The surge of migrants continues at America’s southern border. According to recent data, Customs and Border Protection has seen a staggering 71 percent increase in encounters since February alone and the U.N. announced that nearly 300 minors are entering Mexico every day in hopes of reaching the U.S. Many of these migrants make the treacherous journey to the U.S. when they confront violence, corruption, and lack of regular employment in their own country.
Our research has shown that the only sustainable way to fully address this crisis then, is to support and fund programs that address job growth, crime reduction, and corruption in Central America. In fact, Vice President Kamala Harris has an upcoming meeting with Guatemala’s President to discuss solutions to stem the tide, including direct cash payments to Central American countries. But just relying on these kinds of funding mechanisms is in many ways antiquated and not the right path forward.
To bring about real, lasting change across the globe, and address the root causes of migration from Central America, the Biden administration should change the way that we fund long-term development. One promising yet little discussed solution: start using endowment funding that can be game-changing for global security challenges while helping to reduce inequality. An endowment is a mechanism where money can be invested, so that income generated from that investment can be used for a specific purpose. USAID could establish individual endowments with partner organizations, so that there will be more sustainable funding sources for our global priorities.
Our current system of providing short-term grants is deeply flawed. These days, grants from the U.S. Agency for International Development (USAID) and U.S. Department of State to non-profits, universities, and organizations are often issued for just two to three years. This funding comes with the expectation that the programs be sustained even after the USAID spigot is turned off. This ignores the reality that the political environment and context in countries may change, funds will dry up after the grant period, and the funding itself could change at any time during implementation.
Politics in the U.S. is making this type of investment even more challenging. In recent years, the inability of Democrats and Republicans to agree upon a national budget has led to government shutdowns and gaps in the ability to implement aid programs. COVID-19 has only exacerbated the efforts to fund for global development because of the safety and security of Americans abroad and at home. This is no way to do development work.
Universities, particularly those in the U.S., offer the Biden administration a new model.
The endowments for many U.S. universities continue to perform well in 2020. The pandemic positions universities as a key proponent of change and encouraging alumni donations for these global priorities. Let’s put these trends to work for the global good.
Congress should once again permit grants as endowments to organizations that do global development work, particularly U.S. universities. Regular grants get expended in a just few years. But it’s difficult to measure the impact of any program long-term when there is no funding left. On the other hand, endowments can generate income that can be used to sustain, measure, and fund new priorities in the future. Under the right conditions, endowments could also be managed by organizations in lower-middle-income economies to strengthen local stakeholders, either independently or in partnership with U.S. universities.
This approach is not new. Back in the 1990s, USAID had blanket authority to fund endowments, but only with local currency. That introduced new problems because when local currencies lost their value, USAID didn’t receive any reliable earnings to fund its work. But a simple change can avoid that issue altogether. Unfortunately, Congress removed USAID’s blanket endowment authority in the mid-1990s.
Today, USAID permits endowments on a case-by-case basis, which is what happened recently with the Promote Scholarship Program awarded to the Borlaug Institute at Texas A&M University. In the 2015 Congressional appropriation, USAID was given specific authority to fund scholarships for women in Afghanistan. The Promote Scholarship Program does precisely that and allowed Texas A&M to receive a substantial investment from the federal government. With the federal money, these endowments can work. In the last 15 years, the Texas A&M Foundation’s endowment fund has had an average 8.7 percent annual rate of return.
This could and should be a new tool for USAID and other entitles that already partner significantly with universities. If the endowments are used in the right context and with the requirement for good management and support of USAID purposes, it’s a win-win (there is no using endowment income for a new sports stadium). USAID gets university partners to work on more sustainable global development efforts to protect American security interests while generating university endowment income to run and evaluate the effectiveness of the programs long-term.
The Biden administration and Congress should reinstate the blanket authority, giving USAID and the State Department the power to issue endowments that fully serve the purpose of U.S. goals abroad.