Department of State Budget: FY2027 Cuts, USAID Merger, and Workforce

The U.S. Department of State budget for fiscal year 2026 came in at roughly $50 billion, enacted on February 3, 2026 as part of the Consolidated Appropriations Act.¹ That figure is about 3.3 percent below FY2025 but roughly $21 billion higher than what the Trump administration requested. The gap between what the White House wants for diplomacy and foreign aid and what Congress is willing to fund now defines the department’s finances, and it is running alongside a merger with USAID, an internal reorganization, and the largest workforce reduction in the department’s modern history.

FY2026 Enacted: What the White House Asked For and What Congress Did

The administration’s FY2026 request totaled about $28.5 billion for the State Department and related foreign operations, nearly half the roughly $54.4 billion enacted for FY2025. It zeroed out development assistance, international peacekeeping, the National Endowment for Democracy, and international narcotics control and law enforcement.² Contributions to international organizations were set at $264 million, an 83 percent cut.³ Global health programs were proposed at $3.8 billion, down from $10 billion.⁴ The proposal also folded USAID into State and rescinded roughly $20 billion in previously appropriated foreign aid.

Congress kept most of those programs alive. The National Endowment for Democracy received $315 million against a zero request. The Millennium Challenge Corporation got $830 million against a $224 million request.⁵ Global health programs came in at $9.4 billion, a six percent trim from the prior year but $5.6 billion above the request.⁶ The enacted bill also set floors on global health spending in the accompanying explanatory statement, cutting into the executive’s ability to redirect the money.⁷

FY2027 Request: Another Push for Deeper Cuts

The FY2027 request, released in April 2026, asks for $33.6 billion for State (roughly $35.1 billion counting related international affairs agencies), a 32 percent drop from the $51.3 billion FY2026 enacted level.⁸ Counting proposed rescissions, new budget authority comes to $35.5 billion, down 29 percent.⁹

The request splits into $20.9 billion for foreign assistance and $12.7 billion for diplomatic engagement, with what the department calls a historic investment in the Bureau of Diplomatic Security. Foreign Military Financing is proposed at $5.25 billion in direct funding plus $18 billion in loan authority.¹⁰ On the cut side: UN peacekeeping contributions eliminated ($1.23 billion), humanitarian assistance down a third, educational and cultural exchanges cut 68 percent, and Food for Peace Title II and the U.S. Agency for Global Media zeroed out.⁸

The House Appropriations Committee approved its version, H.R. 8595, on April 28, 2026, at $49.2 billion. That is about 33 percent above the White House number but still 5.4 percent below FY2026 enacted.⁹

The America First Opportunity Fund

A new flexible account called the America First Opportunity Fund has drawn some of the sharpest fights. The Secretary of State would use it for strategic investments in critical minerals, infrastructure, telecommunications, and bilateral partnerships.¹⁰ The administration asked for $2.9 billion in FY2026; Congress gave $850 million and required the Secretary to consult with appropriations committees at least 30 days before spending it.¹¹

For FY2027 the ask is $5 billion, with $1.1 billion earmarked for Egypt and Jordan, $810 million for East Asia and the Pacific, $650 million for the Western Hemisphere, $245 million for countering Chinese influence, and $2.1 billion unprogrammed. Skepticism has been bipartisan. Rep. Madeleine Dean (D-Pa.) called it a “vague, open-ended fund,” and Rep. Debbie Wasserman Schultz (D-Fla.) called it an “unmonitored billion-dollar slush fund.” Kori Schake of the American Enterprise Institute doubted Congress would grant the full amount at the department’s discretion.¹¹

International Organizations and Global Health

Secretary of State Marco Rubio has said every funded program must justify whether it makes America “safer, stronger, or more prosperous,” and the administration has characterized prior spending as “woke, weaponized, and wasteful.” Under the FY2026 request, only 7 of the 46 multilateral organizations traditionally funded by the United States would have received any money.¹² The administration moved to withdraw from the World Health Organization and the UN Human Rights Council. The FY2027 House bill zeroes out the UN regular budget, the UN Development Program, UN Women, and UNICEF, and prohibits contributions to the UN Population Fund.¹³

On global health, the FY2026 proposal capped U.S. contributions to the Global Fund to Fight AIDS, Tuberculosis and Malaria at $1 for every $4 from other donors, doubling the previous matching ratio.³ It also proposed eliminating bilateral funding for family planning, maternal and child health (except polio), neglected tropical diseases, nutrition, and Gavi.¹⁴ Congress preserved most of those programs at modestly reduced levels.

USAID Folded Into State

The U.S. Agency for International Development is being absorbed into the State Department. The process began in early 2025 with a suspension of new USAID obligations and the dismissal of senior career leaders and thousands of mid-level staff.¹⁵ USAID functions are being integrated into State’s regional bureaus so ambassadors have more direct input on aid distribution.¹⁶

The Foreign Affairs Reform and Restructuring Act of 1998 established USAID as an independent agency, and the 2024 foreign operations appropriations law prohibits reorganization of USAID or the State Department without prior congressional consultation.¹⁵ An Inspector General report found State’s absorption plan would hire 308 U.S. direct-hire staff, 370 locally employed staff, and 40 contractors, well short of USAID’s prior workforce of nearly 4,500 domestic direct hires, 5,000 local staff, and over 1,000 contractors. The IG also noted that the hiring numbers were not based on a strategic workforce plan.¹⁷ The FY2027 request zeroes out USAID operating expenses and asks for over $21 million to fund 400 positions transitioned from the former agency.¹⁸

Internal Reorganization and Post Closures

Secretary Rubio announced a department-wide reorganization in April 2025, describing the existing structure as “bloated” and “bureaucratic.”¹⁹ Offices eliminated include the Under Secretary for Civilian Security, Democracy, and Human Rights; the Bureau of Conflict and Stabilization Operations; the Office of Global Women’s Issues; the Office of Diversity and Inclusion; the Global Engagement Center; and the Office of Global Criminal Justice as a standalone entity. Arms control and nonproliferation bureaus were merged into a Bureau of Arms Control, Nonproliferation, and Stability, and the Bureau of Population, Refugees, and Migration absorbed the Office to Monitor and Combat Trafficking in Persons. A Bureau of Emerging Threats was created, and foreign assistance coordination was placed under a new Coordinator for Foreign Assistance and Humanitarian Affairs.²⁰ Functions of dissolved specialty offices, such as human rights and democracy promotion, were woven into regional bureaus.¹⁶

The administration also proposed closing or downsizing nearly 30 overseas posts: 10 embassies and 17 consulates. Embassies identified included those in Malta, Luxembourg, Lesotho, the Republic of Congo, the Central African Republic, and South Sudan. The consulate list included five in France, two in Germany, and posts in the United Kingdom, South Africa, and South Korea. Duties at shuttered embassies would be assumed by outposts in neighboring countries.²¹

Workforce Cuts and the Court Fight

The department began what it called the “largest and most complex workforce reduction of its kind” in July 2025, issuing reduction-in-force notices to more than 1,350 employees.²² More than 1,100 civil service employees were separated in early September 2025. Combined with roughly 1,600 employees who accepted earlier deferred resignation offers, the target was about 18 percent of the workforce.²³

A government shutdown in late 2025 produced a continuing resolution that opponents argued should have blocked the layoffs. The department, citing guidance from OMB and DOJ’s Office of Legal Counsel, said the moratorium did not apply because the RIF process had begun before the shutdown.²² A federal district court judge in San Francisco temporarily blocked Foreign Service separations in December 2025, then ruled in January 2026 that the layoffs were exempt from the moratorium. On May 5, 2026, the department separated nearly 250 Foreign Service employees and about 30 civil service employees. Under Secretary for Management Jason Evans confirmed in March 2026 that laid-off employees would not be eligible to compete for new vacancies.¹⁸ The FY2027 budget targets a workforce of roughly 11,000 Foreign Service and 6,000 civil service employees.

One Piece Runs on Its Own Money: Consular Affairs

Passport and visa services sit outside the appropriations tug-of-war. The Bureau of Consular Affairs has been largely self-funded through user fees since FY2013.²⁴ In FY2019 the department set up a standalone Consular and Border Security Programs account for retained consular fees.²⁵ Fee revenue was $3.7 billion in FY2014 and $4.1 billion in FY2015, with fees set to achieve full cost recovery.²⁶ The pandemic exposed the model’s weakness, cutting FY2020 fee revenue by 41 percent and forcing reliance on supplemental appropriations and carryover balances. The Government Accountability Office has warned that even with recovery, the carryover balance could fall well below the department’s 25 percent reserve target.

What to Watch for FY2027

House Appropriations Chairman Tom Cole set an ambitious schedule to move all 12 spending bills before the July 4 recess, but narrow majorities and midterm pressures make a stopgap continuing resolution a likely outcome before September 30.⁸ House Appropriations Committee Ranking Member Rosa DeLauro called the FY2026 request “the worst I have ever seen,” and Ranking Member Lois Frankel of the State and Foreign Operations Subcommittee said “foreign assistance is not a handout — it’s a strategic investment.”²⁷ Republican appropriators, though more open to reductions, have consistently written bills well above the White House number. Senate Appropriations SFOPS Chair Lindsey Graham held a hearing with Secretary Rubio in May 2025 and then presided over a bill that rejected the administration’s most aggressive proposals.²⁸ The pattern from FY2026 is a decent guide: expect Congress to land somewhere well above the request and well below the previous year, with the Opportunity Fund, UN contributions, and global health matching ratios as the specific fights that shape the final number.

1
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2
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3
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4
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6
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16
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17
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18
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