How does US foreign aid fare in the omnibus bill?

What are the most important foreign aid implications of the omnibus spending bill? Photo by: Robb Hohmann / USAID / CC BY-NC

U.S. development professionals who have watched, with growing anxiety, a stalled federal budget lurch towards an uncertain finale are finally getting a better sense of what to expect in the new year.

The U.S. Congress will vote Friday on a spending bill, an “omnibus” budget agreement that allocates funding to government agencies and programs — including foreign aid. Most analysts expect the bill will find enough votes in both the House and Senate chambers to become law. To block the bill at this point would be to send the U.S. government careening towards a shutdown in the middle of the holiday season.

As with most appropriations bills in recent memory, aid watchers find in this omnibus package some things to celebrate and others to lament.

The budget agreement sets overall spending for the international affairs “150” account, which funds the State Department, U.S. Agency for International Development, and a range of other international programs. For FY2016 overall funding for the international affairs budget, which totals roughly $53 billion is up almost $3.5 billion from FY2015. That is mostly good news, but between the budget lines there is some cause for concern. The increase to overall funding is driven by an ongoing trend to pay for foreign aid programs out of an account created to finance the so-called global war on terror — the Overseas Contingency Operations account, or OCO.

As Devex has reported, aid advocates worry that an over-reliance on OCO money, while helpful in the short term, exposes their programs to long-term risk, since the funding in this account is expected to decrease over time as U.S. military operations draw down. The rise in OCO funding for international affairs is offset by a decrease in “base appropriations,” the basic pool of funding that has paid for aid programs for decades.

“The base funding levels have not been this low since fiscal year 2009 — well before the myriad of new threats we face today, including the Syrian civil war and the rise of ISIS, an increasingly belligerent Russia, and epidemics like Ebola,” said Liz Schrayer, president and CEO of the U.S. Global Leadership Coalition, in a statement.

“It is our strong hope that future budget negotiations will address this dramatic shortfall in base funding that is essential for America to remain a global leader,” Schrayer added.

Even though the omnibus bill tackles every U.S. government funding question at the same time, it still manages to dive into some details and include some provisions development professionals have fought for — or against — in recent years.

Among the most significant of these is the bill’s inclusion of funding for International Monetary Fund quota reform, a long-sought set of organizational reform measures that would seek to update the balance of country representation at the global financial institution to better reflect the current geopolitical landscape. Some partially attribute the rise of alternative financial institutions like the New Development Bank and the Asian Infrastructure Investment Bank to the IMF’s anachronistic governance structure, which privileges historic powers including the European member states and the U.S. over current and emerging ones such as China or countries in South America.

Those aid advocates who have just returned from the Paris climate change conference will likely celebrate the omnibus bill for what it does not appear to include: language prohibiting U.S. contributions to the Green Climate Fund, the climate change financing facility many Republican lawmakers have staunchly opposed. U.S. President Obama has pledged $3 billion over four years to the GCF, which will fund a balance of climate change mitigation and adaptation projects in developing countries.

“This is a huge win for poor communities on the frontlines of climate change. We hope Congress does the right thing on Friday and approves the language in the current omnibus,” said Oxfam America Climate Policy Manager Heather Coleman.

Federal contractors will likely take heart in another omission. As Devex previously reported, in past budget negotiations lawmakers including senator and presidential hopeful Lindsey Graham have sought to prioritize grant making over contracts in the procurement of democracy and governance programs. For-profit consultants who rely on government contracts worried this might mean a diminishing role for them in this sector of global development practice. That language appears to have been tempered in this budget bill.

“The secretary of state and USAID administrator, following consultation with democracy program implementing partners, shall establish guidelines for clarifying program design and objectives for democracy programs, including the uses of contracts versus grants and cooperative agreements in the conduct of democracy programs,” the bill reads.

In another win for some development organizations, the omnibus includes a provision its supporters hope will crack down on foreign governments that impose illegitimate taxes on foreign aid implementers. The issue has come to the fore in Afghanistan, where, as Devex has reported, contractors’ representatives say they are often faced with illegitimate tax demands, and then placed on “no fly” lists or threatened with arrest if they refuse. Championed by Vermont Sen. Patrick Leahy, this provision would impose a 200 percent surcharge on any tax found to be in violation of bilateral treaties and withdraw that amount from future U.S. bilateral assistance to the offending country.

The window for negotiation on these issues has mostly closed, and many expect the omnibus bill on the table now will be passed and signed in time for the Friday deadline to avoid a government shutdown. That might not sound like a holiday miracle, but most development professionals will probably take it.

Stay tuned to Devex for more news and analysis of U.S. aid, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you FREE every business day.

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About the author

  • Igoe michael 1

    Michael Igoe

    Michael Igoe is a Senior Reporter with Devex, based in Washington, D.C. He covers U.S. foreign aid, global health, climate change, and development finance. Prior to joining Devex, Michael researched water management and climate change adaptation in post-Soviet Central Asia, where he also wrote for EurasiaNet. Michael earned his bachelor's degree from Bowdoin College, where he majored in Russian, and his master’s degree from the University of Montana, where he studied international conservation and development.