Statement On Millenium Challenge Corporation

Senate Floor

Mr. LEAHY. Mr. President, as Chairman of the State and Foreign Operations Subcommittee, I want to take a moment to speak about the budget of the Millennium Challenge Corporation, MCC.  

The fiscal year 2009 State and Foreign Operations bill, reported by the Appropriations Committee on July 18, 2008, recommends $254 million for the MCC.  Since this is substantially less than the $2 billion requested by the President, it was predictable that the Senate committee's action would cause concerns among the MCC and many of its supporters, as well as governments that seek MCC funding.  Those concerns have been expressed and I want to address them briefly today.  While differences are inevitable in the legislative process, it is important that such differences not be based on a misunderstanding or confusion about the facts.

During the past several months, I have heard that some of those who have complained about the Senate committee's action have suggested that it was motivated by an antipathy towards the MCC and a desire to close it down or dramatically curtail its functions.  That is incorrect.

To begin with, we have commended the MCC for what it has accomplished since its inception 4 years ago.  Several compacts are beginning to show tangible results, including the implementation of agriculture, infrastructure and other projects.  Ambassador John Danilovich, the MCC's CEO, has been a strong leader at a critical time, and I commend him as well as deputy CEO Rodney Bent.  They have both done a fine job of representing the MCC, both here and abroad.

Earlier this year, when the subcommittee was dividing up funds allocated to State and Foreign Operations, we faced many difficult choices.  Our fiscal year 2009 allocation was $2 billion below the President's budget request, and the President underfunded or failed to fund many critical programs of interest to both Democrats and Republicans.  For example, he cut funding for family planning/reproductive health by over $100 million below the fiscal year 2008 level.  He cut the U.S. contribution to the global fund to fight AIDS, TB and malaria by $350 million.  He shortchanged humanitarian relief programs, peacekeeping, democracy programs, environment and energy programs.  There are many other examples.

We also considered the fact that Congress had appropriated $7.5 billion for the MCC, and by July 18 only $235 million had been disbursed of which a significant portion was for administrative expenses.  While we made clear that we were not advocating faster disbursements, we do not support additional compacts until more of the funds we have already appropriated produce sustainable results.

Many compacts were slow getting off of the ground, in some cases because the MCC rightly insisted that governments make further refinements, or because the contracting process took longer than expected.  These kinds of delays are predictable and do not reflect poorly on the MCC.  Unfortunately, I have heard that some MCC personnel in country are being urged to disburse funds more quickly.  As we have said before, this is not our intent, particularly if it risks short-cutting procurement guidelines or other safeguards, or otherwise negatively affects the quality of implementation of compacts.

I do not know what the optimal rate of disbursement is for the MCC. It may be disbursing funds at the right rate.  By pointing out the rate of disbursement the committee has simply sought to explain why, in part, we are unable to support hundreds of millions of dollars for new compacts when compacts that are several years old have only disbursed a fraction of their funds.  More time is required to review the effectiveness of the 18 compacts that already exist.  I am told that the MCC's board of directors will meet in December to discuss which additional countries will be eligible to apply for compact funding in fiscal year 2009.  Since we will not have a final fiscal year 2009 funding level for the MCC until late January at the earliest, I urge board members to act judiciously and to keep in mind that eligibility does not assure that a compact will be funded.

The many competing demands placed on the State and Foreign Operations Appropriations bill will only increase over the next few years, given the global financial crisis, which will have direct and indirect consequences for the world's poorest countries.  We also expect to be asked to increase funding for international HIV/AIDS programs due to the recent PEPFAR reauthorization.

The MCC is a new and innovative form of assistance, and we want it to succeed.  I was involved in drafting the authorizing legislation that established the MCC, and I have said many times that I strongly support the concept of providing governments with incentives to combat corruption, improve governance, and address the basic needs of their people.  If the MCC shows that it can achieve the results we all want, it could become a model for other forms of foreign assistance.

But we cannot ignore other pressing short-term and long-term needs.  Some have claimed that not providing another billion dollars for the MCC in fiscal year 2009 will delay progress toward long-term development goals.  I would argue that funding to address the acute personnel shortages at the Department of State and USAID, which the President's budget largely ignores, is a priority for effective U.S. diplomacy and development assistance programs now and in the future.

It is also notable that a number of governments that were awarded compacts are not performing as expected.  According to the 2009 Country Scorecard Index, 5 of the 8 MCC lower middle income countries that have compacts have failed 8 of 17 indicators.  Similarly, with the reports of systemic voter fraud in the recent Nicaraguan elections, I am concerned that President Ortega's government may have jeopardized the MCC compact in that country.

The future of the MCC is now up to the Obama administration, and I expect President-elect Obama will explore all options for how the MCC should by managed and implemented, as he will for other Federal programs.  However, before major adjustments, if any, take place, Congress has to finish the remaining fiscal year 2009 spending bills.

Senator Gregg and I will be working with our colleagues in the House.  There are several areas in the State and Foreign Operations bill where the Senate and House positions differ, and the MCC is one obvious example.  Until then, I would encourage those who care about the MCC, as many of us do, to focus on ensuring that funds already appropriated are used effectively.

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