ONE’S Analysis of the President's FY2013 Budget Request for Key Poverty-Focused Development Accounts

Background and Context. ONE is dedicated to supporting developing countries in the fight against extreme poverty and disease, in efforts to promote equitable, sustainable economic growth and the principles of transparency, accountability, and good governance. Funding levels alone do not ensure impactful outcomes in reducing poverty and saving lives. They are in fact only one factor, although an important one. When combined with other elements, such as better coordination, focusing on results, and with changes within the countries themselves, including a vibrant private sector, an expansion of domestic resources, and smart and sound policy implementation, these ingredients collectively can lead to meaningful results on poverty reduction and better health.

In February of each year, the President sends his budget request to Congress for the following fiscal year. This budget request details how much the President believes the country should spend and how it should best be allocated across competing priorities. Congress evaluates this request and may decide to propose its own budget plan that will then guide the House and Senate formulation of twelve appropriation bills that fund the discretionary portion of the US budget. Throughout this process, the Administration and Congress will work to reconcile differences in their respective plans and pass the necessary legislation.

The majority of the poverty-focused development accounts can be found in what is called the International Affairs Budget (also called the "Function 150" or the "150 account"). Most - over 95% -- of the International Affairs Budget is appropriated within the State Department/Foreign Operations Appropriation bill that supports foreign aid programs managed by the State Department, the US Agency for International Development (USAID), the Millennium Challenge Corporation and other agencies. In total, foreign aid represents only a small fraction - less than 1% -- of the entire US budget.

The FY2013 budget request follows two years of intense debate over how to control rising US deficits, an effort that includes reducing or slowing the growth in discretionary spending. Last year, Congress and the President agreed to an unprecedented deficit reduction plan for the next decade that controls annual spending levels and requires agreement on an additional $1.2 trillion in deficit reduction. If this new package is not approved, an automatic cut of $1.2 trillion in spending will be imposed and reduce non-defense discretionary appropriations by 6% to 8% annually through FY2021.

This environment poses significant challenges for obtaining sufficient resources for poverty-fighting,
global development programs with proven records of achieving impact and results. The overall base International Affairs Budget (excluding funds for the Frontline States of Afghanistan, Pakistan, and Iraq) has declined by about 15% since FY2010, although proposals to cut much deeper have been largely defeated. Fortunately, funding for critical life-saving programs has been largely protected. Nevertheless, the pressures that produced the reductions over the past two years will be more intense as Congress considers the FY2013 International Affairs Budget where the stakes are high for protecting and sustaining the many gains that have been achieved over the past decade to combat global poverty and save lives.

The FY2013 Request. President Obama has requested an International Affairs Budget of $56.2 billion for FY2013, including base funding and Overseas Contingency Operations account (OCO) for the frontline states. The level is 2.4% higher than appropriations enacted for FY2012. Although this is a relatively modest increase compared to prior years, it will come under significant scrutiny when compared with other areas of the US budget, many of which are decreased in the FY2013 request. The Defense Department, for example, is down 1.5% from current spending levels.

Most Foreign Aid Accounts are Flat Funded or are Cut. Unlike prior years but in recognition of a dramatically altered budget environment, nearly all foreign assistance appropriation accounts are proposed to receive the same amount or less in FY2013 as this year, including poverty-fighting programs that are ONE priorities. Development Assistance and the Millennium Challenge Corporation are flat funded while Global Health programs decline by 3.8%. There are only two new initiatives proposed for next year, again a departure from past budget proposals. The Administration seeks $770 million for a North Africa and Middle East Innovative Fund (MENA-IF) that would position the United States to better respond to rapidly changing events and circumstances in the region triggered by the Arab Spring. The budget also includes $250 million to cancel debt owed by Sudan to the United States, something that was part of the negotiations last year over the referendum that led to the creation of the new state of South Sudan. Aid to the frontline states is up somewhat, with Afghanistan scheduled to receive a $1 billion increase, Pakistan up slightly, and Iraq down $450 million.

Global Health and Food Security Commitments Met. Last year, the United States made two multilateral pledges that will significantly advance fighting HIV/AIDS, malaria, and tuberculosis and protecting children from disease. The US committed $4 billion over three years as a contribution to the Global Fund to Fight AIDS, TB, and Malaria. The combination of increasing its payment this year by $250 million and an FY2013 request of $1.65 billion will position the United States to fully meet its $4 billion, three-year pledge to the Global Fund. The US also committed $450 million to the Global Alliance for Vaccines and Immunization (GAVI), an initiative that, along with its partners, has averted an estimated 5.5 million child deaths since 2000. The FY2012 appropriation, together with a $130 million request for next year, will put within reach the US commitment of $450 million over three years.

Three years ago, at the G8 L'Aquila summit, the United States was instrumental in shaping a $20 billion global food security initiative by major aid donors, of which the US share was set at $3.5 billion. The US pledget included $475 million for a new multilateral Global Agriculture Food Security Program (GAFSP). Subsequently, the Obama Administration transformed this pledge into a Presidential signature program, Feed the Future. Although the US fell a bit short of meeting the $3.5 billion target in three years, the $1.135 billion FY2013 request will push American food security assistance to nearly $4.2 billion over the past four years. The $134 million recommendation for GAFSP will further complete the US $475 million commitment. 

Proposed cuts to humanitarian aid programs are also problematic. Collectively, across food assistance, refugee support, and disaster relief, the Administration's budget includes nearly 7% less than current amounts. The largest cut comes in the refugee account, a level that falls by $250 million, or 13%.

Millennium Challenge Corporation (MCC) Funding Unchanged. The MCC, an innovative US aid initiative that invests in good performing developing countries, is scheduled to receive $898 million in FY2013, the same as for this year. Nevertheless, the MCC will be able to fully fund its plans for second compacts with Ghana, Benin, and El Salvador.

Congressional Review and Action is Next Up. Attention now turns to Congress where the President's budget will face close scrutiny. The House Budget Committee is expected to act first by issuing its FY2013 Budget Resolution which will include a spending level for the overall International Affairs Budget. House leaders hope to pass the resolution by the end of March. The Senate does not plan to consider a Budget Resolution.

Immediately following House action on the Budget Resolution, House and Senate Appropriations Committees will swing into action with consideration of twelve spending bills, including the State Department/Foreign Operations where most funding for ONE's poverty reduction and life saving priorities are included. Final resolution of the appropriation bills, however, is not expected to occur until after the November elections. They are also expected to be an important part of any comprehensive deficit reduction package that Congress and the White House hope to reach before January 2, 2013, when a severe sequestration of over $100 billion will be applied in the absence of an overall budget deal.