Questions on the FY 2017 Budget Request

Early previews, from a $10 per barrel oil tax to a big boost for clean energy R&D, seemed to affirm that President Obama was going to use the final budget of his presidency to send a message. But while some observers dubbed the FY17 request the YOLO budget, the President’s impending freedom seems to have had little effect on the foreign affairs account. Given a “go big or go home” request would have found a tough audience in Congress, we’re not so much disappointed as uninspired. So with helpful tables and analysis already available (thanks, USGLC), we wanted to lay out some of the questions the budget raises (in no particular order). Add yours in the comment section below.

With no signs of moving away from OCO, how worried should we be?

The President’s request includes a total of $54.1 billion for the international affairs budget. Unfortunately, while the total funding is similar to the FY16 level, the percentage considered Overseas Contingency Operations (OCO) only seems to grow. It’s a troubling trend for those of us who worry that the off-budget line of “wartime” credit may not always be around to supplement a dwindling base budget. Since 2010, OCO has increased from 9 percent to nearly 28 percent of the total International Affairs budget. Heading into the latter half of a two-year budget deal, Congress seems unlikely to rein in OCO in the short term. For now, we’ll just keep our fingers crossed that the base has a chance to grow before the axe comes down.

Is it time for a US Development Finance Corporation?

Yes! Well, that was easy. But in all seriousness, both the Overseas Private Investment Corporation (OPIC) and USAID’s Development Credit Authority (DCA) would receive a substantial bump under the President’s FY17 request. Funding for OPIC’s operations would grow by 30 percent, allowing it to support $4.8 billion in loans, risk insurance, and loan guarantees. DCA would receive an increase to $10 million for its operations, or a 24 percent increase from current levels (much-needed additional staff!). The administration is also seeking transfer authority for $60 million to finance the subsidy cost of new guarantees. This all suggests growing recognition of the value of development finance in a development landscape where there is dramatically increased country demand for private investment. Yet, the real impact to be had on the development finance front is from updating outdated authorities for OPIC and consolidating duplicative efforts. Here’s hoping for some congressional leadership or that the next administration will take this on!

Will the passage of Electrify Africa mean a shot at increased appropriations for Power Africa?

The President’s Power Africa Initiative received the same funding request as FY16: $291 million from USAID and State and $9 million from OPIC. Congress appropriated $76.7 million in FY16. Now that the President has signed into law the Electrify Africa Act, we’re hoping Congress will continue to demonstrate its bipartisan love for expanding energy access in Africa by ponying up more funding.

Will this administration (and the next) step up engagement with Congress to fully fund our commitments to the multilateral development banks?

We’ve learned that US leadership in the international financial institutions is rarely top of mind for most members of Congress, including appropriators. Last year, Congress finally got on board with IMF quota reform. But the truth is we’re still behind on our multilateral commitments and will fall further behind under the president's budget. The overall FY17 request for multilateral assistance is $2.618 billion, a slight decline from FY16 at $2.629 billion. The administration rightly notes in its Congressional Budget Justification, that failure to meet multilateral commitments is “erod[ing] US leadership and influence, pos[ing] a threat to shaping the policy priorities of the MDBs and related funds, and hamper[ing] the ability of these entities to deliver results.” Despite the strong words, the budget request itself would see the hole grow deeper by over $200 million, with unmet commitments totaling a whopping $1.78 billion even if the president's request is met. It will be up to this administration, and the next, to make a strong pitch to Congress on the importance of the US role in these institutions. For some thoughts on how the next administration can leverage the power of multilateralism in US development policy, see Scott Morris’s proposal.

Where’s the love for GAFSP? (Is the acronym the problem?)

Feed the Future’s request level was maintained at $978 million from State and USAID. But the US contribution to the Global Agriculture and Food Security Program (GAFSP) has been reduced from $40 million in FY16 to $23 million in the FY17 request. GAFSP has previously been an especially effective leverage of US resources—what would a reduced contribution mean for Feed the Future’s effectiveness? And stay tuned to CGD for forthcoming analysis on Feed the Future.

Will Congress grant MCC concurrent compact authority?

MCC has made no secret of its interest in pursuing regional compacts, but for the agency to do so under current rules would require neighboring countries to reach the same stage of compact development at the same time, a situation that rarely occurs. Last year, appropriators chose not to give MCC the concurrent compact authority that would make piloting regional compacts a viable option, but signs suggest the hill may be warming to the idea. The House Foreign Affairs Committee advanced legislation in November that includes the authority. In early December, the Senate Foreign Relations Committee held a productive hearing on the future of MCC, where witnesses, including CGD’s Nancy Birdsall, agreed that the agency should be given the opportunity to test a regional approach. So while it will be interesting to see if MCC’s funding level reaches the $1 billion mark, we’ll be keeping a close eye on action as it relates to concurrent compact authority – whether it comes from authorizers or appropriators.

Can supporters fend off a prohibition on Green Climate Fund contributions?

Last year, environmental groups declared partial victory when the FY16 Omnibus emerged sans language prohibiting contributions to the Green Climate Fund (GCF). The multilateral fund, designed to support developing countries mitigate and adapt to climate change, emerged as one of many flash points during negotiations on the massive spending package. While the final product didn’t include any of the administration’s requested funding, it preserved sufficient transfer authority to allow the United States to make an initial payment toward its GCF pledge. The President’s FY17 Budget actually includes $750 million for the GCF – with $250 million channeled through Treasury and $500 million through State – a higher ask than the $500 million total requested in FY16. And hey, GCF, think about funding a CODAid approach for forests.

Will increased funding for Treasury’s work to boost Domestic Resource Mobilization encourage USAID to do more?

The Office of Technical Assistance at Treasury would receive $33.5 million—a $10 million increase over the FY16 enacted level and, per the CBJ, would be a “down payment on Secretary Lew’s commitment at the Financing for Development conference (Ethiopia, July 2015) to double OTA assistance by 2020 to support developing countries’ domestic resource mobilization and sound public financial management. Fantastic. USAID has been doing great things with domestic resource mobilization but has spent very little resources. Hopefully, FY17 will see more smart efforts from USAID on DRM.

Will Congress position the US government to address the next global health emergency?

Congress is staring down another request for emergency, supplemental funding to combat a global health crisis. Ahead of budget day, President Obama announced he would be asking for $1.8 billion to combat and respond to the Zika virus. While many unknowns remain when it comes to Zika and its potential causal connection to microcephaly, the fact that mosquitoes known to transmit the virus are endemic to parts of the United States has sparked significant concern, suggesting Congress may indeed deliver the $1.8 billion. But, as our colleague Amanda Glassman pointed out, outbreaks of viruses and infections are a challenge with which we are increasingly forced to grapple. The emergence of such threats can no longer be considered a surprise, even if we are unable to predict the exact nature, place, and time. Congress has an opportunity to put the US Government on a more sustainable course in responding to such threats by setting aside budgeted funding on a consistent basis to invest in global health preparedness at home and abroad.