An agency closed, a budget contested

For 64 years, the United States ran most of its foreign development and humanitarian assistance through a single independent agency: the US Agency for International Development. In 2025, that agency was dismantled. By July 1, 2025, USAID had formally ceased to operate as an independent agency, and its surviving functions were absorbed into the State Department.

That would be a significant story on its own. What makes it a constitutional story is what happened next. In February 2026, Congress — which creates agencies, and which controls federal spending — enacted a foreign-affairs appropriation of roughly $50 billion, well above what the administration had asked for. Then, in May 2026, the administration moved to divert money Congress had appropriated for global health programs to instead pay the costs of closing the agency Congress had not voted to close.

This brief explains what USAID did, what it structurally changes to fold an independent agency into a Cabinet department, and the tension that the FY2026 sequence has thrown into sharp relief: between an executive branch dismantling an agency and a Congress that holds the power of the purse.

What USAID was and what it did

USAID traces to 1961. Congress passed the Foreign Assistance Act in 1961, President Kennedy signed it, and that fall an executive order established the Agency for International Development to unify a scattered set of postwar aid programs (Britannica). The Foreign Affairs Reform and Restructuring Act of 1998 confirmed USAID’s status as an independent agency — not a bureau of the State Department, but a distinct entity with its own administrator and its own statutory footing.

In its final years the agency administered tens of billions of dollars annually in development and humanitarian assistance — the figure varies with the accounting, in the range of $35–40 billion in managed appropriations, a fraction of one percent of total federal spending. It employed over 10,000 people at the start of 2025. Its work included:

• Global health. USAID implemented most US global-health programming — malaria, tuberculosis, maternal and child health, nutrition — and was a central implementer of PEPFAR, the HIV/AIDS program credited with saving tens of millions of lives since 2003.
• Famine early warning and food aid. USAID ran the famine early-warning system that forecasts food crises, and channeled food assistance to tens of millions of people across roughly 60 countries each year.
• Development and humanitarian response. Long-term development work — basic education, food security, democracy programs — and rapid disaster response.

Reasonable people disagree about how well USAID spent its money. That is a legitimate debate. This brief is about a different question: who gets to decide whether the agency exists, and how its appropriated money is spent.

What it changes to fold an agency into State

Dissolving USAID and moving its functions into the State Department is not a cosmetic reorganization. Three structural things change.

Independence is lost. As an independent agency, USAID had its own administrator, its own budget lines, and a statutory identity that made it visible to Congress and accountable on its own terms. Folded into State, development and humanitarian assistance become one set of priorities competing inside a department whose primary mission is diplomacy. Decisions that were once made by an agency dedicated to assistance are now made by, or subordinate to, officials whose central job is something else.

Development logic is subordinated to diplomatic logic. Independent-agency status was a deliberate design choice: it insulated long-horizon development and humanitarian work from the short-term swings of diplomatic strategy. A famine-response program or a multi-year health program follows a different logic than a diplomatic negotiation. Inside State, assistance is more easily redirected to serve immediate foreign-policy aims — which can mean less continuity for the populations the programs serve.

Congressional oversight changes shape. Congress had created USAID by statute and could hold its leadership accountable as a distinct entity. Once the functions are dispersed into State’s regional and functional bureaus, the lines of accountability blur. It becomes harder for Congress to see how appropriated assistance dollars are being used, and harder to hold any single official answerable for them.

There is also a threshold legal question. Because Congress created USAID in statute, multiple legal experts — and a federal court — concluded that the executive branch likely could not unilaterally abolish it. In March 2025, US District Judge Theodore Chuang ruled that the early dismantling effort likely violated the separation of powers, finding it had “deprived the public’s elected representatives in Congress of their constitutional authority to decide whether, when, and how to close down an agency created by Congress” (NPR; Just Security). The administration nonetheless proceeded, notifying Congress in March 2025 that it was effectively dissolving the agency (CNN) and completing the absorption by July 1, 2025 (NPR).

The FY2026 appropriations fight

This is where the power of the purse enters.

The Constitution gives Congress, not the President, the spending power: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” An administration can propose a budget; only Congress can enact one.

For FY2026, the administration’s proposal was severe. Its budget requested roughly $31.5 billion in new budget authority for State, Foreign Operations, and Related Programs — a sharp cut from prior-year levels — and on top of that asked Congress to rescind about $22 billion in previously appropriated funds (Congressional Research Service). The request zeroed out major bilateral economic-assistance accounts and proposed deep reductions to global health.

Congress declined. On February 3, 2026, the FY2026 appropriations package became law (P.L. 119-75), and its national-security/State/foreign-operations division appropriated roughly $50 billion, net of rescissions — well above the administration’s request, and only modestly below the prior year (NPR). It included about $9.4 billion for global health, billions of dollars more than the administration had sought. Congress also rejected the administration’s proposed new “America First Opportunity Fund” as the main vehicle for assistance, funding it at a small fraction of what was requested and directing money instead to established development priorities (Center for Global Development).

The plain reading of that sequence: the elected legislature, exercising its constitutional spending power, decided that the United States would continue funding diplomacy and assistance at roughly $50 billion — even as the executive branch dismantled the agency that had historically delivered much of it. Congress funded the function; the executive had eliminated the institution.

The May 2026 diversion: the tension made concrete

The structural tension stopped being abstract in May 2026.

Closing USAID is not free. Winding down an agency generates costs — legal expenses, unpaid invoices to contractors, the disposition of assets and property. In 2026 the administration told Congress it had reserved more than $19 billion to cover USAID closeout costs, much of it from previously terminated contracts.

In early May 2026, the administration moved to cover part of those closure costs by diverting roughly $2 billion that Congress had appropriated for global health — money designated for malaria, tuberculosis, maternal and child health, nutrition, global health security, and HIV/AIDS — toward the expenses of shutting the agency down. Reporting indicated that an additional roughly $1.2 billion in development assistance would be redirected as well (CNN). One think-tank analysis estimated that a $2 billion cut to those health programs could translate into well over 100,000 preventable deaths from tuberculosis and tens of thousands more from malaria.

This is the constitutional collision in concrete form. Congress, holding the spending power, appropriated money for global health. The executive branch moved to spend it on closing an agency — a purpose Congress had not authorized, to dismantle an agency Congress had not voted to close. Seventeen Senate Democrats formally objected, demanding the administration reverse the budget notification and arguing there was no justification for withholding global-health money to pay for the costs of dismantling USAID.

The dispute turns on a recurring question of appropriations law: how far the executive may stretch its authority to reprogram or transfer funds between accounts before it crosses into spending money for purposes Congress did not appropriate it for — or into impounding funds Congress did appropriate. Congress sets spending by account and purpose precisely so the executive cannot quietly redirect it. A move to repurpose health money for shutdown costs tests exactly that boundary.

The stakes beyond USAID

The narrow story is about one agency. The broader story is about a structural principle.

If an administration can dismantle an agency Congress created by statute, decline to spend appropriations the way Congress directed, and redirect designated funds to its own priorities, then two of Congress’s core Article I powers — to structure the government and to control its spending — become advisory. The check does not depend on whether one agrees with USAID’s record or with foreign aid generally. It depends on whether the appropriations Congress enacts are binding instructions or merely suggestions.

That is why the FY2026 sequence matters well beyond foreign assistance. It is a live test of whether the power of the purse still functions as a constraint.

What to ask your representatives

• Do they believe the executive branch can lawfully abolish an agency that Congress created by statute without congressional authorization? If not, what will they do about USAID’s dissolution?
• Will they oppose the diversion of roughly $2 billion in appropriated global-health funds to pay USAID closure costs, and will they support legislation or oversight to block it?
• How did they vote on the FY2026 appropriations package (P.L. 119-75), and do they support its roughly $50 billion in funding for diplomacy and assistance over the administration’s much smaller request?
• What specific tools — appropriations riders, reprogramming restrictions, oversight hearings, litigation support — will they use to ensure appropriated funds are spent for the purposes Congress designated?
• If foreign assistance is to be delivered through the State Department rather than an independent agency, what oversight structure will they insist on so that Congress can still track how the money is used?