US Foreign Aid Budget Cuts – What Next?

Alta Alonzi About Alta Alonzi

Alta Alonzi is a prospect researcher of international donors. She works with the fundraising consulting company Philantropia, conducting research for clients ranging from small NGOs to UN organizations. She also works closely with FundsforNGOs running training webinars and updating the Premium donor database.

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In early March 2017, the new Trump administration published a budget proposal which, among other things, called for a 28% cut to United States spending abroad including the State Department and USAID for fiscal year 2018. This is a troubling prospect for many international organizations relying on the US government for funding. So what does this mean and what can we expect going forward? Here we have answered some of the questions currently on the mind of every NGO.

What is the current US foreign aid budget?

For FY 2017, the requested budget for the US State Department and USAID was $50.1 billion, less than 1% of the federal budget. Much of this funding is earmarked for US diplomacy activities, maintaining US embassies and staff. The budget for USAID funding accounts was $22.7 billion.

What is the President’s proposed budget?

Here is the Official Press Release from March 16, 2017:

Today the President released the Fiscal Year (FY) 2018 budget blueprint which provides an overview of the Administration’s overarching priorities for discretionary spending. It includes $37.6 billion for the Department of State and U.S. Agency for International Development (USAID), of which $12.0 billion is Overseas Contingency Operations funding.

The FY 2018 budget advances the national security interests of the United States by focusing on diplomatic efforts and foreign assistance programs that advance the security and prosperity of the American people.

The budget blueprint includes $3.1 billion to meet our security assistance commitments to Israel and supports other critical foreign assistance efforts, including global health and humanitarian assistance programs. The budget also supports diplomatic engagement activities, and ensures the safety of our diplomats by applying $2.2 billion towards new embassy construction and maintenance. The budget will support Department of State and USAID efforts to optimize organizational effectiveness, helping us work to efficiently achieve our diplomatic and development goals and objectives.

More information will be available in May of this year.

Will this budget cut be approved?

While the foreign aid budget is likely to be cut, it is unlikely to be cut by a number as high as 28%. The President is asking Congress for a 28% reduction, the President does not have the power to make the budget. It is the job of the U.S. Congress to create the budget. The Republican Party, which currently carries the majority in both Houses of Congress as well as the Presidency, typically supports cutting government spending. However a significant number of Republicans have openly acknowledged that such a drastic budget cut would harm U.S. interests abroad. Thus, while the foreign aid budget is expected to shrink next year, the cuts are not expected to be as high as 28%.

What is the President’s role in creating the budget?

Creating the budget is a long and complicated process. Congress holds the main power over creating the budget, but there are a number of different groups and interests that also play a role. In general, the President submits an initial proposal to Congress, and then in a few months’ time he can send back or sign into law the budget Congress decides on.

For more information on the US Federal budget approval process, see this report on Introduction to the Federal Budget Process.

When will the new budget go into effect?

In theory, the budget will go into effect at the beginning of the new fiscal year, October 1st. In practice, there is often a lot of back-and-forth, and oftentimes parts of the budget are not finalized until later.

For a more detailed timeline, see this report on: The Congressional Budget Process Timetable.

Will this result in any immediate changes to current grants?

No. The FY 2017 budget allocations will not be effected, nor should multi-year grants that have already been allocated. Renewal of funds next year however may be effected.

How will this impactNGOs receiving US government funding?

The Trump administration has not yet nominated a new head for USAID, so it is unclear where exactly the cuts will occur. However, experts predict that most of the cuts will come out of administrative cost and overhead, not program support. In particular, the cuts will likely be dealt with by closing offices, letting staff go, and combining programs.

While program support may not decrease drastically, there are some changes which could affect organizations depending on US government support:

  • Fewer offices, so fewer opportunities to directly connect or network with staff.
  • Greater burden on remaining staff, likely slowing down the application process and ability to respond to questions.
  • USAID may be combined into the State Department, reducing overhead but more closely aligning USAID to US political interests.
  • US aid operations will likely be scaled back, meaning some countries and programs may be dropped completely.
  • Fewer funding opportunities, so more competition for the remaining funds.

Which programs will be affect and which will not?

While it remains unclear exactly which programs will be impacted, some information already leads to speculation. For example, the budget of PEPFAR (the President’s Emergency Plan for AIDS Relief) was not touched, however the new Global Gag Rule disallowing abortion services or even abortion counseling or referrals does seem to apply to PEPFAR funding. Funding for Israel is likely to be untouched or even increased. Other likely scenarios include a decrease in grants and increase in loans particularly in foreign military aid, as well as defunding of programs not in line with US political goals. The US still has commitments towards achieving the UN Sustainable Development Goals (SDGs), however the current administration has shown disregard for many international commitments, including the UN, so it is unclear how closely future aid will be tied to the SDGs.

Funding that is likely to be maintained:

  • Israel security programs
  • The President’s Emergency Plan for AIDS Relief (PEPFAR)
  • The Global Fund for AIDS, Tuberculosis and Malaria

Funding that is likely to be decreased:

  • The United Nations and affiliated agencies
  • UN Peacekeepers
  • S. Global Climate Change Initiative and the Green Climate fund
  • The World Bank
  • The State Department’s Educational and Cultural Exchange Programs

Will other funding sources replace US government funding?

This is also very difficult to say. The US government is a huge donor and it is difficult to fill the gap a 28% cut would leave. However, there has been some show that alternative income sources are available. Domestically, when funding for Planned Parenthood and Meals on Wheels was threatened, individual giving for those causes drastically increased. Internationally, after the Global Gag rule was instituted, the Dutch government and others pledged to fill the funding gap the US rule will cause. It is possible others will step up to fill the other important gaps left by US aid.

How will this effect organizations not directly reliant on US government funding?

As the US government funds in over 180 countries on a broad range of issues, adecrease in foreign commitments will likely have wide-spread effects even for those not directly receiving US government funding.

The US government funds many large organizations that in turn sub-grant or provide services to other organizations, including: numerous multilateral aid organizations; other governments; international development consultants and service providers; development banks; and INGOs which may partner or sub-contract to national and grassroots NGOs. The new administration is looking to reduce these commitments, particularly to the United Nations. As the United States currently contributes to over one-fifth the UN’s annual budget, the potential large cuts will diminish UN aid programs, partnerships, and support.  So, organizations relying on the UN or others that are in turn funded by the US government may face budget challenges.It is recommended that all NGOs should check with their current donors. Even if you are not directly receiving USAID grants, your donors might be.

Additionally, decreases in US foreign aid decreases the total amount of funding available for international development in 2018. This will increase the competition for remaining US government funding as well as increase competition for other funding opportunities. Even organizations that have no reliance on the US government will find competition for foreign aid money increase as many programs once supported by the US government turn elsewhere for funding.

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