Funding for International Affairs Activities, Within and Outside Agencies’ Base Budgets

The Congress provides the State Department, the Agency for International Development, and other agencies a “base budget” each year to fund ongoing activities related to international affairs. In addition to that base budget, in recent years the agencies have received other funding—referred to as “nonbase” in this report—in three forms:

• Supplemental appropriations that are made outside the normal annual appropriation process;
• Emergency appropriations (which may or may not be supplemental) designated for addressing unanticipated needs; and
• Funding to support overseas contingency operations (OCO). In recent years, this third category has accounted for most nonbase funding.

In this report, CBO analyzes the recent use of nonbase appropriations for international affairs activities. Among CBO’s key findings are the following:

• Nonbase appropriations for international affairs activities grew rapidly during the early years of the United States’ military operations in Afghanistan and Iraq, but they decreased in 2010 and were not provided in 2011.
• After the enactment of the Budget Control Act of 2011 (BCA), agencies once again received nonbase funding for international affairs activities, most of which was designated for OCO. By providing some of the annual appropriation in the form of OCO funding, lawmakers were, under the rules set by the BCA, able to free up funding for other nondefense discretionary budget accounts.
• The agencies have used nonbase funding to cover expenses that would otherwise have been paid for by their base budget. Those expenses have included operations and programs in countries with extraordinary policy and security challenges.

Background

The base budget for international affairs is intended to fund the day-to-day activities that support the government’s longer-term projects and objectives. For example, the State Department includes in its base budget the estimated costs of operating embassies and consulates around the world. Funding for the base budget is provided by the Congress through the regular appropriations process or is sustained through continuing resolutions.

By contrast, nonbase appropriations are intended to be used when circumstances arise that were not anticipated when the base budget was prepared, such as wars, natural disasters, or epidemic outbreaks abroad. For example, combating an Ebola outbreak in Africa might be funded by a nonbase appropriation.

The BCA capped discretionary appropriations; if appropriations exceed the caps, across-the-board reductions of discretionary funding automatically take effect (a procedure referred to as sequestration). That legislation also established a separate designation for funding for overseas contingency operations. The caps on discretionary appropriations are automatically adjusted to accommodate amounts designated as either OCO or emergency funding.

Because OCO-designated funds are not constrained by those caps, the BCA’s rules encourage the Congress and the executive branch to categorize appropriations as OCO-related, even if they are for activities that would otherwise be incorporated in the base budget. The term “OCO-for-base funding” refers to such OCO appropriations that support activities that would most likely continue even if the overseas contingency operations ended and U.S. troops were recalled from abroad. Activities do not have to be linked with a formal Department of Defense overseas contingency operation to be supported by OCO funding.

OCO-for-base funding is problematic primarily because it understates the cost of current base-budget activities and increases the likelihood of errors in planning for future budgets. If OCO appropriations ended, the base budget for international affairs might need to be increased to continue funding the programs and activities that have been supported by OCO appropriations.