FSM TO INCREASE COMPACT FUNDING TO STATES

By Jaime Espina

KOLONIA, Pohnpei (Marianas Variety, Nov. 3) — For the first time in more than a decade, the governments of the Federated States of Micronesia and the four states have agreed in principle on a new distribution formula for sector grants to be made available under the amended Compact of Free Association with the United States that "substantially reduces the national government’s share" while increasing that of the states.

This was disclosed by sources, speaking on condition they not be identified, who attended the recently concluded meeting of the Economic Planning and Implementation Council in Palikir. EPIC is composed of the heads of the national and state governments and their respective legislatures.

Last week’s meeting was called to discuss issues regarding the still to be ratified amended Compact.

Variety tried to cover the three-day EPIC meet, from Tuesday to Thursday last week, but was prevented from doing so by the FSM public information office which said the affair was "closed to the public."

Despite the optimism generated by the consensus on the new distribution formula for the sector grants, the sources said that this would still have to be approved by the FSM Congress.

"At this point, Congress has not approved (the agreement) and won’t take any action until it has more information on what the national government actually needs," one of the sources said.

They explained that since EPIC is essentially a "sense of the leadership of the nation," agreements reached during meetings were not binding but recommendatory in nature.

Although the sources declined to give specific figures, they said the new distribution formula would shave off around $4 million from the national government’s current share of Compact sector grants of a little over 13 percent.

They said the new distribution formula was meant to "balance out the loss" of the 20 percent additional tax revenue the states had previously enjoyed but which had been taken away by a recently passed law that restored to equal the level of revenue sharing between the national and state governments.

"It was made very clear that Congress won’t return (the ATR), so there was a pressing need to revise the distribution formula of the sector grants," one of the sources said.

Although the sources said the additional amount of sector grants the agreement, if approved by the FSM Congress, would make available to the states fell a little short than the ATR they lost, "there was a feeling of great achievement because the issue of distribution formula has come up again and again over the last fifteen years and this is the first time the states and national government have agreed in principle on how to distribute the sector grants."

One of the sources explained that, under the original Compact, the agreement was that, "after five years, (the national and state governments) get back together and discuss alternative (distribution) formulas. They never did," even if "the original formula no longer reflects the national reality anymore."

The sources at the same time said the Joint Committee on Compact Economic Negotiations, which briefed EPIC on the status of the amended Compact, also reported that the U.S. House of Representatives had voted unanimously to approve its version of the amended Compact bill.

This was noteworthy because, in an earlier briefing paper obtained by Variety, the JCN noted that "the (U.S.) Senate version (of the amended Compact bill is) generally the most favorable to the FSM" and that committees in both houses of the U.S. Congress were trying to "work around objections to the continuation" of some education programs "on the part of the House staff."

The sources, quoting the JCN’s report, said the key to the unanimous House vote was apparently the fact that, "when the bill was introduced, there was a reference to the sacrifice" of Pohnpei native Hilario Bermanis Jr., who was recently accorded U.S. citizenship after he lost both legs and an arm while serving with the U.S. Army in Iraq.

"That substantially contributed to the passage" of the bill, said one of the sources.

However, the sources stressed that while the House passage of the bill was a "significant first step toward adoption of the (amended) Compact" and made it "closer in substance," the procedure needed "before it becomes legally binding" had yet some distance to go. They said that while the U.S. Senate would likely pass its own version of the bill soon, both Houses would have to reconcile their versions of the measure before submitting it for signing to the president.

After this, the Compact will then have to be ratified by the legislatures of the FSM and the four states. They also said that despite the upbeat impression of the unanimous passage of the bill in the House, the exact form of the version had yet to be known.

"There were some provisions added in (the U.S.) Congress but which, for some reasons, were left out of the text that the House passed," one of the sources said. "We are still waiting for the complete text."

November 3, 2003

Marianas Variety: www.mvariety.com

 

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