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This is a joint post with Erin Collinson.

It’s official: no government shutdown until at least October 1, 2014. But perhaps the best news to come out of the passage of the FY14 Omnibus Appropriations legislation is that USG agencies are no longer operating on yet another continuing resolution – congressional guidance that was certainly dated for the State and Foreign Operations-related programs,[1] as well as just about everything else.

So what is in the $1.012 trillion, 1,582 page bill and the explanatory statement that matters to you development wonks?

At $50.6 billion, the total spending for the International Affairs accounts is $1.598 billion less than last fiscal year, even accounting for FY13 sequestration. However, this is largely due to a $6.5 billion cut in Overseas Contingency Operations (OCO) funding (i.e., Afghanistan, Iraq, and Pakistan). The base funding in fact grew compared to FY13 by $2.525 billion and $0.922 billion compared to FY12. The total account remains just over one percent of the entire federal budget.

All $ in billions

FY12

FY13 (post-sequester)

FY14 Request

FY14 House

FY14 Senate

FY14 Final

International Affairs, Total

$54.362

$52.197

$51.806

$41.915

$52.191

$50.599

International Affairs, Base (Less OCO)

$43.158

$41.555

$47.999

$35.393

$45.675

$44.080

Read the whole thing below or jump to a section:

USAID

MCC

OPIC

The IFIs

Global Health

Climate

Food Aid

Extractive Industries

USAID

Even with passage of a full appropriations bill, the outlook for USAID for the rest of the fiscal year remains somewhat hazy. The bill provides $1.140 billion for USAID’s Operating Expenses, $81 million of which is earmarked for front-line states. This is a reduction of nearly 11 percent compared to the FY13 level post-sequestration. However, appropriators note the availability of additional funding sources totaling just over $335 million from trusts and carry-overs that could be used to bolster the agency’s operating budget.

The bigger challenge for USAID in the months ahead may come in the form of restrictions to the agency’s push to increase local procurement. Under the USAID Forward reform agenda, the agency committed to allocating 30 percent of its budget to developing country governments, businesses and NGOs by 2015 – a target designed to advance capacity development in the countries where the agency works. While this is not the first time Congress has expressed concern over USAID’s procurement reform efforts, the bill increases the number of hoops that the agency will need to jump through before limiting competition for large project contracts to local entities.

Appropriators also included restrictions on direct government-to-government assistance, a signal of both chambers’ continued suspicion. As Justin Sandefur has pointed out, misperceptions have helped fuel apprehension about on-budget aid, despite its potential to yield unique collaborations and deliver impact.

In addition, overall development assistance funding took a hit, reduced by nearly 8 percent to $2.5 billion, even while the bill directs higher levels of funding to certain programs and initiatives. As a result, USAID may be forced to make difficult decisions when it comes to the programs without specified allocations. For why these kinds of specified allocations from Congress (amidst other limitations) make USAID “destined to disappoint,” see our former colleague Kate Almquist Knopf’s blog here.

MCC

MCC received $898.2 million in funding; a $45 million or 5.3 percent increase from its FY13 funding of $853 million. Certainly it’s good news to see the MCC fully funded, but less than good news are the policy riders included. As Sarah Rose’s blog discusses in detail, Congress is unhappy with MCC’s threshold program. It limited MCC’s flexibility on threshold programs (which are supposed to help countries gain compact eligibility) in ways that appear targeted more at the MCC Board’s specific country picks—admittedly questionable with respect to Tunisia and Honduras—than at ensuring MCC remains the nimble, independent agency it was authorized to be.

Congress’s concerns about the corruption hurdle also continue (was this a contributing factor to this year’s non-picks by the Board?). Stay tuned for forthcoming work from CGD on suggested reforms to the corruption hard hurdle.

OPIC

OPIC fared pretty well for the remainder of FY14, with a $13 million or 17 percent increase to its administrative and program funding, allowing it to retain $90 million of its annual profits (about $12 million less than the budget request). Allowing OPIC to retain a bit more of its profits for administrative expenses should allow OPIC to hire more employees—currently one of the largest constraints on OPIC’s ability to deploy all of its available development capital. For other ways to unleash OPIC, see this policy proposal.

OPIC also featured heavily in one of the more controversial policy riders in the SFOPS bill, section 7081, which allows Ex-Im and OPIC to engage in non-renewable power-generation projects for FY14, including coal, in IDA and IDA-blend countries beyond the agencies’ existing carbon caps and policies. But the bill also banned US support at the IFIs for any large hydroelectric dams—a renewable power source and one that many think is necessary for reliable electricity access in much of sub-Saharan Africa (though environmental groups often raise concerns). This kind of policy incoherence is not surprising in a bill this large, but as Scott Morris explains, it’s a bit of a “huh?” when it comes to how Power Africa will move forward effectively. Perhaps we’ll see a longer-term resolution in the House’s Electrify Africa bill and the forthcoming Senate version. See Todd Moss’s suggestion for a natural gas exemption to OPIC’s cap for the poorest and least-emitting countries.

IFIs

Congress failed to fund IMF quota reform, which, as Nancy Birdsall explains, is an embarrassment. Nancy and Clay Lowery argued in this op-ed that the minor budgetary cost (which CBO scored at $315 million but it’s debatable that it should have scored at all) to US taxpayers would have helped protect Americans from the costs of the next global financial crisis. 

The omnibus did include, however, $2.6 billion for the MDBs, a $70 million or 2.9 percent increase from FY13, with IDA receiving $1.35 billion, one of the few accounts funded over the President’s request (compare that to the $1.65 billion for the Global Fund and see Scott Morris and Amanda Glassman’s previous takes). Presumably because the MDBs fared well in the omnibus as compared to the House bill from earlier this year, the language that would have allowed the State Department to transfer funds to Treasury for funding some multilaterals. Several of us here at CGD loved this language (though not the funding levels!) because, as Scott Morris put it, “the language could be a driver for a more coordinated approach to foreign assistance budgeting across the executive branch.”

Global Health

Funding for global health programs at USAID and the State Department fared well again, totaling $8.4 billion – nearly 5 percent above FY13 enacted levels. Congress matched the President’s request for global AIDS spending (which accounts for about 67 percent of all global health spending) and exceeded the President’s request for several other programs including TB, maternal and child health, pandemic influenza, and polio. This outcome is welcome, if not surprising. Global health has enjoyed widespread support from Congress for much of the last decade. Summary language from the House Appropriations Committee says it best: “Within [funding for bilateral assistance], programs that support global health and humanitarian assistance are prioritized.”

Climate

One stark difference between the State and Foreign Operations spending bills released by the House and Senate this summer was the treatment of international climate finance. The final omnibus bill provides for contributions to key multilateral funds, including the Strategic Climate Fund ($49.9 million), the Clean Technology Fund ($184.63 million), and the Global Environment Facility ($143.75 million), all of which had been zeroed out in the House bill. The bill also includes $10 million for the UN Framework Convention on Climate Change and Intergovernmental Panel on Climate Change, an international scientific advisory board that releases key reports on climate change science, impact, mitigation, and adaptation. However, perhaps in a nod to the enduring controversy that the subject of climate change stirs in Congress, the bill mandates a comprehensive report on all domestic and international climate change programs and initiatives funded in fiscal years 2013 and 2014.

Food Aid

The omnibus[2] provides $1.466 billion for Title II grants under the Food for Peace Program, the largest component of US overseas food assistance. While the bill does not advance the food aid reform prescribed in the President’s budget, it does include $35 million for private aid organizations, to help offset the need for monetization, an inefficient practice in which organizations sell US commodities abroad to earn money for aid activities.

Last month, Kim Elliott called attention to the Bipartisan Budget Act provision that eliminated the Maritime Administration’s reimbursement for excess transport costs associated with shipping food aid on US-flagged vessels. The legislation requires a report assessing the impact of this policy change, which could effectively reduce the money available for critical food assistance.

Extractive Industries

The omnibus contains language making funding explicitly available for implementing and monitoring associated with the Extractive Industries Transparency Initiative. It also demands that the Treasury Department make it clear that policy of the United States to vote against any international financial institution assistance from the extraction and export of a natural resource if the country’s government has policies preventing or limiting the public disclosure of company payments required by section 1504 of Dodd-Frank Act. Could this help put pressure on the SEC to issue a new final rulemaking for section 1504 in 2014?

Up next, yet another debt limit fight in February and the release of the President’s Budget Request for FY2015 on March 4!

Thanks to Jenny Ottenhoff for her contribution on global health. And, as with all things budget, to USGLC for their excellent detailed analysis.



[1] The last time Congress passed a stand-alone State and Foreign Operations Appropriations bill was 2005, for FY2006. A full bill was included in the FY2008 Consolidated Appropriations bill, passed in 2007.

[2] Funded under Division A – the Agriculture, Rural Development, Food and Drug Administration, an Related Agencies Appropriations Act.

 

 

 

CGD blog posts reflect the views of the authors drawing on prior research and experience in their areas of expertise. CGD does not take institutional positions.

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