Understanding the DETERRENT Act

Legislation currently under consideration in Congress could shine a stronger light on foreign gifts to American universities.

The DETERRENT Act, a higher-ed bill introduced in Congress by California Republican Michelle Steel, has recently advanced out of committee. Formally known as the Defending Education Transparency and Ending Rogue Regimes Engaging in Nefarious Transactions Act, the bill aims to increase transparency for higher-education institutions receiving foreign gifts and contracts. According to the bill’s authors, the legislation would protect American institutions from foreign influence, which, if left unchecked, could not only threaten our national security but also leave our top research institutions at risk of foul play. The DETERRENT Act thus aims to strengthen existing protections for the benefit of our nation’s universities and students.

American institutions of higher education were first required to report foreign funding in 1986, via what is now known as Section 117 of the Higher Education Act (HEA). During the Trump administration, then-secretary of education Betsy DeVos exposed concerns about the accuracy of foreign gift and contract reporting. In an effort to make reporting more robust and transparent, the DETERRENT Act would strike the existing Section 117 of the HEA and institute reforms, especially where certain countries and entities of concern are involved.

The bill aims to increase transparency for higher-ed institutions receiving foreign gifts and contracts.The United States Department of State maintains a list of countries and entities of concern (current as of November 2022). Among the countries in question are China, Iran, North Korea, Russia, and Saudi Arabia, to name only a few. Entities of particular concern, meanwhile, include the following: ISIS-Sahel (formerly known as ISIS-Greater Sahara), ISIS-West Africa, and the Taliban.

Presently, under Section 117 of the HEA, American institutions are required to submit biannual reports of foreign gifts or contracts over $250,000. The DETERRENT Act would change that to an annual report but lower the threshold to $50,000. For gifts from countries of concern, the threshold would be any dollar amount.

Additionally, the DETERRENT Act would prohibit American institutions from entering into contracts with any foreign entities or countries of concern. However, institutions could request a waiver from the secretary of state 60 days prior to the contract. Naturally, if the waiver were not granted, the institution would be unable to proceed with the contract—with penalties assessed if institutions were not compliant.

Should a school be found non-compliant with the DETERRENT Act, the penalties could have a major impact. An institution in violation of the law’s regulations for three consecutive years would lose federal funding. Maintaining compliance for two years would be required to regain funding; however, considering that most institutions are dependent upon federal funding to stay afloat, non-compliance could result in bankruptcy. (Depending on one’s perspective, that may not be a terrible thing.) To monitor reporting, the secretary of state would create and maintain an online public database of institutional reports.

During DeVos’s tenure under the Trump administration, a report on Section 117 compliance was presented by the Department of Education in October 2020. Widespread non-compliance was alleged, and the report uncovered roughly $6.5 billion in previously unreported funds from foreign gifts and contracts. Consequently, an older online reporting portal was modernized, which has somewhat aided in compliance. Gift and contract reporting increased from 500-1,000 reports per month to over 7,000 reports in the first three months of the updated portal’s existence alone.

Currently, the information available to the public is fairly general: It includes the dollar amount of the contract or gift, the country sourcing the funds, and the name of the school receiving them, as well as a yes/no option addressing whether the funding comes directly from the foreign government and the start/end dates for the contract. In other words, there is just enough information present to pique an observer’s curiosity about the purpose of these often-exorbitant gifts.

China has made 11 recorded transactions with two North Carolina institutions, Duke and North Carolina State.According to the current public database of foreign gift reporting, of the 12 countries of particular concern, seven have given gifts or entered into contracts with American institutions. Two of the 12 have contracts with or have given gifts to North Carolina institutions: China and Saudi Arabia. China has made 11 recorded transactions with two North Carolina institutions, Duke and North Carolina State, totaling nearly $21 million. And there are 67 reported transactions between four N.C. institutions and Saudi Arabia, totaling over $12 million. (Those schools are Duke, North Carolina A&T, North Carolina State, and UNC Greensboro.) Of the 67 transactions with Saudi Arabia, 43 were made with NCSU.

Speculation has increased lately regarding the potential underlying purposes of these gifts, specifically from entities of concern. Are foreign entities and countries attempting to wield power over American institutions under the guise of making an innocent gift? A recent report by the Network Contagion Research Institute (NCRI) found correlations that may point to ulterior motives behind such monetary gifts to, and contracts with, our nation’s colleges and universities.

NCRI’s report analyzes the possible connection between “foreign funding and its statistical relationship to campus political climate and events.” NCRI found that over the past 10 years, there has been an increase in foreign funding that has been illegally unreported. In fact, at least 200 institutions concealed approximately $13 billion in foreign funding. For example, UNC-Chapel Hill was found to have concealed over $41 million in foreign contributions, while Duke concealed over $343 million.

Much of this concealed funding originates from authoritarian regimes and Middle Eastern sources. NCRI has identified a strong correlation between concealed foreign funds and the decline of free speech on campus, as well as an increase in antisemitic incidents.

The report’s conclusion is as follows:

A massive influx of foreign donations to American institutions of higher learning, much of it concealed and from authoritarian regimes, with notable support from Middle Eastern sources, reflects or supports heightened levels of intolerance towards Jews, open inquiry, and free expression.

It is problems like these that the authors of the DETERRENT Act hope to avoid in the future. While there is, at present, a mere correlation between foreign influence and illiberal incidents on college campuses, the implications are still concerning.

This is the same concern that has the authors and supporters of the DETERRENT Act pushing this piece of legislation forward. Further monitoring foreign funding may be the surface goal, but, ultimately, this piece of legislation could give support to free-speech protections on campus, student safety, and transparency. It will be interesting to see how this bill fares and, if enacted, what information it reveals.

Ashlynn Warta is the state reporter for the James G. Martin Center for Academic Renewal.