New Model Legislation: Tracking Foreign Funds in American Universities
NEW YORK, NY – In September, Congress discovered that federal agencies had inadvertently bolstered China’s military capabilities by channeling federal funding through partnerships between American and Chinese universities. The U.S. government lacked visibility into many of these collaborations because the U.S. universities involved had failed to report the funds as required by Section 117 of the Higher Education Act. Current federal law lacks robust enforcement mechanisms and fails to capture key details, such as a gift’s intended purpose and the donor’s name. As a result, universities have weak incentives to disclose crucial funds in a timely manner and the public remains largely unaware of the forces vying for influence at our top institutions.
Improving Section 117 is an important task, but reform efforts have suffered from the typical partisan gridlock now characteristic of Congress. States, meanwhile, have shown to enact more thorough disclosure laws. In new model legislation, Manhattan Institute Paulson Policy Analyst Neetu Arnold provides the first comprehensive overview of existing state-level foreign funds disclosure laws applicable to universities. She notes that state foreign disclosure laws offer several key improvements over the current federal disclosure standards, but also cautions that there is significant variation in quality among the states. Many states’ disclosure laws could be significantly improved by matching or exceeding the standards set by the laws of the most comprehensive states: Florida, Louisiana, and Pennsylvania.
Arnold proposes the following key improvements that foreign disclosure laws at the state level can make:
- Lowering reporting thresholds
- Making donor names public
- Consistently reporting the purpose of the gift
- Defining enforcement mechanisms and penalties
- Providing clear definitions of university-affiliated organizations
The model legislation presented in this brief improves laws already adopted by states by suggesting language to implement these recommendations. If states enact laws that include these provisions, they can close the loopholes universities exploit to avoid disclosure of foreign money.
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