House vs. Senate US FY25 Development Spending: Olympic Edition

It's August, and US lawmakers have fled the nation's capital, temporarily shelving efforts to advance FY25 spending bills. Seized with the Olympic spirit, we're opting for a slightly different spin on our annual appropriations update. With apologies for some tortured metaphors, read on to see where House and Senate appropriators seem ready to go for the proverbial development gold and what foreign aid spending asks might not make the cut.   

For a second year running, the State and Foreign Operations spending bills drafted in each chamber present quite an uneven matchup—with toplines billions of dollars apart. (You can find the House bill text HERE, and the House report HERE. You can find the Senate bill text HERE, and the Senate report HERE.) 

Amid competition for resources, a big divide on the volume of bilateral economic assistance, but mutual understanding toward advancing aid effectiveness

The House and the Senate are swimming in opposite directions when it comes to proposed FY25 spending for the two major bilateral economic assistance accounts managed by the State Department and USAID. The House is proposing nearly $2 billion less than the Senate—the difference between an 18 percent cut and a 5 percent increase over last year's enacted level.  

But development effectiveness is one area where the two chambers appear more synchronized. Both chambers include funding for impact evaluations—with nods to USAID's Office of the Chief Economist. The House would set aside $25 million for these evaluations, while the Senate would stick with a $15 million directive. USAID's Development Innovation Ventures (DIV) appears poised to ride a wave of support—with appropriators tapping $50 million for the competitive fund supporting innovative development solutions, compared to $40 million in FY24, and just $30 million in FY23. There's also a $25 million directive on the Senate side to help scale effective innovations. Meanwhile, the Senate directs USAID to make greater use of cost-effectiveness benchmarking and the House urges USAID to use rigorous evaluations to inform decision-making. Despite our concerns about an overreliance on spending directives and reporting requirements, the unity here is encouraging. 

Neither chamber appears ready to deliver fully on the administration's IFI ambitions, and select multilateral funding asks face hurdles 

The Biden administration again aimed high in its requests for US contributions to the international financial institutions (IFIs). While Senate appropriators didn't clear every ask, their House counterparts came up woefully short.  

As we speed toward the next replenishment of the International Development Association (IDA)—the World Bank's concessional financing window that serves as a lifeline for the world's lowest income countries—the Senate bill would put the US back on track to deliver on its most recent IDA pledge with a small increase to make up for a shortfall in the FY24 omnibus. In contrast, the House funding level would create substantial new arrears. The House version of the bill would also undercut US commitments at the African Development Bank—providing less than full funding for its next installment toward the institution's last capital increase and evading an ask to boost the US callable capital subscription while also shortchanging the recent US pledge to the African Development Fund. The Senate bill would enable the US to participate in new capital increases at the European Bank for Reconstruction and Development (EBRD) and the Inter-American Development Bank's private sector arm (IDB Invest). But the House eschews both, citing the absence of authorizations.   

Notably, neither chamber is looking to provide the $750 million requested by the administration to support the World Bank's portfolio guarantee platform nor are they supplying the nearly $250 million ask for Bank-administered trust and financial intermediary funds. But Senate Appropriators, again, look willing to provide the Treasury with some leeway by including $200 million in flexible funding for international programs. Finally, the Senate side signals interest in greater USAID engagement at the MDBs with a directive to assign development advisors from the agency in the offices of the US executive directors to the ADB, AfDB, EBRD, IDB, and World Bank. 

A narrower gap on global health funding with a reminder that Team USA can't go it alone  

Historically, US global health spending has been an area of bipartisan agreement. To an extent, that trend seems to be holding in FY25. Still, US global health accounts could see another year of reduced funding due to a statutory prohibition capping US contributions to the Global Fund at $1 for every $2 contributed from other donors. The initial US pledge to the Global Fund was an ambitious $2 billion annually over three years (FY23-25), but with less than anticipated support from other donors, the United States has needed to pare back—from $2 billion in FY23 to $1.6 billion in FY24 to around $1.2 billion in FY25. The United States is the largest historic donor to the Global Fund, but this is an area where they'd clearly appreciate greater competition for spots on the podium.  

Last year we complained that pandemic fatigue was taking root. This year, we're worried it's fully set in. While the Senate is proposing a $30 million increase to the global health security (GHS) account compared to FY24, it's $170 million less than the committee proposed last year, and $200 million short of the administration's request. The House may be less enthused, not offering a figure for the GHS account. One silver lining—the Senate would provide a $250 million contribution to the Pandemic Fund, designed to incentivize low- and middle-income-country investments in health preparedness. Another highlight is that both chambers would provide $300 million for Gavi, the vaccine alliance. The contribution will help deliver on the most recent US pledge of (not less than) $1.58 million over five years. 

A chasm between chambers on humanitarian assistance

With humanitarian needs at unprecedented levels, and stagnant growth in base US humanitarian funding, Congress has relied on emergency supplemental aid to fill the gap. In FY24, the national security supplemental enacted in April, alongside support for Ukraine, delivered funding that helped shore up critical humanitarian accounts.  

The FY25 bill released on the Senate side would deem a portion of the proposed humanitarian assistance as "emergency" spending, giving the headroom for a modest boost in humanitarian assistance compared to last year's minibus. The House side would level cuts particularly affecting State's Migration and Refugee Assistance and the major US international food assistance program—though the report suggests the latter has some unobligated balances.  

The House and Senate split on funding for DFC  

If there's one area of US development policy that's felt like a team relay, it's support for the US International Development Finance Corporation (DFC). The administration and Congress both contend they're willing to cooperate to maximize the impact of the agency, and there's been bipartisan leadership to get a reauthorization measure across the finish line. Given our interest in seeing DFC increase its transparency, it was encouraging to see Senate appropriators go the extra mile to include a directive that reminds DFC of its requirement to publish transaction data and evaluations on ForeignAssistance.gov.  

The House's proposed cut to DFC's funding in FY25 is a misstep—unless they can manage a budget scoring fix for equity investments that would reduce pressure on the agency's program budget. Still, a similar reduction was proposed by the chamber last year, and the final spending deal was far more aligned with the Senate's proposed figures.  

MCC appears on track to avoid a rescission for the first time in years 

Last year, Congress rescinded $475 million in MCC's unobligated balances, bringing the total rescissions from the agency to more than $1 billion in just three years. That practice is unlikely to continue in FY25, with neither chamber proposing to claw back funding. And for the second year in a row, the Senate committee indicated support for reforming the income restrictions on MCC's potential country partners. (MCC is currently limited to working with low- and lower-middle-income countries.) Overall, it's good news for the agency, who is presumably rooting for a steady pace.  

Conclusion 

The divide between the two chambers on development spending leaves us in a similar position to the summer of 2023, with the House seeking deep cuts, and the Senate looking to maintain relatively level amounts of funding. When legislators return to DC in September, they'll have their work cut out for them. Near the top of the list will be passing a short-term spending deal by October 1 to avoid a government shutdown. But we'll also be anxiously awaiting negotiations down the stretch to see how development priorities win out in a final FY25 spending deal. Expect a marathon, not a sprint.