Foreign aid, Wye funding almost a done deal

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WASHINGTON — After a month of intense political haggling between the White House and congressional Republicans — and a lobbying blitz by Israeli officials and Jewish groups — a foreign aid bill that includes $1.8 billion in aid to implement the Wye agreement appears to be a done deal.

But the deal was clinched only after Israel agreed to pay a price.

Israel agreed to give up for one year its perk known as "early disbursal," which allows Israel to receive its annual $1.9 billion in military aid from the United States in a lump-sum payment so it can accrue interest on the money.

According to all accounts, the move freed up enough money to make the foreign aid bill acceptable to President Clinton, who had already vetoed an earlier version of the legislation because it contained less than he had requested.

As a result of the compromise, the U.S. House of Representatives last Friday passed a $13.5 billion foreign aid bill that adds $1.8 billion in emergency funding for Wye.

The bill also includes nearly $3 billion in economic and military aid for Israel, nearly $2 billion for Egypt, $225 million for Jordan and $75 million for the Palestinians.

The Senate was expected to pass a similar bill late this week, possibly yesterday or today.

Sources close to the negotiations also said Israel's sacrifice was the key in allowing the White House and Republican leaders to figure out a way to add money to the foreign aid bill without being accused of dipping into the politically sensitive Social Security trust to fund foreign aid.

The inclusion of the funding to help implement last year's Wye agreement between Israel and the Palestinians was considered a major victory for Clinton and Jewish activists who had pushed Congress hard to fulfill the pledge Clinton had made at the Wye talks.

The Wye funding provides $1.2 billion for Israel, $400 million for the Palestinians and $200 million for Jordan.

In addition to the Wye funding, the compromise bill includes an additional $799 million for other programs such as debt relief for poor countries, nuclear threat reduction in the former Soviet Union and aid to Africa.

As a result of the change in disbursal, Israel is still slated to receive an estimated $1.35 billion early, which means 30 days after enactment of the foreign aid bill. The United States would hold on to at least $550 million, which could mean a loss of an estimated $60 million in accrued interest for Israel.

Although the exact details are still being worked out, the theory behind the move is this:

Since the United States will not be paying all the aid up front, the money will still be on hand in the U.S. Treasury. According to budget procedures, there is a distinction between budget authority, or money earmarked to be spent that could actually take several years to be paid out, and outlays, money that is actually being spent now.

By not giving Israel at least $550 million of the aid upfront, the United States was able to create $2.6 billion more in budget authority to cover Wye and the other programs, many of which spend the money appropriated at a slow rate over several years.

However, there are some risks associated with the change in disbursal this year.

It could weaken the flexibility of Israeli defense officials who are used to having the money in the bank, Jewish activists and Israeli sources said, adding that it also could set a precedent for eliminating the provision down the road.

But they said those costs pale in comparison to the possibility of not getting the special $1.2 billion in military aid to help defray the cost of further withdrawing from West Bank territory.

Last Friday's 316-100 vote in the House marked a sharp contrast to last month's narrow passage of a foreign aid bill, which was ultimately vetoed by Clinton.

But the lack of debate belied the behind-the-scenes drama last week that led to the easy vote on the floor.

After the early disbursal was proposed by Republicans and agreed to by the pro-Israel lobby, the American Israel Public Affairs Committee, and Israel, GOP leaders wanted to vote on a bill that included the full Wye aid package but only a small amount of additional funding for other foreign affairs programs.

This tactic was especially troublesome to the 21 Jewish Democrats who had all voted last month — in an unprecedented move — against a foreign aid bill that included Israel's nearly $3 billion in annual aid but not the Wye package.

The Jewish lawmakers, who have routinely been the driving force in advocating for passage of the foreign aid bill, said they voted against the measure because it did not provide funding for Wye and because it shortchanged assistance programs in Africa and Latin America, among others.