From Global to Local: How USAID Implementing Partners Can Pivot to State Government Partnerships

A New Frontier for USAID Implementing Partners

With USAID restructuring and funding uncertainties disrupting international development programs, implementing partners must find alternative avenues for sustaining their operations and impact. While previous discussions have highlighted the role of the private sector and philanthropic organizations as viable funding sources, another promising pivot exists: state governments.

State governments across the U.S. face a myriad of challenges related to economic development, public health, education, infrastructure, and climate adaptation—challenges that align closely with the expertise of USAID implementing partners. By shifting their focus to domestic development while maintaining global operations, these organizations can diversify their revenue streams, sustain their workforce, and contribute to solving pressing local challenges. But what exactly do state governments need, and how can USAID implementing partners adapt to fill these gaps?

The Critical Needs of State Governments: Where Implementing Partners Can Help

State governments play a pivotal role in managing economic and social challenges, yet many face resource limitations, workforce shortages, and outdated systems. The following sectors represent significant areas where USAID implementing partners can provide expertise and capacity-building support:

1. Public Health and Social Services

• Addressing health disparities, particularly in rural and underserved communities.
• Strengthening healthcare infrastructure, including workforce development and telemedicine expansion.
• Implementing pandemic preparedness and response programs.
• Enhancing mental health and substance abuse intervention programs.

2. Workforce Development and Economic Resilience

• Designing and implementing job training and reskilling programs, particularly for displaced workers.
• Supporting small business development and access to capital for underrepresented entrepreneurs.
• Helping states build inclusive economic policies that address income inequality.

3. Climate Resilience and Disaster Preparedness

• Developing climate adaptation strategies for communities affected by rising sea levels, extreme weather, and wildfires.
• Assisting in energy efficiency projects and renewable energy adoption.
• Strengthening disaster response planning and community preparedness efforts.

4. Education and Digital Access

• Expanding broadband access to bridge the digital divide.
• Strengthening K-12 and vocational education programs through curriculum development and teacher training.
• Implementing youth development and mentorship programs in low-income communities.

5. Governance and Public Administration

• Supporting evidence-based policymaking and data-driven decision-making.
• Strengthening financial and performance management systems within state agencies.
• Assisting with public-private partnership (PPP) development for infrastructure and community development projects.

Case Study: The Success of the Massachusetts Pathways Program

One successful example of a state-NGO partnership is the Massachusetts Pathways to Economic Advancement Program, implemented by the nonprofit Jewish Vocational Services (JVS) in partnership with the Massachusetts state government. This initiative aimed to provide workforce training and English language learning programs for immigrants and low-income workers, helping them secure higher-paying jobs.

By leveraging state workforce development funds and collaborating with employers, JVS was able to:

• Provide career coaching and upskilling programs tailored to state economic needs.
• Increase employment rates among participants, reducing dependency on public assistance.
• Demonstrate measurable economic impact, which led to expanded state funding for similar programs.

This case study highlights how USAID implementing partners can replicate similar models by aligning their expertise with state priorities, securing government funding, and delivering results-driven programs that address local challenges.

State Funding for Local Development: A Deep Dive

State governments operate under diverse funding mechanisms that could serve as potential revenue sources for implementing partners. Understanding the scale of these funds is critical for organizations looking to pivot from USAID funding to state-level contracts.

The Scale of State Government Funding for Development

State governments collectively manage trillions of dollars in annual budgets, with a significant portion allocated to economic development, public health, education, and infrastructure. According to the National Association of State Budget Officers (NASBO):

• Total state spending exceeded $2.65 trillion in 2023, with $1.1 trillion coming from federal transfers and $1.55 trillion from state revenues.
• Public health funding exceeded $250 billion, including grants for health infrastructure, workforce development, and disease prevention.
• Economic development and workforce training programs received over $100 billion, including funding from the Department of Labor and state workforce agencies.
• Infrastructure and climate adaptation projects accounted for over $200 billion, fueled by funds from the Infrastructure Investment and Jobs Act (IIJA) and state budget allocations.

For implementing partners, these numbers highlight the sheer magnitude of state-level funding. Unlike USAID funding, which fluctuates based on federal policies and appropriations, state budgets tend to be more stable and predictable, providing a viable alternative revenue stream.

Primary Funding Sources for Implementing Partners

1. Federal Grants Passed Through State Agencies
2. State Revenue Allocations
3. Public-Private Partnerships (PPPs)
4. Philanthropic and Corporate Grants Managed by State Agencies

Using Social Return on Investment (SROI) to Secure State Funding

SROI is a methodology that enables implementing partners to measure and communicate the value of their programs in terms of social and economic impact. Unlike traditional reporting, which focuses solely on outputs (e.g., number of people served), SROI quantifies the broader benefits that projects generate for communities and economies.

By incorporating SROI into their proposals and reporting, implementing partners can position themselves as accountable, results-driven, and high-impact partners in the state government landscape.

Pros and Cons of Domestic Development for Implementing Partners

Like any strategic pivot, shifting to domestic development comes with opportunities and risks:

? More Stable Funding Cycles

? Opportunities for Long-Term Impact

? Stronger Stakeholder Relationships

? Potential for Expansion into Federal Contracts

? Competitive Contracting Landscape – Many domestic firms and nonprofits already specialize in local development.

• Mitigation: Position as a technical expert with international best practices and a proven track record of impact.

? Differences in Regulatory and Compliance Structures

• Mitigation: Invest in legal and compliance training for state-level procurement rules.

? Brand Identity Shift May Create Internal Resistance

• Mitigation: Communicate the benefits of diversification and create hybrid roles that allow staff to engage in both global and domestic projects.

Conclusion: Embracing the Local Development Opportunity

With USAID’s shifting priorities, state government partnerships present an untapped opportunity for implementing partners to apply their expertise domestically. By addressing critical public sector challenges, leveraging alternative funding streams, and restructuring operations to meet local needs, implementing partners can secure long-term financial stability while making a tangible impact within U.S. communities.

Looking ahead, the role of implementing partners in domestic development is poised to evolve significantly over the next decade. As states increasingly turn to data-driven policymaking, public-private partnerships, and innovative service delivery models, implementing partners that successfully integrate technology, social impact measurement tools like SROI, and cross-sector collaboration will be best positioned to lead the next generation of state-driven development initiatives. Those who adapt will not only survive the current funding crisis but will thrive as essential partners in shaping the future of both global and domestic development.