PUBLIC POLICY UPDATE March 7, 2014 WASHINGTON UPDATE

PUBLIC POLICY UPDATE March 7, 2014 WASHINGTON UPDATE InterAction Budget and Appropriations Update The Obama Administration s Proposed International Affairs Budget for FY2015: Challenges for Poverty-Focused and Humanitarian Aid On Tuesday, March 4, President Obama released the bulk 1 of his administration s proposed budget for fiscal year (FY)2015, a little over a month after it was due. While Congress always has the final say in what can be spent in any fiscal year, the President s budget is a key starting point for the discussion and sets much of the tone and terms of the debate for the next several months. The Context This particular budget proposal arrived during a respite from the bitter spending wars of the last several years. Congress already agreed last December on how much discretionary spending it would allow in FY2015 - $1.014 trillion, including $492 billion for non-defense spending. In theory, then, this overall cap would mean that spending in FY2015 would closely resemble funding for 2014, since the caps this year are nearly identical to last year, which were $1.012 trillion and $492 billon, respectively. In his proposal, the President stuck to that spending cap by and large, though he requested an extra $56 billion, calling it the Opportunity, Growth, and Security Initiative, (OGSI) and splitting it equally between defense and non-defense spending. While any president s budget proposal is really just that a proposal this particular gambit seems even more implausible than usual. Several lawmakers have already stated their view that OGSI is outside the budget deal and that they plan to appropriate according to the budget caps negotiated in the December. Even if pieces of OGSI see some light of day, few of the International Affairs proposals within OSGI are likely to be enacted into law. The International Affairs Budget The Overall Picture Under President Obama s plan, the base 150 budget for FY2015 would be set at $44.1 billion, about $100 million less than in 2014. When you add the $5.9 billion for Overseas Contingency Operations (OCO), which funds activities in frontline countries like Afghanistan, Iraq and now officially Syria 2, the total 150 account would come to $50.1 billion in 2015, about $619 million less than its current funding level. (See more about OCO in the humanitarian funding section below.) That amounts to a 1.2% drop in overall International Affairs funding. In particular, the budget proposal tends to underfund the accounts Congress has championed in recent years and emphasizes the accounts Congress has typically neglected. It is hard to 1 While most of the budget was released March 4, some of the details are scheduled to be released on March 11 or later. 2 While Congress had allocated OCO funding to Syria in previous fiscal years, the Obama Administration had not officially requested OCO funding for Syria in previous budgets. 1

ascertain the Obama Administration s true intentions, but they may be trying to appear fiscally responsible by cutting in places they know Congress will restore funding, while pushing for greater funding in areas that have traditionally been more politically fraught. Proposed Cuts in Global Health Programs Raise Concerns Overall, Global Health which Congress gave modest increases in FY2014 would receive just $8.05 billion in FY2015, a 4.6% drop from current levels. This overall decline is reflected in the health sub-accounts: Maternal and Child Health would fall to $695 million (-1.4%), though there was a reference to unspecified additional OGSI funding in the budget; Nutrition would drop to $101 million (-12.2%); Vulnerable Children would lose a whopping 34.1%, down to $14.5 million, Neglected Tropical Diseases would fall to $86.5 million (-13.5%). The one bright spot, Malaria, would increase slightly to $674 million (+1.4%). Even HIV/AIDS funding, traditionally the strongest set of health accounts, would see some declines. The President s Emergency Plan for AIDS Relief (PEPFAR) and USAID funding to combat HIV/AIDS would remain in place at $4.02 billion and $330 million respectively, but the U.S. contribution to the Global Fund to Fight AIDS, TB and Malaria would shed $300 million, to just $1.35 billion. This funding level is consistent with the President s recent commitment to provide the Global Fund with $4 billion between 2014 and 2016. Through a proposed $300 million as part of the aforementioned OGSI, the administration could cover the possible FY2015 share of the remaining $1 billion it pledged to the Global Fund which is dependent on other nations contributing more to the Global Fund. The budget also proposes a new Global Health Security Agenda, which would be spearheaded by the Center for Disease Control and Prevention, along with other U.S. agencies, international organizations, foreign nations and public and private stakeholders. It would promote global health security as an international priority by working with 30 partner countries to prevent, detect and effectively respond to infectious disease threats, whether naturally-occurring or caused by accidental or intentional releases of dangerous pathogens. This additional $45 million would train epidemiologists and expand public health emergency management capacity and Global Disease Detection Centers in up to 10 countries. $30 million was also requested for the Advanced Molecular Detection Initiative to identify the sources of emerging infectious disease faster, determine whether microbes are resistant to antibiotics, and study how microbes are moving through a population. Proposed Sharp Declines in Humanitarian Funding Perhaps even more concerning are cuts to the two largest accounts that fund overseas humanitarian operations International Disaster Assistance (IDA) and Migration and Refugee Assistance (MRA). Congress had given those two accounts very robust increases in FY2013 and FY2014, but at $1.3 billion overall, IDA would see a 28% cut under the president s plan, while MRA, at $2.047 billion, would suffer a 33% cut, both from current spending levels. (The much smaller Emergency Refugee and Migration Assistance account would remain flat at $50 million.) While few people expected Congress to continue increasing funding for IDA and MRA, cuts like these would make it difficult to meet the severe needs arising from the ongoing crises in Syria, South Sudan, the Central African Republic and any new emergencies which may arise in 2014 or 2015. IDA and MRA are also divided across base funding and OCO funding. The MRA account includes a proposed $1.582 million in base funding and $465 million in OCO funding. 2

For IDA, the $1.3 billion total includes a request of just $834 million for the Office of U.S. Foreign Disaster Assistance (OFDA), far less than what is essential for responding to humanitarian crises and the needs of internally displaced persons (IDPs). The rest of IDA funding ($466 million) goes to the Emergency Food Security Program (EFSP) 3, raising the overall IDA total and leaving the impression that funding for OFDA s needs are being met. Please see the tables below for a breakdown of IDA funding between the OFDA, EFSP, the base budget and OCO. IDA Breakdown of OFDA vs. EFSP (Total: $1.3 billion) OFDA: $834 million EFSP: $466 million Base: $499m OCO: $335m Base: $166m OCO: $300m IDA Breakdown of Base vs. OCO (Total: $1.3 billion) Base: $665 million OCO: $635 million OFDA: $499m EFSP: $166m OFDA: $335m EFSP: $300m Food Aid Money Stays in Agriculture Appropriations One of the most contentious issues in last year s budget proposal was the president s initiative to reform the way we deliver international food assistance. Ultimately, the proposals he put forward to transfer funding for the Food for Peace Title II program from the agriculture appropriations budget to the State-Foreign Operations budget were not enacted in FY2014, but Congress did pass a number of reforms through the appropriations process and within the recently passed Farm Bill. The president s 2015 proposal would keep funding for Food for Peace Title II (FFP) within the agriculture appropriations budget and flat fund the McGovern-Dole International Food for Education & Child Nutrition program at $185 million. Total funding for FFP would be $1.4 billion (a 4.5% decrease from FY14), including $1.13 billion for emergency food assistance and $270 million for development programs. $80 million from the Development Assistance account would fund Community Development Funds (CDF) in order to bring the total funding for FFP development programs to $350 million. The president also requests up to 25% flexibility, valued at $350 million, for cash-based food assistance for emergencies, which will allow USAID to reach approximately 2 million more beneficiaries with live-saving food aid with the same level of resources. Partly due to the late conclusion of the Farm Bill, the president s proposed budget did not fund the newly authorized USDA Local and Regional Procurement (LRP) Program. The Farm Bill established and authorized this program at $80 million annually (subject to annual appropriations) in order to improve the ability and flexibility of the U.S. to respond to food insecurity with a wider range of tools which ensure the most appropriate response in each context. International Food Security Other Donors Must Step Up While the International Fund for Agricultural Development (IFAD) would receive flat funding at $30 million, another disappointment is the U.S. contribution to the Global Agriculture and Food Security Program (GAFSP), which would be zeroed out in the president s budget, proposing funding of $80 million only through OGSI (a 40% cut from current funding levels). In October 2012, the U.S. pledged to commit $1 for every $2 from other donors up to a total of $475 million. The budget request states that based on other donors commitments to date of $230 million, the 3 EFSP provides cash-based emergency food assistance through critical voucher programs, local and regional purchasing of food, and related cash-based emergency assistance efforts that enable rapid delivery of assistance. 3

Department would not need additional funding to meet its pledge. However, fundraising efforts are ongoing, with the goal of securing an additional $720 million from other donors, and the Department continues to anticipate the need for appropriated funds to meet the U.S. commitment. Development Assistance A Bright Spot Nonetheless, there are some positive elements in the president s plan. Development Assistance (DA), which was cut by Congress in FY2014, would receive a small boost of 4.5%, putting it at $2.62 billion. Within DA, Feed the Future would receive $1 billion (a 9% drop) and bilateral efforts to combat the effects of climate change would likely receive $506.3 million, though details on both of those are still to come. There was also reference to potential OGSI funding for bilateral food assistance programs, though details have not yet been made available. A new Global Development Lab, funded at $146.3 million, would consolidate and expand USAID's efforts in science, technology, innovation and partnerships, creating a world-class capability to discover, incubate, test, and scale transformational solutions to the greatest development challenges that we face today. At this point in time, we do not have much detail about how DA money would be spent, including on key sectors such as Microfinance, Basic Education, Biodiversity, Water and Agricultural Development in Frontline States. International Organizations Another Bright Spot Another positive in the president s budget would be the U.S. engagement with international organizations, an effort that Congress has underfunded in recent years. While the relatively small International Organizations and Programs account would shed 12%, down to $303 million, the two much larger accounts, Contributions to International Organizations (CIO) and Contributions for International Peacekeeping Operations (CIPA) would each fare well, up to $1.5 billion (up 13%) and $2.5 billion (up 43%), respectively. The proposed increase in CIPA is part of the administration s effort to pay off the U.S. debt at the United Nations while simultaneously pushing the international community to get more involved in addressing instability in Mali, South Sudan, and CAR. The president s request also includes $150 million for a peacekeeping response mechanism, which would enable the Administration to pay for new peacekeeping costs if and when they arise after the appropriations process has been completed. Other Accounts There are several other accounts that do not fit neatly into the categories outlined above. The Democracy Fund is another area that the administration typically defunds, knowing full well that Congress will ignore their proposed cut. This year is no exception, and the Obama Administration has zeroed it out completely, following a year in which Congress modestly increased its funding. On the flip side, USAID Operating Expenses, an account traditionally underfunded by Congress, would receive $1.38 billion under the President s plan, 21% more than in 2014. The Millennium Challenge Corporation would receive an 11% boost, up to $1 billion (and the OGSI included another $350 million for MCC). The World Bank s International Development Association would drop down to $1.3 billion, 4.8% lower than in 2014. FY2015 would mark the first year of a new three-year U.S. commitment to the International Development Association. Another positive proposal would be U.S. contributions to multilateral climate funds. The Strategic Climate Fund would receive just over $63 million (+27%) and the Clean Technology Fund would receive $201.2 million (+9%). We do not have information at this time about other 4

multilateral climate funds such as the Least Developed Countries Fund, Special Climate Change Fund or the Green Climate Fund. In recent years, the administration has requested that Congress aggregate funding for Gender issues and while that request may come in the documents that have not yet been released, so far we have not found a number that aggregates that data, though the budget proposal did include language supportive of gender-focused initiatives. Looking Ahead In the next few weeks, Congress will be looking at the president s proposal and asking questions about why the president made the choices he did to fund certain programs and not others. While the Senate is not likely to pass a 2015 budget resolution, the House may consider an overall budget in the coming weeks that will likely have significantly different priorities than the administration. Following this, both chambers will write detailed appropriations bills of their own to begin setting actual funding levels for FY2015. We will continue to keep you apprised of the developments as they unfold. UPCOMING HEARINGS Hearing: Budget Hearing Department of State Committee: House Appropriations Committee When: Wednesday, March 12, 10:30 a.m. Where: 2359 Rayburn Hearing: National Security & Foreign Policy Priorities in the FY 2015 International Affairs Budget Committee: Senate Foreign Relations Committee When: Wednesday, March 12, 2:30 p.m. Where: 419 Dirksen Hearing: FY 2015 Budget Request for the Department of State Committee: Senate Appropriations Committee State, Foreign Operations Subcommittee When: Thursday, March 13, 10:30 a.m. Where: 226 Dirksen Hearing: Advancing U.S. Interests Abroad: The FY 2015 Foreign Affairs Budget Committee: House Foreign Affairs Committee When: Thursday, March 13, 1:30 p.m. Where: 2172 Rayburn Hearing: Budget Hearing Department of Agriculture 5

Committee: House Appropriations Committee Thomas Vilsack, Secretary, Department of Agriculture Dr. Joseph Glauber, Chief Economist, Department of Agriculture Michael Young, Budget Officer, Department of Agriculture When: Friday, March 14, 10:00 a.m. Where: 2362-A Rayburn 6