Devex Pro Insider: The $6.5B US foreign aid spending spree

This is a special Saturday edition of Devex Pro Insider from Senior Reporter Michael Igoe. For the next few months, this newsletter will tackle some of the biggest questions about the future of U.S. foreign aid, with insider reporting and analysis delivered straight to your inbox. It is a confusing, overwhelming moment for the U.S. development community. On one hand, there are a staggering number of aid-related processes currently underway — from the State Department’s ongoing foreign aid takeover, to an end-of-fiscal-year spending race, to a multibillion-dollar budget rescission, to lawsuits alleging the Trump administration’s aid shutdowns violated the Constitution, to congressional negotiations over next year’s budget (plus debates over big policy proposals), to strategic rethinks for U.S. global health programs. It sounds like a moment for hashing out big questions about the future of U.S. foreign aid. Wasn’t that the whole idea? But on the other hand, many of these processes are in conflict with each other, or operating behind closed doors, or simply tackling immediate crises rather than resolving weighty strategic uncertainties. It’s still not adding up to a clearer picture of where U.S. global development engagement is going … but maybe we’re getting closer? With freezes and rescissions dominating the news, you’d be forgiven for thinking the U.S. government isn’t spending any foreign aid money right now. Actually, they’re faced with the opposite problem — spending it fast enough. And as the State Department turns the funding faucets from a slow trickle to a sudden rush, aid experts are looking for any clues they can find about what it is all supposed to add up to. Spend first, ask questions later After months of freezing and slow-walking foreign aid funds, the State Department is now scrambling to spend billions of dollars before they expire at the end of the fiscal year on Sept. 30. In recent court filings, the department stated it intends to obligate about $6.5 billion by the end of this month. A spreadsheet attached to one of those filings adds more detail about where it expects that spending to happen — including commitments to spend all expiring global health funds. Some bigger-ticket items have begun popping up in public announcements. Last week, the State Department announced $250 million in new foreign assistance funding for a global health partnership with the Philippines. In a statement, Secretary of State Marco Rubio said that funding “demonstrates the efficient, time-limited, and narrowly targeted approach of this new era of America First foreign assistance.” But faced with such a large balance sheet and so little time to spend it, Rubio’s team has also had to come up with some unconventional work-arounds. Or, as a congressional aide with knowledge of the State Department’s plans put it to me: “scrambling to obligate money in large tranches without real plans for how to spend most of it.” For example, the department has notified Congress that it is transferring $1.8 billion of Economic Support Fund money from the U.S. Agency for International Development to the State Department, according to the aide. Doing so is not exactly necessary — State and USAID already jointly control those funds — but it does technically satisfy the requirement that money be “obligated” by Sept. 30 in order to prevent its expiration. The aide said that the State plans to move that money into “big regional pots,” which it will eventually roll out into programs over time. In another example, the department has notified lawmakers it is obligating $25 million for program administration, including hiring program support contractors in any of several dozen countries, according to the aide. State hasn’t said where it’s in most need of that additional support, but it’s “clear they know they are now understaffed,” the aide said. “On the positive side, it shows they’ve gotten creative to keep certain funds from expiring now that the White House told them they can,” they said. “On the negative side, it just reveals what we’ve all been saying for months about the lack of process, clear policy, or preparedness, and lack of respect to date for legal requirements from Congress, which can and needs to change.” ICYMI: US foreign aid legal showdown heads to the Supreme Court Reading tea leaves The sharp focus on State Department spending belies a larger uncertainty: Organizations that want to get back in the U.S. foreign aid game are still working without a clear road map for where the sector is going in a post-USAID world. The Trump administration’s decision to freeze and review aid spending was justified by adamant calls for strategic clarity. Instead, the U.S. aid community has been left mostly in the dark when it comes to the question of what President Donald Trump and Rubio believe an “America First” foreign assistance enterprise should look like. Aid watchers have been left to read between the lines of individual spending decisions in an attempt to divine the outlines of a broader strategy. Some say the problem is that the strategy might simply not exist. “There's no strategy. There's no written plan. There's nothing in any of the [congressional notifications] that have come to Capitol Hill that gives you any confidence that they have a clear idea of where it's headed,” Republican U.S. aid expert Jim Kunder said in a Devex Pro Briefing this week. In place of a strategy, Kunder sees a presidential power grab. In his words: “Give us the money. Trust Donald Trump. He'll spend it the right way to make America safer, stronger, and more prosperous.” We don’t know yet where things will settle after this disruptive, transitional period comes to an end and U.S. foreign aid reaches some kind of stable state, said Kunder, who served as USAID’s acting deputy administrator during the George W. Bush administration. But the fact that at the moment two different paths seem equally likely is cause for his concern. “There's a possibility that we could have a perfectly rational foreign aid program once the transitional adjustment gets done. There's also a possibility that we could have a foreign aid program run by whatever the president of the United States happens to be thinking that afternoon,” Kunder said. “I fear that, unfortunately, the probability is about equal for those two potential directions.” So how will we know which way the balance is tipping? What should we be watching? Kate Eltrich, an expert on U.S. aid budgets, thinks there’s some good news buried in the spreadsheets that the Trump administration has included in recent court filings, showing which expiring funds they plan to spend and which they do not. In Eltrich’s reading, those spending plans were detailed — and generally aligned with directives and budget proposals coming out of Congress. “That's a really good sign that they have gone through a lot of internal processes in the administration to say, ‘here's what we agree with, here's where we want to go,’” she said in the same Devex briefing. What we still do not have, Eltrich said, is a clear picture of what the future holds for the entire $63 billion foreign aid budget that lawmakers approved for the current fiscal year. At a very high level, Eltrich hopes a forthcoming U.S. National Security Strategy could offer some of that strategic guidance and direction, and she said a lot of “internal energy” has been focused on producing it. “That would be the compass heading to say, ‘these are the things that we want to accomplish and how we're going to do it,’” she said. Watch: US foreign aid wavers between chaos and strategy A turning point? In its sprint to the fiscal year deadline, the State Department apparently isn’t above asking for some help. Robert Nichols said on a call with U.S. aid partners last week that his government contracting law firm, Nichols Liu, has been meeting with officials to “help them spend $5 billion in the next three weeks.” That is roughly the amount of expiring funds left over that was not included in the so-called pocket rescission proposal put forward by Trump’s Office of Management and Budget. “I think foreign assistance is coming back. It's not going to look the same as it did before,” Nichols said. “Those organizations that have been able to survive — it's not like you're going to be able to turn on a dime and hire everybody back — but I think we're at a turning point here.” If it is a turning point, it’s a complicated, potentially awkward one. Many U.S. development organizations are faced with trying to position themselves for the future, even as they are still actively litigating the past. To put a finer point on it, U.S. aid implementers are trying to figure out how to win future State Department funding — while many of them are suing the administration for freezing funds and breaking contracts. In Nichols’ view, the return of foreign assistance spending means that organizations should currently be focused on rebuilding — in part by taking legal action to ensure they get paid by the U.S. government for past work and termination costs. “I think we're seeing light at the end of the tunnel. I encourage you to think proactively and aggressively in rebuilding your organizations through these various legal means,” he said, while adding that the “real win” for many organizations is to get back to implementing aid programs. Making that happen, he said, will require getting past the acrimony of USAID’s shutdown and the Trump administration’s vilification of U.S. development programs, personnel, and organizations. That’s no easy task. But Nichols suggested that in his interactions with U.S. government officials, they have shown some openness to reengaging with implementers who are willing to deliver programs that align with the administration’s goals, and that are committed to complying with Trump’s executive orders. “Most of these organizations are businesses. They're in the business of providing professional services. They may not like you, you may not like them, but this is business, and leave that stuff at home,” Nichols counseled. What does that mean for ongoing litigation challenging the constitutionality of the Trump administration’s foreign aid freeze, rescissions, and impoundment of funds? From the perspective of development organizations that want to get back to work, it means those cases are “interesting,” but “not what you guys should be hanging your hats on,” Nichols said. Instead, he sees the legal landscape shifting from “high cover bombing raids to knife fights over specific terminations,” with the latter presenting more concrete opportunities for organizations to recoup expenses, rebuild, and position themselves for whatever comes next. Read: Trump's $5B 'pocket rescission' escalates foreign aid funding fight Court watch: The latest on the USAID docket The Trump effect: Explore our dedicated page to catch up on all the latest news, in-depth analysis, and exclusive insights on how the Trump administration’s policies are reshaping U.S. aid and global development.