President’s Budget Request - U.S.-Israel Aspects of Note
Key Takeaways:
No change to Israel FMF and MDA toplines, but reduction in overall FMF topline means Israel would consume approx 64% of global FMF availability.
New FMF Loan Authority creates an arms transfer funding “invisibility cloak”.
Caveat: This Fact Sheet represents an initial review of the full CBJ request for FY27. It is not comprehensive, and does not address matters that may be relevant including broader human rights issues and domestic civil rights concerns. This factsheet does not include full review of the Galleys.
Israel Security Assistance
Foreign Military Financing (FMF): No change in topline ($3.3B) or caveats. However, overall FMF topline has been cut from $6.1B in 2026 Estimated to $5.25B, meaning that Israel alone now accounts for 63% of global FMF, and Israel and Egypt ($1.3B, no change) combined account for 88%
Israel Loan Guarantees - availability is extended from September 30, 2028 to September 30, 2031.
Israeli Cooperative Programs; Missile Defense: No change in topline ($500M), but a reduction in the minimum allocations by $40M for Iron Dome and $10M to SRBMD co-production, paired with an increase of $100M towards Arrow 3.
Peacekeeping: Peacekeeping Operations (PKO) funding, renamed the National Security Engagement Account (NSEA), is reduced globally from $200M to $164M, and the CBJ notes "support is planned to promote U.S. national security interests by advancing comprehensive and lasting peace between Israel and its neighbors through support of the Multinational Force and Observers Mission in the Sinai." Assuming steady-state funding for the MFO, this would now constitute approximately 15% of global PKO/NSEA funding.
Additionally, for FY26 Congress provided $1,230,667,000 in Contributions for International Peacekeeping (CIPA) funding; the FY27 CBJ does not request any CIPA funding, and the President's budget summary notes the impending end of the UNIFIL peacekeeping mission in Lebanon - a noteworthy 'coincidence' given Israel's current invasion of Southern Lebanon.
Foreign Military Financing Loans (Global)
Proposed Section 7046 of the FY27 CBJ radically transforms the global FMF loan program, doubling the available principal from $8B to $16B, while making available $2,000,000,000 for loan guarantees. The language in the CBJ explicitly allows the use of previously designated "Overseas Contingency Operation/Global War on Terrorism" (GWOT) balances. This allows the government to tap into "old" money that was sitting in accounts from prior years to cover the subsidy costs of these new loans. Notably, the CBJ grants the Secretary of State explicit, broad authority to determine the interest rate and the repayment period "notwithstanding section 23 of the Arms Export Control Act." This gives the Executive Branch significantly more flexibility to offer favorable (or "concessional") loan terms to specific allies. The new CBJ language also states that the costs of these loans/guarantees "shall not be considered assistance" for the purposes of laws that limit how much aid a specific country can receive. This allows the U.S. to subsidize massive loans to countries that might otherwise be hitting a "cap" on traditional grant aid.
So, for example: By waiving the standard accounting rules, the State Department can authorize a $1 billion loan to a country while only "charging" the U.S. budget for the subsidy cost (the estimated risk of default), which might only be $50 million. This allows the Secretary to move $16 billion worth of hardware while only "spending" a fraction of that in actual appropriated tax dollars.
Because the subsidy “shall not be considered assistance”, the provision creates essentially a legal "invisibility cloak." It allows the Secretary of State to provide a country with billions in military hardware via loans without those billions counting toward legal limits on how much "aid" that country is allowed to receive annually.
In sum: The Secretary of State becomes a sovereign lender. They can decide who gets the best interest rates, who gets decades to pay it back, and how to move $16 billion in weapons without the transaction being legally labeled as "foreign aid." This transforms the FMF program from a rigid military-sales tool into a highly flexible geopolitical banking tool.
A New Policy Comment: While there are multiple global uses cases for this authority (Ukraine and some emerging defense markets), given recent discussion about off-ramping Israel from grant FMF, this expanded FMF Loan Authority would give the Secretary of State wide authority to provide Israel with financing for defense materiel via 0% loans with repayment terms extending decades into the future. More broadly, Congress should be concerned over the significant oversight gap this mechanism would create vs current grant assistance - and even current loan mechanisms.
Israel-related conditionality:
NADR restriction on funding IAEA unless the Secretary of State determines that Israel is being denied its right to participate in the activities of that Agency: - no change
Restriction on moving the United States embassy in Israel to a location other than Jerusalem. - no change
Prohibition on funding for United Nations International Commission of Inquiry on the Occupied Palestinian Territory and funding for UNRWA - no change
Limitations relating to Assistance for the West Bank and Gaza
No change to the substantive limitations; the CBJ does not include the FY2026 Appropriations language on Gaza oversight.
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