently, the Administration amended its pending FY15 International Affairs Budget request by seeking $1 billion for the Counterterrorism Partnership Fund for the State Department (the balance would come from DOD's budget). As part of the same budget amendment, the Administration asked for $75 million to address growing Russian aggression against Ukraine that threatened a key U.S. friend as well as other
states in the region. The Administration called this the European Reassurance Initiative. These requests, however, came too late for House and Senate Committees to consider as part of their summer markups of the State-Foreign Operations appropriations bill and the issues were left for the final spending package.

Final FY15 appropriations do not include $1 billion for the Counterterrorism Partnership Fund. For the European Reassurance Initiative, however, the legislation provides $75 million under the Foreign Military Financing account for Ukraine, Georgia, and Moldova. It further increases the request by $25 million for U.S. allies in Europe and Eurasia, including a total of $502 million under the Economic Support Fund account. In total, the bill provides $139 million for Ukraine.

International Monetary Fund (IMF): Quota and Governance Reforms Denied

A continuing controversial issue within the State-Foreign Operations appropriation in recent years has been Administration requests for authority to agree to a set of IMF reforms and to re-balance the U.S. quota within the Fund. For the third consecutive year, however, Congress rejects the proposal. IMF reforms, which the U.S. helped negotiate in 2010, have been approved by all G-20 nations. But without U.S. approval they cannot go into effect. The IMF quota changes would not alter the net level of U.S. support for the IMF but would retain U.S. veto power over significant IMF decisions.
During earlier stages of the FY15 appropriations debate, the Senate had approved the IMF reform package while its House counterpart did not. Part of the issue in dispute between the two Houses has been the degree of risk for the United States in altering its quota configuration and how that would
be scored in the bill.

3. Account-by-Account Detail of FY15 International Affairs Appropriations

Account-by-account details for the final FY15 appropriations for International Affairs Programs can be found here. http://action.usglc.org/site/R?i=-oXLiobaymjHRg8i4rog-Q

4. Additional Information and Resources
* FY15 CROmnibus Text and Joint Explanatory Statement http://action.usglc.org/site/R?i=g8NdvS7I2AXbw3oZY-gi8A
* President's FY15 Budget http://action.usglc.org/site/R?i=QymBeDD1qHrtsr2C9aw3pg
* Funding Highlights of FY15 International Affairs Budget Request http://action.usglc.org/site/R?i=_HtbDPsrL7bFgI_D-4-4aA
* FY15 Executive Budget Summary - Function 150 and other International Programs http://action.usglc.org/site/R?i=J7oHeRhY0-S4ReSZpMTDrw
* FY15 International Affairs Budget Fact Sheet http://action.usglc.org/site/R?i=6gqnQzSXhU2lNwu5F-xpGA
* FY15 State Department and USAID Funding Highlights http://action.usglc.org/site/R?i=dL-42fD2uxGO2nxPVJf_-Q


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