[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
H.J.RES. 63 AND H.R. 2522
=======================================================================
LEGISLATIVE HEARING
before the
COMMITTEE ON RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
Thursday, July 10, 2003
__________
Serial No. 108-38
__________
Printed for the use of the Committee on Resources
Available via the World Wide Web: http://www.access.gpo.gov/congress/
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______
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COMMITTEE ON RESOURCES
RICHARD W. POMBO, California, Chairman
NICK J. RAHALL II, West Virginia, Ranking Democrat Member
Don Young, Alaska Dale E. Kildee, Michigan
W.J. ``Billy'' Tauzin, Louisiana Eni F.H. Faleomavaega, American
Jim Saxton, New Jersey Samoa
Elton Gallegly, California Neil Abercrombie, Hawaii
John J. Duncan, Jr., Tennessee Solomon P. Ortiz, Texas
Wayne T. Gilchrest, Maryland Frank Pallone, Jr., New Jersey
Ken Calvert, California Calvin M. Dooley, California
Scott McInnis, Colorado Donna M. Christensen, Virgin
Barbara Cubin, Wyoming Islands
George Radanovich, California Ron Kind, Wisconsin
Walter B. Jones, Jr., North Jay Inslee, Washington
Carolina Grace F. Napolitano, California
Chris Cannon, Utah Tom Udall, New Mexico
John E. Peterson, Pennsylvania Mark Udall, Colorado
Jim Gibbons, Nevada, Anibal Acevedo-Vila, Puerto Rico
Vice Chairman Brad Carson, Oklahoma
Mark E. Souder, Indiana Raul M. Grijalva, Arizona
Greg Walden, Oregon Dennis A. Cardoza, California
Thomas G. Tancredo, Colorado Madeleine Z. Bordallo, Guam
J.D. Hayworth, Arizona George Miller, California
Tom Osborne, Nebraska Edward J. Markey, Massachusetts
Jeff Flake, Arizona Ruben Hinojosa, Texas
Dennis R. Rehberg, Montana Ciro D. Rodriguez, Texas
Rick Renzi, Arizona Joe Baca, California
Tom Cole, Oklahoma Betty McCollum, Minnesota
Stevan Pearce, New Mexico
Rob Bishop, Utah
Devin Nunes, California
Randy Neugebauer, Texas
Steven J. Ding, Chief of Staff
Lisa Pittman, Chief Counsel
James H. Zoia, Democrat Staff Director
Jeffrey P. Petrich, Democrat Chief Counsel
------
C O N T E N T S
----------
Page
Hearing held on July 10, 2003.................................... 1
Statement of Members:
Abercrombie, Hon. Neil, a Representative in Congress from the
State of Hawaii............................................ 12
Prepared statement of.................................... 12
Bordallo, Hon. Madeleine Z., a Delegate to Congress from
Guam, Oral statement on H.J.Res. 63........................ 13
Prepared statement on H.J.Res. 63........................ 13
Oral statement on H.R. 2522.............................. 81
Prepared statement on H.R. 2522.......................... 84
Case, Hon. Ed, a Representative in Congress from the State of
Hawaii..................................................... 14
Prepared statement of.................................... 16
Faleomavaega, Eni F.H., a Delegate to Congress from American
Samoa...................................................... 10
Prepared statement of.................................... 11
Gallegly, Hon. Elton, a Representative in Congress from the
State of California, Prepared statement of................. 42
Pallone, Hon. Frank, Jr., a Representative in Congress from
the State of New Jersey, Prepared statement of............. 76
Pombo, Hon. Richard W., a Representative in Congress from the
State of California........................................ 1
Prepared statement of.................................... 3
Rahall, Hon. Nick J., II, a Representative in Congress from
the State of West Virginia................................. 4
Prepared statement of.................................... 5
Statement of Witnesses:
Camacho, Hon. Felix P., Governor of Guam..................... 95
Prepared statement of.................................... 100
Christian, Senator Peter M., Chief Negotiator, Federated
States of Micronesia....................................... 56
Prepared statement of.................................... 58
Response to a question submitted for the record.......... 121
Cohen, David, Deputy Assistant Secretary for Insular Affairs,
U.S. Department of the Interior............................ 19
Prepared statement of.................................... 21
Pangelinan, Hon. Vicente, Speaker, I Liheslaturan Guahan..... 103
Prepared statement of.................................... 109
Pula, Nickolao, Director, Office of Insular Affairs, U.S.
Department of the Interior................................. 77
Prepared statement of.................................... 79
Short, Albert V., Negotiator of the Compact of Free
Association, U.S. Department of State...................... 24
Prepared statement of.................................... 26
Westin, Susan, Managing Director-International Affairs and
Trade, U.S. General Accounting Office...................... 30
Prepared statement of.................................... 32
Response to questions submitted for the record........... 122
Zackios, Gerald, Minister of Foreign Affairs, Government of
the Republic of the Marshall Islands....................... 61
Prepared statement of.................................... 63
Additional materials supplied:
Lingle, Hon. Linda, Governor, State of Hawaii, Letter
submitted for the record................................... 120
Loeak, Hon. Christopher J., Chairman, Kwajalein Negotiation
Commission................................................. 6
H.J. RES. 63 AND H.R. 2522
----------
Thursday, July 10, 2003
U.S. House of Representatives
Committee on Resources
Washington, DC
----------
The Committee met, pursuant to notice, at 9:36 a.m., in
room 1324, Longworth House Office Building, Hon. Richard W.
Pombo, Chairman of the Committee, presiding.
Present: Representatives Pombo, Gallegly, Calvert, Cubin,
Rehberg, Rahall, Faleomavaega, Abercrombie, Pallone,
Christensen, Udall of New Mexico, and Bordallo.
STATEMENT OF HON. RICHARD W. POMBO, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
The Chairman. The Committee is meeting today to hear
testimony on H.J.Res. 63, a bill to approve the Compact of Free
Association, as amended, between the Government of the United
States of America and the Government of the Federated States of
Micronesia, and the Compact of Free Association, as amended,
between the Government of the United States of America and the
Government of the Republic of the Marshall Islands, and
otherwise to amend P.L. 99-239 and to appropriate for the
purposes of the amended P.L. 99-239 for fiscal years ending on
or before September 30, 2003; and H.R. 2522, to amend the
Organic Act of Guam to authorize the Secretary of Interior to
reduce, release, or waive amounts owed by the Government of
Guam to the United States to offset unreimbursed compact impact
expenses.
Under Rule 4(g) of the Committee rules, any oral opening
statements at hearings are limited to the Chairman and the
Ranking Minority Member. This will allow us to hear from our
witnesses sooner and help members keep their schedules.
Therefore, if other members have statements, they can be
included in the hearing record under unanimous consent.
On behalf of the full Committee, I would like to welcome
everyone in attendance today and especially our witnesses. We
are fortunate to have with us today experts who have been
directly involved throughout the process of negotiating the
Compact of Free Association, including both administration
representatives and our friends from the island countries that
will be directly affected by any formal legislation. This panel
will truly be representative of the numerous parties that have
been working for years toward a formal agreement on a compact.
Our full Committee hearing today will focus on the
documents that were recently submitted to Congress regarding
the Compacts of Free Association with the Federated States of
Micronesia and the Republic of the Marshall Islands, which have
been introduced as H.J.Res. 63. We will also directly address
concerns that our countries are expressing as a result of their
experiences with the effects of the Compact.
For over 50 years, the United States has enjoyed a very
unique relationship with the citizens of Micronesia and the
Marshall Islands. In 1984, President Ronald Reagan proposed a
new status for the Trust Territories of the Pacific through
negotiated Compacts of Free Association. After having status as
a United Nations Trust Territory for many years, in 1986, these
islands chose to become sovereign states. In fact, this large
territory comprises around 2,000 islands over three million
square miles of ocean. During the period after World War II,
the United States had a continual interest in working with FSM
and the RMI, including everything from nuclear testing to a
missile test range that continues to operate in the Marshall
Islands.
Starting in 1986, when Congress passed the Compact Act, we
made the agreement to strive to continue to maintain both
economic and political stability in this region, including
working to advance economic self-reliance in these islands. It
is encouraging to see the mutually beneficial results that have
come from the original Compact. The U.S. has truly moved from
merely a trust administrator with these islands to our work
with them being one of the United States' closest bilateral
relationships.
Unfortunately, the original Compact was also somewhat
disappointing in some aspects of the economic progress that
resulted. In general, the U.S. provided a large amount of
funding to the Freely Associated States without any sort of
effective payment structure that was closely monitored. The
result was a lack of proper development in multiple arenas and
mismanagement of funds that, in part, led to the current
shortcomings that exist in health care and education.
There have also been some unintended consequences as a
result of P.L. 99-239, of which many are seen in the
neighboring countries. The original Compact provided the
citizens of FSM and RMI to travel freely and live throughout
the Pacific. As a result, these migration rights coupled with
continued difficult economic opportunities, thousands of
migrants are living in areas like Guam, Hawaii, and the
Commonwealth of the Northern Mariana Islands.
Living with the lack of proper health care and educational
options mentioned earlier, this is what many migrants sought
when moving from the FSM or RMI. Now the island areas are
experiencing a migration impact of what they have calculated to
be hundreds of millions of dollars since 1986, when the
original Compact was enacted.
It is encouraging to see that this new legislation will
provide a mandatory funding level of $15 million for 20 years
to address the issue. The amended Compact will also enable us
to see a more direct and accurate accounting of this trend, as
it requires the President to report and make recommendations
annually to Congress.
Some countries have argued that this simply is not enough
funding. Guam, for example, which lies relatively close to the
RMI and FSM, has seen and felt this migration more than other
countries. Through 2001, the U.S. Government has provided
approximately $41 million in impact compensation for Guam.
Unfortunately, though, this funding has not been used in the
areas of health and education, where it is needed most.
It is intended that the amended Compacts' provisions
regarding targeted grants and accountability will begin to
encourage many citizens to remain in the FSM and RMI. Our
hearing today should enable us to judge the scope of our
current problems, as well as see the potential for the help in
the amended Compact given U.S. budgetary constraints.
My hope is today that our witnesses can explain how the
newly negotiated Compact will work to advance the goals of
economic self-reliance that truly help those living in the FSM
and RMI while maintaining necessary U.S. security interests.
Our friends in the FSM and RMI, with whom we have worked for
nearly 60 years now, will also hopefully be able to explain how
this new Compact will ensure their economic and political
viability for years to come.
Our hearing and future work is also hastened by the need to
act quickly to ensure that this negotiated Compact can move
forward. If not, on September 30 of this year, important
components of this agreement will expire. The work of many
people, including that of the U.S., the FSM, and RMI, should be
applauded and this Committee appreciates the time spent by
these individuals and their willingness to now work with
Congress to move forward.
[The prepared statement of Chairman Pombo follows:]
Statement of Hon. Richard Pombo, a Representative in Congress from the
State of California
The hearing will come to order. Good morning.
On behalf of the full Committee, I would like to welcome everyone
in attendance today and specifically our witnesses. We are fortunate to
have with us today experts who have been directly involved throughout
the process of negotiating the Compact of Free Association, including
both Administration representatives and our friends from the island
countries that will be directly affected by any formal legislation.
This panel will truly be represenative of the numerous parties that
have been working for years toward a formal agreement on the Compact.
Our full Committee hearing today will focus on the documents that
were recently submitted to Congress regarding the Compacts of Free
Association with the Federated States of Micronesia and the Republic of
the Marshall Islands, which have been introduced as H. J. Res. 63. We
will also directly address concerns that other countries are expressing
as a result of their experiences with the effects of the Compact.
For over 50 years, the United States has enjoyed a very unique
relationship with citizens of Micronesia and the Marshall Islands. In
1984, President Ronald Reagan proposed a new status for the trust
territories of the Pacific through negotiated Compacts of Free
Association. After having status as a United Nations Trust Territory
for many years, in 1986, these islands chose to become sovereign
states. In fact, this large territory comprises around 2,000 islands
over 3 million square miles of ocean. During the period after World War
II, the United States had a continual interest in working with the FSM
and the RMI, including everything from nuclear testing to a missle test
range that continues to operate in the Marshall Islands.
Starting in 1986, when Congress passed ``The Compact Act,'' we made
the agreement to strive to continue to maintain both economic and
politically stability in this region, including working to advance
economic self-reliance in these islands.
It is encouraging to see the mutually beneficial results that have
come from the original Compact. The U.S. has truly moved from merely a
trust administrator with these islands to our work with them being one
of the United States' closest bilateral relationships.
Unfortunately, the original Compact was also somewhat disappointing
in some aspects of the economic progress that resulted. In general, the
U.S. provided a large amount of funding to the Freely Associated States
without any sort of effective payment structure that was closely
monitored. The result was a lack of proper development in multiple
arenas, and mismanagement of funds that in part led to the current
shortcomings that exist in health care and education.
There have also been some unintended consequences as a result of
P.L. 99-239, of which many are seen in neighboring countries. The
original Compact provided the citizens of the FSM and RMI to travel
freely and live throughout the Pacific. As a result, these migration
rights coupled with continued difficult economic opportunities,
thousands of migrants are living in areas like Guam, Hawaii, and the
Commonwealth of the Northern Mariana Islands.
Living with the lack of proper health care and educational options
mentioned earlier, this is what many migrants sought when moving from
the FSM or RMI. Now the island areas are experiencing a migration
impact of what they have calculated to be in the hundreds of millions
of dollars since 1986, when the original Compact was enacted. It is
encouraging to see that this new legislation will provide a mandatory
funding level of $15 million for twenty years to address this issue.
The amended Compact will also enable us to see a more direct and
accurate accounting of this trend, as it requires the President to
report and make recommendations annually to Congress.
Some countries have argued this is simply not enough funding,
though. Guam, for example, which lies relatively close to the RMI and
FSM has seen and felt this migration more than other countries. Through
2001, the U.S. Government has provided approximately $41 million in
impact compensation for Guam. Unfortunately, though, this funding has
not been used in the areas of health and education, where it is needed
most.
It is intended that the amended Compacts' provisions regarding
targeted grants and accountability will begin to encourage many
citizens to remain in the FSM and RMI. Our hearing today should enable
us to judge the scope of our current problems as well as see the
potential for help in the amended Compact given U.S. budgetary
constraints.
My hope is today that our witnesses can explain how the newly
negotiated Compact will work to advance the goals of economic self-
reliance that truly help those living in the FSM and the RMI while
maintaining necessary U.S. security interests. Our friends in the FSM
and the RMI, with whom we've worked for nearly sixty years now, will
also hopefully be able to explain how this new Compact will ensure
their economic and political viability for years to come.
Our hearing and future work is also hastened by the need to act
quickly to ensure this negotiated Compact can move forward. If not, on
September 30 of this year, important components of this agreement will
expire. The work of many people, including that of the U.S., the FSM
and the RMI should be applauded and this Committee appreciates the time
spent by these individuals and their willingness to now work with
Congress to move forward.
I thank the witnesses for coming and look forward to their
testimony.
______
The Chairman. I would like to now recognize the Ranking
Member of the full Committee, Mr. Rahall.
STATEMENT OF HON. NICK RAHALL, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF WEST VIRGINIA
Mr. Rahall. Thank you, Mr. Chairman. Mr. Chairman, I do
express my gratitude to all the witnesses who have traveled so
far today to attend this hearing on the reauthorizing of the
Compacts of Free Association between our government and those
of the Republic of the Marshall Islands and the Federated
States of Micronesia. It is also appropriate to thank the
negotiating teams from each country for their diligence in
pursuing this agreement.
I also welcome the Governor of Guam and the Speaker of
Guam's Legislature. Both are here to testify on our colleague's
bill which addresses Compact impact issues affecting Guam.
The majority of this Committee's activity involves the
stewardship of this nation's natural resources, our forests,
parks, fisheries, water, and minerals. As we consider
legislation affecting our resources, it is also our job to
translate to the American people how these issues improve or
degrade their quality of life and what our actions mean to
future generations of Americans.
In addition to protecting our resources, this Committee has
had an historical charge of promoting the emergence of U.S.
territories to Statehood, Native American tribes to independent
governance, and former trust territories to nationhood. The
means to achieve these sorts of political freedoms have not
always encompassed the best of decisions, nor have they been
painless in terms of concessions needed by one party or
another. However, we should keep in mind that this is a process
of political and economic evolution based on close historical
ties.
In this regard, the relationship between the U.S. and the
RMI and FSM historically was steeped in defense issues. With
the enactment of the original Compacts, we supposedly moved
from those considerations to values for a more modern political
economy, opportunities for self-sufficiency, accountability,
independence, and partnership.
The reality is, however, that the U.S. continues to have
strategic defense interests in mind. Our world today is so much
more fragmented than it was during the cold war. Then, our
adversary was known. We knew where they were. We knew what they
were doing, and we needed to be sure there was no expanse on
our part. Today, we contend with threats of nuclear
proliferation in Asia and the movement of terrorism through the
back yards of our Asian allies. It is often difficult to
pinpoint where the hostilities will arise. As such, our need to
continue our defense relationships with the FMI and FSM remains
prominent.
We do, however, need to simultaneously move forward and
buildupon the first successful 15 years of our Compact
relationship, and toward that end, I look forward to hearing
the testimony of our witnesses today and I am interested in
learning what the successes of our Compact relationship have
been to date, how the renegotiated Compact addresses some of
Congress's concerns and the solutions that have been agreed
upon by all parties.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Rahall follows:]
Statement of Hon. Nick J. Rahall, II, a Representative in Congress from
the State of West Virginia
Mr. Chairman, I would like to express my gratitude to all the
witnesses who have traveled, some at great distances, to attend this
hearing on reauthorizing the Compacts of Free Association between our
government and those of the Republic of the Marshall Islands and the
Federated States of Micronesia.
It is also appropriate to thank the negotiating teams from each
country for their diligence in pursuing this agreement.
Let me also welcome the Governor of Guam, and the Speaker of Guam's
Legislature. Both are here to testify on our colleague's bill which
addresses Compact impact issues affecting Guam.
The majority of this Committee's activity involves the stewardship
of this Nation's natural resources--our forests, parks, fisheries,
water and minerals. As we consider legislation affecting our resources,
it's also our job to translate to the American people how these issues
improve or degrade their quality of life and what our actions mean to
future generations of Americans.
In addition to protecting our resources, this Committee has had a
historical charge of promoting the emergence of U.S. Territories to
Statehood, Native American tribes to independent governments, and
former Trust Territories to nationhood.
The means to achieve these sorts of political freedoms have not
always encompassed the best of decisions, nor have they been painless
in terms of concessions needed by one party or another. However, we
should keep in mind that this is a process of political and economic
evolution based on close historical ties.
In this regard, the relationship between the United States and the
RMI and FSM historically was steeped in defense issues.
With the enactment of the original Compacts, we supposedly moved
from those considerations to values for a modern political economy--
opportunity, self-sufficiency, accountability, independence, and
partnership.
The reality is, however, that the U.S. continues to have strategic
defense interests in mind.
Our world today is so much more fragmented than it was during the
Cold War. Then, our adversary was known--we knew where they were, we
knew what they were doing, and we needed to be sure there was no
expanse on their part.
Today, we contend with threats of nuclear proliferation in Asia and
the movement of terrorism through the backyards or our Asian allies. It
is often difficult to pinpoint where the hostilities will arise, as
such, our need to continue our defense relationship with the RMI and
FSM remains prominent.
We do, however, need to simultaneously move forward and build upon
the first successful fifteen years of our Compact relationship.
Toward that end, I look forward to examining the testimony of our
witnesses. I am interested in learning what the successes of our
Compact relationship have been to date, how the renegotiated Compact
addresses some of Congress's concerns, and the solutions that have been
agreed upon by all parties.
Thank you.
______
The Chairman. Thank you.
After having the opportunity with Mr. Abercrombie to do a
teleconference with a number of folks from his home State, I
had requested and have received a report on the impact on
Hawaii and I would like at this time to have that included, by
unanimous consent, have that report included in the record.
[NOTE: The report submitted for the record by Mr.
Abercrombie has been retained in the Committee's official
files.]
Mr. Rahall. Mr. Chairman, I ask unanimous consent also to
have submitted for the record the statement by Senator Chris
Loeak, who is the Chairman of the KNC, on behalf of the
Kwajalein land owners.
The Chairman. Without objection.
Mr. Rahall. Thank you.
[The prepared statement of Mr. Loeak follows:]
Statement submitted for the record by Senator Christopher J. Loeak,
Chairman, Kwajalein Negotiation Commission, on Behalf of Kwajalein
Landowners
My name is Christopher J. Loeak, Chairman of the Kwajalein
Negotiation Commission. I appreciate the opportunity to present the
views of the KNC today.
Recently I submitted testimony to the House International Relations
Committee regarding the views of the KNC on the proposed agreement
between the United States and the RMI with respect to a new Military
Use and Operating Rights Agreement. I append that statement to the one
that I submit to you today.
The position of the KNC on the proposed MUORA can be summarized by
the following points:
The compensation amounts for landowners of Kwajalein are
insufficient to provide for the long-term benefit of the people of
Kwajalein. The amount of compensation for the people of Kwajalein must
be at least $19.1 million in 2004 fully indexed for inflation.
The term of the agreement is insufficient and must be
made longer to adequately plan for the use of Kwajalein for our people.
Although the U.S. portrays this agreement as an agreement of over 50
years duration, it only guarantees use of Kwajalein for seven years
beyond 2016. Thus the agreement is only a 7-year extension with a
series of 1-year options to terminate, leaving the landowners in a
state of suspended animation for years to come. This term is far worse
than the present 15-year term in the present MUORA.
The Landowners will not sign a new Land Use Agreement
until and unless acceptable changes are made to the MUORA to address
these deficiencies. The 7-year extension of the MUORA as proposed is
legally insufficient and cannot be implemented.
Thank you for this opportunity and you can be sure that we will
pursue every opportunity to reach an acceptable agreement through the
constitutional processes of our respective governments.
______
Statement submitted by Senator Christopher J. Loeak, Chairman,
Kwajalein Negotiation Commission, on Behalf of Kwajalein Landowners
My name is Christopher J. Loeak, Chairman of the Kwajalein
Negotiation Commission. I appreciate the opportunity to present the
views of the KNC today.
Besides being Chairman of the KNC, I have been a Senator in the
Nitijela representing the Atoll of Ailinglaplap since 1985.
I am also a major landowner on Kwajalein Atoll.
Mr. Chairman, I am honored to present the following statement on
behalf of the people of Kwajalein and I would like to express my
appreciation and sincere thanks to you and the members of this House
International Relations Committee for giving me the opportunity to do
so.
ABOUT THE KWAJALEIN NEGOTIATION COMMISSION
I represent the Kwajalein Negotiation Commission (KNC), an
organization established in October 2001 by the people of Kwajalein to
represent them in the Compact renegotiations. The KNC is an
unprecedented alliance of the traditional leaders of Kwajalein whose
purpose is to provide an opportunity for the U.S. to enter into a long-
term relationship guaranteeing secure and uninterrupted use of
Kwajalein. The divisions within the local traditional leadership that
marred the entry into the first Compact have been put aside in the
interest of this relationship. As you know, compact renegotiation
discussions between the U.S. Government and the Government of the
Republic of the Marshall Islands (RMI) were finalized in January of
this year.
The fast Compact was negotiated when RMI was still a territory.
Many provisions were accepted by RMI in the interest of achieving self-
government as early as possible and sometimes to the detriment of its
regional or individual island atoll interests. The Kwajalein people in
this context accepted agreements pertaining to Kwajalein, even though
the agreements were not completely satisfactory to the people. Indeed,
in the plebiscite on the Compact in 1982, the people of Kwajalein
overwhelmingly voted to reject adoption of the Compact (the Compact was
nonetheless approved by the RMI by a close margin).
The KNC was formed in large part in order to adequately represent
the interests of the people in this regard to ensure that any agreement
reached would be equitable and in the interests of the people at large.
Part of the Compact agreement reached in January of this year
between the RMI and the U.S. Government included a new agreement on the
Military Use and Operating Rights Agreement, otherwise known as the
MUORA. The KNC opposes the new agreement as presently structured and we
are asking Congress to either change the agreement to include
additional compensation for landowners or postpone approval of the
MUORA until a satisfactory agreement can be reached between all the
parties.
THE MILITARY USE AND OPERATING RIGHTS AGREEMENT
The current Military Use and Operating Rights Agreement (MUORA)
governing Kwajalein expires in 2016. Some argue that the U.S. already
has rights to Kwajalein until 2016 and therefore no new agreement
should be negotiated before expiration of that agreement. The people of
Kwajalein honor the right of the U.S. to Kwajalein until 2016. However,
as other matters in the Compact are brought up for discussion or
modification, it is only fitting that the most important component of
that agreement, namely U.S. defense rights in the Marshall Islands, be
revisited. We believe this exercise to be of mutual interest and
benefit because it can eliminate those aspects of the first Compact
that are unfair to the landowners while at the same time guarantee the
long-term access that the U.S. seeks. A mere extension would perpetuate
the existing hardships and inequities and would ignore the lessons
learned in the first fifteen years of the Compact.
Any extension of the MUORA beyond 2016 requires the approval of the
people of Kwajalein as stipulated by our Constitution. Moreover, any
change to the MUORA that would extend the use of Kwajalein by the
United States beyond 2016 requires that a new Land Use Agreement
(``LUA'') be implemented between the RMI and Kwajalein Landowners.
Accordingly, the new MUORA agreement cannot be implemented without a
new LUA.
The KNC rejects the notion that the execution of a new LUA is
exclusively an internal matter between the national government of the
RMI and the landowners of Kwajalein. Although we understand that it is
the position of the United States that the U.S. negotiates ``sovereign
to sovereign'' and that it must respect the nationally recognized and
duly chosen representatives of the people of the RMI, the United States
always takes into account the practical considerations that exist in a
country when implementing new agreements. For example, in 1982 the U.S.
required that the original LUA be implemented before the U.S.
Government agreed to the present MUORA in force between our
governments.
The point has been made that if the people of Kwajalein have an
issue with the MUORA we should take it up with our own government in
the RMI and that we do not have standing to petition the Congress for
changes to the agreement. This type of thinking is not credible and
belies the reality of the process in which we are all now engaged. The
RMI in fact is petitioning the Congress for changes to the new Compact
in the areas of infrastructure, inflation, FEMA and other areas. In
1982, Congress legislated changes to the negotiated Compact that
increased coverage for the RMI on programs related to FEMA, Education,
and other items. The issue of increased compensation to Kwajalein is
but one in a number of issues to be addressed by the Congress.
The United States and the RMI recognized the importance of securing
the participation of the KNC in the negotiations when we were invited
to participate in several negotiating sessions between the U.S. and the
RMI. However, when the meaningful bargaining began between the parties,
the KNC was excluded from negotiations. The reasons for this exclusion
are unclear to us. We were left with the proposition of ``take it or
leave it''. Accordingly, we have made it absolutely clear that we will
not support execution of a new LUA until such time as the new MUORA
reflects a fair and equitable deal for the people of Kwajalein.
THE INADEQUACIES OF THE RECENTLY ANNOUNCED MUORA
The term
The KNC opposes the recently announced MUORA proposal because it
does not adequately provide for the long-term needs of the people of
Kwajalein. When these negotiations started, the KNC proposed a 50-year
long-term lease of Kwajalein. We believe that a 50-year commitment on
behalf of both of our governments is in our mutual self-interests.
However, the new MUORA falls short of this commitment. While the new
MUORA purports to be a 50-year extension from 2017 until 2066, with a
possible 20-year extension beyond that, in reality the new MUORA is a
7-year extension, since the U.S. can exercise a termination notice in
2016 that could terminate the MUORA by 2023. After 2023, the agreement
is essentially a year-to-year lease, since the termination notice right
can be exercised in any year after 2016. Accordingly, the KNC, on
behalf of the people of Kwajalein, must consider the social and
financial implications of a termination of the MUORA at a date as soon
as 2023, notwithstanding that the U.S. has falsely described this lease
as long-term.
The people of Kwajalein have consistently expressed their
commitment to providing the U.S. full access to Kwajalein and they
hereby reaffirm this commitment. However, it is also their position
that a piecemeal approach is not a satisfactory arrangement to either
side. Our proposal for a 50-year lease would give the U.S. advantage of
long-term security enabling substantial investments in its missile
defense program while the people of Kwajalein will have the advantage
of economic security. Short-term options do not provide either and in
fact will leave our people in a state of suspended animation, severely
limiting the ability of determining an appropriate development program
for Kwajalein.
The compensation amounts
When the KNC joined negotiations with the RMI and the U.S. in the
early fall of 2002, the RMI and the KNC proposed a joint package based
upon an 8-point comprehensive formula that addressed the totality of
programs that affect the use of Kwajalein by the U.S. Included in the
proposal were provisions dealing with the MUORA Term, Kwajalein
Landowners Compensation, Taxation, a Kwajalein Landowners Trust Fund,
Kwajalein Impact funding, Ebeye Special Needs, Early Termination, and
the SOFA. These items were linked together and the adequacy of funding
for one of the provisions affected the adequacy of funding for the
other.
With respect to the Kwajalein Landowner Compensation amount, the
Kwajalein Landowners proposed a funding index supported by economic and
population indexes that were intended to reflect the inflation indexed
value of the compensation amounts in the original MUORA supplemented by
population growth. This amount, $19.1 million in 2004, was economically
supported and justified by data.
In the negotiations, one-by-one the United States whittled away at
the 8-point proposal and isolated each part of the package so that the
negotiations appeared to be progressing towards agreement upon items of
the package without respecting the interplay between theprovisions
themselves. For instance, the proposal to allow the FM to tax
expatriate workers at Kwajalein at the prevailing national rate of
taxation (an increase from 5% to 12%) was intended to ameliorate a tax
subsidy to the U.S., while at the same time, providing a means of
providing a growth-oriented revenue source to the RMI for landowner
funding. Notwithstanding this basic right of national sovereignty, the
U.S. rejected any increase in taxation amounts, even to the national
rate, depriving the RMI government of its most effective means of
raising revenue to pay for the welfare of its people. We know of no
other example where the United States enjoys such a tax subsidy to the
disparity and detriment of another country. And this agreement locks in
this subsidy for the entirety of the term of the MUORA!
At the same time, the U.S. offered amounts for landowner
compensation that were below inflation adjusted amounts and were
offered without economic rational or justification other than that they
were above what is presently offered in the present MUORA. In the final
offer by the U.S., a $15 million base was offered beginning in 2004 as
landowner compensation. On an inflation basis, this amount represents a
degradation of 60% of the value that the landowner's compensation
amount achieved in 1979. Accordingly, it was no surprise that the KNC
rejected the U.S. offer on Landowner funding as inadequate,
particularly since the U.S. would not offer an alternative means of
achieving landowner compensation through taxation.
The lack of a Landowner's Trust Fund
A basic tenet of the philosophy of the landowners in formulating
their proposal for a long-term lease of Kwajalein was that the term and
the amount of funding for landowner's compensation be sufficient to
provide for the long-term needs of the people of Kwajalein. The U.S.
government states that the new MUORA is a billion-plus deal that will
last until 2086. But as I have already described, the agreement is
actually a short-term extension until 2023 with the possibility that
the U.S. may decide to stay longer. In effect it is an agreement until
2023 with a series of rolling annual 1-year options to terminate if and
when the U.S. chooses to leave after 2023.
Under these circumstances, the landowners are concerned that the
compensation amounts provided in the new MUORA be sufficient that a
corpus of funds be retained that would provide annual income to
landowners sufficient to replace the compensation payment if and when
the U.S. departs. At the $19.1 million level (in 2004), the landowners
offered to voluntarily contribute 10% of the annual compensation amount
into a trust fund for this purpose. This amount was to be matched by a
contribution from the RMI through tax receipts.
The present MUORA offer does not meet the objectives of the people
of Kwajalein in this regard and must be rejected as insufficient to pay
for our long-term needs.
As we have stated time and again, the people of Kwajalein are
committed to long-term access to Kwajalein on the basis of an equitable
arrangement between both parties. If the U.S. and the people of
Kwajalein cannot reach an acceptable arrangement at this time, however,
we would prefer to postpone our discussion related to extension of the
lease beyond 2016 to another time. It is far preferable to us to delay
our talks to the alternative of having to debate a deal that we
consider is unfair and inequitable and which cannot be implemented. Put
another way, the present circumstances will breed division and
opposition in our country.
If on the other hand the U.S. prefers to close out the Kwajalein
Reagan Test Site in 2016, then it should be prepared to discuss now the
terms of that closure including resettlement, restoration, re-
adaptation, and rehabilitation. Environmental clean up and the planting
of crops will take at least 7 years and therefore planning and
agreements cannot wait until 2016. It is the preference of the
landowners that the U.S. remains in Kwajalein, keeping with our mutual
defense agreement. However, should the U.S. plans demand otherwise,
then we should all face up to that possibility by carefully and
adequately planning for it.
SUMMARY
In conclusion, the leadership and people of Kwajalein wish to
reaffirm their full support for the U.S. military activities in
Kwajalein atoll and hope to continue their friendship and cooperation
with the United States. At the same time, we are hopeful that through
changes to the new MUORA we will achieve a fair and just arrangement
for the continued use of Kwajalein. We have formulated several
alternatives as a basis for changing the new MUORA that can lead to
implementation of a new LUA. Indeed, there are many inconsistencies,
other than the Kwajalein land use issue, contained in the draft compact
which may very well justify delaying the approval of this agreement for
one year. This would allow time for both sides to resolve differences
which if allowed to remain in present form will only foment division
within our country and undermine the foundation of our unique
relationship. I make these observations not only as a Kwajalein
landowner but also as a member of the Nitijela. We thank the Committee
for this opportunity and look forward to working with our negotiators
to reach an agreement that will gain early approval by both the U.S.
and the RMI in accordance with their Constitutional processes.
______
The Chairman. At this time, I would like to recognize Mr.
Faleomavaega for his testimony on this issue.
STATEMENT OF HON. ENI F.H. FALEOMAVAEGA, A DELEGATE TO CONGRESS
FROM AMERICAN SAMOA
Mr. Faleomavaega. Mr. Chairman, I want to thank you and the
distinguished Ranking Member of our Committee for your eloquent
statements. I am not going to repeat myself in terms of the
historical context we find ourselves in this morning at this
hearing. I am very, very happy that we are able to call this
hearing and invite witnesses from both the administration and
our friends from Micronesia to testify.
Mr. Chairman, these agreements that we are now going to be
discussing in the Compact extends financial assistance from the
United States, implements changes in the administration of
grants, and establishes trust funds for the Republic of the
Marshall Islands and the Federated States of Micronesia.
However, there are certain issues about which, in my humble
opinion, Mr. Chairman, the Republic of the Marshall Islands and
the Federated States of Micronesia have expressed serious
concerns regarding the Compact proposal.
I support the Marshall Islands and the FSM's determination
and dedication of building a self-sufficient government and
economy and I recognize their need for assistance. People of
the Marshall Islands, as we know, have suffered and continue to
suffer long-lasting life-altering effects as a result of our
testing program, both from our missile program, and our nuclear
weapons testing from 1946 to 1958.
Mr. Chairman, as I speak this morning, I need to remind my
colleagues that there are well over 500 Micronesians from the
FSM and the Republic of the Marshall Islands who currently
serve with pride and dignity in our Armed Services. As I speak,
I think of Specialist Olario Bromares, a proud member of the
Army's 82nd Airborne, who was seriously injured in Baghdad and
now is fighting for his life. He lost his arm and is without
any legs, seriously wounded by shrapnel.
I just wanted to make that emphasis, Mr. Chairman, with my
colleagues. Sometimes I get the impression that we think that
we are giving this as a form of welfare payments or
entitlements to these people, and I submit respectfully, Mr.
Chairman, that this is not the case. I am very, very concerned
with the question of Federal assistance programs that we seem
to be now not in the mood in providing for our friends in
Micronesia. I am concerned as to why we are not giving the full
inflation clause to the negotiation. I am concerned why the
FEMA program is not extended to our Micronesian friends. I am
concerned about the Kwajalein land lease agreement that is not
in place. I am also concerned about the nuclear claims that
have been going on now for the last 15 years and our government
has given these Micronesian people the run-around and not given
them proper assistance and medical attention.
With that, Mr. Chairman, it is my intention to introduce an
amendment or a series of amendments to the Compact to take
corrective action in some of these areas that I am very
seriously concerned about. With that, Mr. Chairman, I thank you
for allowing me to say this, and I will ask unanimous consent
that the full text of my statement be made part of the record.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Faleomavaega follows:]
Statement of The Honorable Eni F. H. Faleomavaega, a Delegate to
Congress from American Samoa
Mr. Chairman, the Compact of Free Association was entered into in
1986 by the Marshall Islands and the Federated States of Micronesia
with the United States. By entering into this agreement, the RMI and
FMS became Freely Associated States, which allied them with the United
States while allowing them to remain sovereign states. Objectives of
the Compact include democratic self-government, economic development,
self-sufficiency through assistance from the United States. Portions of
the Compact expired in October 2001 and we are here today to honor our
pledge to the people of RMI and FSM to assist them in maintaining a
democratic government and principles and enable them to sustain
economic development and self-sufficiency.
On April 30, 2003 and May 15, 2003 the Republic of the Marshall
Islands and the Federated States of Micronesia signed agreements with
the United States to amend certain provisions of the Compact. These
agreements were a result of diligent work by all parties. The amended
Compact extends financial assistance from the United States, implements
changes in the administration of grants, and establishes trust funds
for the RMI and FSM.
However, there remain a few issues with which the RMI and FSM have
expressed concerns regarding the Compact. These include the rate of
inflation, the continued need for access to U.S. federal education
programs, continued development of infrastructure, continued
eligibility for FEMA disaster relief and hazard mitigation programs,
immigration, and economic tax incentives.
I support the RMI and FSM's determination and dedication to
building a self-sufficient government and economy and recognize their
need for our assistance. The RMI and FSM have a long history with the
U.S. which includes testing of nuclear weapons testing from 1946-1958.
Testing which continues to impact the people of the RMI and FSM.
The people of the RMI and FSM have suffered and continue to suffer
long lasting and life altering effects as a result of our testing and
it is my hope that as members of this Committee we will consider the
needs of these people as we listen to their remaining issues regarding
the amended Compact.
I would like to thank the Chairman and Ranking Member for their
support in this matter I urge my colleagues to continue to support the
efforts of the RMI and FSM to be a self-governing and self-sufficient
people.
______
The Chairman. Mr. Abercrombie?
STATEMENT OF HON. NEIL ABERCROMBIE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF HAWAII
Mr. Abercrombie. Thank you very much, Mr. Chairman. I most
especially thank you for your opening statement and the
inclusion of the report into the record.
In the interest of time, could I have your permission and
the consent of the Committee to submit a statement which will
go over some of the issues raised by my good friend from
American Samoa as well as those raised by you and Mr. Rahall?
The Chairman. Without objection. Thank you.
[The prepared statement of Mr. Abercrombie follows:]
Statement of The Honorable Neil Abercrombie, a Representative in
Congress from the State of Hawaii
For the past 17 years, the United States has had a successful
relationship with the Freely Associated States (FAS). The Federated
States of Micronesia (FSM) and the Republic of the Marshall Islands
(RMI) have been able to transition from a United Nations trusteeship to
sovereign governments. At the same time, the United States has had its
security and defense interests in the Pacific fulfilled. I believe that
the renewal of the Compacts of Free Association, a formality in the
continuation of our relationship, is in the best interest of all.
I have no doubt that the relationship between our governments will
continue to be productive and mutually beneficial. My concern lies with
the relationship between the United States and the individual states
and territories affected by the Compacts.
The Compacts allow FSM and RMI citizens to freely enter the U.S.
and its territories to live, seek an education, obtain healthcare and
find employment. For FSM or RMI citizens who need complex medical
treatment or seek higher educational opportunities unavailable in their
country, the ability to enter the U.S. is critical. Due to the
proximity of the State of Hawaii to these Pacific Island nations and
our familiar island lifestyle, our State welcomes many FSM and RMI
citizens. While many Compact migrants become productive residents of
the state and add to the unique diversity of Hawaii, there are
quantifiable costs, totaling $140 million over the last six years,
borne by the State.
The Personal Responsibility and Work Opportunities Reconciliation
Act of 1996 determined that Compact migrants were no longer eligible
for federal means tested public benefits: Medicare, Medicaid, the State
Children's Health Insurance Program (SCHIP), and Temporary Assistance
for Needy Families. As a result, the affected states and territories
have shouldered the responsibility of providing public benefits to
Compact migrants with little assistance from the federal government.
Hawaii, Guam and the Commonwealth of the Northern Mariana Islands, have
all incurred significant costs as a result of the Compacts in the areas
of health, education and social services.
For 2002, Hawaii expended more than $32 million in assistance to
Compact migrants. The biggest impact has been on our education system.
Last year, the number of Compact migrants increased by 32 percent in
the primary and secondary school systems. This influx of students
increased our public school system costs by at least $18 million for
the 2002-2003 academic year. The $18 million figure is based on the
cost of educating the average student, so it does not include
additional costs for the special education and the English as a Second
Language needs of two-thirds of the Compact migrant students. Nor does
it account for lost revenue to the University of Hawaii for allowing
Compact migrants to pay in-state tuition and fees.
Compact migrants also enter the U.S. with complex medical problems
and communicable diseases. These costs have strained our medical
system, especially after the 1996 welfare reform laws which made
compact migrants ineligible for Medicaid, Medicare and SCHIP. The State
of Hawaii and its hospitals have incurred more than $13 million in
unreimbursed costs by treating compact migrants in the last five years.
This burden increases with every passing year as more and more migrants
enter the state.
I could continue to detail the monetary costs borne by the State of
Hawaii but a lengthy report has been submitted for the record with
specific details on what departments and agencies are impacted. These
expenditures cannot continue to go uncompensated. I realize that the
Administration has proposed $15 million in annual funding to be
distributed for compact impact aid. I appreciate the recognition of
this serious problem and the willingness to provide some recompense.
Unfortunately, this amount is proposed to be shared proportionately by
Hawaii, Guam, CNMI, and American Samoa. This $15 million proposal is
less than Hawaii's annual education costs alone and it is wholly
inadequate to support the needs of Compact migrants in the impacted
areas.
Congress must fund the Compacts sufficiently so that impacted
states and territories can be fully reimbursed for all expenses
incurred as a result of the Compacts. As a signatory to the Compacts of
Free Association, the United States, not the State of Hawaii, must bear
its costs.
In closing, I would like to reiterate my support for the
reauthorization of the Compacts and a continued relationship between
the United States and the FAS. However, I must stress the magnitude of
the effects felt by the State of Hawaii and the affected territories. I
sincerely hope that this Committee will work with the Administration to
address these problems and find a solution agreeable to everyone.
______
The Chairman. Ms. Bordallo?
STATEMENT OF HON. MADELEINE Z. BORDALLO, A DELEGATE TO CONGRESS
FROM GUAM, ON H.J.RES. 63
Ms. Bordallo. Thank you, Mr. Chairman. I will have my
statement submitted for the record.
The Chairman. Without objection.
[The prepared statement of Ms. Bordallo on H.J.Res. 63
follows:]
Statement of Hon. Madeleine Z. Bordallo, a Delegate to Congress from
Guam, on H.J.Res. 63
Chairman Pombo, Ranking Member Rahall, and Members of the
Committee:
I strongly support the renewal of the Compact agreements and the
continued economic assistance to the Compact States. Guam is the
closest American neighbor to the Federated States of Micronesia and the
Republic of the Marshall Islands, and we have seen the progress that
the Freely Associated States (FAS) have made under their respective
Compact agreements. As we review the record of accomplishments under
the fifteen year agreement, we should also weigh the issues and
concerns that have been raised regarding economic and social
development.
One of the major concerns for Guam remains the reimbursement of
costs incurred by Guam due to the Compact. With the proposed renewal of
the unrestricted migration provisions, the time to appropriately
address this issue is now. The Government of Guam has incurred
significant costs over the past seventeen years due to this migration,
and we have been inadequately reimbursed by the Federal Government. The
immigration policy should go hand in hand with an adequate
reimbursement policy for Compact-impact costs. I ask my colleagues for
their support in providing for an improved process for redressing the
adverse financial consequences of the immigration provisions. These
improvements are needed if we are to adequately address these issues as
a part of the Compact law reauthorization
I have other concerns regarding the changes that the Administration
has proposed and I would seek clarification on how these changes would
improve the economic viability of the Freely Associated States. I am
concerned about proposed changes to participation in disaster
assistance programs under the Stafford Act, and changes to
participation in other Federal grant programs. Will these changes
contribute to the future well being of the Compact States, or are these
changes driven by budget constraints? Is there an overall policy which
defines which Federal programs are appropriate for the Compact States,
or is this an issue that is defined on a program by program basis? As
the Congressional review process goes forward, I hope these questions
will be answered and that these concerns will be addressed.
Finally, I am interested in how Compact assistance will be
administered and whether new measures intended to increase
accountability will work. Guam's experience with the Compact-impact
issue is a warning that we have to be on guard against the law of
unintended consequences because it may be very difficult to foresee how
policies made in Washington work in the islands. If experience is the
guide, then Guam's experience has been that Compact issues are nearly
impossible to revisit if we do not get this right the first time.
______
The Chairman. Now, I would like to introduce our first
panel. I would like to welcome my colleague, the gentleman from
Hawaii, Congressman Ed Case, to our hearing toady about how the
original Compact Act has affected his State.
STATEMENT OF HON. ED CASE, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF HAWAII
Mr. Case. Chair Pombo, Ranking Member Rahall, members of
the Resources Committee, especially my Pacific Caucus over
here, it is a pleasure to see my senior colleague from Hawaii
as well as my friends from Samoa and Guam. Aloha. Thank you
very much for the opportunity to provide full support for the
Compacts of Free Association with the Freely Associated States.
I also have my written testimony and I would like to ask
unanimous consent to have it inserted into the record, Chair,
and simply summarize for you this morning for the sake of time.
The Chairman. Without objection.
Mr. Case. Thank you very much. As I said, our feelings in
Hawaii are in full support of the Compacts, but my purpose this
morning is to express some concerns to this Committee and to
request this Committee's assistance in taking actions that deal
with the consequences of the Compacts upon Hawaii and other
affected jurisdictions, primarily Guam and Saipan.
We in Hawaii have really a unique position in this story.
We, of course, have a unique status in the Pacific. We are our
country's central presence in the Pacific and we are proud of
that presence and welcome the responsibility that comes with it
to advance our country's interest in the Pacific.
At the same time, we enjoy a unique cultural-historical
relationship with our brothers and sisters in the Pacific, the
island nations of the Pacific, and we are also proud to be able
to advance their interests as part of the commonwealth of the
entire Pacific, if I can put it that way. And in this case, the
Compacts serve us in both instances.
Our support for the Compacts comes from two basic reasons.
First of all, the Compacts are integral to our country's
interests in the Pacific, and those interests are to promote
economic self-sufficiency, to promote political stability, and
to assure the common security of the Pacific on behalf of all.
From the perspective of the Pacific nations, the Compacts are
integral to the continued development of their countries, and
in that spirit, we in Hawaii, and I believe I speak for all of
the peoples that I represent in Hawaii, we support these
Compacts and we want to advance them.
However, as has already been noted, there are consequences
to the Compacts that fall disproportionately upon some U.S.
jurisdictions, Hawaii, Guam, and Saipan being the primary
three.
The basic principle of the Compacts is that in return for
certain interests granted to the Freely Associated States, they
are entitled to immigrate into our country virtually without
any restrictions, and as a result, they do, in fact, immigrate
greatly and increasingly to Hawaii and other jurisdictions.
Now, Hawaii and those jurisdictions where that immigration
occurs bear certain increased burdens as a result of that
immigration. They fall across the spectrum, but particularly in
education, health, and human services.
When a community of Marshallese, for example, sets up on
the Big Island of Hawaii, which I represent, and those members
of the community, their children, go to school at Honokaa High
School, which is a rural high school on the Big Island, and
they incur certain obligations in that high school in servicing
that community that are related, for example, to English as a
Second Language, that is an impact upon the State of Hawaii as
a result of immigration. When those communities have unique
health problems, communicable diseases, for example, those
diseases are addressed through the Hawaii State health service,
and that is an impact on the State of Hawaii, and that is
repeated in other areas, as well.
That is why the issue of Compact impact aid is so important
to Hawaii and the other jurisdictions. Our estimates are that
Hawaii has borne about, has seen about $100 million worth of
impact from immigration from the FAS since 1986 and it has seen
only about $10 million in Federal impact aid.
The testimony I believe you referred to earlier is
testimony from the Government of Hawaii, which estimates that
in 2002 alone, the impact upon Hawaii was somewhere in the
range of $32 million, not including unreimbursed costs to
private health care providers. Some of the figures really
demonstrate what is happening. We have seen a 32 percent
increase in education impact, a 20 percent increase in health-
related impact, a 20 percent increase in human services-related
impact.
So when we see that this Compact, these Compacts as
negotiated by the administration, as presented to this
Committee, incorporate only $15 million in impact aid for all
of the jurisdictions that are affected, we ask the question,
first of all, what exactly is the basis for that calculation of
$15 million, and there is, in fact, I don't believe, any
realistic calculable basis for it, No. 1. No. 2, it is woefully
inadequate to address the needs of all of the jurisdictions,
much less the needs simply of Hawaii.
So the first and foremost point that I would make to this
Committee is that $15 million is not going to do it in terms of
addressing the impacts of the Compacts upon the jurisdictions
that are most affected, Hawaii, Guam, and Saipan, and we very
much appreciate the Committee's assistance in communicating
that, asking the questions that relate to that, and increasing
that amount.
Now, if we are not going to do it from that perspective,
then there clearly are alternatives to address Compact impacts
upon these jurisdictions. We can, for example, expand Federal
eligibility requirements for those programs that are not
currently under Federal law applicable to immigrants from the
Freely Associated States. Later today, I will be introducing,
along with some of my colleagues here on the Committee, a bill
which seeks to provide just that, to provide that in these
jurisdictions, and for that matter, throughout our country,
Freely Associated States citizens living in our country are
eligible for aspects that they are not currently, whether they
be Medicaid, food stamps, or treatment in DOD medical
facilities.
On the bigger picture, though, I think what is lacking,
really, despite the best wishes, the best intentions of many
people, is an overall coordinated effort in our Federal
Government over how exactly we are going to mesh all of these
various interests, whether they be military, whether they be
political, whether they be social.
I will give you just one example that I have seen from my
Committee on Education and the Workforce, a Committee that I am
very proud and happy to sit on. In the last few weeks, as we
have reauthorized or proposed reauthorization of key programs
such as special education, IDEA, and Head Start, we have seen a
move in that Committee to strip away eligibility for the FAS
citizens from those programs, whereas they were previously
eligible for those programs. Now, in seeking to fight that
restriction, I asked the question, why, and there is no reason
why. In fact, the State Department has said that the Compacts
were not intended to replace the benefits granted to these
citizens on behalf of those Federal programs.
So clearly, what we have is really a lack of coordination
and a lack of a big picture approach to addressing not only the
issues that my colleague from Samoa talked about, but also the
issues of the impacts upon our country, including my
jurisdiction, of the Freely Associated States immigration, or
the impacts within those States themselves.
So in conclusion, I want to say once again what I have said
three times, I think, already. My State of Hawaii is proud to
stand in support, full support, of the continuation of these
Compacts. It is the right thing to do. It is what we want to
do. It is what we should do. But we also ask the Committee's
help in understanding that there are significant impacts upon
the State of Hawaii and others from the Compacts, and to ask
this Committee's assistance in rectifying those impacts and
addressing them in a fair manner.
Thank you very much.
The Chairman. Thank you. I thank the gentleman for his
testimony.
[The prepared statement of Mr. Case follows:]
Statement of Hon. Ed Case, a Representative in Congress from the
State of Hawaii
Chairman Pombo, Ranking Member Rahall, and members of the House
Resources Committee, good morning and aloha!
I appreciate the opportunity to testify today in support of
H.J.Res. 63, legislation reauthorizing expiring provisions of the
Compact of Free Association with the Federated States of Micronesia and
the Republic of the Marshall Islands, with concerns on implementation.
I commend Chairman Pombo and Representative Rahall for their
leadership on this issue. Within the short time-frame given Congress to
consider these recently-submitted agreements, I am glad that the
Committee has expeditiously scheduled today's hearing, following on the
heels of the House International Relations Committee hearing.
At the outset, let me say that I fully support our country's
continued recognition of the strategic importance of the Freely
Associated States to our national security interests in the Western
Pacific Region, and the special relationships our countries have shared
based on the U.N. trusteeship system as well as mutual respect and
friendship.
It should come as no surprise that my State of Hawaii continues to
have great interest in U.S. policy toward these areas given our
geographic proximity and close ties in the Pacific, and thus continues
its historic support of the Compacts of Free Association. Having said
that, however, we continue also our historic concerns with the U.S.
government's administration and coordination of Federal assistance and
policy toward Micronesia, and especially the issue of Compact Impact
Aid to Hawaii and other affected U.S. jurisdictions.
Accountability.
There have been countless reports, including from GAO, which have
recognized the need for greater accountability over Federal assistance
in Micronesia. There is a specific need for the Federal Government to
hold accountable the Department of Interior and other Federal agencies
on how they oversee Compact funds. I am, therefore, pleased that the
current amendments to the Compact seek to strengthen reporting and
monitoring measures to improve accountability.
Coordination of Federal Policy.
I share the concerns of many over the coordination of U.S. policy
toward the FSM and RMI. Our national policy is to advance economic
self-reliance, maintain economic and political stability, and maintain
continued access to Kwajalein Missile Test Range. There is an apparent
disconnect between Federal agencies on the coordination of this Federal
policy toward the FSM and RMI. While there has been a lot of effort on
the part of the State and Interior Departments on the Compact
renegotiations, notably, no concerted effort and affirmative position
has been taken by the Administration on the eligibility of citizens of
the Freely Associated States in important Federal educational and other
social programs during the reauthorization of many of these Federal
programs.
As a member of the House Education and Workforce Committee, for
example, I have witnessed firsthand the arbitrary exclusion of FAS
citizens from the reauthorization of the Individuals with Disabilities
Education Act (IDEA) and Head Start, even after pleas by myself and
others on the Committee who recognize the importance of these programs
to those communities. These actions are contrary to the State
Department's recent position which made clear that the intent of the
renegotiated Compacts is not to replace existing programs authorized by
Congress as part of the U.S. assistance program. Essentially, I believe
that much more needs to be done by the Administration to support
Congressional allies who advance U.S. policy in this crucial region.
Otherwise, all of the goodwill and efforts of the renegotiated Compacts
will be offset by the consequences of decreases in educational and
social funds that FAS citizens currently receive from the Federal
Government under separate statutes.
This issue is important to Hawaii and our country for two reasons.
First, I believe it is the right thing to do for the FAS and our
national policy. Second, any disruption in our efforts to promote
economic self-sufficiency and improved educational and health systems
in Micronesia will potentially lead to even more migration of FAS
citizens to the United States, particularly Hawaii, Guam and the
Commonwealth of the Northern Mariana Islands, due to the strain on the
education and health services of these countries to provide these basic
governmental services.
Compact Impact Aid.
Continued migration from these countries to the United States
brings me to the issue of Compact Impact Aid. The Administration has
proposed, as part of H.J.Res. 36, $15 million in Compact Impact Aid to
be collectively shared by affected U.S. jurisdictions, which are
primarily Hawaii, Guam, and the CNMI. This level of assistance is
completely inadequate, given the actual costs that all of our
jurisdictions have incurred since 1986. Moreover, the Administration
has provided no clear justification on where it even came up with the
$15 million figure. In fact, in recent years, the Department of
Interior has reported that supportable ``best estimates'' in 1997 for
fiscal impact costs in our jurisdictions are over $30 million annually.
While Hawaii has spent more than $100 million on state benefits to
FAS citizens since 1986, it has received less than $10 million in
Compact Impact Aid from the Federal Government. In 2002 alone, Governor
Linda Lingle of Hawaii estimates, Hawaii has spent over $32 million in
assistance for FAS citizens, most on educational costs. $18 million was
spent for primary and secondary education for the academic year 2002-
2003, a 32% increase from the year before. The second highest impact is
in health care costs. The State Department of Human Services has spent
$4.5 million in financial assistance and $6.7 million in medical
assistance--a 20% increase in services from the previous year. These
amounts do not take into account the $15 million that is annually spent
by private hospitals in Hawaii with no debt relief.
While Administration officials repeatedly say that the $15 million
proposed should be considered the annual ``minimum'' amount the Federal
Government will be provided, its record in assuring adequate Compact
Impact to Hawaii since 1986 is wanting. Moreover, given the fact that
the Office of Insular Affairs office budget is one of the smaller
budgets at the Interior Department, I am not optimistic that Hawaii and
other affected jurisdictions will be successful in securing additional
amounts annually in the appropriations process without the full support
of the entire Executive Branch.
I have repeatedly said that since our costs are primarily in the
field of education and health care, then other Federal agencies,
particularly the Departments of Education and Health and Human
Services, should be part of an overall Federal and Compact Impact
assistance strategy and program. The easiest route, of course, would be
to simply increase the Compact proposal of $15 million to at least $35
million in mandatory spending. In that way, areas affected will not
have to fight annually in the appropriations process.
Other ways to ameliorate Compact Impact costs include making FAS
citizens eligible for key Federal social programs that will offset the
costs borne by our jurisdictions and providing our jurisdictions with
the clear authority to receive other Federal assistance and make
referrals to DOD medical facilities. I am asking that this Committee
give priority consideration to legislation I am introducing today with
my colleagues which gives the Administration other alternative ways to
provide assistance to our areas.
Our legislative proposal does the following:
Increases Compact Assistance from $15 to $35 million
Includes FAS citizens in the Medicaid program
Includes FAS citizens in the Food Stamp Program
Allows Hawaii and other jurisdictions to refer FAS
citizens to DOD medical facilities
Includes Hawaii and other U.S. jurisdictions in the
communicable diseases program; and
Continues medical debt relief authority for the FSM and
RMI
In closing, Mr. Chairman, I want to reiterate my support and, I
believe, the support of my state for the Compacts, but also the great
importance of Compact Impact Aid to Hawaii. The Hawaii Congressional
delegation, our local political leaders, and service providers in
Hawaii view the renegotiated Compact agreements as the best window of
opportunity to address Compact Impact Aid. Apart from the support of
Governor Lingle, the Hawaii State Legislature has passed House and
Senate resolutions seeking Federal assistance as well to help our
state. Our private hospitals and educational school system also share
our concern.
I look forward to working with the Members of this Committee on all
of these issues as H.J.Res. 63 moves forward. Mahalo!
______
The Chairman. Are there any questions of Mr. Case? Thank
you very much.
Mr. Rahall. I don't have any questions, but I do want to
commend the gentleman from Hawaii in his first term for being
such an effective leader on this issue and representing not
only Hawaii but those members of the Compact Association as
effectively as he does.
Mr. Case. Thank you very much.
The Chairman. Mr. Faleomavaega?
Mr. Faleomavaega. Mr. Chairman, I, too, would like to join
my colleague from West Virginia in commending the gentleman
from Hawaii for his eloquent statement.
I would also like to share with our colleagues in the
Committee and with my good friend, Mr. Case, kind of like an
institutional memory that in my understanding 30 years ago,
there were provisions in the Compact that were agreed upon
because of the bipartisanship support that members of this
Committee had given not only to the previous administration,
especially the various social assistance programs that were
absolutely necessary, because these governments, the RMI,
Republic of the Marshall Islands, and the Federated States of
Micronesia, had nothing to begin with. They had no
infrastructure. They had no educational system to begin with.
They had nothing.
But to now expect these programs to be cut unilaterally
without even any real set of documentation as to whether or not
these programs are still essentially needed, I believe, Mr.
Chairman, and I want to share this concern with my good friend
from Hawaii, that this cannot be acceptable.
Thank you, Mr. Chairman.
Mr. Case. Thank you.
The Chairman. Thank you.
Ms. Bordallo?
Ms. Bordallo. Thank you very much, Chairman. I would also
like to go on record to thank my colleague, Mr. Case, for his
comments in support of our Micronesian neighbors. Thank you.
Mr. Case. Thank you.
The Chairman. Thank you.
I would like to call up our second panel, Mr. David Cohen,
Mr. Albert Short, and Susan Westin, if you can approach the
witness table. Before you sit down, if I could have you stand
and raise your right hand.
Do you solemnly swear or affirm under the penalty of
perjury that the statements made and the responses given will
be the whole truth and nothing but the truth, so help you, God?
Mr. Cohen. I do.
Mr. Short. I do.
Ms. Westin. I do.
The Chairman. Let the record show they answered in the
affirmative.
Thank you very much for being here. I know that a number of
you are on time constraints this morning, but I do appreciate
you joining us for our hearing this morning.
Mr. Cohen, we are going to begin with you on your
testimony. If you are ready, you can begin.
STATEMENT OF DAVID COHEN, DEPUTY ASSISTANT SECRETARY FOR
INSULAR AFFAIRS, U.S. DEPARTMENT OF THE INTERIOR
Mr. Cohen. Thank you, Mr. Chairman, and thank you for
arranging the schedule to accommodate my time constraints.
Mr. Chairman and members of the Committee, I am pleased to
appear before you today to discuss the administration's
proposed legislation to amend the Compacts of Free Association
with the Republic of the Marshall Islands and the Federated
States of Micronesia. Over the 17-year life of the Compact, the
U.S. will have paid a total of $1.04 billion in direct
financial assistance to the RMI and $1.54 billion to the FSM.
There have been few restrictions on this aid.
The GAO has issued a number of reports that have raised
concerns about the effectiveness of Compact assistance. We at
Interior have had similar concerns for quite some time. Our
desire for better accountability has been frustrated by the
fact that the current Compact provides for large, loosely
defined grants with no express enforcement mechanisms.
I am pleased that the U.S., the RMI, and the FSM have
designed a completely new system to ensure that Compact funds
are used productively. The system, which features targeted
funding, performance measurement, increased oversight, and
remedies as a last resort, is explained in greater detail in my
written statement. In order to implement this new program, we
are assembling a Compact oversight team based on the Pacific.
I would also like to address the impact that migration from
the RMI, FSM, and Palau has had on Hawaii, Guam, the Northern
Mariana Islands, and American Samoa, as Congressman Case has
just addressed. We are requesting $15 million in annual
mandatory funding to these jurisdictions to mitigate the impact
of migration. We believe, however, that the first line of
defense against this impact is the financial assistance that we
will provide to the Freely Associated States under the amended
Compact. The amended Compact is designed to address the
problems that, according to a GAO report, drive people to
migrate--inadequate health care, inadequate education,
inadequate economic opportunity.
We don't pretend that the amended Compact will bring
migration to a halt, but we sincerely hope that the people of
the Freely Associated States, including those who choose to
migrate, will, as a result of our new targeted assistance
program, be healthier and better educated and, hence, more
likely to be net contributors to whatever community in which
they choose to live.
I offer a few observations. First, when we talk about
accountability, we are not talking about making sovereign
states accountable to the U.S. Accountability refers to the
collective accountability that all three governments have to
both the people of the islands and the American taxpayer. All
three governments have a collective responsibility to ensure
that the American taxpayers' money will not be wasted and, just
as importantly, a collective responsibility to deliver on our
promise to help the people of the islands to improve their
quality of life.
Some might interpret our new accountability program as an
admission that the original Compact has been a failure. Nothing
could be further from the truth. The Compact has been a
tremendous success. America's former trust territory wards have
emerged as free, vibrant, sovereign democracies. These nations
have become America's most loyal allies in the world. Cynics
say that this loyalty has been purchased with Compact aid, but
no amount of money could buy the type of loyalty that leads so
many of these islands' finest sons and daughters to serve
proudly and honorably in the U.S. military.
I am very happy that the Congressman from American Samoa
made a special mention of 82nd Airborne Army Specialist Olario
Bromares, who I would also like to acknowledge. He is from
Pohnpei, and as we sit here, Mr. Chairman, he is lying in
Walter Reed Army Hospital. He was gravely wounded in the attack
in Baghdad, as the Congressman has already mentioned. He has
lost both legs and an arm. We all pray for Olario's recovery
and we thank him so much for the tremendous courage that he has
shown in the service of our country.
As illustrated by the inspiring valor of Olario Bromares
and other men and women from the Freely Associated States,
there is clearly a heartfelt bond between Americans and the
people of these islands. The Compact has only made it stronger.
We Americans value this bond.
As for criticism of the original Compact, it is important
to remember that that document invented a comprehensive new
kind of international relationship that was completely untested
at the time. It should surprise no one and shame no one that
with the wisdom of 17 years of experience, the parties can find
opportunities to improve the Compact. The U.S. and the Freely
Associated States are committed to embracing those
opportunities, working together as partners to ensure that the
promise of these Compacts is fully realized for all the people
of the islands. Thank you.
The Chairman. Thank you.
[The prepared statement of Mr. Cohen follows:]
Statement of David B. Cohen, Deputy Assistant Secretary for
Insular Affairs, U.S. Department of the Interior
Mr. Chairman and members of the House Committee on Resources, I am
David B. Cohen, Deputy Assistant Secretary of the Interior for Insular
Affairs. I am pleased to appear before you today to discuss H. J. Res.
63, the Administration's proposal for legislation that would approve
amendments to the Compact of Free Association with the Republic of the
Marshall Islands (RMI) and the Federated States of Micronesia (FSM),
which I will collectively refer to as the freely associated states or
FAS. These amendments will, among other things, split the current
Compact, which is a single, tri-lateral agreement among the United
States, the RMI and the FSM, into two bi-lateral Compacts between the
United States and the RMI and between the United States and the FSM,
respectively.
I will focus my comments on the fiscal and economic provisions of
the Compacts and the Fiscal Procedures Agreements, which are subsidiary
agreements to the respective Compacts. In particular, I will discuss
how proposed amendments to these provisions are designed to address the
very legitimate concerns that the General Accounting Office (GAO), the
Department of the Interior and others have raised with respect to the
lack of accountability for Federal funds provided under the current
Compact.
BACKGROUND
Over the 17-year life of Compact financial assistance, it is
expected that the United States will ultimately have paid a total of
$1.04 billion in directs grants to the RMI and $1.54 billion to the
FSM. There have been few restrictions on these grants.
Over the last several years, the GAO has issued a number of reports
that have raised concerns about the effectiveness of Federal assistance
that has been provided under the Compact. We at the department of the
Interior have had similar concerns for quite some time; particularly
officials in the Office of Insular Affairs, who have been greatly
frustrated with the lack of tools properly to administer or track
Federal assistance in a manner that could reasonably ensure that such
assistance is having its intended effect. Most importantly, we have
been hampered by the fact that the current Compact provides for large,
loosely defined grants with no express enforcement mechanisms to ensure
the efficient and effective expenditure of funds.
I am pleased that, in negotiating the provisions of the amended
Compacts, the United States and its negotiating partners, the RMI and
FSM, have sought to address the concerns raised by the GAO, the
Department of the Interior and others.
ACCOUNTABILITY PROVISIONS
We have designed a completely new system to ensure that Compact
funds are used productively. First, we will target our funding. Compact
funds will be available for the following six high-priority sectors
only:
Health
Education
Public Infrastructure
Environmental Protection
Private Sector Development
Public Sector Capacity Building
Special emphasis will be given to health and education. The
respective Compacts and the related Fiscal Procedures Agreements
describe the types of activities that are eligible for funding under
each of these sectors. This will enable us to ensure that Compact funds
are used exclusively for what the U.S. and our FAS partners have
jointly identified as high-priority activities.
Second, the U.S. and its FAS partners will work together to control
Compact budgets, including the allocation of funds among the six
sectors, to ensure that the objectives of the Compact are being
properly pursued. The process will work as follows: Each year, the RMI
and FSM will propose their respective Compact budgets. Those proposals
must be approved by bilateral joint committees--a U.S.-RMI joint
committee for the RMI Compact and a U.S.-FSM joint committee for the
FSM Compact. Each joint committee will include three members from the
U.S. and two from the applicable freely associated state. The joint
committees will ensure that the Compact budgets conform to the letter
and spirit of the respective Compacts.
Third, we will require planning to ensure that Compact budgets
further medium- and long-term goals and objectives. Each FAS will be
required to prepare and periodically update various plans, which will
be subject to the approval of the applicable joint committee. The
Compact budgets will be expected to be consistent with these plans.
Fourth, we will give oversight personnel at the Department of the
Interior the tools to protect against waste, fraud and abuse. The
sector grants will be subject to terms and conditions similar to those
applicable to Federal grants provided to state and local governments in
the United States. The provisions designed to protect Compact funds
include:
The right of the U.S. to unilaterally impose certain
special conditions, including additional reports, monitoring and prior
approvals, in the event that a grantee has a history of unsatisfactory
performance or is not financially stable.
The right of the U.S. to withhold payments or suspend or
terminate grants under certain conditions.
The requirement that the FAS be subject to annual audits,
and the right of the U.S. to conduct specific audits as it deems
necessary.
The right of the U.S. to have full access to all relevant
FAS records.
The requirement that the FAS follow procurement
provisions designed to ensure competition, transparency and the
avoidance of conflicts.
The obligation of the FAS to fully cooperate with any
U.S. investigation into the misuse of Compact funds.
We do not intend to make these tools the focus of our
accountability program. We understand that the key to a successful
accountability program is a continued strong relationship with our FAS
partners, so that we can work together to ensure that the Compact funds
benefit the people that they are intended to benefit. We also
understand, however, that it is difficult to predict what will happen
over a 20-year period, and it would be imprudent for us to not have the
tools necessary to protect the American taxpayers' investment to
improve life in the FAS.
The provisions described above will help us to ensure that the
Compact funds reach their intended destination. But it will be of
little good if the Compact funds reach their intended destination but
do not have the intended effect. That is why, as the fifth prong of our
new accountability program, we will apply performance standards and
measures to each Compact grant. The joint committees will be
responsible for applying appropriate performance standards and measures
and evaluating performance on the basis thereof.
Sixth, we will provide for strong minimum standards for each FAS's
financial management systems, and we will help them to meet these
standards with technical assistance provided by my office and with the
public sector capacity development grant.
Seventh, we will provide for detailed reporting, so that the U.S.
and its FAS partners can track progress and identify any areas of
concern.
Finally, the Department of the Interior is in the process of
assembling a Compact oversight team based in the Pacific. We are hiring
eight additional full-time employees who will focus exclusively on
monitoring and oversight of Compact financial assistance and
coordination with other Federal agencies providing program assistance
to the FAS.
Additionally, Mr. Chairman, I would like to address the very
important question of the impact that migration from the RMI, FSM and
Palau, as authorized by the current Compacts, has had on Hawaii, Guam,
the Northern Mariana Islands and American Samoa. Migrants have made
important contributions to Hawaii and the territories, but have placed
additional burdens on the local governments because of their
utilization of services. The GAO reported significant outlays by these
United States jurisdictions in aid of migrants and their families. With
this history in mind, the legislation before you today includes $15
million in annual mandatory funding as a contribution to these United
States jurisdictions to mitigate the impact of migration.
While this $15 million will be applied directly to address the
impact of migration on United States jurisdictions, the financial
assistance that we will provide to the FAS under the amended Compact is
really the first line of defense against this impact. The GAO found
that migration from the FAS is motivated mainly by the lack of proper
education, health care and economic opportunity. The amended Compact is
designed to address the problems that drive people to migrate: The
targeted funding gives priority to health and education and also
supports activities that are designed to promote economic development.
We do not pretend that the amended Compact will bring migration to a
halt, but we sincerely hope that the people of the FAS, including those
who choose to migrate, will, as a result of our new targeted assistance
program, be healthier and better educated and hence more likely to be
net contributors to whatever community in which they choose to live.
Thus, the legislation seeks to improve the conditions that lead to
migration from the FAS and ameliorate the effects of migration to the
United States when it occurs.
OBSERVATIONS
Now that I have described our new program, Mr. Chairman, I would
appreciate the opportunity to offer a few observations.
My first point is that when we talk about accountability, we are
not talking about making the sovereign freely associated states
accountable to the U.S. ``Accountability'' refers to the collective
accountability that all three governments share both to the people of
the islands and to the American taxpayer. All three governments have a
collective responsibility to ensure that the American taxpayer's money
will not be wasted, and, just as importantly, a collective
responsibility to ensure that we deliver on our promise to help the
people of the islands to improve their quality of life.
Although there will always be some who are initially resistant to
change, there is widespread support in all three governments for the
new accountability provisions. In fact, some of the most enthusiastic
supporters are government ``line managers'' in the RMI and the FSM--
those with the day-to-day responsibility for delivering public services
to the people. These managers have endured years of frustration,
struggling to keep essential programs going while knowing that a more
productive allocation of Compact funds could have made their jobs
easier.
A few have expressed concern that the new accountability provisions
are harsh, and that the FAS are not equipped to comply with them. We
disagree. The new provisions include standard remedies for waste, fraud
and abuse. These remedies are the same ones to which state and local
governments in the United States are subject when they receive grants
from the Federal Government. The RMI and FSM have had considerable
experience with numerous United States Federal programs and these same
remedies. I stress again, however, that the key to our accountability
program is not the remedies that could conceivably be exercised in the
worst case scenario, but the strong, cooperative relationship that we
have with our partners in the islands.
In order to strengthen their ability to comply with the new
requirements, the FAS may use Compact funds for appropriate training,
software, equipment and guidance. For example, Compact funds could be
used to purchase financial management systems, to provide training and
hands-on guidance for local personnel or to supplement local personnel
with outside experts.
The bottom line, Mr. Chairman, is that all three governments want
to ensure that the people of the RMI and FSM receive the full benefit
of the Compact assistance program. We can only achieve this with a
strong accountability program. The U.S. cannot do it alone: We could
not place sufficient personnel on the ground to properly do this job
all by ourselves without seriously interfering with the sovereign
governmental operations of our FAS partners, conjuring unfortunate
images of a return to the old Trust Territory days. The FAS cannot do
it alone: They are still in the process of developing the capacity to
fully protect against the possibility of waste, fraud and abuse, and to
properly measure the effectiveness of Compact-funded activities. All
parties recognize that we need to work together to achieve the
objectives that we all share.
BUILDING ON SUCCESS
Some might interpret our new accountability program as an admission
that the original Compact has been a failure. Nothing could be further
from the truth. The Compact has been a tremendous success. America's
former Trust Territory wards have emerged as free, vibrant, sovereign
democracies. The United States has achieved its strategic objective of
denying other powers control over vast areas of the Pacific. The freely
associated states have benefited from the United States defense
umbrella, and their people enjoy the right to live, work and study in
the United States. Significantly, these nations have become America's
most loyal allies in the world.
Cynics say that this loyalty has been purchased with Compact aid.
No amount of money, however, could purchase the type of loyalty that
leads so many of these islands' finest sons and daughters to serve
proudly and honorably in the United States military, risking their
lives to protect the freedom of all Americans. Mr. Chairman, at this
moment, 82nd Airborne Army Specialist Hilario Bermanis from Pohnpei
lies in Walter Reed Army Hospital after being gravely wounded in a
grenade attack in South Baghdad. He has lost both legs and an arm. We
all pray for Hilario's recovery, and we thank him so much for the
tremendous courage that he has shown in the service of our country. As
illustrated by the inspiring valor of Hilario Bermanis and other men
and women from the freely associated states, there is clearly a
heartfelt bond between Americans and the people of these islands. The
Compact has only made it stronger. We Americans value this bond.
As for criticism of the original Compact, it is important to
remember that that document invented a comprehensive new kind of
international relationship that was completely untested at the time. It
should surprise no one, and shame no one, that with the wisdom of 17
years of experience, the parties can think of ways to improve the
Compact. The financial assistance and accountability provisions of the
original Compact provide some opportunities for improvement. The United
States and the freely associated states are committed to embracing
those opportunities--working together, as partners, to ensure that the
promise of these Compacts is fully realized for all of the people of
the islands.
______
The Chairman. I would like to now recognize Mr. Albert
Short, who was the chief negotiator of the Compact.
STATEMENT OF ALBERT V. SHORT, NEGOTIATOR FOR THE COMPACT OF
FREE ASSOCIATION, U.S. DEPARTMENT OF STATE
Mr. Short. Mr. Chairman, members of the Committee, thank
you for this opportunity to testify on a Compact of Free
Association with the Federated States of Micronesia and the
Republic of the Marshall Islands.
First of all, the original Compact. The Compact of Free
Association with the FSM and RMI established a political
relationship that is ongoing. The original 15-year Compact
funding authorization for both nations, however, ended in
Fiscal Year 2001 with an extension through September 30 of this
year. The original Compact successfully met its main goal of
providing for a stable transition from United Nations
trusteeship to sovereign self-government for these two nations.
At the same time, the Compact protected U.S. security,
maritime, and commercial interests in the Pacific by our
assumption of defense responsibilities for this vast sea and
airspace--this also included Palau--and ensured access to
important Department of Defense sites at Kwajalein Atoll in the
Marshall Islands.
The original Compact was successful in transforming the
relationship between these islands and the United States to one
of our closest bilateral relationships, which, as you mentioned
this morning, Mr. Chairman.
The current Compact assistance. The U.S. currently provides
assistance in three ways: Financial assistance under the
Compact, Federal programs and services under the Compact, and
Federal programs apart from the Compact. The U.S. currently
provides about $160 million annually in financially assistance
to these two nations, 80 percent from the Compact and 20
percent from other Federal agencies, such as the Departments of
Education, Health and Human Services, Labor, and Agriculture.
Reasons to continue Compact assistance. The United States
has strong interests in these countries that justify continued
economic assistance. These interests include advancing the
economic self-reliance; improving health, education, and social
conditions; sustaining the political stability and close ties
which have developed; and assuring our strategic interests
continue to be secured, including access to the important
defense sites at Kwajalein Atoll.
The economic assistance. The administration recognizes that
too sharp a reduction in U.S. assistance at this stage of
economic development could result in economic instability and
other disruptions and could encourage an increase in the level
of migration under the Compact to the United States. The
Compact, as amended, will continue economic assistance from
Fiscal Year 2004 through Fiscal Year 2023. Furthermore, the
economic package includes annual contributions to trust funds
that will provide an ongoing source of revenue when the grant
assistance ends in 2023. Federal service and program assistance
also continues, unless otherwise provided by the Congress.
Compact funding. Compact funding will ensure economic and
social stability and a smooth transition in 2024 when the trust
funds become a source of revenue. These amounts are partially
adjusted for inflation at the same rate as the original
Compact.
The President's 2004 budget includes the funding, $165.4
million for Fiscal Year 2004, for the first year of the amended
Compact, but we also need the authorization for these funds,
which is the Compact Act that we are now addressing. The
administration is putting in place an effective accountability
mechanism, which has been discussed by Mr. Cohen.
The Kwajalein Military Use and Operating Rights Agreement.
As part of the amended Compact, the United States and the
Republic of the Marshall Islands agreed to a long-term
extension of the MUORA, or Military Use and Operating Rights
Agreement, for our ballistic missile defense test site at
Kwajalein. This extension could run to 2066 and beyond, and Mr.
Lawless in the Department of Defense has submitted written
testimony on our use of Kwajalein and the security and defense
aspects of the Compact.
Immigration. Based on our experience to date, as well as in
the wake of the September 11 attack, we reexamined the
immigration provisions of the existing Compact. These
provisions provide that the RMI and FSM citizens ``may enter
into, lawfully engage in occupations, and establish residence
as non-immigrants in the United States.''
The amended Compact will, first of all, require FAS
citizens to use machine-readable passports. Second, institute
child adoption visa procedures. Further, implement visa entry
procedures for naturalized FAS citizens. It will preclude
passport sales and similar programs and will make explicit the
inherent U.S. authority to regulate the terms and conditions of
an FSM or RMI citizen's admission and stay in the United States
and its territories. It also removes the annual requirement for
an EAD, or Employment Authorization Document, which has been a
troublesome administrative requirement on FSM and Marshall's
migrants, and substitute a multi-year authorization.
Mr. Chairman, in conclusion, thank you for this opportunity
to present the administration's views on the Compact we have
signed with the FSM and the RMI. Let me assure you, we welcome
any and every opportunity to keep the Committee informed of
your deliberations as you proceed on this legislation. Thank
you.
The Chairman. Thank you.
[The prepared statement of Mr. Short follows:]
Statement of Albert V. Short, Negotiator for the Compact of Free
Association, United States Department of State
Thank you for this opportunity to testify on the recently submitted
Compact Act of Free Association with the Federated States of Micronesia
(FSM) and with the Republic of the Marshall Islands (RMI).
The Original Compact
The original 15 years of Compact funding authorization for the FSM
and RMI ended in Fiscal Year 2001. The Compact provisions provided an
extension for up to two years through September 30, 2003, as long as
Compact negotiations progressed. The original Compact successfully met
its main goal of providing for a stable transition from United Nations
Trusteeship to sovereign self-government for the FSM and RMI. At the
same time, the Compact protected U.S. security, maritime, and
commercial interests in the Pacific by assuming defense
responsibilities for the vast sea and air space of the Freely
Associated States (FAS) including Palau--and by ensuring access to
important defense sites operated by the Department of Defense on
Kwajalein Atoll in the Marshall Islands.
The original Compact was also successful in transforming the
relationship between these islands and the United States into one of
our closest bilateral relationships. We now number the FSM and RMI
among our staunchest friends in the United Nations. These achievements
are solid and lasting, and the American and FAS peoples can be justly
proud of them.
Current Compact Assistance
The U.S. currently provides assistance to the FSM and RMI in three
ways: through financial assistance under the Compact; through programs
and services that are included in the Compact, such as the services and
related programs of the U.S. Weather Service, the Postal Service, and
the Federal Aviation Administration; and through programs apart from
the Compact that are funded, as Congress sees fit, by other Federal
agencies. The U.S. currently provides about $160 million annually in
financial assistance to the FSM and RMI, 80 percent from the Compact
and 20 percent from other Federal agencies outside of the Compact, such
as the Departments of Education, Health and Human Services, Labor, and
Agriculture.
The past seventeen years have witnessed recurring problems stemming
from the lack of accountability and the sometimes ineffective use of
Compact Funds. Therefore, a principal task of the recently signed
agreements to amend the Compact is to improve the effectiveness and
accountability of these funds. Moreover, we have agreed to put an
increasing percentage of the annual U.S. Compact assistance into a
trust fund that will provide an ongoing source of revenue to the two
countries when annual payments by the United States end in 2023.
Reasons to Continue Compact Assistance
The United States has strong interests in these countries that
justify continued economic assistance under the Compact through Fiscal
Year 2023 and the contributions to the trust fund, provided this
assistance is structured and managed as proposed. These interests
include:
Advancing economic self-reliance. (In this regard, the
United States will continue its commitment to the economic strategies
that the RMI and FSM have developed with the support of the United
States, the Asian Development Bank (ADB), the International Monetary
Fund, and our partners in the ADB Consultative Group, including Japan
and Australia);
Improving the health, education, and social conditions of
the people of the RMI and FSM;
Sustaining the political stability and close ties which
we have developed with these two emerging democracies;
Ensuring that our strategic interests continue to be
secured, including access to our important defense sites on the
Kwajalein Atoll;
Putting in place and contributing to a trust fund that
will provide an ongoing source of revenue when annual payments by the
United States end in 2023;
Strengthening immigration provisions in the wake of the
September 11th attacks and addressing various problems that have arisen
since the Compact was first approved by the U.S. Congress; and
Mitigating the impact of immigration under the Compact on
Hawaii, Guam, the Commonwealth of the Northern Mariana Islands, and
American Samoa.
Economic Assistance
The Administration recognizes that too sharp a reduction in U.S.
assistance at this stage of economic development of the RMI and the FSM
could result in economic instability and other disruptions, and could
encourage an increase in the level of immigration under the Compact to
the United States by citizens of those countries. We continue to
believe that providing substantial financial and other assistance under
the Compact will help to ensure economic stability while the RMI and
FSM continue to implement economic development and reform strategies.
The Compact, as amended, provides for continued economic assistance
from Fiscal Year 2004 through Fiscal Year 2023. Furthermore, the
economic package provides for annual contributions to a trust fund that
will provide an ongoing source of revenue, to be used for the same
purposes as the previous grant assistance when the annual grant
assistance ends in Fiscal Year 2023. Federal services and program
assistance also continues, if provided by Congress.
Compact Funding
Compact funding will ensure economic and social stability and a
smooth transition to Fiscal Year 2024 when annual payments from the
U.S. will have terminated and the trust fund becomes a source of
revenue.
Beginning in Fiscal Year 2007, the FSM sector grants
decrease by $800,000 per year through Fiscal Year 2023, with this
decrease added to the trust fund.
The RMI will receive $30.5 million in sectoral grants,
$5.2 million for Kwajalein impact, and $7 million for its trust fund
annually beginning in Fiscal Year 2004.
Beginning in Fiscal Year 2005, the RMI sectoral grants
decrease by $500,000 per year through Fiscal Year 2023, with this
decrement added to the trust fund.
These amounts are partially adjusted for inflation: two-
thirds of the implicit price deflator will be applied as in the
original Compact period.
Under the Compact, as amended, the U.S. contributions to
the trust funds are conditioned on the FSM contributing at least $30
million to the FSM trust fund prior to September 30, 2004 and the RMI
contributing at least $25 million to the RMI trust fund on the
effective date of the Trust Fund Agreement or October 1, 2003,
whichever is later, and $2.5 million prior to October 1, 2004 and
another $2.5 million prior to October 1, 2005.
Under the Compact, grant assistance will be used for six
sectors, with priorities in the education and health sectors and tied
to specific outcomes and purposes and monitored by the Department of
the Interior.
Misuse of Compact funds can lead to withholding of funds
until the problem is resolved. The FSM and the RMI have agreed to
cooperate with the United States on criminal investigations regarding
misuse of funds, if necessary.
The Administration is putting in place an effective accountability
mechanism with respect to future U.S. economic assistance to the FSM
and the RMI under the Compact. Economic assistance will no longer be
made available through transfers that co-mingle U.S. funds with local
funds, thereby rendering it difficult to track and monitor their use.
Instead, future funds under the Compact will be provided through
targeted, sectoral assistance, each with a clearly defined scope and
objectives.
In the amended Compacts, the FSM, RMI, and U.S. have agreed that
any future grant assistance will be used in six sectors:
health,
education,
infrastructure,
private sector development,
public sector capacity building, and
the environment.
Built into each sectoral grant will be regular planning,
monitoring, and reporting requirements. The amended Compacts also
provide the necessary authority and resources to ensure effective
oversight and reasonable progress toward the agreed objectives.
Trust Fund
A major element of the new Compact provisions is the termination of
annual mandatory payments to the FSM and the RMI at the end of Fiscal
Year 2023--and the establishment of a trust fund to provide an ongoing
source of revenue starting in Fiscal Year 2024. In its earlier
proposals to the U.S., both the FSM and RMI anticipated the U.S.
interest in the termination of mandatory annual financial assistance by
proposing that the U.S. capitalize a trust fund over the next term of
Compact assistance. Under the amended Compact, the Administration has
agreed that annual U.S. financial assistance will terminate at the end
of Fiscal Year 2024, and thereafter the trust fund will provide an
ongoing source of revenue. Congress has previously authorized and
funded the use of similar trust funds, including one established under
the Compact with the Republic of Palau, and several established in the
Marshall Islands as compensation for the U.S. nuclear weapons testing
program.
Federal Services and Program Assistance
With a few notable exceptions, Federal program coordination and
oversight of Compact Funds has been ineffective. We are committed to
putting in place a more effective system of coordinating and monitoring
that assistance during the amended Compact period.
Kwajalein MUORA Extension
As part of the amended Compact, the United States and the Republic
of the Marshall Islands have agreed to a long-term extension of the
Military Use and Operating Rights Agreement (MUORA) for the Ronald
Reagan Ballistic Missile Defense Test Site on Kwajalein Atoll. The
Reagan Test Site (RTS) serves a key role in research, development, test
and evaluation for the Administration's high-priority missile defense
and space programs.
Although the current Military Use and Operating Rights Agreement
covering U.S. use of these defense sites runs through 2016, in November
2001, RMI President Note reaffirmed the RMI's willingness to consider a
long-term extension of U.S. use of Kwajalein Atoll for our defense
needs. Subsequently, the RMI Government proposed that the ongoing
negotiations to amend the Compact of Free Association provided a
convenient forum to consider amendments extending the Military Use and
Operating Rights Agreement. Following consultations with the Department
of Defense, the Administration decided to pursue such an extension, if
agreement could be concluded on acceptable terms, and negotiations on
this issue would not delay our efforts to obtain agreement on
amendments to the Compact.
Sections 211 and 212 of Title Two of the Compact, as amended, and
the MUORA, as amended, provide for the following:
The parties agree to extend the MUORA for a period of
fifty years from 2016 (the current expiration date) to 2066, with a
U.S. option to extend it for an additional twenty years to Fiscal Year
2086.
To achieve the flexibility necessary to permit the long-
term extension of the agreement, the two sides agreed to a schedule of
early termination payments if the United States chooses to leave
Kwajalein before the end of the agreement. This outcome could be
exercised anytime after 2023, on advance notice of at least seven
years.
As Compensation:
These agreements establish a new series of Kwajalein
payments beginning in Fiscal Year 2004 (October 1, 2003) at a level of
$15 million per year (increased from the current $11.3 million) with a
further increase to a new base of $18 million in 2014. The United
States Government is obligated in any case to make payments through
Fiscal Year 2023, and thereafter, depending on whether it chooses to
continue its use of Kwajalein Atoll. The RMI has assured us that it
will endeavor to ensure that payments to landowners are distributed
more equitably than they have been in the past in a manner consistent
with Marshallese custom and tradition.
The U.S. will continue paying the $1.9 million per year
in Kwajalein impact money established in the current agreement.
However, beginning in Fiscal Year 2004, this payment, which has not
previously been adjusted for inflation, will be subject to the
provisions of the new Compact Fiscal Procedures Agreement, will be
indexed for inflation based on the formula established in the amended
Compact, and emphasis will be on addressing the special needs of the
Kwajalein landowners most affected by the United States presence on
Kwajalein.
Pursuant to the Compact, U.S. Army Kwajalein Atoll
(USAKA) has developed, in cooperation with the RMI Environmental
Protection Authority, a strong set of environmental standards and a
formal process to review these standards annually and report to both
governments. To promote a greater RMI capability for independent
analysis of the Survey's findings and conclusions, the U.S. will
provide an annual grant of $200,000 to support increased participation
of the GRMI EPA in the Survey.
For some years now, overcrowding on the Kwajalein island of Ebeye,
where most of the Marshallese work force supporting the defense sites
lives, has created an unmet series of special infrastructure needs for
the Marshallese Communities on Ebeye and some other islands of the
Kwajalein Atoll. This agreement will address these needs in the
following way:
First, the U.S. and the RMI have agreed that $3.1 million
per year of the RMI grant funding will go towards meeting the special
infrastructure and development needs of the Marshallese communities on
Kwajalein Atoll. In 2014, this funding will increase to $5.1 million
per year. These funds are indexed according to the Compact Title Two
formula.
Second, considering the $1.9 million impact funding
mentioned above, which is specified by the Compact to offset the impact
of U.S. defense activities on Kwajalein Atoll, together with the Ebeye
special needs funding, $5 million per year (increasing to $7 million in
2014), all of which will be focused on improving the quality of life of
the Marshallese communities on Kwajalein, starting October 1, 2004.
In sum, the Administration feels that extending the MUORA, in
concert with the provisions of the amended Compact, will promote the
economic stability and opportunity of the RMI for the indefinite
future.
Immigration
Based on our mixed experience since the Compact took effect, as
well as in the wake of the September 11th attack, we have reexamined
the immigration provisions of the existing Compact. Section 141(a)
provides that citizens of the RMI and FSM ``may enter into, lawfully
engage in occupations, and establish residence as a nonimmigrant in the
United States'' without regard to certain grounds of inadmissibility
under the Immigration and Nationality Act (INA). Our examination and
the subsequent negotiations concluded that the immigration provisions
should be amended to:
Require FAS citizens seeking admission under the Compact
to use passports.
Clarify that immigrant visa procedures, rather than
Compact nonimmigrant admission, are necessary and appropriate for child
adoption cases.
Limit Compact entry privileges of naturalized FAS
citizens to a greater degree.
Preclude use of passport sales and similar programs from
serving as a means for persons from countries other than the FSM and
the RMI to obtain visa-free admission privileges under the Compact.
Make more explicit the authority of the Government of the
United States to regulate the terms and conditions of FSM or RMI
citizens' admission and stay in the United States, including its
territories and possessions.
Make explicit that the INA applies in full to persons
seeking admission to, or the right to remain in, the United States
pursuant to the Compact.
Provide Compact admission privileges to the immediate
relatives of FAS citizens in U.S. military service, whether or not the
relatives are FAS citizens.
Streamline the documentation that FAS citizens may use as
evidence of work authorization in the United States.
Under the Compact, as amended, the United States will now require
passports for FSM and RMI citizens seeking admission as nonimmigrants
to the United States. Further, naturalized citizens of the FSM and RMI
will, with certain limited exceptions, now be ineligible for visa-free
admission to the United States. In addition, the Compact, as amended,
provides other safeguards to prevent the admission under the Compact of
persons from other countries who might seek to exploit the visa-free
immigration privileges intended for the citizen population of the FAS.
It addresses explicitly the problem of passport sales and other
naturalization schemes designed to provide visa-free admission
privileges to persons from countries other than the FSM and the RMI
under the Compact. The Compact, as amended, also provides express
safeguards for FSM and RMI children who are coming to the United States
permanently pursuant to an adoption, or for the purpose of adoption, by
requiring that those children possess an immigrant visa. This clarifies
the existing U.S. interpretation of the Compact, and brings the
provisions relating to the Freely Associated States into harmony with
that pertaining to children from other countries concerning child
adoptions and protections available to adopted children.
Impact
Section 104(e)(2) of the existing and amended Compact statutes
requires the President to report annually to Congress on the impact of
the Compact. A recent GAO study documents the substantial impact of FAS
migration to the State of Hawaii, Guam, and the Commonwealth of the
Northern Mariana Islands (CNMI). The amended Compact and other proposed
amendments to the Compact Act address the migratory impact issue in
three ways:
First, we will provide $15 million per year of direct
compensation to Hawaii, Guam, American Samoa, and the CNMI for the
negative impacts of migration.
Second, the amended Compacts strengthen immigration
provisions to improve our ability to regulate RMI and FSM migrants who
are eligible for admission.
Third, the amended Compacts focus on areas such as
improving the health and education of, and private sector jobs for,
potential migrants, thereby reducing the impact of migration under the
Compact.
The annual impact funding of $15 million will be:
a mandatory appropriation for twenty years.
allocated based on a pro rata formula reflecting a
periodic census of Micronesians living in Hawaii, Guam, American Samoa,
and the CNMI.
Palau
The Compact of Free Association between the United States and Palau
is not up for review at this time. We believe, however, that it makes
sense for us to bring the immigration, labor and trade provisions of
the Palau Compact into line with those agreed with the RMI and FSM. In
addition, Palau has sought a change to the communications provision to
make its telecommunications carrier eligible to participate in the
National Exchange Carriers Association and the Universal Services
Support Fund. Negotiations are underway on these issues. If we reach
agreement, the Administration will submit these amendments to the
Congress.
Conclusion
Thank you for this opportunity to present the Administration's
views on the Compact Act with the FSM and RMI. Let me assure you that
we welcome any and every opportunity to keep the Committee informed as
your deliberations proceed on the Compact Act.
______
The Chairman. Ms. Westin?
STATEMENT OF SUSAN S. WESTIN, MANAGING DIRECTOR, INTERNATIONAL
AFFAIRS AND TRADE, U.S. GENERAL ACCOUNTING OFFICE
Ms. Westin. Mr. Chairman and members of the Subcommittee, I
am pleased to be here today to testify on the Compacts of Free
Association that the United States recently signed with the FSM
and the RMI. I will just summarize and ask that my written
statement become part of the record.
Specifically, I will discuss three main topics: One, the
potential cost to the U.S. Government; two, changes to both the
structure and levels of future assistance; and three, changes
in accountability addressed in the amended Compacts and related
agreements.
Turning to the first topic, the potential cost of the
amended Compacts, the amended Compacts of Free Association with
the FSM and the RMI to renew expiring assistance would require
about $3.5 billion in funding over the next 20 years, with a
total possible authorization through 2086 of $6.6 billion from
the U.S. Congress. These dollar amounts include estimated
inflation.
I direct your attention to the chart that we have here. It
is also in the beginning of our statement. The share of new
authorizations to the FSM would be about $2.3 billion and would
end after Fiscal Year 2023. The share of authorizations to the
RMI would be about $1.2 billion for the first 20 years. Further
funding of $3.1 billion for the remainder of the period
corresponds to extended grants to Kwajalein and payments
related to U.S. military use of land at Kwajalein.
This new authorized funding would be provided to each
country in the form of annual grants targeted to priority
areas, contributions to a trust fund for each country such that
trust fund earnings would replace annual grants beginning in
Fiscal Year 2024, payments the U.S. Government makes through
the RMI Government to Kwajalein landowners to compensate them
for the U.S. use of their lands for defense sites, and an
extension of Federal services that have been provided under the
original Compact but are due to expire in Fiscal Year 2003.
Further, the administration is proposing to provide $15
million annually for Hawaii, Guam, and the Northern Mariana
Islands for the costs associated with FSM and RMI citizens who
migrate to those areas. This would cost an additional $300
million over the 20-year period.
Turning to the second topic, changes in the structure and
levels of funding, under the U.S. proposals, annual grant
amounts to each country would be reduced each year in order to
encourage budgetary self-reliance and transition the countries
from receiving annual U.S. grant funding to receiving annual
trust fund earnings beginning in 2024. This decreasing grant
funding combined with FSM and RMI population growth would
result in falling per capital grant assistance over the funding
period, particularly for the RMI. You can see that on the chart
we have here. It is also on page eight of our testimony.
The reduction in real per capita funding over the next 20
years is a continuation of the decreasing amount of available
grant funds that the FSM and the RMI had during the 17 years of
prior Compact assistance.
The amended Compacts were designed to build trust funds
that, beginning in Fiscal Year 2024, yield annual earnings to
replace grant assistance that ends in 2023. Our analysis shows
that the trust funds may be insufficient to replace expiring
grants, depending on assumptions about the rate of return on
the trust funds.
Finally, I will discuss provisions in the amended Compacts
designed to provide improved accountability over U.S.
assistance. This is an area where we have offered several
recommendations in past years. Most of our recommendations
regarding future Compact assistance have been addressed with
the introduction of strengthened accountability measures in the
signed amended Compacts and related agreements. Let me give
four examples.
One, the amended Compacts would require that grants be
targeted to priority areas such as health, education, the
environment, and public infrastructure, including funding for
maintenance.
Two, grant conditions normally applicable to U.S. State and
local governments would apply to each grant.
Three, the United States could withhold payments if either
country fails to comply with grant terms and conditions.
And four, joint economic management Committees with each
country would be established.
I must emphasize, however, that the successful
implementation of the many new accountability provisions will
require a sustained commitment, including resources, by the
three governments to fulfill their new roles and
responsibilities.
Mr. Chairman, this completes my prepared statement and I
would be happy to respond to questions.
The Chairman. Thank you very much.
[The prepared statement of Ms. Westin follows:]
Statement of Susan S. Westin, Managing Director International Affairs
and Trade, U.S. General Accounting Office
Mr. Chairman and Members of the Committee:
I am pleased to be here today to testify on the Compact of Free
Association between the United States and the Pacific Island nations of
the Federated States of Micronesia, or the FSM, and the Republic of the
Marshall Islands, or the RMI. 1 In 1986, the United States
entered into this Compact with the two countries after almost 40 years
of administering the islands under the United Nations Trust Territory
of the Pacific Islands. The Compact has provided U.S. assistance to the
FSM and the RMI in the form of direct funding as well as Federal
services and programs for almost 17 years. Further, the Compact
establishes U.S. defense rights and obligations in the region and
allows for migration from both countries to the United States.
Provisions of the Compact that address economic assistance were
scheduled to expire in 2001; however, they can remain and have remained
in effect while the United States and each nation renegotiated the
affected provisions. 2
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\1\ The FSM had a population of about 107,000 in 2000, while the
RMI had a population of 50,840 in 1999, according to each country's
most recent census.
\2\ Other Compact provisions are also due to expire in late 2003 if
not renewed. These include (1) certain defense provisions, such as the
requirement that the FSM and the RMI refrain from actions that the
United States determines are incompatible with U.S. defense obligations
(the defense veto) and (2) Federal services listed in the Compact.
---------------------------------------------------------------------------
Today I will discuss our review of the amended Compacts and related
agreements that the United States signed with the FSM and the RMI in
May and April of 2003, respectively. (According to a Department of
State official, while the original Compact was one document that
applied to both the FSM and the RMI, the Compact that has been amended
is now a separate Compact with each nation.) Specifically, I will
discuss changes to levels and structure of future assistance, including
the potential cost to the U.S. government. Further, I will comment on
changes in accountability and other key issues addressed in the amended
Compacts and related agreements.
Summary
The amended Compacts of Free Association with the FSM and the RMI
to renew expiring assistance would require about $3.5 billion in
funding over the next 20 years with a total possible authorization
through 2086 of $6.6 billion from the U.S. Congress. 3 The
amended Compacts would provide decreasing levels of annual assistance
over a 20-year term (2004-2023) in order to encourage budgetary self-
reliance. Simultaneously, the Compacts would require building up a
trust fund (with contributions that would increase annually) for each
country to generate annual earnings that would replace the grants that
end in 2023. Per capita grant assistance would fall over the 20-year
period, particularly for the RMI. At an assumed trust fund rate of
return of 6 percent, in 2024 the RMI trust fund would cover expiring
grant assistance, while the FSM trust fund would be insufficient to
replace grants. By the year 2040, however, RMI trust fund returns also
would be unable to replace grant funding.
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\3\ Although the amended Compacts have been signed by the U.S.,
FSM, and RMI governments, they have not been approved by the
legislature of any country. Therefore, in our testimony we describe the
amended Compacts' requirements and potential impact in a conditional
manner in recognition that the Compacts have not yet been enacted. The
total possible cost to renew expiring assistance in Fiscal Year 2004
U.S. dollars would be $3.8 billion on the basis of the Congressional
Budget Office's forecasted inflation rate.
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The amended Compacts include many strengthened reporting and
monitoring measures that could improve accountability if diligently
implemented. The amended Compacts and related agreements have addressed
most of the recommendations that we have made in past reports regarding
assistance accountability. For example, assistance would be provided
through grants targeted to priority areas, such as health and
education, and with specific terms and conditions attached. Annual
reporting and consultation requirements would be expanded, and funds
could be withheld for noncompliance with Compact terms and conditions.
However, the successful implementation of the many new accountability
provisions will require a sustained commitment and appropriate
resources from the United States, the FSM, and the RMI.
The amended Compacts address other key issues. One key change to
Compact defense provisions would occur--U.S. military access to
Kwajalein Atoll in the RMI could be extended from 2016 to 2086. This
extension would cost $3.4 billion of the total possible authorization
of $6.6 billion. Further, amended Compact provisions on immigration
have been strengthened. FSM and RMI citizens entering the United States
would need to carry a passport, and regulations could be promulgated
that would impose time limits and other conditions on admission to the
United States for these citizens.
Background
The 1986 Compact of Free Association between the United States, the
FSM, and the RMI provided a framework for the United States to work
toward achieving its three main goals: (1) to secure self-government
for the FSM and the RMI, (2) to assist the FSM and the RMI in their
efforts to advance economic development and self-sufficiency, and (3)
to ensure certain national security rights for all of the parties. The
first goal has been met. The FSM and the RMI are independent nations
and are members of international organizations such as the United
Nations.
The second goal of the Compact--advancing economic development and
self-sufficiency for both countries--was to be accomplished primarily
through U.S. direct financial payments (to be disbursed and monitored
by the U.S. Department of the Interior) to the FSM and the RMI. For
1987 through 2003, U.S. assistance to the FSM and the RMI to support
economic development is estimated, on the basis of Interior data, to be
about $2.1 billion. 4 Economic self-sufficiency has not been
achieved. Although total U.S. assistance (Compact direct funding as
well as U.S. programs and services) as a percentage of total government
revenue has fallen in both countries (particularly in the FSM), the two
nations remain highly dependent on U.S. funds. U.S. direct assistance
has maintained standards of living that are higher than could be
achieved in the absence of U.S. support. Further, the U.S., FSM, and
RMI governments provided little accountability over Compact
expenditures.
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\4\ The cost of prior assistance in Fiscal Year 2004 U.S. dollars
was $2.6 billion. This estimate does not include payments for Compact-
authorized Federal services or U.S. military use of Kwajalein Atoll
land, nor does it include investment development funds provided under
section 111 of Public Law 99-239. Additionally, the Compact served as
the vehicle to reach a full settlement of all compensation claims
related to U.S. nuclear tests conducted on Marshallese atolls between
1946 and 1958. In a Compact-related agreement, the U.S. government
agreed to provide $150 million to create a trust fund. While the
Compact and its related agreements represented the full settlement of
all nuclear claims, it provided the RMI with the right to submit a
petition of ``changed circumstance'' to the U.S. Congress requesting
additional compensation. The RMI government submitted such a petition
in September 2000, which the U.S. executive branch is still reviewing.
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The third goal of the Compact--securing national security rights
for all parties--has been achieved. The Compact obligates the United
States to defend the FSM and the RMI against an attack or the threat of
attack in the same way it would defend its own citizens. The Compact
also provides the United States with the right of ``strategic denial,''
the ability to prevent access to the islands and their territorial
waters by the military personnel of other countries or the use of the
islands for military purposes. In addition, the Compact grants the
United States a ``defense veto.'' Finally, through a Compact-related
agreement, the United States secured continued access to military
facilities on Kwajalein Atoll in the RMI through 2016. 5 In
a previous report, we identified Kwajalein Atoll as the key U.S.
defense interest in the two countries. 6 Of these rights,
only the defense veto is due to expire in 2003 if not renewed.
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\5\ U.S. access to Kwajalein Atoll is established through the U.S.-
RMI Military Use and Operating Rights Agreement (MUORA). Funding
provided for U.S. military access to Kwajalein for the years 1987 to
2003 is estimated, on the basis of Interior data, to be $64 million for
development assistance and $144 million for the RMI government to
compensate landowners for U.S. use of their lands.
\6\ See U.S. General Accounting Office, Foreign Relations:
Kwajalein Atoll Is the Key U.S. Defense Interest in Two Micronesian
Nations, GAO-02-119 (Washington, D.C.: Jan. 22, 2002).
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Another aspect of the special relationship between the FSM and the
RMI and the United States involves the unique immigration rights that
the Compact grants. Through the original Compact, citizens of both
nations are allowed to live and work in the United States as
``nonimmigrants'' and can stay for long periods of time, with few
restrictions. 7 Further, the Compact exempted FSM and RMI
citizens from meeting U.S. passport, visa, and labor certification
requirements when entering the United States. In recognition of the
potential adverse impacts that Hawaii and nearby U.S. commonwealths and
territories could face as a result of an influx of FSM and RMI
citizens, the Congress authorized Compact impact payments to address
the financial impact of these nonimmigrants on Guam, Hawaii, and the
Commonwealth of the Northern Mariana Islands (CNMI). 8 By
1998, more than 13,000 FSM and RMI citizens had made use of the Compact
immigration provisions and were living in the three areas. The
governments of the three locations have provided the U.S. government
with annual Compact nonimmigrant impact estimates; for example, in 2000
the total estimated impact for the three areas was $58.2 million. In
that year, Guam received $7.58 million in impact funding, while the
other two areas received no funding. 9
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\7\ Typically, nonimmigrants include those individuals who are in
the United States temporarily as visitors, students, or workers.
\8\ Payments were also authorized for American Samoa, but impact
compensation has not been sought.
\9\ See U.S. General Accounting Office, Foreign Relations:
Migration From Micronesian Nations Has Had Significant Impact on Guam,
Hawaii, and the Commonwealth of the Northern Mariana Islands, GAO-02-40
(Washington, D.C.: Oct. 5, 2001).
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In the fall of 1999, the United States and the two Pacific Island
nations began negotiating economic assistance and defense provisions of
the Compact that were due to expire. Immigration issues were also
addressed. According to the Department of State, the aims of the
amended Compacts are to (1) continue economic assistance to advance
self-reliance, while improving accountability and effectiveness; (2)
continue the defense relationship, including a 50-year lease extension
(beyond 2016) of U.S. military access to Kwajalein Atoll in the RMI;
(3) strengthen immigration provisions; and (4) provide assistance to
lessen the impact of Micronesian migration on Hawaii, Guam, and the
CNMI.
Amended Compacts Would Alter Assistance Levels and Structure
Under the amended Compacts with the FSM and the RMI, new
congressional authorizations of approximately $3.5 billion in funding
would be required over the next 20 years, with a total possible
authorization through 2086 of $6.6 billion. Economic assistance would
be provided to the two countries for 20 years--from 2004 through 2023--
with all subsequent funding directed to the RMI for continued U.S.
access to military facilities in that country. Under the U.S.
proposals, annual grant amounts to each country would be reduced each
year in order to encourage budgetary self-reliance and transition the
countries from receiving annual U.S. grant funding to receiving annual
trust fund earnings. This decrease in grant funding, combined with FSM
and RMI population growth, would also result in falling per capita
grant assistance over the funding period--particularly for the RMI. If
the trust funds established in the amended Compacts earn a 6 percent
rate of return, the FSM trust fund would be insufficient to replace
expiring annual grants. The RMI trust fund would replace grants in
Fiscal Year 2024 but would become insufficient for this purpose by
Fiscal Year 2040.
Amended Compacts Could Cost the U.S. Government $6.6 Billion
Under the amended Compacts with the FSM and the RMI, new
congressional authorizations of approximately $6.6 billion could be
required for U.S. payments from fiscal years 2004 to 2086, of which
$3.5 billion would be required for the first 20 years of the Compacts
(see table 1). The share of new authorizations to the FSM would be
about $2.3 billion and would end after Fiscal Year 2023. The share of
new authorizations to the RMI would be about $1.2 billion for the first
20 years, with about $300 million related to extending U.S. military
access to Kwajalein Atoll through 2023. Further funding of $3.1 billion
for the remainder of the period corresponds to extended grants to
Kwajalein and payments related to U.S. military use of land at
Kwajalein Atoll. 10 The cost of this $6.6 billion new
authorization, expressed in Fiscal Year 2004 U.S. dollars, would be
$3.8 billion.
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\10\ U.S. access to Kwajalein Atoll in the RMI has already been
secured through 2016 through a Compact-related agreement. The amended
Compact with the RMI extends this funding to 2066, with an additional
20-year optional lease extension at that point.
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This new authorized funding would be provided to each country in
the form of (1) annual grant funds targeted to priority areas (such as
health, education, and infrastructure); (2) contributions to a trust
fund for each country such that trust fund earnings would become
available to the FSM and the RMI in Fiscal Year 2024 to replace
expiring annual grants; (3) payments the U.S. government makes to the
RMI government that the RMI transfers to Kwajalein landowners to
compensate them for the U.S. use of their lands for defense sites; and
(4) an extension of Federal services that have been provided under the
original Compact but are due to expire in Fiscal Year 2003.
[GRAPHIC] [TIFF OMITTED] T8192.001
Amended Compacts Would Reduce U.S. Grant Support Annually
Under the U.S. proposals, annual grant amounts to each country
would be reduced each year in order to encourage budgetary self-
reliance and transition the countries from receiving annual U.S. grant
funding to receiving annual trust fund earnings. Thus, the amended
Compacts increase annual U.S. contributions to the trust funds each
year by the grant reduction amount. This decrease in grant funding,
combined with FSM and RMI population growth, would also result in
falling per capita grant assistance over the funding period--
particularly for the RMI (see fig. 1). Using published U.S. Census
population growth rate projections for the two countries, the real
value of grants per capita to the FSM would begin at an estimated $687
in Fiscal Year 2004 and would further decrease over the course of the
Compact to $476 in Fiscal Year 2023. The real value of grants per
capita to the RMI would begin at an estimated $627 in Fiscal Year 2004
and would further decrease to an estimated $303 in Fiscal Year 2023.
The reduction in real per capita funding over the next 20 years is a
continuation of the decreasing amount of available grant funds (in real
terms) that the FSM and the RMI had during the 17 years of prior
Compact assistance.
[GRAPHIC] [TIFF OMITTED] T8192.002
The decline in annual grant assistance could impact FSM and RMI
government budget and service provision, employment prospects,
migration, and the overall gross domestic product (GDP) outlook, though
the immediate effect is likely to differ between the two countries. For
example, the FSM is likely to experience fiscal pressures in 2004, when
the value of Compact grant assistance drops in real terms by 8 percent
relative to the 2001 level (a reduction equal to 3 percent of GDP).
11 For the RMI, however, the proposed level of Compact grant
assistance in 2004 would actually be 8 percent higher in real terms
than the 2001 level (an increase equal to 3 percent of GDP). According
to the RMI, this increase would likely be allocated largely to the
infrastructure investment budget and would provide a substantial
stimulus to the economy in the first years of the new Compact.
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\11\ The level of grant assistance in 2001 was converted into
Fiscal Year 2004 dollars for comparison purposes.
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Trust Funds May Be Insufficient to Replace Expiring Grants
The amended Compacts were designed to build trust funds that,
beginning in Fiscal Year 2024, yield annual earnings to replace grant
assistance that ends in 2023. Both the FSM and the RMI are required to
provide an initial contribution to their respective trust funds of $30
million. In designing the trust funds, the Department of State assumed
that the trust fund would earn a 6 percent rate of return.
12 The amended Compacts do not address whether trust fund
earnings should be sufficient to cover expiring Federal services, but
they do create a structure that sets aside earnings above 6 percent,
should they occur, that could act as a buffer against years with low or
negative trust fund returns. Importantly, whether the estimated value
of the proposed trust funds would be sufficient to replace grants or
create a buffer account would depend on the rate of return that is
realized. 13
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\12\ The State Department chose a 6 percent return in order to
reflect a conservative investment strategy. This rate of return can be
compared with the current average forecasted return for long-term U.S.
government bonds of 5.8 percent by the Congressional Budget Office.
\13\ This analysis does not take into account volatile or negative
returns. The sufficiency of either the FSM or the RMI trust fund to
replace grants has not been tested under conditions of market
volatility.
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If the trust funds earn a 6 percent rate of return, then
the FSM trust fund would yield a return of $57 million in Fiscal Year
2023, an amount insufficient to replace expiring grants by an estimated
value of $27 million. The RMI trust fund would yield a return of $33
million in Fiscal Year 2023, an estimated $5 million above the amount
required to replace grants in Fiscal Year 2024. Nevertheless, the RMI
trust fund would become insufficient for replacing grant funding by
Fiscal Year 2040.
If the trust funds are comprised of both stocks (60
percent of the portfolio) and long-term government bonds (40 percent of
the portfolio) such that the forecasted average return is around 7.9
percent, then both trust funds would yield returns sufficient to
replace expiring grants and to create a buffer account. However, while
the RMI trust fund should continue to grow in perpetuity, the FSM trust
fund would eventually deplete the buffer account and fail to replace
grant funding by Fiscal Year 2048.
Amended Compacts Have Stregthened Accountability Over U.S. Assistance
I will now discuss provisions in the amended Compacts designed to
provide improved accountability over, and effectiveness of, U.S.
assistance. This is an area where we have offered several
recommendations in past years, as we have found accountability over
past assistance to be lacking. 14 In sum, most of our
recommendations regarding future Compact assistance have been addressed
with the introduction of strengthened accountability measures in the
signed amended Compacts and related agreements. I must emphasize,
however, that the extent to which these provisions will ultimately
provide increased accountability over, and effectiveness of, future
U.S. assistance will depend upon how diligently the provisions are
implemented and monitored by all governments.
---------------------------------------------------------------------------
\14\ See U.S. General Accounting Office, Foreign Assistance: U.S.
Funds to Two Micronesian Nations Had Little Impact on Economic
Development, GAO/NSIAD-00-216 (Washington, D.C.: Sept. 22, 2000) for a
review of the first 12 years of direct Compact assistance.
---------------------------------------------------------------------------
The following summary describes key accountability measures
included in the amended Compacts and related agreements:
The amended Compacts would require that grants be
targeted to priority areas such as health, education, the environment,
and public infrastructure. In both countries, 5 percent of the amount
dedicated to infrastructure, combined with a matching amount from the
island governments, would be placed in an infrastructure maintenance
fund.
Compact-related agreements with both countries (the so-
called ``fiscal procedures agreements'') would establish a joint
economic management committee for the FSM and the RMI that would meet
at least once annually. The duties of the committees would include (1)
reviewing planning documents and evaluating island government progress
to foster economic advancement and budgetary self-reliance; (2)
consulting with program and service providers and other bilateral and
multilateral partners to coordinate or monitor the use of development
assistance; (3) reviewing audits; (4) reviewing performance outcomes in
relation to the previous year's grant funding level, terms, and
conditions; and (5) reviewing and approving grant allocations (which
would be binding) and performance objectives for the upcoming year.
Further, the fiscal procedures agreements would give the United States
control over the annual review process: The United States would appoint
three government members to each committee, including the chairman,
while the FSM or the RMI would appoint two government members.
Grant conditions normally applicable to U.S. state and
local governments would apply to each grant. General terms and
conditions for the grants would include conformance to plans,
strategies, budgets, project specifications, architectural and
engineering specifications, and performance standards. Other special
conditions or restrictions could be attached to grants as necessary.
The United States could withhold payments if either
country fails to comply with grant terms and conditions. In addition,
funds could be withheld if the FSM or RMI governments do not cooperate
in U.S. investigations regarding whether Compact funds have been used
for purposes other than those set forth in the amended Compacts.
The fiscal procedures agreements would require numerous
reporting requirements for the two countries. For example, each country
must prepare strategic planning documents that are updated regularly,
annual budgets that propose sector expenditures and performance
measures, annual reports to the U.S. President regarding the use of
assistance, quarterly and annual financial reports, and quarterly grant
performance reports.
The amended Compacts' trust fund management agreements
would grant the U.S. government control over trust fund management: The
United States would appoint three members, including the chairman, to a
committee to administer the trust funds, while the FSM or the RMI would
appoint two members. After the initial 20 years, the trust fund
committee would remain the same, unless otherwise agreed by the
original parties.
The fiscal procedures agreements would require the joint economic
management committees to consult with program providers in order to
coordinate future U.S. assistance. However, we have seen no evidence
demonstrating that an overall assessment of the appropriateness,
effectiveness, and oversight of U.S. programs has been conducted, as we
recommended. 15
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\15\ This recommendation was included in U.S. General Accounting
Office, Foreign Assistance: Effectiveness and Accountability Problems
Common in U.S. Programs to Assist Two Micronesian Nations, GAO-02-70
(Washington, D.C.: Jan. 22, 2002).
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The successful implementation of the many new accountability
provisions will require a sustained commitment by the three governments
to fulfill their new roles and responsibilities. Appropriate resources
from the United States, the FSM, and the RMI represent one form of this
commitment. While the amended Compacts do not address staffing issues,
officials from Interior's Office of Insular Affairs have informed us
that their office intends to post six staff in a new Honolulu office.
Further, an Interior official noted that his office has brought one new
staff on board in Washington, D.C., and intends to post one person to
work in the RMI (one staff is already resident in the FSM). We have not
conducted an assessment of Interior's staffing plan and rationale and
cannot comment on the adequacy of the plan or whether it represents
sufficient resources in the right location.
Amended Compacts Address Other Key Areas
U.S. Military Access to Kwajalein Atoll Could Be Extended Until 2086
The most significant defense-related change in the amended Compacts
is the extension of U.S. military access to Kwajalein Atoll in the RMI.
16 While the U.S. government had already secured access to
Kwajalein until 2016 through the 1986 MUORA, the newly revised MUORA
would grant the United States access until 2066, with an option to
extend for an additional 20 years to 2086. According to a Department of
Defense (DOD) official, recent DOD assessments have envisioned that
access to Kwajalein would be needed well beyond 2016. He stated that
DOD has not undertaken any further review of the topic, and none is
currently planned. This official also stated that, given the high
priority accorded to missile defense programs and to enhancing space
operations and capabilities by the current administration, and the
inability to project the likely improvement in key technologies beyond
2023, the need to extend the MUORA beyond 2016 is persuasive. He also
emphasized that the U.S. government has flexibility in that it can end
its use of Kwajalein Atoll any time after 2023 by giving advance notice
of 7 years and making a termination payment.
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\16\ A few expiring provisions would be extended indefinitely in
the amended Compacts. The ``defense veto'' has been extended. In
addition, the ability of FSM and RMI citizens to volunteer to serve in
the U.S. military would be extended.
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We have estimated that the total cost of this extension would be
$3.4 billion (to cover years 2017 through 2086). 17 The
majority of this funding ($2.3 billion) would be provided by the RMI
government to Kwajalein Atoll landowners, while the remainder ($1.1
billion) would be used for development and impact on Kwajalein Atoll.
According to a State Department official, there are approximately 80
landowners. Four landowners receive one-third of the annual payment,
which is based on acreage owned. This landowner funding (along with all
other Kwajalein-related funds) through 2023 would not be provided by
DOD but would instead continue as an Interior appropriation.
Departmental responsibility for authorization and appropriation for
Kwajalein-related funding beyond 2023 has not been determined according
to the Department of State. Of note, the Kwajalein Atoll landowners
have not yet agreed to sign an amended land-use agreement with the RMI
government to extend U.S. access to Kwajalein beyond 2016 at the
funding levels established in the amended Compact.
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\17\ Our figure of $3.4 billion is adjusted for inflation.
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Amended Compacts Would Strengthen Immigration Provisions
While the original Compact's immigration provisions are not
expiring, the Department of State targeted them as requiring changes.
The amended Compacts would strengthen the immigration provisions of the
Compact by adding new restrictions and expressly applying the
provisions of the Immigration and Nationality Act of 1952, as amended
(P.L. 82-414) to Compact nonimmigrants. 18 There are several
new immigration provisions in the amended Compacts that differ from
those contained in the original Compact. For example, Compact
nonimmigrants would now be required to carry a valid passport in order
to be admitted into the United States. Further, children coming to the
United States for the purpose of adoption would not be admissible under
the amended Compacts. Instead, these children would have to apply for
admission to the United States under the general immigration
requirements for adopted children. In addition, the Attorney General
would have the authority to issue regulations that specify the time and
conditions of a Compact nonimmigrant's admission into the United States
(under the original Compact, regulations could be promulgated to
establish limitations on Compact nonimmigrants in U.S. territories or
possessions).
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\18\ As noted in the background section, FSM and RMI citizens who
enter the United States are legally classified as ``nonimmigrants --
that is, individuals who are in the United States temporarily as
visitors, students, or workers.
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In addition, the implementing legislation for the amended Compacts
would provide $15 million annually for U.S. locations that experience
costs associated with Compact nonimmigrants. This amount would not be
adjusted for inflation, would be in effect for fiscal years 2004
through 2023, and would total $300 million. Allocation of these funds
between locations such as Hawaii, Guam, and the CNMI would be based on
the number of qualified nonimmigrants in each location.
Mr. Chairman and Members of the Committee, this completes my
prepared statement. I would be happy to respond to any questions you or
other Members of the Committee may have at this time.
______
The Chairman. I thank the entire panel for your testimony.
In the interest of time, I am going to waive my questioning for
the moment and I would like to recognize Mr. Faleomavaega.
Mr. Faleomavaega. Thank you, Mr. Chairman. If I could offer
a humble suggestion, Mr. Chairman, because of Mr. Cohen's time,
we would like to focus our line of questions to Mr. Cohen
because he has another important meeting, if that is all right,
and we will then defer or delay our questioning Mr. Short and
Ms. Westin to a later point in time, if that is all right with
you.
The Chairman. We will have ample time to question the other
witnesses.
Mr. Faleomavaega. Thank you, Mr. Chairman. I would be
remiss, Mr. Chairman, if I do not also recognize the presence
of one of our distinguished national leaders representing the
great State of Louisiana, the honorable Senator from Louisiana,
Bennett Johnston, who is here with us. Again, this is part of
the institutional memory, Mr. Chairman, that this gentleman,
Senator Johnston, played a key role in so many of these issues
that were discussed when the first Compact came into view, not
only in this Committee, but as well as in the Senate, and I
want to certainly offer my commendations to Senator Johnston
for his tremendous help that he has given in solving some of
these serious issues and problems that we faced concerning
Micronesia.
I want to thank Mr. Cohen for his eloquent statement, as
always, and certainly commend him for the tremendous work that
he is trying to do, indeed, not only with the insular areas of
the Pacific but also in the Virgin Islands, as well.
Mr. Cohen, you had indicated that there should be some
sense of a collective accountability. I am very, very concerned
about this new mechanism that has been devised in this special
Committee composed of the three U.S. representatives and two
Micronesian representatives. I get the strong impression that
this is going to be the organizing or the comptroller that is
going to be literally--I mean, you might as well not have these
island governments. Maybe let this Committee of five be running
the operations, if they are going to be having to make
decisions of whether or not they get the funds or to see that
the accountability is provided. I am very, very concerned about
this and I certainly would appreciate your comment on this.
Mr. Cohen. Thank you, Mr. Congressman, and thank you for
your comments, as well. There have been some concerns about the
joint Committees and some of those concerns have been based on
incorrect information.
For example, there was a notion floating around that the
joint Committees would have the authority to approve the
national budgets of the RMI and the FSM and that simply isn't
true. The joint Committees only have the authority to approve
the allocations of Compact funds, so I would like to make that
clear.
The role of the joint Committee is not to substitute its
judgment for the judgment of the sovereign governments of the
RMI and the FSM. The way the process will work, the RMI and FSM
national governments will propose budgets to the joint
Committee. It is not the role of the joint Committee to usurp
the prerogative of the national governments by reallocating
funds. It is the role of the joint Committee to make sure that
the proposed budgets are consistent with the letter and spirit
of the compact and also that they pay attention to the
performance measures, the information that we have gotten from
the performance measures, so that the U.S. taxpayers'
investment in the Compact has a chance of succeeding. But it
is--
Mr. Faleomavaega. I am sorry, because my time is running
out, Mr. Cohen, here is my problem. Again, with all due respect
to the Department of the Interior, we can't even keep an
accounting of the trust funds for the American Indians. I am
wondering if the Department of the Interior has the expertise
that could provide for this special Committee of accountability
to the RMI and the FSM. I am concerned, again, how this is
going to operate in a way that we maintain the integrity of
these governments to function.
I would like to think that these governments are in
partnership with our government and not us telling them what to
do in every instance and how to spend the money, and if the
money is not accounted for, this Committee is going to say you
cannot spend any more, because this is the impression that I
get of this Committee.
Mr. Cohen. I appreciate that concern, Congressman. My first
point is that the joint Committee does not just include the
Department of Interior. In fact, the executive branch has not
yet finalized the rules under which the U.S. delegation will be
selected. I think it is likely that Interior will have a
representative but will also have representatives from other
agencies of the Federal Government.
We are adding resources in order to provide oversight and
to staff the U.S. delegation to the joint Committee. We are
adding eight full-time employees whose job it will be--a main
part of their job will be to staff this Committee. So we are
adding the expertise we need.
Mr. Faleomavaega. Thank you, Mr. Chairman. I am sorry. My
time is up.
The Chairman. Ms. Bordallo?
Ms. Bordallo. Thank you, Mr. Chairman. In the interest of
time, I know Mr. Cohen has another engagement, so I would like
to address my two questions to him.
Mr. Secretary, in the past Compact, Chuuk State received
about 37 percent of the Compact funding even though they
account for one-half of the FSM population. Schools and health
care in Chuuk was underfunded, from my understanding, and the
result has been substantial migration to Guam, where migrant
families have had a serious impact on Guam Memorial Hospital
and our public schools. They make up more than 10 percent of
the school children.
What is Interior's objective for allocating grant
assistance among the FSM states? Will education funds be fairly
distributed based on a per capita formula? In other words, will
Chuuk get its fair share?
Mr. Cohen. Thank you, Congresswoman, and that is a very
good question and it is a very sensitive issue, as you can
imagine, because we do treat our counterparts in the Freely
Associated States as partners and we respect their national
sovereignty, and hence, it is very delicate for us to get
involved in the allocations that are made by the FSM national
government.
We trust that the FSM national government will make proper,
equitable allocations among the states, and to the extent that
allocations are out of whack, to the extent that they violate
the letter and spirit of the Compact or they jeopardize the
ability of our Compact investment in these islands to succeed,
then I think it is appropriate for the joint Committees, which
would not just include interior, to step in. But we have to
give due deference to the prerogative of the national
government of the FSM to allocate among the States.
Ms. Bordallo. Thank you. That answers my questions.
Also, in 2001, the GAO recommended that future Compact
funds be directed to address specific Compact migrant impact on
Guam, Hawaii, and the CNMI. Will Interior work with Guam
Memorial Hospital to make sure that the specific health care
being sought at public expense in Guam is provided in the FSM?
Mr. Cohen. We will certainly work with the Government of
Guam--I am sorry, could you please repeat the question? I want
to make sure I understood--
Ms. Bordallo. OK. The GAO recommended that future Compact
funds be directed to address specific Compact migrant impact on
Guam, Hawaii, and the CNMI. Will Interior work with Guam
Memorial Hospital to make sure that the specific health care
being sought at public expense in Guam is provided in the FSM?
Mr. Cohen. We will certainly work with Guam to award its
share of our Compact impact funds on a grants basis so that the
process will enable the Government of Guam to set its own
priorities, including making sure that the GMH is properly
compensated to the extent that we have resources available.
One thing I would like to point out is that under the
current system, all Compact impact funds to Guam have to be
used for infrastructure projects, which doesn't make much
sense, and we are changing that. We are allowing these funds to
be used unrestricted for impact services.
Ms. Bordallo. Thank you. Thank you, Mr. Chairman.
The Chairman. We have a vote on the floor, but I want to
quickly recognize Mr. Gallegly.
Mr. Gallegly. Thank you very much, Mr. Chairman. For the
record, I just ask unanimous consent that I place an opening
statement in the record.
The Chairman. Without objection.
[The prepared statement of Mr. Gallegly follows:]
Statement of Hon. Elton Gallegly, a Representative in Congress from the
State of California
I will be brief, Mr. Chairman.
I am pleased to have this opportunity to discuss the importance of
the special relationship between the Republic of the Marshall Islands
and the Federated States of Micronesia under the Compacts of Free
Association.
It is important to note that the Republic of the Marshall Islands
and the Federated States of Micronesia have been critical components in
our nation's defense for the last fifty years. I know the importance of
these nations firsthand--my district alone has two military bases that
have a symbiotic relationship with the Ronald Reagan Ballistic Missile
Test Site on the Kwajalein Atoll in the Marshalls.
Vandenberg Air Force Base in northern Santa Barbara County and the
Point Mugu Naval Air Station in Southern Ventura County both coordinate
with Kwajalein in developing a missile defense shield. Rockets are
routinely launched from Vandenberg, while interceptors are launched
from Kwajalein. Tracking of both missiles and interceptors takes place
at the Point Mugu Naval Air Station, which can fly P-3's equipped with
high-powered cameras back and forth to Kwajelein.
I am pleased that Sections 211 and 212 of Title Two of the Compact
includes an extension of the U.S. Army's use of Kwajalein to 2066, with
an option to extend it to 2086. The critical testing performed there
will someday give the U.S. the capability to intercept incoming
missiles from rogue states such as North Korea.
I am also pleased to have this forum today to focus on issues that
are still yet to be fully addressed in the Compact, such as the
permissive entrance provisions of the Compact for Micronesians and the
Marshallese, which continue to act as an under funded mandate that has
had a particularly negative fiscal impact on Guam, Hawaii and the
Northern Mariana Islands. Legislation I have introduced with the
gentlelady from Guam, Mrs. Bordallo--the Compact Impact Assistance
Act--gives the Secretary of Interior the flexibility to forgive Guam
debt in exchange for the U.S. not paying continued compensation to Guam
for migration impacts under the Compact. I believe this is an
innovative approach to this ongoing problem.
In addition, I still have concerns regarding the radiological
effects of nuclear testing on the atolls in the Marshalls and
Micronesia. I believe it is important for the United States to live up
to its commitments to the island residents who have been affected by
this testing. For this reason, I have joined with my colleague, Mr.
Faleomavaega, in introducing legislation to transfer a decommissioned
NOAA vessel to the government of the atoll of Utrok in the Marshalls.
This ship will allow for radiological monitoring, resettlement and
rehabilitation of the residents of the Utrok Atoll. It is my hope that
the committee consider this legislation in the near future. I thank the
Chairman, and yield.
______
Mr. Gallegly. I would like to take this opportunity and ask
my colleagues to join with me in welcoming a very dear friend
of mine, a member that served on this Committee when I first
came here back in the mid-1980's, the highest-ranking military
officer in the Marine Corps, General Ben Blaz, former
Congressman from Guam. Ben, thank you for being here this
morning.
[Applause.]
Mr. Gallegly. Mr. Chairman, in the interest of time, I will
just place this statement in the record.
The Chairman. We are going to temporarily recess the
Committee so that the members can take a vote, and when we
return, obviously, I will give Mr. Gallegly an opportunity to
ask his questions.
The Committee will stand in recess.
[Recess.]
The Chairman. I am going to call the hearing back to order.
If I could have everybody take their seats, please.
Thank you. I would like to recognize Mrs. Christensen for
her questions.
Mrs. Christensen. Thank you, Mr. Chairman. I apologize for
having to step out to attend another function temporarily, so I
hope that my questions are not repetitive.
There is a $7 million shortfall in what the FSM had
requested, or their analysis had come up with as to what their
budgetary requirements would be annually. It really takes it
down to about $12 million, as I understand, a $12 million
deficit from their original calculation. Was there a problem
with the analysis that brought them to the, I think it was--
well, to the figure that they had proposed in negotiations?
Mr. Short. The U.S. is prepared to provide and has agreed
in the signed Compact to provide $76 million a year in the
first year, Fiscal Year 2004, and $16 million a year in the
trust, and with other small amounts, a total of $92.7 million a
year to the Federated States of Micronesia. Now, that $76
million is below the requested number by the FSM for their
annual grant assistance.
Mrs. Christensen. Was it a problem with their--I understand
that they underwent a very thorough and relatively long
analysis to come up with that figure. Was there a problem with
their analysis? Why is there a difference?
Mr. Short. The number 76 is what the administration was
willing to support, and we recognize that in any analysis,
especially in the area of capital improvements, that the
requirements are significant and almost open-ended. We felt
that we came as close as we could. And also, in the process of
negotiations with the FSM, there were tradeoffs between the
amount of resources to put into the trust fund on an annual
basis and the decrements and the amount that would go to the
grant. So there was a process of negotiation with the FSM as to
the allocation between the trust fund amount on an annual
basis, the grant, and the decrements that would be taken out of
that annual grant assistance.
Mrs. Christensen. As I understand it, there are several
goals that were identified in the renegotiation of the Compact.
The administration feels that the sums that you are willing to
provide are adequate to allow and support the meeting of the
goals that you have jointly identified?
Mr. Short. Yes, ma'am.
Mrs. Christensen. I have one other question. I am sorry, I
didn't have a chance to get through all of your testimony. I
represent the U.S. Virgin Islands. We have had our share of
hurricanes and FEMA has been very important to us. I understand
that FEMA will not be available--the resources of FEMA would
not be available under the current renegotiated contract, and
in place of that, what has been discussed is a mechanism to
deal with hurricanes or typhoons, as the case might be. What is
being put in its place?
Mr. Short. Disaster response will be covered by the Office
of Foreign Disaster Assistance, which is an element of the U.S.
Agency for International Development. This is the same
organization that has been in place in Palau since its Compact
came into effect.
Mrs. Christensen. Just one other question, and just a
process sort of a question. I understand that on certain issues
as the negotiations took place that there may have been times
when the administration would say, let Congress handle that,
and other times where the administration would prescribe what
would take place in a certain instance. Because of different
approaches to different issues that may be in some cases, like
perhaps Leave No Child Behind, FSM and Micronesia may not have
received adequate treatment under certain programs.
What is the process, or is it that once the negotiations
start, that you expect Congress to decide on every issue, or is
it the administration, and when certain programs are developed
here, initiatives are started here, that we should go ahead and
make sure that the FSM and Micronesia are included?
Mr. Short. Ma'am, I mentioned this briefly in my testimony.
Mrs. Christensen. I am sorry. I wasn't--
Mr. Short. The Compact provides assistance basically in
three routes: Grant assistance under the Compact; Federal
programs and services that are enumerated in the Compact, such
as the Weather Service, Postal, and so on and so forth; and
recognizes that the Congress has in the past provided for
various Federal programs, the education programs, for example,
that you are addressing.
So the Compact does not provide for those programs. They
have been separately provided for pursuant to individual Acts
of the Congress and they stand or are modified or deleted based
on Congressional action.
In this case, the history of the last couple of years has
been that there has been various education programs where--
previous applicable to the FAS--where they have been stricken,
and one case was brought up here on the Americans with
Disabilities and then there is the Pell Grant program that is
up next year.
Mrs. Christensen. So is--
Mr. Short. So the administration--OK. I was not charged to
renegotiate those programs because they are outside the context
of the Compact. And also, I should note that in formulating
Title II of the economic assistance in the Compact, we did not
take into effect what might happen in the future with regard to
deletion of those programs.
Mrs. Christensen. Thank you, Mr. Chairman.
The Chairman. If I could just briefly follow up on this
line of questioning, the Compact was not--during your
negotiations, it was not intended to deal with the educational
grants?
Mr. Short. That is correct. Yes, sir.
The Chairman. At no time has the educational grants been
included in the Compact or the negotiations. That was a
separate issue?
Mr. Short. Exactly. In fact, it was not a negotiated issue.
It was simply a case where the Congress in enacting various
pieces of legislation has made them applicable to the Freely
Associated States on a case-by-case basis.
The Chairman. So--
Mr. Short. One thing that perhaps would be useful, sir, the
administration put together a policy regarding the relationship
between certain U.S. Federal programs and the Compact in
response to a question from the Senate. Perhaps I could submit
that for the record and it would be useful to delineate the
administration's position on the relationship between Federal
programs and the Compact activities.
The Chairman. I think that would be very helpful as we move
forward with this legislation, to have that, so thank you.
Mr. Short. OK.
The Chairman. Ms. Westin?
Ms. Westin. I just wanted to add, to make sure that there
is not confusion between using the word ``grants'' and then
talking about the programs, like Pell Grants and Head Start and
special education, the amended Compact does talk about that the
grant funds will be targeted to priority areas, including
education. But as Mr. Short has said, these were not intended
to replace monies that the countries have in the past been
eligible and have received under the Pell Grant program, under
Head Start, under special education.
I don't have exact figures, but we did look a little bit at
the impact of Pell Grants on both countries and they depend
heavily for their higher education on the Pell Grants. It is a
major source of funding for the colleges in both the FSM and
the RMI, and the loss of this funding could possibly result in
the collapse of both colleges.
The Chairman. That is a somewhat troubling statement. I
believe that the purpose, or at least one of the purposes of
this Compact, is the economic development and economic
sufficiency in these areas. Education is a very big part of
that. I don't know if you are prepared to answer this question,
Mr. Short, but if we were to end that, can you give the
Committee an idea as to what the impact would be on the
educational system?
Mr. Short. Yes, I can. This is on the loss of Federal
programs outside the context of the Compact. I think it is
clear that loss of eligibility, especially for the Department
of Education funds, may mean that the RMI and FSM will either
have to focus more Compact funds in those areas, either turn to
local resources, or simply do less in that area. I mean, those
are the options.
The Chairman. OK. Let me stop you right there. To put more
Compact monies into those areas in order to maintain it would
mean that it would be taken away from areas that you felt were
important--
Mr. Short. Yes, sir.
The Chairman. --because--
Mr. Short. Other areas such as health, environment,
infrastructure development.
The Chairman. So they are areas that you felt were
important enough in your negotiations that you included dollars
to cover that?
Mr. Short. Yes.
The Chairman. The other option being that they do nothing
and the system collapses?
Mr. Short. That is correct.
The Chairman. Which destroys the other parts of the
Compact.
Mr. Short. Precisely.
Mr. Abercrombie. Mr. Chairman, would you yield a moment?
The Chairman. I would be happy to yield to my friend.
Mr. Abercrombie. Mr. Short or Ms. Westin, I am not really
asking you to give a definitive statement on this or even
necessarily to respond by way of observation, but my thought
would be that should something of what you are speaking of with
the Chairman now take place, I have an idea what would happen.
The immigration out of these countries would accelerate and we
would find Guam and Hawaii and the West Coast of the United
States or other enclaves of citizens of these nations--the
acceleration would take place and the impact on Guam, on Hawaii
and other areas, I would say California probably more likely
than anything else, would be considerable.
Is that an unreasonable thought that might take place
should there be, for example, a collapse in the college, as you
characterize it, Ms. Westin? If they would collapse, don't you
think people would then leave?
Ms. Westin. When we did our report on immigration that came
out, I believe a little over a year ago, we noted three reasons
for the immigration, basically, were for education services,
for health services, and for lack of jobs, essentially, and
that is why we talked about having a focus on money going to
health and education, which is structured in the new Compact.
Mr. Abercrombie. I understand.
Ms. Westin. But Mr. Short is very correct in saying that
these other Federal programs were not dealt with by
negotiations in the Compact.
Mr. Abercrombie. I understand that.
Ms. Westin. That is outside the realm of those
negotiations.
Mr. Abercrombie. I understand, but you understand the
thrust of the Chairman's approach here in his questioning. It
is clear what he is driving at, right?
Ms. Westin. That you have to take into account that if they
lose these funds from programs where they have had the
eligibility and received many, many dollars in the past, it
will have an impact. It will have an impact on education, and
as I said, that is one of the three things, educational
opportunities, that we found was a driver of immigration.
Mr. Abercrombie. And by definition, then could undermine
the whole object of the Compact in the first place.
The Chairman. Reclaiming my time, I would just tell my
friend from Hawaii that if you look at this scenario playing
out, what you end up with is those parents that value education
the most, those students that value education the most, will be
the ones that encourage their kids to come to Hawaii or come to
California and get their education. The chances are they won't
go back at that point because they will get a job and get
married and everything wherever they go. I think the long-term
impact of following through on this path would be devastating.
I think it is something that we had better address in the
future.
I am going to--Mr. Abercrombie, did you have questions? I
will recognize you on your own time.
Mr. Abercrombie. Thank you very much, Mr. Chairman. In some
respects, what we just talked about covers what I wanted to
deal with. But so we are absolutely clear on the record, if
both of you recall, Mr. Cohen's phrase was, to the extent we
have resources available, was his response--I believe it was
his exact words--with regard to meeting whether it was grants
or whether it was payments with regard to health care, et
cetera, elsewhere.
I guess this really should go to Ms. Westin, then. Ms.
Westin, if we were to accept the idea that even if the Compact
as negotiated by Mr. Short and his colleagues were to be
implemented in terms of this bill in every respect, is it
likely that there would, in your judgment, to the degree you
feel you can give a judgment or give an observation, is it
likely that there would continue to be an impact in Guam and
Hawaii and elsewhere with regard to education, health care, and
other services now currently being provided? Is that impact
likely to continue?
Ms. Westin. I think that there is likely to continue to be
an impact, but the thrust of the structure of the amended
Compacts was to have the grants going to the priority areas
like education, like health, and like infrastructure,
environment, all of these, hopefully providing better
education, for better health services in the islands, and the
possibility of jobs--
Mr. Abercrombie. Yes, I understand completely--
Ms. Westin. --or at least economic development, with the
idea, then, that that would lessen the reasons for--
Mr. Abercrombie. No, I understand that--
Ms. Westin. --for citizens wanting to immigrate.
Mr. Abercrombie. And maybe my question isn't fair to you as
a result. I understand that completely, but if I understood
your testimony correctly and if I understand what Mr. Cohen and
Mr. Short testified to, as well, the amount of money that is
going is not substantially different than that which has been
invested so far, isn't that correct?
Mr. Short. Roughly, yes, that is correct. Perhaps the
difference will be on the emphasis.
Mr. Abercrombie. I know. I don't want to--
Mr. Short. Total dollar value is about equivalent to the
past.
Mr. Abercrombie. OK, but this is my--I am going into the
end of my third decade in elective office, in public office,
and I know all about emphasis, but I will tell you, it comes
down to money. It is always money. Money doesn't talk, it
screams.
If it is the same amount of money, you can have all the
good will in the world in terms of your advisory Committee and
all the best intentions in the world, but my guess is, Mr.
Chairman, that that exodus for health are, for education, et
cetera, is going to continue. There may be some marginal gain,
there may be some retention of people, or people may want to
come back a little bit more than they may otherwise. But that
is where the difficulty, I think, for us is.
And at a minimum, even if that succeeds, Ms. Westin, would
you--you haven't had a chance to see, I think, in front of you
in writing the studies from Hawaii. You may have had the chance
to see that from Guam. I don't know if that material has been
provided to you.
Ms. Westin. Not the new ones, no.
Mr. Abercrombie. OK. But there, we are talking about--I
will just cite you, and if you will accept for conversation's
sake that my figures are fairly accurate--that where Hawaii is
concerned, we are dealing with probably roughly $30 to $35
million a year in impact that can be reasonably accounted for
through the Department of Education, through the Department of
Health, and again, if you will take my word for it, this has
been pretty well documented in the material submitted to us by
the State of Hawaii and has become part of the record today.
Would you agree that it is likely that even with the best
outcome from the new Compact, and as Mr. Short puts it, the
reemphasis or change of emphasis or a little more concentration
on accountability, that if we are spending $30 to $35 million
now, that that is likely to continue for a good portion of the
next decade, so that when we authorize this bill, that it is
reasonable for some of us to hope that the numbers might change
with regard to the $15 million? Yes?
Ms. Westin. Well, as you know, directing to talk about what
might be likely in the future is always uncomfortable for
somebody from GAO--
Mr. Abercrombie. Of course.
Ms. Westin. --who tends to deal with the past. I don't--
Mr. Abercrombie. I said we are having a conversation here.
I am not holding you to anything hard and fast.
Ms. Westin. Oh, OK.
[Laughter.]
Mr. Abercrombie. I am relying on your professionalism and
your experience as to whether my proposition to you is a
reasonable one.
Ms. Westin. I would not see any--
Mr. Abercrombie. Excuse me--in the context of us trying to
have to put legislation forward, because we are also
speculating on the future. But that is what we do for a living.
Ms. Westin. Right. I don't think that you would see an
immediate impact in the change of immigration. Education and
health services improving could have an impact over time, but
you are not going to see an immediate impact.
I think you would see the more immediate impact on
education if, for example, the eligibility for Pell Grants was
not extended once it expires, because there, we have seen how
much of the budgets of the colleges of the two countries depend
on Pell Grant money, and that is why I made my statement that
it is certainly a possibility that the colleges would collapse
without the eligibility of Pell Grants any further.
Whether it would lead to, in the next five or 6 years, an
increase in immigration to the three areas, it is a little hard
to speculate on that. But I think that Hawaii, Guam, and the
Northern Mariana Islands will continue to feel the impact of
the migration out of the two countries.
Mr. Abercrombie. Let me just ask one other thing fairly
quickly. Again, I am asking just to give an educated guess on
this. Again, if the money stays the same in terms of
investment, regardless of the reemphasis, if you are dealing
with situations like cancer in a child's life, the likelihood
of increasing the facilities, the sophistication of the
hospital facilities, increasing the numbers of physicians that
may have specialties to deal with things like cancer in
children.
Again, isn't it likely that people who find themselves in
situations requiring specialized health care are likely to
continue to have to go to Guam or to Hawaii or elsewhere in
order to receive those services? Isn't it unlikely under the
present investment protocols that there will be significant
increase either in personnel or in facilities to handle
specialized health problems?
Mr. Short. Congressman, let me just address that in one
context. When you deal with impact in Hawaii, especially in the
medical area, you deal with it really in two areas. One are
individuals from the Marshall Islands who are referred there by
the government for specialty-type care. The other are
Micronesian migrants who are residing in, for example, Hawaii,
who seek medical attention locally and don't have any coverage
or are not referred by the government.
Mr. Abercrombie. Yes.
Mr. Short. The Government of the Marshall Islands, for
example, has, I believe, brought up to currency all their
accounts with the hospitals in Hawaii and they recognize that
they have limited capabilities and they do have to refer, and
this might be a question you want to direct to either of the
Micronesian testifiers that will be coming on behind us. But
there will continue to be acute needs that can't be met in both
jurisdictions where people would be referred. But when referred
by the government, the government undertakes the reimbursement,
and most of your impact on medical is for people who are
residing in Hawaii and who have no coverage.
Mr. Abercrombie. Thank you very much.
The Chairman. I thank the gentleman.
Any further questions for this panel? The gentlelady from
Guam?
Ms. Bordallo. Thank you, Mr. Chairman. I would like to
follow up on our Chairman's questions on FEMA, the elimination
of the FEMA program, and also Dr. Christensen. What will
happen, what will the impact be on infrastructure improvements
in the islands? Most of these, and, in fact, all of them, the
infrastructure has been built with Federal monies, so I am just
wondering, how will they be able to improve it, keep it
maintained?
Mr. Short. With the existing FEMA program, there is a
matching program whereby if public facilities are destroyed or
damaged, they can be replaced on a matching basis. The Office
of Foreign Disaster Assistance in the Department of State does
not provide that coverage. So there is a gap in the coverage
from the current coverage to the future.
Ms. Bordallo. My next question is for Ms. Westin. What will
the impact on the standard of living in the FSM and the RMI
under the amended Compacts, which decrease grant assistance
annually? Is there evidence that economic growth will be
sufficient each year to absorb the loss of U.S. funds?
Ms. Westin. In small island economies, economic growth is
always a challenge, and as you know, we looked at the first 15
years of the Compact to see what kind of economic development
there had been as a result of Compact money and found that
there hadn't been too much as a result of the Compact money.
Ms. Bordallo. But now you are decreasing it annually.
Ms. Westin. But now it will be decreasing annually, and
also you have to remember that the structure of the assistance
has changed. So as the payments and the grant assistance goes
down, the contributions to the trust fund goes up. So although
it is about the same amount of money, the structure of the
assistance is changing over the next 20 years.
I think there have been--probably the best studies have
been done by the Asian Development Bank in terms of talking
about the economic development prospects for these two
countries. But it is difficult for island nations of limited
resources. They are not too close to heavily populated areas
where they might be able to expand tourism to a great extent.
So it is--
Ms. Bordallo. So you feel this is--
Ms. Westin. --difficult to talk about economic development.
Ms. Bordallo. You feel this is a sound plan?
Ms. Westin. Do I feel the Compact is a sound plan?
Ms. Bordallo. Yes.
Ms. Westin. What we looked at was to really see what kind
of accountability provisions they put in and really to develop
the cost. But we at GAO didn't negotiate the compact, nor have
we really assessed it as to whether this will be a successful
thing.
Ms. Bordallo. In answer to my question, then, in your own
personal assessment, do you feel it is a sound plan?
Ms. Westin. I don't have any reason to say that it is not a
sound plan. But I do think that economic development will
continue to be difficult for these countries.
Ms. Bordallo. Mr. Short--I have one other question, Mr.
Chairman. Without an agreement between Kwajalein landowners and
the RMI government for access beyond 2016, what is the value of
the Compact extension for Kwajalein use and what happens to the
increased funds for Kwajalein access through 2016 if a land use
agreement is not struck by October 1, 2003? Are the payments
made?
Mr. Short. Let me put that in context. When we deal with
foreign military access and rights, we deal government to
government, as in this case or any other nation in the world.
So we have dealt with the Marshall Islands Government on the
extension of the Kwajalein facility lease.
We have a present lease that runs through 2016, as you
indicated. There is an agreement between the Government of the
Marshall Islands and the affected landowners called the land
use agreement whereby the pass the money through on their own
formula. We deal government to government. The Marshall Islands
Government has signed this arrangement and they are committed
to providing us access at the facility. We expect that they
will, in turn, deal with the landowners and work out any
relationship that is needed there regarding the land use
agreement.
Ms. Bordallo. All right, thank you. Thank you, Mr.
Chairman.
The Chairman. I thank the gentlelady.
The gentleman from Puerto Rico, do you have any questions?
The gentleman from Arizona? No questions? The gentleman from
Washington? No questions? Mr. Faleomavaega?
Mr. Faleomavaega. Thank you, Mr. Chairman. As I had
indicated earlier, Mr. Chairman, I do have some very serious
concerns with some of the provisions or nonexistence of some of
the things that I had hoped for that would be part of the
proposed Compact. I certainly don't envy Mr. Short and the
several-month period that he has had to conduct such a
difficult task of negotiating this proposed Compact that is now
before us.
I note also with interest, Mr. Chairman, and I want to ask
Mr. Short and Ms. Westin, because there seems to be a very
serious timetable effect, that if this Compact is not approved
before October of this year, I get the very strong impression
that these people are going to be without funds. Has the
administration developed an ``option B'' perhaps that if this
Compact is not approved before October of this year, where do
we go from here?
Mr. Short. Sir, I think we have the pieces in place to
achieve our objective, which is to put a compact in place by 1
October. The President's budget that is presently being
considered on the appropriations side includes the full 2004
funding, the amended Compact of Free Association, and we have
introduced the bill and it is being actively considered in both
Houses. We are on a very tight time schedule, but we feel we
can close by the end of September. There might be some sort of
savings situation that we would have to address in September,
but so far, the assurances from both sides of the Hill have
been that we think we can move it in the time that we have
remaining. I do admit that it is a very short fuse.
Mr. Faleomavaega. I like the assurances, Mr. Short, but
that still doesn't answer my question. If this Compact is not
approved before October of this year, where do we go from here
as far as the funding? Is there some mechanism, some continuous
resolution, or will the administration support some legislation
to the effect of continuing the current funding levels for
these, for RMI and FSM in the event that the Compact may not be
approved before October of this year?
Mr. Short. It is possible that if we do not achieve the 1
October objective that there would be a contingency put in
place as a place saver until a Compact is approved.
Mr. Faleomavaega. So the administration is prepared for
that contingency?
Mr. Short. Yes, sir.
Mr. Faleomavaega. --I mean, we don't know, but I would feel
very comfortable, if some of the concerns that were raised here
will be corrected before then, and will be approved in the
Compact.
Ms. Westin, again, I appreciate your testimony, as always.
We have had the opportunity of testifying before the
International Relations Committee, of which I am a member, so
now we are having a double dose of this, so I appreciate your
patience, along with Mr. Short, as we continue this dialog.
You mentioned, Ms. Westin, that according to the GAO
review, there is a distinction between Federal grants and
programs and I wanted to ask you if you could submit for the
record the listing of all Federal grants and Federal programs
that the current Compact provides for FSM as well as RMI. Would
you be able to do that for us?
Ms. Westin. Yes. We will be able to that.
Mr. Faleomavaega. OK.
Ms. Westin. Can I check 1 second with my colleague?
Mr. Faleomavaega. Please.
Ms. Westin. We wouldn't have something that is absolutely
current, but we did put out a pretty large programs report
within the last 18 months. Would that be suitable?
Mr. Faleomavaega. The sooner the better, if I could get
that information. I would really appreciate it, Ms. Westin.
Ms. Westin. Sir, having the work that we have completed,
would that meet your needs, even though it is not current right
up to today?
Mr. Faleomavaega. Just a simple listing--especially of the
major grants and the major programs.
Ms. Westin. Yes, we have that.
Mr. Faleomavaega. OK. I would appreciate that. And also, a
listing of what the proposed Compact will not provide in terms
of Federal grants and Federal programs. I would appreciate if
you could help me on that, Ms. Westin.
Ms. Westin. Well, the Compact itself doesn't provide for
many of the Federal programs that have been provided in the
past. We don't have real direct knowledge of what may or may
not be included. I think that is action that is being
undertaken in other Committees now.
Mr. Faleomavaega. That is OK. I will proceed with that.
Ms. Westin, on the Federated States of Micronesia and the
Marshall Islands budgets, what percentage of the annual budgets
that they have comes from the local revenue stream of
collection? And also, I would be interested to know what
percentage comes from the Federal Government. Do we have that
on hand as part of the GAO review?
Ms. Westin. We had those figures exactly when we put out a
report 2 years ago. I think it is now in the neighborhood of
about 50 percent, 50 percent from local revenues--
Mr. Faleomavaega. Is Federal?
Ms. Westin. --50 percent from--
Mr. Faleomavaega. Oh, 50 percent is the local revenue? All
right. And is there also an accounting of how much the FSM and
RMI receive from foreign or regional organizations like ADB and
the others? Do you have an accounting for that?
Ms. Westin. I do. I don't have those figures with me. Can I
provide them to you?
Mr. Faleomavaega. Please. You mentioned also, Ms. Westin,
you say that economic development is difficult for both of
these island governments. At the same time, we are making a
proposal to decrease the funding of the 20-year period. This
doesn't strike me as a common sense approach in helping
economic development for both the FSM and RMI. Am I getting
something wrong here, or can you help me with this? I mean, I
get the impression there is definitely a need for economic
development. Shouldn't we also then be in the process of
increasing the assistance, if necessary, for the next 20-year
period?
Ms. Westin. Well, I think one type of assistance that is
structured into the Compact that I really expect will be
increasing will be the technical assistance, because as Mr.
Cohen talked about the Committees, one of the things that I
heard from both governments when I visited the islands was that
they really do need technical assistance in the help of looking
at grants, making sure that it is a good grant proposal, that
the money is well spent, and then this is what you would expect
then would really lead to economic development.
Mr. Faleomavaega. Following Mr. Abercrombie's line of
questioning earlier, Ms. Westin, what is the minimum wage per
capita income right now in the RMI and the Federated States of
Micronesia? Isn't it $1.50 an hour or something like that, or
$3,500 per annum?
Ms. Westin. It might be that the next panel would be able
to have those figures exactly.
Mr. Faleomavaega. I had hoped that maybe it was part of
your GAO review.
Ms. Westin. No--
Mr. Faleomavaega. It is not in there?
Ms. Westin. --I don't think I have those figures exactly
right now.
Mr. Faleomavaega. OK. So we don't even know what the per
capita income is for the RMI and the FSM. Shall we let the
others testify on the next panel?
Ms. Westin. It is about $1,100, $1,200 a year.
Mr. Faleomavaega. Eleven or $1,200? What was it before, 15
years ago? I am curious. I am trying to get some sense of
continuity here, what had we done 15 years ago? To say that we
have made a lot of improvements now but that we are going to
decrease the funding for these people, and yet there is no real
substantive change to say that there is really an economic
progress going on with these two entities. This is where I am
very concerned, and I would appreciate your comment on that,
Ms. Westin, if I am wrong in my observations on this.
Ms. Westin. I would be happy to provide for you the exact
figures. I don't have them with me right now. But again, what I
could say is that I think the new Compact with these joint
management Committees will help provide technical assistance
which should, I think, help to see that the money that is
provided through these grants will be well spent and, we hope,
lead to--move toward economic self-sufficiency. But part of
that is that the development of the trust funds, so as the
grants are discontinued, there will be money available every
year from the trust funds.
Mr. Faleomavaega. The problem that I have, Mr. Chairman,
and also want to share again with Mr. Short and Ms. Westin,
there has been some suggestion that this has been a miracle
success in terms of what we have done in the last 15 years in
dealing with the FSM and RMI. I would beg to differ with that
opinion. We have made a failure.
I am talking about the nuclear problems that these people
were subjected to in our nuclear testing program in the 1950's
that we still have not provided adequate, not only medical
treatment, not even compensation for the 300 or 400 Marshallese
that were directly subjected to nuclear radiation when the
Bravo shot took effect in 1954, 1,000 times more powerful than
the nuclear bombs that we dropped at Hiroshima and Nagasaki. We
still have not resolved that issue with the Marshallese people,
and that, to me, is not a success. That is a total failure.
There is still a very serious problem that we have in
dealing with the landowners and the lease agreements in dealing
with the Kwajalein, which to me is a multi-billion dollar
operation that we currently have on that island, and again, we
have not come to a fruitful conclusion to that basis of
negotiating, not only with the landowners but even with the
Marshallese government.
And I am very concerned, Mr. Short, in terms of some of the
information that has been brought to my attention in the
negotiation process. When our friends from the FSM and RMI said
we want to negotiate, they said, no, we can't. I am not
authorized. It is not in the agenda. It is not in my program.
So where is this partnership and a sense of fairness that there
was a sense of comity and understanding, but the way that we
seem to--this is not just this administration, to be sure. This
is also both Democratic and Republican administrations. We have
not dealt with these people in a fair and equitable way. I am
sorry to say that.
Thank you, Mr. Chairman.
Mr. Calvert. [Presiding.] I thank the gentleman.
Mr. Udall, do you have a question? We are going to real
quickly go through this so we can get to our next panel. Mr.
Udall, you are recognized.
Mr. Udall of New Mexico. Just a couple of quick questions
here. Thank you both for coming.
Concerning the elimination of the FAS access to FEMA
programs, how will their ineligibility impact the potential
loss to infrastructure improvements that were built with
Federal money? And then, second, will this not ultimately put
at risk the investments we are making to improve their
infrastructure?
Mr. Short. That definitely is a gap in the coverage. The
Office of Foreign Disaster Assistance provides disaster
response but does not provide for the coverage that has been
provided under FEMA, which included the matching, basically,
asset and capital replacement.
Mr. Udall of New Mexico. Thank you. I yield back, Mr.
Chairman. Thank you.
Mr. Calvert. I thank the gentleman.
Mrs. Christensen, you are recognized.
Mrs. Christensen. Thank you, Mr. Chairman. I have one
question that arises also out of the concern of the funding and
the adequacy of funding.
It is my understanding that only a partial inflation
adjustment is included in the Compact, both for grant
assistance and also for military use and the operating rights
agreement. Why is it that it is only a partial?
Mr. Short. The previous Compact--
Mrs. Christensen. Especially in light of the fact that you
are underfunding based on their analysis of the needs. There is
loss through Federal grant programs. Why are we only using a
partial adjustment?
Mr. Short. The present Compact that is in place today and
has been in effect for 17 years provides a formula that is two-
thirds of the implicit price deflator, capped at 7 percent. The
average over the last 17 years has been about one or 2 percent.
It was higher in the earlier years. It has been rather much
lower more recently.
The same formulation was carried forward on the amended
Compact. That is, two-thirds of the implicit price deflator,
capped at 5 percent rather than seven. That is simply the
formulation that the administration proposed that addresses but
does not totally address the impact of inflation.
Mrs. Christensen. It just seems to me that that partial
adjustment, in light of everything else, is not consistent. I
understand that in the trust, there is a full cost, full
inflation adjustment. It is something I think we need to look
at, as well.
Mr. Calvert. I thank the gentlelady.
I think the gentlelady from Puerto Rico has one additional
question, and then we will move on.
Ms. Bordallo. From Guam.
Mr. Calvert. Excuse me, Guam. Excuse me. I am sorry.
Ms. Bordallo. Thank you, Mr. Chairman.
Mr. Calvert. The gentlelady is recognized.
Ms. Bordallo. Ms. Westin, the immigration trends, have you
taken that into account at all? For example, what percent of
the FSM and RMI populations are under 16 years of age now and
is there a trend that we can foresee in the future?
Ms. Westin. I don't have those figures in front of me, but
I am sure we could get them for you. We took immigration into
account when we looked at trying to determine what the per
capita assistance would be over time in terms of looking at
population growth, and that included immigration projections.
Ms. Bordallo. I see. I am just thinking, Mr. Chairman,
because you know young people now, and particularly if
economically these islands are not doing well, certainly they
will look for bigger and better things. I just wondered if you
had taken that into account. Thank you, Mr. Chairman.
Mr. Faleomavaega. Would the Chairman yield?
Mr. Calvert. The gentleman is recognized.
Mr. Faleomavaega. Just an observation, Mr. Chairman, that I
am sorry that there is no representative here from the
Department of Defense to testify. I believe that this is one of
the most critical issues relative to the Compact of
negotiations simply because we have to face the reality, what
is our national interest? What do we really have there that
causes us to negotiate and to have this unique political
relationship with these Pacific island governments?
And simply, the bottom line is strategic. The fact that the
multi-billion-dollar presence that we have there in the
facility at Kwajalein missile testing gives it even a greater
sense of urgency. I think the President's hope that we will go
back again and testing our missile capabilities program, I
sincerely hope the President is not going to undertake another
nuclear testing program because that is a very serious concern.
I don't know if my good friend Ben Blaz is still in the
audience, but I am reminded of two things that always seem to
strike me as something that I hope that my colleagues in the
Committee and the Congress will always seem to bear and
understand and appreciate. At the height of the cold war, the
problems, Micronesia offered tremendous, tremendous aid and
assistance to our national security. Without those nuclear
testings, nuclear bombs that we exploded in the Marshalls, I
don't think we would have achieved the success during the cold
war. And yet, in return, we have failed to give proper
assistance and education and economic assistance to the people
of the Marshall Islands.
I will always remember what Henry Kissinger said about
Micronesia. There are only 90,000 of them. Who gives a damn?
That is the kind of attitude that really disturbs me in our
government, and this is the attitude that we have displayed
toward the people of Micronesia.
And Ben Blaz, I always will remember what General Blaz said
in this Committee. Sometimes those of our fellow Americans,
even our friends from Micronesia, because of the sacrifices
they make in defense of our nation, and Ben Blaz always says,
we are equal in war but not in peace.
Thank you, Mr. Chairman.
Mr. Calvert. I thank the gentleman.
Just one comment. I am on the Armed Services Committee. I
don't believe that--I think the days of above-ground testing
are over, so I don't think the people of the Marshall Islands
have that to fear.
With that, there are no additional questions for this
panel. This panel is excused. We thank you for your attendance
here today.
Mr. Calvert. Now, we will recognize our next panel, Mr.
Peter Christian from FSM and Mr. Gerald Zackios from the RMI,
if you will please come forward.
If both the gentlemen would please rise and raise your
right hand and repeat after me--gentlemen, Mr. Christian and
Mr. Zackios, it is a tradition of this Committee to swear in
our witnesses, so if you would please rise, we would appreciate
it. Please raise your right arm.
Do you solemnly swear or affirm under the penalty of
perjury that the statements made and the responses given will
be the whole truth, nothing but the truth, so help you, God?
Mr. Christian. I do.
Mr. Zackios. I do.
Mr. Calvert. Thank you. Both witnesses answered in the
affirmative. We would now like to thank the witnesses for their
attendance and I would now recognize Mr. Peter Christian from
the FSM for his testimony. We are attempting to stay within our
5-minute rule. Certainly, all of your testimony will be entered
into the record and we appreciate your attendance and you are
recognized. Thank you.
STATEMENT OF THE HON. SENATOR PETER M. CHRISTIAN, CHIEF
NEGOTIATOR, FEDERATED STATES OF MICRONESIA
Mr. Christian. Thank you very much, Congressman Calvert. I
say aloha to the other gentlemen to your left. Good morning.
Mr. Chairman, it is my honor again to be called to appear
before this Committee to provide the testimony of my government
on behalf of the people of the Federated States of Micronesia.
Our written statement on the pertinent issues we wish to
discuss with this Committee has been submitted earlier, and in
it, the Committee will find some detailed explanation of our
outstanding concerns.
We are also prepared, in case the Committee wishes, to meet
with any member of your staff to answer some questions that may
be required of us. We have a full contingency of people here
with all the answers, Mr. Chairman, and I am sure they will be
happy to meet with your staff to bring them up to date on our
positions on those concerns that we will very shortly list.
Mr. Chairman and honorable Members of Congress, this
morning, my testimony will simply attempt to guide our
attention to the list that I will submit to you now. The
administration is aware of our intention to bring these before
Congress and these items are those unresolved issues on the
date that we signed the document agreeing that that could be
submitted to Congress for consideration. At that particular
time, there were some issues that were not resolved between the
United States team and the Federated States of Micronesia
negotiations team.
I would like to highlight those points. One is the $7
million shortfall that we have been speaking about for the past
12 months. Second is the concept of the decremented grants.
Third is the inflation adjustment, which has been touched upon
earlier by the witnesses here and also the panel. Fourth, the
continued FSM eligibility for Federal programs. Fifth, the
reinstatement of FEMA. And sixth, tax and trade provisions.
Mr. Chairman, in addition to the items above, I must point
out to the Committee, in case it does not already know, some
elements of the draft legislation which were not part of the
agreed-to proposed Compact amendment. In reviewing the
administration's proposed changes, we found at least three
major problems for which we also seek Congress's help in making
adjustments.
These include the unilateral decision by the administration
to take $250,000 from Compact grants to implement United States
policy on machine-readable passports. Two, the imposition of a
1-year deadline for FSM to develop and to implement an
immigrant screening program. Third, the unilateral decision by
the administration to change Compact language mandating
programs as currently provided by the current Compact. This
change, I would like to add, Mr. Chairman, concerns provision
of compensatory Federal programs approved by Congress in 1986
as partial offset of loss of tax and trade benefits, previously
agreed to by the administration and approved by the Congress.
I would like at this time, Mr. Chairman, if you will, to
touch on a question posed by the gentlelady from Guam. The
question was, is the Compact a sound document? We believe, sir,
that the Compact is a sound document and we believe that it
will be a more sound document if the adjustments we seek before
this Committee can be accommodated. However, I regret to say
that the sound document meets with a problem in the fiscal
procedures developed by the Interior, by the administration, in
their hope to help us implement the Compact provisions.
In addition, Mr. Chairman, we would like to propose that
your Committee recommend to Congress that the Compact
legislation before you be changed to include a provision for a
3-year comprehensive Congressional review of the health of the
FSM economy, mostly to examine whether a need then exists
requiring review and adjustment.
In conclusion, Mr. Chairman and members, we solicit the
Committee's careful review of our concerns raised and we
further request the Committee's favorable recommendation on the
adjustments.
Finally, Mr. Chairman, we respectfully urge Congress to act
favorably on the Compact legislation.
At the last time I was here, Mr. Chairman, I was called out
before my statement was over, so I have decided to make it very
short this time and thank you very much again for allowing me
to appear on behalf of my people to solicit your support. Thank
you very much.
Mr. Calvert. We thank the gentleman for his testimony.
[The prepared statement of Mr. Christian follows:]
Statement of Hon. Senator Peter Christian, Speaker of the Congress of
the Federated States of Micronesia and Chief Negotiator of the Joint
Committee on Compact Economic Negotiations
Mr. Chairman,
I have the honor to appear before you today on behalf of the
Federated States of Micronesia, and wish to thank you and the Members
of your Committee for holding this important and timely hearing on a
matter of utmost importance to my nation.
Mr. Chairman, the negotiations on the Compact amendments have
evolved considerably since the last hearing held by your Committee in
July 2002. We have now concluded negotiations with the Administration
on a package of Compact amendments. We joined the U.S. in signing these
agreements in May of this year, and look forward to working with
Members and staff to address concerns we have regarding the proposed
legislation now before you so that Congress may pass this important
legislation on a timely basis.
We stand at an important juncture in the special relationship
between our nations. The Compact as it is to be amended, intends to
further our mutual commitment to preserve the peace and stability of
the central Pacific, and to promote the continued development of the
FSM on a sustainable basis. Mr. Chairman, these documents will
profoundly affect the fate of the Micronesian people and the security
and stability of the region for the next twenty years and beyond.
The sectoral approach to grant assistance in the new agreement is a
marked change from past practice. As such it will require
implementation adjustments by both sides. Nonetheless, it provides the
best mechanism for reaching our mutual goals and will direct assistance
to where it is needed most.
Similarly, we welcome and are committed to implementing new
accountability and oversight requirements. It is no secret that there
have been mistakes on both sides under the original Compact. While we
were not always in agreement with the tone and findings of the GAO's
reports during the past several years, we are thankful to the Congress
for undertaking this important initiative and shedding light on
deficiencies. Their work assisted both the U.S. and FSM negotiators in
addressing these issues in the amendment documents.
At the outset of the talks, the FSM proposed the notion of a joint
committee to oversee implementation of the Compact. This proposal was
welcomed by the US, and ultimately took the form of the proposed Joint
Economic Management Committee (JEMCO). The JEMCO will consist of
representatives from the U.S. and FSM, with a U.S. majority, and will
meet regularly to identify any problems in Compact implementation and
develop prompt and cooperative responses. This approach certainly adds
to the measures available to make proportional and selective
interventions to ensure effective implementation of the amended
Compact; however, and most importantly, the JEMCO provides a mechanism
for constructive, consultative and consistent dialogue that was missing
in the past.
We appreciate the generous nature of the U.S. proposal. However,
there remain certain provisions of the Administration's proposal that
cause the FSM serious concern. Unless addressed by the U.S. Congress
during the approval process, these problems hold the potential to
unravel the carefully-woven fabric of the Compact package. And that
package, Mr. Chairman, was designed in close consultation with
professional economists and adopted by the FSM leadership to achieve
our mutual goal of ultimate self-reliance.
First and foremost, our concerns center on the level of economic
assistance over the next twenty years. Beginning in 1997, the FSM began
work on constructing a comprehensive economic analysis of its needs
over the next twenty years. This analysis was at the core of our
original economic proposal made in 1999, which called for economic
assistance at the level of $84 million annually over the next twenty
years. Six months later, the U.S. responded with an initial offer of
$61 million annually that fell far short of our annual needs and
disastrously short of creating a Trust Fund sufficient to secure
stability at the end of the period. After further analysis of ongoing
macroeconomic trends, the FSM was able to lower its minimum required
figure by $5 million annually. Still, the U.S. proposal as reflected in
the legislation before you falls $7 million annually short of that
level.
The FSM demonstrated that such a marked reduction in current levels
of assistance would threaten the viability of the nation from the
outset. The rationale for the economic package was to provide economic
stability throughout the twenty year period, while allowing for a
gradual reduction in the level of the FSM's reliance on annual
assistance as the economy grows. On numerous occasions we presented our
economic reasoning to the U.S. negotiator, and at no time were they met
with countering arguments. Neither has there ever been any dispute with
the analysis or the anticipated outcomes based on economic modeling.
Instead, we were told that the U.S. assistance proposal was simply the
maximum that the U.S. could offer--in essence, the result of a
political decision rather than being based on sound and responsible
economic analysis.
Fortunately, and through the hard work of negotiators on both
sides, we were able to bridge the gap to the point where we could agree
on submitting the document for Congressional consideration. However the
sum of the annual grant and Trust Fund contributions still falls $7
million short on an annual basis of what we identified as the absolute
minimum required for the FSM economy to achieve our mutual goals. Those
being, among others, to gradually improve economic vitality and living
standards during the next twenty years and to have a sufficiently
funded Trust Fund to achieve self-reliance.
In addition to the effects of the initial proposed reduction in
grant funding in 2004, the FSM is facing significant pressures placed
on the economy by the need to raise the necessary $30 million trust
fund contribution and by the reduction in government capacity due to
new restrictions on the funds. Quite frankly, the potential for
economic instability exists. The $7 million in additional annual
funding requested by the FSM may not seem like much in the overall
scheme of the Compact or relative to the U.S. foreign assistance
budget, but it is critical to the health of the FSM's economy, the
well-being of our people, and to the future of our nation.
The adequacy of the Trust Fund is also a profoundly important
aspect of our long-term development strategy as it gives our people and
potential investors a sense of hope and confidence in a sustainable
future. In considering the legislative package as submitted, the U.S.
Congress should take note of the stated Compact goals and determine
whether the funding levels and mechanisms can produce the desired
result, making such adjustments as it may deem necessary.
There are several other aspects of the Compact proposals that are
troublesome from our point of view. First, there is the inadequacy of
the inflation adjustment. This involves two separate issues--the
formula to calculate the annual adjustment and the base year for
adjustment. The FSM seeks the assistance of the Congress in restoring
full inflation adjustment and adjusting the base year to 2002, the last
year of original Compact funding.
Another area of great concern to the FSM is the loss of FEMA
disaster relief assistance. Without reinstatement of this important
benefit by the U.S. Congress, the substantial investment made by the
US, and pledged for the next twenty years, is placed in jeopardy. As
the proposed amendments now stand, storms or other natural disasters--a
statistical certainty--hold the potential to irreparably damage the
social and economic infrastructure upon which our nation's growth
prospects rely.
Similar to the FEMA issue, we are very concerned by threats to the
continuation of important and successful Federal programs under the
Compact as amended. Throughout the negotiations, the Administration has
stated that it was not their desire to preempt the Congress on these
important issues. At the same time, Congress has at times (such as in
the ``No Child Left Behind Act'') called upon the negotiators to decide
the matter. In many areas this has resulted in essential Federal
programs extended to the FSM possibly falling through the cracks and no
longer being made available to support our development efforts. Again,
loss of complementary programs presents a further threat to near-term
stability and reduces the chances to achieve even our modest economic
growth projections.
The U.S. negotiator has since clarified the Administration's
position on the matter, stating that calculations of the U.S.
assistance offer were made based upon the assumption that Federal
programs would continue at their current levels. We hope that Congress,
in its wisdom, will take note of this important statement and act to
ensure the continuation of invaluable programs to the FSM, such as
those under NCLBA, IDEA, Head Start, Pell Grants, and others.
Mr. Chairman, during our lengthy negotiations we sought to address
non-financial methods in which the U.S. could enhance the FSM's growth
prospects for the future. We seek to maintain and modernize tax and
trade provisions that will enhance the economic linkages between our
two nations. Specifically we wish to work with Members to redress the
elimination of reference to certain tax provisions in the legislation
before you by ensuring that the original intent of those tax provisions
will be maintained. In order to support private sector development and
to foster private investment, we would like the U.S. Congress to
consider enhancing the trade provisions available to the FSM. The scope
for trade preferences has narrowed and the prevailing conditions have
changed since the Compact was first drafted; however, we believe both
our special relationship of Free Association and the clear intent of
the proposed twenty year package provide sufficient justification for
the FSM to gain access to modernized trade privileges.
The proposal before you includes changes to the non-expiring
immigration provisions of the Compact. These changes have been made at
the insistence of the Administration. While the FSM agreed to discuss,
and did discuss, in good faith and on a bilateral basis, specific
issues of concern as to our citizen's entry and residence in the United
States, we would not have amended the Compact to accomplish the result
of our discussions. The FSM fully understands the U.S. concerns over
security, and we support the U.S. in all its positions against
terrorism and transnational crime. But the FSM and our citizens are not
a threat to the United States. We have never sold passports to foreign
nationals; we do not naturalize foreign citizens; we do not facilitate
the adoption of our children to ``baby brokers.'' We do agree with the
U.S. that passports should be required of our citizens, and we are
willing to accommodate the expressed interest in the FSM's use of the
latest technology to reduce the risk of passport fraud. The FSM wants
to do its part to assist the U.S. in its important task of securing the
peace and in securing its borders.
Mr. Chairman, allow me to turn to elements of the legislation that
are not part of the proposed Compact amendments. We wish the Committee
to be aware that the FSM had no part in the drafting of these Compact
Act proposals by the Administration. We were assured that any changes
from the existing language in PL 99-239, would be solely to update
existing language. When we finally had the opportunity to review the
proposal transmitted by the Administration, we found that the changes
went far beyond a simple ``updating.'' We identified at least three
major problems for which we seek adjustments by the Congress.
First there is the issue of transition to a machine-readable
passport scheme. This is a concept to which the FSM has repeatedly
pledged its support. However, we find it quite alarming that the
Administration has seen fit, unilaterally, without prior notice, to set
aside $250,000 or more from the Compact's capacity-building assistance
for this purpose. It is alarming for many reasons--the fact that
budgets are in the process of being developed on the negotiated
package, the fact that the sector is currently under-funded even before
these changes, and for the precedent it sets for future Administration
action without consultation.
Second, and similar to the first, is that the Administration
insists on mandating the FSM's development of a more effective
immigrant screening system. We are given just one year to do this.
Again, the FSM has repeatedly agreed to undertake steps to implement
such systems. However, and by all reasonable estimates, it is an
extremely complex and expensive undertaking. With multiple court
systems, four states, and a decentralized judicial system, it is
unlikely this effort could be concluded in just one year. Under the
Administration's unilateral proposal, FSM failure to meet this
arbitrary deadline would result in withholding of Compact assistance.
Such a punitive provision is unnecessary and unjustified considering
our mutual interest in pursuing this objective.
Third, there is the matter of changes to the language concerning
provision of compensatory Federal programs. In 1986, Congress initiated
and passed this language in order to mandate these programs, and
funding, to the FSM as partial compensation for loss of tax and trade
benefits agreed to by the Administration but eliminated by Congress
prior to passage. Unexpectedly, the Administration now has proposed to
alter the language of the compensatory provisions to make them optional
for the U.S. agencies. The FSM requests that the Congress restore the
original language consistent with the original Congressional intent.
Mr. Chairman, I have highlighted a number of problems and
uncertainties posed by the Compact amendments and the Compact Act
proposals. We would like to propose the Congress include in its
legislation a provision for a three-year comprehensive Congressional
review of the health of the FSM economy, to examine whether, in light
of experience, a need then exists for further adjustments beyond those
that now may be made.
In conclusion, Mr. Chairman, the U.S. and the FSM, acting together,
have drawn upon the lessons of the original Compact in an attempt to
develop a document that will further the mutual interests of both
nations. With the help of the U.S. Congress in addressing our concerns
about the legislation before you, we can arrive at an agreement that
ensures the continued viability of a nation and the well-being of its
people, and that maintains the peace and security of this critical
region of the world.
Both the U.S. and the FSM can be rightly proud of the unique bonds
we have forged in the Compact period. We hope to be equally proud of
the course that will be set for the next 20 years and beyond. We urge
Congress to act favorably on the Compact legislation, and to make the
adjustments necessary to ensure a solid foundation for the future.
I thank you, Mr. Chairman.
______
Mr. Calvert. Next, we have Mr. Gerald Zackios from the RMI.
Mr. Zackios, you are recognized.
STATEMENT OF GERALD M. ZACKIOS, MINISTER OF FOREIGN AFFAIRS,
GOVERNMENT OF THE REPUBLIC OF THE MARSHALL ISLANDS
Mr. Zackios. Thank you, Mr. Chairman. Before I proceed with
my testimony this morning, if I may respectfully request that
the record be open for submission of a joint statement by the
people of the four atolls affected by the nuclear testing
program.
Mr. Calvert. Without objection, so ordered.
Mr. Zackios. Mr. Chairman, on behalf of the people of the
Republic of the Marshall Islands, RMI, I want to express our
gratitude to you and this Committee for its review of the
proposed legislation to sustain the success of free association
between our governments.
The special and unique history between our two countries
extend from World War II, when Marshallese scouts assisted U.S.
soldiers advancing across the Pacific. The testing of 67 atomic
and thermonuclear warheads from 1946 to 1958 tied our fate to
yours.
As the closest of U.S. allies, we have provided land and
sea rights at Kwajalein Atoll since the 1960's to support U.S.
missile defense programs. Today, Marshallese citizens are
serving in the U.S. Armed Forces in Operation Iraqi Freedom, as
they did in the liberation of Kuwait in 1991.
The RMI Government respectfully requests that Congress
approve the negotiated agreements. My government will also be
seeking early approval of the agreements by the Nitijela, or
national parliament. President Note and his cabinet believe the
agreements will provide the continuity and stability that is
imperative in our bilateral relationship.
While we support our agreements, several outstanding issues
remain. Before summarizing these issues, Mr. Chairman, I ask
that the Committee first hear our basis for how we see the
Compact's grant assistance, commitments, and obligations.
As a first principle, the Compact is not a grant handout or
a foreign aid program. It is an alliance closer than NATO, in
which the RMI continues to support U.S. leadership in the
preservation of international peace and security. It is a two-
way relationship, a real partnership.
We are not just asking for more. We are asking for Congress
to fine-tune the amended Compact so that it does endure for the
benefit of both parties. The RMI now and in the future is
obligated not to erode its unique security and defense
commitments that include the defense veto, third country denial
of use of air, land, and sea space, and the eligibility of
Marshallese to join and be drafted into the U.S. Armed Forces.
On the other side of the equation, we hope that the U.S. does
not allow its commitments to the RMI on economic assistance,
immigration, and Federal programs to erode.
The unresolved issues include, first, a full inflation
adjustment for Compact funds so that the grant assistance and
compensation provided by the Compact does not lose real value
and fully supports the Compact's mutual commitments. We do not
know why a partial adjustment is mandated unless the United
States has the intention of deflating the grant assistance and
compensation and, thus, our budget and economy.
While we can achieve more revenue generation and cut budget
costs to fill this increasing gap, we do it with such a rapid
decline in the funding. A full inflation adjustment would
reduce this gap and make fiscal stability more manageable. The
full inflation adjustment for the trust fund contributions
would make this funding mechanism for the post-2023 period more
viable to meet its long-term obligations.
For Kwajalein landowner compensation under the Military Use
and Operating Rights Agreement, MUORA, with only a partial
inflation adjustment, the landowners give to the U.S.
Government a rebate annually and that multiples the longer
MUORA is in effect.
Second, we seek the continuation of Federal education
programs and services that are an integral part of the RMI's
education system. If these programs and services were removed,
we will severely injure the delivery of education in the RMI as
well as limit education opportunities for Marshallese youth. As
it stands now, we are losing eligibility under the No Child
Left Behind Act as well as other programs, including Pell
Grants in 2004.
Mr. Chairman, both our governments have made education a
key priority sector for Compact grant assistance. However, if
Federal programs and services are eliminated, the added
investments we plan to make will not have an impact. More
specifically, if the Pell Grant program is not continued, the
College of the Marshall Islands would be in a critical position
and post-secondary education would be unattainable for almost
all Marshallese.
Third, we ask for Congressional support to assist the
repaving of the Majuro International Airport so U.S. commercial
air services and military access is maintained for this sole
international air link for the RMI and a crucial link for the
Micronesian region.
Fourth, we urge and we seek continuing eligibility for FEMA
disaster and rehabilitation assistance, especially since most
of our infrastructure has and will continue to be built using
Compact funds and since our low-lying atoll environment is
highly susceptible to natural disasters. This assistance has
been seldom used, but has proven critical in times of need.
Fifth, in order to finally realize the long-term objectives
and goals of the RMI Government as well as the Kwajalein
landowners, it is imperative that the early termination
provisions of the MUORA be modified to ensure that the United
States does not vacate Kwajalein earlier than 2030. Such an
extension, which is only 7 years past the current earliest
termination date, would help the landowners buildup their own
trust fund and it would provide incentives to make viable the
RMI and U.S. investment for medium- and long-term. An example
of this is the current discussion for a fiber optic cable
project that involves the RMI and U.S. Army's base and missile
defense program.
Sixth, the RMI Government petitioned the Congress under the
Compact ``changed circumstances'' petition in September of 2000
and updated it in November of 2001. Congress has yet not
responded to the RMI's petition for additional compensation
contemplated by the settlement agreement. To move forward, we
ask that this Committee schedule a hearing focusing on the
nuclear claims issues. Also, Congress requested the
administration review the RMI's petition over a year ago and we
understand that there still is no definite date for its
completion and release.
Meanwhile, Marshallese who were directly exposed to the
nuclear tests continue to die from cancers and leukemia without
ever receiving full compensation for their injuries. Moreover,
entire communities continue to live in exile from their
homelands to this day. Confronting and resolving these issues
should not be put off any longer and we believe solutions are
possible.
The final issue, Mr. Chairman, concerns the Compact Act. We
were not provided the opportunity to address our concerns
resulting from the administration's unilateral changes. While
our main issues are in our submitted testimony, we were taken
aback by the changes that were made without consultation and
not in the spirit of the Compact agreements we had
painstakingly negotiated. I hope we can resolve several of the
key issues changed in the Act.
Mr. Chairman, my government endorses the Compact's amended
Compact accountability provisions. We firmly believe just as
the U.S. Government must be accountable to its taxpayers for
Compact funds, my government must be accountable to its
citizens for spending Compact funds and our own resources. We
are currently working closely with the U.S. Department of
Interior in applying the fiscal procedures agreement and we
welcome their support and cooperation.
Mr. Chairman, I realize our issues together may sound
overwhelming to you and other members. I believe that,
together, we can address these issues in a timely manner. We
have come a long way in our relationship. The issues identified
are to move our relationship forward so we both step into the
future together. We are striving for a Compact that serves both
our needs while giving us both the tools to meet our
obligations. I look forward to working with you and your staff
so our common interests are achieved and we conclude the
amended Compact in both our legislatures. Thank you.
Mr. Calvert. I thank the gentleman.
[The prepared statement of Mr. Zackios follows:]
Statement of Hon. Gerald M. Zackios, Minister of Foreign Affairs,
Republic of the Marshall Islands
On behalf of the people and the Government of the Republic of the
Marshall Islands (RMI), I want to express our gratitude to this
Committee for its oversight and review on behalf of the U.S. House of
Representatives of agreements and proposed legislation to sustain the
success of free association between our governments. The agreements
that have been signed by our governments to renew expiring provisions
of the Compact, and to adapt some of its provisions to our evolving
alliance amid new realities, were negotiated in a spirit of friendship
and respect. Consistent with the special and unique history and
features of our bilateral alliance, both the RMI and U.S. negotiators
have consulted regularly with the Members and staff of this and other
Committees of the U.S. Congress regarding the progress of our
negotiation process.
This special and unique history between our two countries extends
from World War II when Marshallese scouts assisted U.S. soldiers as
they advanced across the Pacific through to the testing of 67 atomic
and thermonuclear warheads from 1946-1958, to the continuous provision
of land and sea at Kwajalein Atoll since the 1960s and the continued
cutting edge advancements made there for U.S. missile defense. Today,
Marshallese citizens are serving in the U.S. Armed Forces, with many
having participated in Operation Iraqi Freedom. We are proud that our
citizens are serving not only because it is a Compact provision but
also because we share the same ideals as the United States: the pursuit
of life, liberty and happiness and our real experience in democratic
governance and freedom.
The RMI Government fully supports and respectfully requests that
Congress approve the negotiated agreements. My government is also
seeking early approval of the agreements by the Nitijela, our national
parliament. President Note and his Cabinet believe the agreements will
provide the continuity and stability that is imperative in our
bilateral relationship with the United States, thereby also enabling
the RMI to continue, domestically and internationally, to support the
political, social and economic development of our people.
As we can now see how free association has evolved over the last 17
years of the Compact, we have come to realize that the bilateral
relationship that was constructed during the late 1970s and to the mid-
1980s has more than survived the test of time. The agreement and
relationship has evolved to changing circumstances--circumstances
within the global and regional context; circumstances and priorities
within the United States; and circumstances and challenges within the
RMI. Some will concentrate on the weaknesses of the past years,
however, the strengths and accomplishments of our relationship, and the
Compact that embodies this relationship, far outweigh the weaknesses.
If not, we would not be here today discussing the acceptance of
amendments to the Compact.
Mr. Chairman, as you and the Committee members know, we have
negotiated an agreement that adjusts the Compact to today's world and
today's needs and tries to set a realistic framework for the future.
The main components of this agreement are the renewal of the Compact's
economic provisions that contain several new or revised elements. Most
notable is the introduction of a trust fund and a more practical and
transparent accountability framework; a renewal of our mutual security
and defense relations which set forth obligations that remain
unprecedented in U.S. bilateral relations with any other country;
revised immigration policies and procedures that address U.S. security
and other concerns but maintain the right for Marshallese to live, work
and learn in the United States; and, while not expiring, an amended
Military Use and Operating Rights Agreement that continues the use of
Kwajalein Atoll for the U.S. Army beyond 2016 with the potential to
remain until 2086.
Mr. Chairman, we have painstakingly negotiated these elements with
the U.S. Administration over the last 2 years. We thank U.S. Compact
Negotiator Al Short and the Administration for their constant pursuit
of an agreement and we thank them for their patience in working with us
to address our concerns, our hopes, and our belief in the future of our
relationship.
While we stand by what was negotiated, there remain several
outstanding issues that the Administration could not respond to or
changes that were made without consultation. My government hopes and
expects that all pending issues between our nations can and will be
addressed in the same spirit of trust, justice, and partnership that
produced the amendments to the Compact agreements. We believe
outstanding issues can be resolved positively in a way that preserves
and further improves our relationship.
We do not see the Compact as a grant hand-out or a foreign aid
program as the underpinning of our relationship. To the contrary, we
strongly believe that we have provided and continue to provide the
United States with our very limited land, our vast air space and sea
area, and even our people--past, present, and future--through the
historical and present security and defense relationship, including the
sacrifices we have and continue to endure because of these commitments.
In our view, it is a two-way relationship, a real partnership. Thus,
when the Congress addresses our remaining issues, we hope that you view
them in this context.
We are not asking for ``more'' just to supplement what we
negotiated with the Administration. We are asking Congress to fine tune
the Compact, as amended, so that it does endure for the benefit of both
parties. The RMI has not and in the future is obligated not to erode
its unique security and defense commitments that include: the defense
veto; third-country denial; use of air, land and sea space; and the
eligibility of Marshallese to join the U.S. Armed Forces. On the other
side of the equation, we hope that the U.S. commitments to the RMI on
the economic, immigration and certain eligibility for Federal programs
do not erode.
The unresolved pending issues include: 1) a full inflation
adjustment for Compact funds so that the grant assistance and
compensation provided by the Compact does not lose real value and fully
compensates the RMI and its citizens for its continued support and
commitments of the Compact's provisions; 2) the continuation of Federal
education programs and services that are an integral part of the RMI's
education system and, if removed, would severely injure the delivery of
education in the RMI as well as limit education opportunities for
Marshallese youth; 3) Congressional support to assist the repaving of
the Majuro international airport so U.S. commercial air service and
military access is maintained for the sole international air link for
the RMI and a crucial link for the Micronesian region; 4) continued
eligibility for FEMA disaster and rehabilitation assistance especially
since most of our infrastructure has been and will continue to be built
using Compact funding and since our low-lying atoll environment is
highly susceptible to natural disasters; 5) Congressional support for a
Kwajalein landowner trust fund; and 6) Congressional consideration of
nuclear claims issues arising from the U.S. nuclear weapons testing
program.
In reference to these issues, I am submitting with this statement
several issue papers that summarize where continued agreement is
required. If I may, Mr. Chairman, the following is a summary of our
views on the crucial elements of these issues.
Full Inflation Adjustment
Most of the current Compact agreement's economic assistance has a
partial inflation adjustment (2/3rds of the Gross National Product
Implicit Price Deflator). Since the grant assistance was only partially
inflation adjusted and there were substantial step-downs (by $4 million
in 1992 and $3 million in 1997), our economy suffered severe economic
shocks during these step-downs. The economic growth and budget cuts
that were expected materialized to some degree but not at the expected
levels.
For the Compact, as amended, we have agreed with the Administration
to have the annual grant assistance decremented by $500,000 annually
with the decremented amount being added annually to the trust fund's
annual contribution. While this decremented amount is a large
percentage of our annual grant, and grows as a proportion of the grant
annually, we agreed to such a large decrement because without it, our
trust fund would not be viable for the post 2023 era. In addition, we
are committed to contribute $30 million between now and fiscal year
05--this amounts to about 30 percent of our current annual budget. We
consciously made a medium term sacrifice to save for future
generations.
While we fully believe in the decremented approach and the
reduction of our grant assistance because of this conscious sacrifice,
we cannot understand why the grant assistance must lose value to
inflation. Since most of our goods for our import-reliant economy are
from the United States, and the U.S. dollar is the official currency of
the RMI, we not only import U.S. inflation but also the added
inflation-affected costs of shipping and handling.
The only answer we can come up with for the U.S. inflation policy
is that the United States wishes to deflate our economy by having the
funding lose its real value. The U.S. Government has not provided a
reason--past or present--of why only a partial inflation adjustment is
applied. We have suffered in the past for this error and we hope not to
suffer again. It is, to us, ironic that the Administration has agreed
to allow the distributions from the Compact trust fund (post 2023 when
annual grant assistance is to end) to equal the annual grant assistance
plus full inflation.
There are many statements within the U.S. government and my
government about achieving ``economic advancement and budgetary self-
reliance'' via the Compact grant assistance. Rather than deal with a
generic objective, we have concentrated on budgetary self-reliance as
meaning long term fiscal stability as our goal for the Compact's
economic assistance and post grant assistance era. Why? During the
current Compact we have put in place the components of democratic
governance and a free society. Even given our belt tightening and some
economic growth, we realize that to have properly funded government
functions and the related trained human resources, our fiscal situation
requires an input from an outside source. We see the main source as
being the Compact's grant assistance until 2023 and the trust fund
distribution thereafter.
The problem is that with the annual decrement and the loss of the
grant funding to inflation, we can fill this growing funding gap in the
short term but we cannot do it continuously. The gap just grows at too
rapid a pace and we cannot fill it by such large increases in revenue
generation or budget cuts. Thus, our request to apply the full
inflation adjustment. With this minimal added amount to the grant
funding and trust fund contributions we believe we can maintain fiscal
stability as well as have a strengthened Compact trust fund that will
insure that fiscal and economic stability will occur.
For the funding provided under the Military Use and Operating
Rights Agreement (MUORA), the same argument applies with a twist: the
Kwajalein landowners are providing their very limited land for use of
the Ronald Reagan Missile Test Site at Kwajalein Atoll. Why should the
payments under the MUORA only be partially inflation adjusted? With
only a partial adjustment, the landowners are really giving the U.S.
Government a rebate on their access to Kwajalein. This rebate will
multiply as the new MUORA is extended to 2023 and can go as long as
2086. In effect, the longer the MUORA is extended, the more money
landowners will lose in terms of the real value of the funding provided
and the larger the bargain to the U.S. for access
As I have said above, the RMI commitments do not erode under the
Compact and, thus, the U.S. commitments should not erode.
The Importance of Federal Education Programs and Services
Federal education programs and services have proven to be critical
in educating young Marshallese and opening doors to those who go on to
post-secondary education. Our country has significantly benefited from
these programs and services and, I believe, the United States has
benefited also. Just as an example, most of our Compact and Embassy
team, as well as most of the people in my Ministry, have benefited in
an extraordinary way from a U.S Federal education program, with the
most critical being the Pell Grant program. If these doors are shut,
our mutual objectives for economic advancement and budget self-reliance
will be severely impacted.
The importance of these programs is not only in terms of financing,
but even more critically in terms of technical expertise, methods and
approaches as well as access to educational institutions.
The RMI Government has made a firm and conscious decision to apply
the largest portion of Compact grant assistance to the education
sector. For Fiscal Years 2004-2006 about $10 million will be aimed at
the education sector annually, in addition to domestic resources and in
addition to targeted infrastructure spending on education facilities.
The Federal programs are identified to provide critical programs and
services for which the RMI does not have the funding or capabilities,
on its own, to provide. Thus, if the RMI loses its eligibility for the
education program funding, the Compact funding will merely replace
funding and programs once provided by the Federal education programs.
These programs are in crucial areas, such as Elementary and Secondary
Education, Head Start, Special Education, Bilingual Education, and
Vocational Education. The elimination of the Pell Grant program would
have more catastrophic impacts such as critically destabilizing the
College of the Marshall Islands (a U.S. land grant institution) as well
as closing higher education opportunities in the United States.
Mr. Chairman, we have sought support from the U.S. Compact
Negotiator on this issue. He has kindly informed us, through a letter
to the Senate Energy Committee of the Administration's position: the
Compact's Title Two grant assistance was not negotiated on the basis of
replacing funding for U.S. Federal programs and services.
I kindly request that we work with your committee and other related
committees to continue RMI eligibility for these crucial education
programs and services. If we do not have the U.S. Government's support
on this issue, I believe that the Compact's emphasis placed on
education by the Administration during negotiations will be lost during
the new term of the Compact, as amended. We simply cannot replace what
would be lost from these programs and services.
Federal Emergency Management Assistance (FEMA) Eligibility
The current Compact provides for RMI eligibility for FEMA's
disaster rehabilitation and hazard mitigation assistance as well as a
disaster preparedness annual grant. Under the Compact, as amended, FEMA
will provide the disaster preparedness annual grant but the U.S. Agency
for International Development's Office of Foreign Disaster Assistance
will provide the disaster relief assistance. No hazard mitigation or
rehabilitation services will be available. The U.S. will provide
$200,000 annually for a disaster relief fund under the Compact, which
will assist our capacity to deal with small-scale disasters, but will
certainly not help in the case of a catastrophic disaster.
FEMA program eligibility is critical for the RMI given the
vulnerability of the RMI to high impact natural disasters, such as
typhoons, tropical storms, wave action and drought. The RMI's natural
environment is characterized by low lying atolls scattered throughout
the Western Pacific ocean with an average of 6 feet above sea level, a
total land area of 71 square miles, limited fresh water supplies, and
remoteness from major metropolitan centers with the closest being
Hawaii at 2,500 miles away.
FEMA has provided significant disaster rehabilitation and hazard
mitigation assistance during the Compact's current term. Without FEMA,
the RMI would be in a precarious position financially and more
susceptible to natural disasters. The OFDA program is provided to all
foreign countries but does not have FEMA's disaster relief and hazard
mitigation programs.
Finally, we note that most of the RMI's essential infrastructure
has been built with the use of U.S. grant assistance and this will
continue to be the case under the new Title Two Compact provisions for
public infrastructure. Given the large U.S. investment in the public
infrastructure of the RMI, it follows that measures should be taken to
protect these investments.
Mr. Chairman, we ask that the RMI continue to be eligible for
FEMA's disaster rehabilitation and hazard mitigation assistance. There
is no question that these programs have proven most critical for our
country.
Majuro International Airport Repaving
The RMI has an urgent infrastructure need to repave the Majuro
international airport. The U.S. Federal Aviation Administration
identified this urgent need in early 2002. Since that time, the RMI has
performed an engineering feasibility study and attempted to find
project funding sources. The cost is estimated at $10-12 million.
My government did look at using Compact ``bump-up'' funds in Fiscal
Year 2002 and Fiscal Year 2003 to fund the project. However, given our
commitment for the Compact trust fund's start-up amount of $30 million,
we had to set aside most Compact Fiscal Year 2002 and Fiscal Year 2003
infrastructure and ``bump-up'' funding for this Trust Fund
contribution. Finding an extra $10-12 million in a total budget of
about $100 million was not possible.
We have run out of financing options and the airport is now in
danger of being shut down. Two U.S. carriers service the airport:
Continental and Aloha airlines. It is also the home for Air Marshall
Islands- the only airline that provides intra-RMI services. If
Continental and Aloha must stop services, the RMI will be physically
cut off from Hawaii and Guam and will disrupt service throughout
Micronesia as well as prevent commercial flights to the Ronald Reagan
Missile Test Site at Kwajalein Atoll. In addition to commercial
flights, U.S. military flights land, transit and refuel in Majuro for
flights to/from Kwajalein as well as for trans-Pacific flights.
Mr. Chairman, we would like to work with you and the Committee to
address this immediate need. If we are not successful in finding a
funding source, we will have to dip into our trust fund set-aside and,
thus, we will not meet our obligation under the Compact. We do want to
meet this obligation since without the RMI initial contribution, the
Compact trust fund will undoubtedly be inadequate.
Extension of the Military Use and Operating Rights Agreement for
Kwjalein Atoll
The RMI Government and the Kwajalein landowners will be negotiating
an amended Land Use Agreement to reflect the negotiated terms and
conditions of the extended MUORA, which allows the U.S. access to
Kwajalein to at least 2023 with the potential to remain until 2086. The
U.S. can terminate use at any time after 2023 as long as it provides a
7-year notice. The Kwajalein landowner trust fund was a proposal by the
landowners to help insure an income stream once the U.S. does terminate
use, especially if termination occurs between the years 2023-2030.
The trust fund initiative for the Kwajalein landowners is
consistent with the MUORA and is well supported by precedent and other
aspects of the RMI-U.S. relationship. Trust funds for the atolls of
Rongelap, Bikini, Enewatak, Utrik and the Nuclear Claims Trust Fund,
under Section 177 of the Compact, have been established by the United
States to provide for the long-term economic and social benefit of RMI
citizens impacted by U.S. nuclear testing.
The requested funding for the initial capitalization of the
Kwajalein landowner trust fund is $20 million. The landowners have
committed to additional self-financing of the trust fund on an annual
basis if this one-time appropriation is provided. If early U.S.
termination were to occur, projections indicate that with a $20 million
initial capitalization, plus the landowners' contributions in addition
to early termination payments by the U.S. as agreed to in the
negotiated MUORA, the Kwajalein landowner trust fund corpus would reach
above $150 million in 2023, the earliest the U.S. can vacate Kwajalein.
With such a corpus, the landowners will be able to replace the annual
rent payments for about 10 years, which would allow a reasonable
timeframe for the landowners to transition into an alternative use and/
or resettlement of their lands on Kwajalein.
If, however, such a request cannot be met by the U.S. Government at
this time, the RMI Government requests that Congress, at the very
least, allow for the extension of the MUORA early termination clause to
2030, thereby giving assurance that the U.S. will use Kwajalein for a
sufficient length of time to achieve the long-term objectives of the
RMI and the Kwajalein landowners.
Such an early termination clause will not only help Kwajalein
landowners but also RMI and U.S. Army long-term initiatives. For
instance, the RMI and the U.S. Army, with the Federated States of
Micronesia (FSM), are currently preparing a project to extend a fiber
optic cable from Guam to Pohnpei, Majuro and Kwajalein (to the Ronald
Reagan Missile Test Site). The benefits for the U.S. Army's operations
are obvious as well as the commercial opportunities for the RMI and
FSM. Such a project will surely enhance and illustrate the cooperation
between the U.S., RMI and FSM. The extension of the U.S. Army's
definite presence until 2030 will make this project more commercially
viable.
Nuclear Claims Issues Arising from the U.S. Nuclear Weapons Testing
Program
One major issue of commitment in the Compact that was not addressed
during our negotiations regarding amendments to the Compact is the U.S.
nuclear testing legacy and those categories of claims that remain
unresolved under the terms of Section 177 of the Compact, as amended,
and the Section 177 Agreement. Although Section 177 of the Compact as
amended and the Section 177 Agreement remain in full force and effect,
we were informed early in our negotiations that the U.S. Compact
negotiator lacked authority to deal with unresolved issues related to
the effects of the U.S. nuclear testing program in the Northern
Marshall Islands.
The reason given to us for this lack of authority was that the
nuclear issues were under the jurisdiction of Congress by virtue of the
``Changed Circumstances' provisions of Article IX of the Section 177
Agreement. The RMI Government filed a petition under this provision
with the U.S. Congress in September 2000, and updated it in November,
2001.
The problem that has arisen, as the attached issue paper regarding
the nuclear test legacy explains, is that the U.S. Congress has not
responded to the RMI's petition for additional compensation to be
provided through the political process contemplated by the settlement
agreement.
Unfortunately, the issues involved are many and complex. They
include government taking of private property without just
compensation; important new information regarding the effects of
radiation on human health; and the clean up and restoration of
radiologically contaminated lands.
The RMI understands that responding to the RMI's petition for
additional compensation in the political process may be difficult,
which is why the RMI is proposing that the awards of the RMI Nuclear
Clams Tribunal (NCT) be returned to the legal process on the basis of a
limited grant of jurisdiction to review, and reject or certify the
awards of the NCT, based on U.S. standards of adequate compensation.
In order to move forward, we would ask that this Committee schedule
a hearing focusing on the nuclear claims issues as soon as possible.
Congress had requested that the Administration review the RMI's
petition over one year ago and we understand that there still is no
definite date for its completion and release. Meanwhile, Marshallese
who were directly exposed to the nuclear tests continue to die from
serious cancers and leukemias without ever receiving full compensation
for their injuries. Moreover, entire communities continue to live in
exile from their homelands to this day. Confronting and resolving these
issues should not be put off any longer.
Other Issues
The Administration provided my government with a copy of the
amended Compact Act on June 20th, just before the amended Compact was
sent to Congress. We were not provided the opportunity to address any
of our concerns resulting from the Administration's unilateral changes.
In some instances, such as Section 104(b), these changes
unilaterally amend the economic assistance and immigration provisions
that we just concluded with the Administration. These issues have been
difficult and contentious at times during our negotiations and to see
the Administration making substantive changes to the Compact in this
manner is wrong.
Moreover, in other instances, these changes affect the substance
and intent of provisions inserted by Congress, in its wisdom, during
the first Compact approval process. Below are several items we wish
Congress to address by re-inserting its original Compact language.
Section 103(e)(3) makes reference to Articles X and XI of the
Section 177 Agreement regarding claims, yet fails to point out actions
taken by the RMI Government under Article IX of the same agreement to
seek additional compensation, based on the U.S. commitment to provide
adequate compensation under the terms of the claims settlement
implemented pursuant to Section 177 of the Compact, as amended. Given
that U.S. negotiators claimed a lack of authority to address unresolved
nuclear-related concerns in Compact negotiations, the RMI Government
believes it would be only fair to return to Congress's original
language in this section. If the Administration wishes to advance a
legal interpretation of Section 177 or provisions of the agreement
implementing U.S. commitments to settle nuclear claims, the time and
place to do that would be in a hearing and in legislation on the
nuclear claims issue. The attempt to introduce this disputed legal
interpretation into legislation approving agreements that do not
address the nuclear claims issue, because the Administration refused to
discuss the issues, is not a proper way to proceed.
Section 103(f)(2) should be clarified to provide that essential
agricultural and food programs shall be continued to the affected atoll
communities. While additional food supplement programs will be needed
to support resettlement of contaminated islands once radiological clean
up has progressed and safety standards have been satisfied, these
nutritional programs are a moral obligation of the U.S. to ensure a
minimum level of food assistance to both dislocated and resettling
populations for the foreseeable future. We doubt that anyone familiar
with the hardships and living conditions of the nuclear affected
peoples would dispute the need for these programs to be extended as an
on-going U.S. responsibility. This legislation presents the best
opportunity that may arise before the current authorization for these
programs expires for Congress to extend the USDA food program for at
least another five years.
Under the current Compact and its Compact Act, Congress included
Compensatory Adjustments (Section 108) that were provided for
Congress's revision of the tax and trade provisions of Title Two,
Economic Assistance. The Congress provided, under Section 108(a) that
certain commercial U.S. programs ``shall be made available.'' The
Administration has now changed the RMI's eligibility for these programs
to ``are authorized to be made available.'' The programs include: the
Small Business Administration, Economic Development Administration,
Rural Utilities Service (formerly the Rural Electrification
Administration); the programs and services of the Department of Labor
under the Workforce Investment Act of 1998; the FDIC, and the programs
and services of the Department of Commerce relating to tourism and to
marine resources development.
The RMI sees this as a significant downgrade of eligibility and
application of these programs. Your Committee should note that the
trade provisions of the amended Compact are the same, restricting RMI
exports in certain products. Congress should restore its original
language in the new Section 108(a) (formerly Section 111(a)) to include
all of the programs listed in Section 111(a) or their successors and to
require that these programs ``shall be made available'' as provided by
Congress in the original Compact Act.
This comment also relates to the amended Compact's Section 108(b).
In the current Compact Act, the Congress allowed up to $20 million to
be authorized for compensation for any adverse impact of the Compact's
tax and trade provisions. The RMI did apply for this compensation but
the request did not pass the Administration's review. As you can
imagine by reading the section, it is extremely difficult to prove such
a negative impact. The result is that no funds have been disbursed to
the RMI or FSM under this Compact provision.
The amended Compact Act sets a time limit to submit such an impact
report or request by September 30, 2004 and for impacts only suffered
from 1987-2003. We do not think this just. If the trade provisions were
improved, we would understand, but, they are not.
Mr. Chairman, we ask that your committee review this provision so
that: 1) impact can be claimed for the new Compact term, if
appropriate; 2) that the deadline for submission for any such claim be
submitted by September 30, 2023, the end of the amended Compact's Title
Two; and 3) transparent guidelines and an evaluation process and
requirements are defined so that it is something practical, not a
nebulous, subjective process.
Conclusion
Last, Mr. Chairman, I would like to comment on the accountability
mechanisms negotiated for the amended Compact's term, and thereafter in
regard to the Compact trust fund. We stand by and fully support the
Fiscal Procedures and the Trust Fund Agreements. We firmly believe just
as the U.S. government must be accountable to its taxpayers for Compact
funds, my government must be accountable to its citizens for spending
Compact funds and our own resources.
In fact, Mr. Chairman, we initiated steps on our own last year
during our budget process and have begun allocating Compact assistance
in the key sectors. The priorities are clear in our Medium Term Budget
and Investment Framework. These are education, infrastructure
development and maintenance, health and environment. We are currently
working closely with the U.S. Department of Interior in applying the
Fiscal Procedures Agreement and we welcome their support and
cooperation.
My only word of caution is that what we are developing is a new
budget and fiscal management system that resounds throughout our public
service. As in the United States, applying performance-based budgeting
and other requirements at a Federal, state or local level does not
occur overnight. We are instituting a step-by-step process. I hope both
sides have patience as well as perseverance. We need assistance and
support to help us apply these new requirements, not people looking
over our shoulder and pointing fingers. With the cooperation we have
received so far, my government is encouraged, progress is being made,
and we feel we are doing it right.
Mr. Chairman, I realize our issues, together, may sound
overwhelming to you and other Committee members. I believe that,
together, we can address these issues in a timely manner. As I have
said early on in my statement, we have come a long way in our
relationship. The issues identified are to move our relationship
forward so we both step into the future together and that we have an
enduring Compact that serves both our needs while giving us both the
tools to meet our obligations.
Mr. Chairman, after departing Washington, I will return to Majuro
where I look forward to presenting the Compact, as amended, to our
legislature, the Nitijela. The sooner we can come to agreement on the
above issues, the faster we can have the amended Compact passed through
our legislative process.
I look forward to working with you and your staff so our common
interests are achieved.
Kommol Tata.
[Attachments to Mr. Zackios' statement have been retained in the
Committee's official files.]
______
Mr. Calvert. I have had the pleasure of visiting both
Micronesia and the Marshall Islands and certainly recognize the
strategic importance of that certain part of the South Pacific,
which is certainly a large area, and especially the importance
of Kwajalein at this time, as we try and endeavor to move
toward a workable strategic missile defense system for this
country and our allies.
For the record, what is the population at this date of both
your respective island states? I guess the gentleman from
Micronesia first.
Mr. Christian. The estimated current population of
Micronesia is about 134,000 people.
Mr. Calvert. A hundred-and-thirty-four-thousand people. And
what is the rate of growth in Micronesia now, approximately?
Mr. Christian. Mr. Chairman, I apologize. I am a Member of
Congress. I don't know that answer.
[Laughter.]
Mr. Christian. There are people back here who may be able
to help. That is why, Mr. Chairman, I offered that after the--
Mr. Calvert. The record will be open, so certainly that
information will be--
Mr. Christian. Thank you very much, sir.
Mr. Calvert. The gentleman from the Marshall Islands?
Mr. Zackios. Thank you, Mr. Chairman. In the Marshall
Islands, there is over 50,000-plus people with an extra over
10,000 situated in the United States. The second question, Mr.
Chairman?
Mr. Calvert. The approximate rate of growth.
Mr. Zackios. We have one of the highest growth rates around
the world, but I think it is in the area of two or 3 percent.
Mr. Calvert. Two to 3 percent. Obviously, when I visited
the Marshall Islands and we spent some time discussing the
impact of nuclear testing in that region over, as you
mentioned, the period of 1946 to 1958, the incidence of cancer,
leukemia, has that statistically obviously been followed over
the last number of years, the last 50 years, and have you seen
any noticeable decline in the younger populations or getting
into more of the norm rate, or is it still above average?
Mr. Zackios. Mr. Chairman, as I requested for a joint
statement by the four atolls, I think they will be in a
position to address that question much better. But I believe
over the years, we have seen an increase in the rate of cancers
among our population.
Mr. Calvert. So you have seen an increase even with the
younger population of cancer and leukemia, or--
Mr. Zackios. Yes.
Mr. Calvert. You submitted your report for the record. We
will take a look at that.
The gentlelady from Guam?
Ms. Bordallo. Thank you very much. First, I want to thank
Senator Christian and Minister Zackios for being here with us
today. Certainly, I agree with their statements that
accountability is very important as we go forward.
I want to ask you both a question. Does the FSM and the RMI
support compensation for Compact impact, for the affected U.S.
State of Hawaii, Guam, and the CNMI?
Mr. Zackios. Mr. Chairman, the Compact speaks to the issue
itself. The Compact itself speaks to that issue, and certainly
we from the FSM support the compensation to be made to any area
affected by our current migration to those areas, particularly
to the Territory of Guam, CNMI, and the State of Hawaii.
Ms. Bordallo. Thank you.
Mr. Christian. Thank you, Madam Congresswoman. I think I
answered that question a year ago in a similar hearing. I
stated that we do support the Compact impact provisions on the
premise that such assistance is not taken from assistance as
provided to the FAS states.
Ms. Bordallo. Thank you. I also, Mr. Chairman, would like
to welcome to the hearing from the FSM, Ambassador Jesse
Marehalau, and from the RMI, Ambassador Banny de Brum, who are
with us in the audience. I would like to welcome them, as well.
Thank you, Mr. Chairman.
Mr. Calvert. I thank the gentlelady.
Mrs. Christensen?
Mrs. Christensen. Thank you, Mr. Chairman. I would like to
welcome both of the panelists this morning also.
I think it was in the testimony of Senator Christian that
he talked about a $30 million contribution. Is that yours?
Mr. Christian. I believe that is in our submitted
testimony.
Mrs. Christensen. How do you propose to raise that $30
million and do you foresee any problems in meeting the level of
contribution that you are required to make?
Mr. Christian. I am informed by the Secretary of Finance
and Administration, who is in the gallery this afternoon, that
as of this date, we have $26 million raised toward the trust
fund.
Mrs. Christensen. Thank you. Mr. Zackios, could you tell us
a little--the question about the less-than-full adjustment for
inflation came from reading your testimony. Could you just
elaborate for us a bit on the impact that the less-than-full
adjustment would have?
Mr. Zackios. Thank you, Congresswoman. As you have already
alluded to, I have addressed the issue of the inflation or the
effect of a two-thirds inflation as opposed to a full inflation
in our written testimony. As we see, we have made a conscious
decision to agree to the amounts of decrements that will go
into the establishment of the trust fund and we see that over a
number of years, that this decrement does take place with a
two-thirds inflation. It does certainly create a widening gap
that would be too rapid for us to raise the new revenues or
even with budget cuts to address.
In fact, we see the numbers for this period in terms of the
grant assistance would be around $57 million if we were--the
difference between the two-thirds and the full inflation on
grant assistance alone. For the Kwajalein payments, it would be
around $26 million and $19 million for the trust fund.
Mrs. Christensen. Thank you. I am going to ask this
question to both of you. I had asked the question about the
loss of FEMA and I would like you to tell me, how do you see
its replacement with the disaster assistance under USAID? Is
that--do you foresee that as being adequate and a suitable
replacement for FEMA in light of--I know of the devastation and
the issues around hurricanes and typhoons.
Mr. Christian. Mr. Chairman, if I may, if we thought,
Madam, that the substitution of that particular program would
fully handle what we need to be handled under a FEMA program,
we would not be asking for FEMA.
Mrs. Christensen. Would you like to also respond on this,
too?
Mr. Zackios. I would like to say that we do welcome the
Office of Foreign Disaster Assistance as being part of the
Compact, as amended, but it does not seek to replace the very
important programs, such as rehabilitation, that FEMA does
provide. OFDA does not do rehabilitation programs in cases of
disaster. Thank you.
Mrs. Christensen. Thank you, Mr. Chairman.
Mr. Calvert. The Chair now recognizes Mr. Faleomavaega.
Mr. Faleomavaega. Thank you, Mr. Chairman. I certainly want
to commend both gentlemen for their fine statements, especially
my good friend, Senator Peter Christian, whom I have not seen
in years. I want to offer my personal welcome to him for being
here, and the Foreign Minister of the Republic of the Marshall
Islands, Mr. Zackios, and thank him, as well, for his
statement.
I would like to also offer my congratulations to Senator
Christian who I understand is going to be the new Speaker of
the Parliament of the Federated States of Micronesia, and if I
may, Speaker Christian, convey my personal regards. Believe it
or not, I do have relatives in the FSM. Vice President Killion,
Mr. Speaker, is Samoan. He is not Micronesian. Please convey to
him my personal regards and I hope some day that I will have an
opportunity to meet with him and the members of the family.
Mr. Speaker, you mentioned that the Compact is a sound
document but it could be more sound. In other words, it is not
sound.
[Laughter.]
Mr. Faleomavaega. I am trying to follow up on your thought
here that while I notice that both of you have advocated
strongly that the Compacts be approved, that at the same time,
you expressed some very serious concerns about some of these
provisions. So it seems to me that we are not on equal terms
here. I mean, do you think that if these are serious issues,
they should continue to be under negotiations and not be what I
sense is a rushed effort to get this thing done before the
Fiscal Year 2004 starts this fall.
I just wanted to ask Speaker Christian, why are we in so
much of a rush? I mean, are the people going to starve if we
don't approve this thing by October of this year?
Mr. Christian. Mr. Chairman, may I--I believe, gentlemen,
ladies, that at one point in our discussions, we had suggested
about the possibility of a continuing resolution or some kind
of a carry-over funding by the United States so that we could
continue to discuss, especially touch on those matters and
close the cap on those particular points that I pointed out
earlier. It was made clear to us that this would not be the
case, that the United States wishes to submit this document to
the U.S. Congress now, for its action now. So we did, along the
lines of your own thoughts and concern, felt that it was
important for us to continue discussing those issues that have
not been fully covered.
Mr. Faleomavaega. Under the provisions, and I know that
there are four states which make up the Federated States of
Micronesia, specifically, what is the population of Chuuk, the
State of Chuuk?
Mr. Christian. Chuuk is about--since I am not from there, I
will guess--
Mr. Faleomavaega. I am from Chuuk, but I forgot the
population.
Mr. Christian. --about 51,000 to 53,000.
Mr. Faleomavaega. It is the most populous of the states.
Mr. Christian. Most populous.
Mr. Faleomavaega. And Pohnpei?
Mr. Christian. Pohnpei is about 34,000, with the rest being
spread over Yap and Kosrae. Kosrae has about 7,000 to 8,000.
The Lieutenant Governor of Kosrae is in my back, so if he has a
problem with that number, it could yell.
[Laughter.]
Mr. Christian. But may I, Mr. Chairman--
Mr. Faleomavaega. Please.
Mr. Christian. --touch on the reasons why we probably have
the answers figured this way. You see, there are other people
in our backs this afternoon, this morning, and it makes it
difficult for us to completely tell us how we feel about the
Compact. We don't want to chance losing another million dollars
here or there because we have said something that some of the
witnesses may not like.
Mr. Faleomavaega. Well, Mr. Speaker, I want to offer my
fullest assurance to you that I don't believe that my good
friends in the administration are of the opinion that you have
just expressed. In good faith, I would like to say that this is
not the case. So please, if you do not express with total
honesty and candor the situation as it will affect the lives of
the future of the good people of the Federated States of
Micronesia, then it is going to be difficult for us as members
of this Committee to make the proper decisions that will be
helpful not only to our government, but as well as to the
people of FSM as well as RMI.
So please feel free to express yourself honestly. I don't
think Mr. Short feels that way. So be honest and come forward,
and if there were disagreements, we want to know about it. This
is what democracy is all about. I am sure that this is not an
issue of national security or discussions of negotiations that
were top secret that members of this Committee could not be
privy to, to have knowledge of. I would hope that, Mr. Speaker,
that you don't feel that way. So be free and feel open to share
with us your concerns and the problems.
Again, I have taken your statement, hopefully not out of
context, but as I heard it clearly from what you said, it is a
sound document, but it is not sound enough, or it needs to be
more sound, which tells me that there are still a lot of
serious issues that you have not completed in your negotiations
with our government, or my government, if you will. So please,
I want you to feel free to express your thoughts on this.
The State of Yap, there are how many people there,
approximately?
Mr. Christian. About 17 million.
Mr. Faleomavaega. Seventeen million?
[Laughter.]
Mr. Christian. Oh, I am thinking--I am beginning to think
in terms of how much money we need to ask of you.
[Laughter.]
Mr. Christian. Seventeen thousand, sir.
Mr. Faleomavaega. Mr. Speaker, it is my understanding,
among the four states, that the State of Yap is probably the
prime example of what good management and administration. How
they were able to develop their economy with the funding that
they receive from the central government in such a way that it
is an example not only to other states, but certainly to
other--to the rest of the region in the Pacific. Here again,
just in general understanding of this, what is the per capita
income there in FSM, basically? On the average, how much does a
person in FSM make a year?
Mr. Christian. Could I turn around?
Mr. Faleomavaega. I think it is critical to know this,
because we are talking about economic assistance. If you have
your expert, if it is all right, Mr. Chairman--
Mr. Calvert. Without objection.
Mr. Faleomavaega. Why don't you have our friend who is the
expert there--
Mr. Christian. About $1,800, the young lady says.
Mr. Faleomavaega. It is $1,800 per capita income at FSM?
Mr. Christian. Yes.
Mr. Faleomavaega. OK. What about the standard of living?
Mr. Christian. The standard of living, sir, I believe that
that is the focal point of the whole Compact of Free
Association as first envisioned by those who got together to
create this document. This Compact of Free Association is
supposed to be the instrument by which the standard of living
is improved in the Micronesian Islands.
There was a question earlier on migration. Mr. Chairman,
migration will continue to occur as long as the economic
development of the islands are not raised to a level where
people can return from overseas to find meaningful and gainful
employment in Micronesia.
The statement that the reason why Micronesians or any
Pacific Islander migrate to a metropolitan area is because of
health and education may be true, but not totally true. The
real root of this migration is to look for economic development
for certain advancement. So even if we improve the health and
education in Micronesia, in this regard, the improvement of the
economic development, you will continue to see a migration of
people who are smart and very healthy but could not find
gainful employment in the islands.
Mr. Faleomavaega. To Foreign Minister Zackios, probably no
other group in the Pacific, in my humble opinion, besides
French Polynesia, the people, or those of us who have come from
the Pacific region have experienced in a most unfortunate way
the problems of how the superpowers and the more industrialized
countries have exposed us to this whole problem of nuclear
testing. To say that what the Marshallese people have had to
endure for the past 50 years and what we have not done to not
only compensate the Marshallese who were directly subjected to
nuclear contamination, but the fact that also that the Marshall
Islands Government, in association with the Kwajalein missile
range, where our government to this day still operates a multi-
, and I think the dollar value of the Federal Government's
structural facility that we now have at the Kwajalein missile
range, Mr. Chairman, I believe it is somewhere between $4 to
$10 billion. And your willingness to, at least those who are
landowners who are willing to put this forth to help provide
the best possible security for the United States, that
certainly needs to be brought not only for the record, but as a
remembrance for the members of this Committee.
You mentioned that there are some serious issues that have
not been resolved in this proposed Compact. As also Speaker
Christian alluded to earlier, what do you suggest, given the
fact that some of these issues are serious enough that have not
yet been settled, do you consider that they should still be
subject to formal negotiations with the United States or should
we just kind of say we hold this as a subsidiary form of
negotiation? I am concerned about this.
Mr. Zackios. Thank you, Congressman. In light of the
Compact as negotiated, we feel we have negotiated a document in
good faith. However, there are, as I have raised in my
testimony, issues that still remain unresolved and those take a
twofold approach. One is with having negotiated and concluded a
document, the administration then proceeds to unilaterally make
changes to pertinent provisions that were negotiated by both
parties.
The second is that there are those outstanding issues that
we were unable to get conclusion in our negotiations with the
administration and I have listed those in my written testimony
before the Committee.
I would like to go back a little bit and touch on the issue
of the Compact and why you made reference to it is a sound
document. But I would like to say that if this document is not
resolved, I think it creates a position of difficulty for us in
the Marshall Islands and in the approval process.
Having said that, I see that we, on these important issues,
and I take it that you are making reference to Kwajalein and
the changed circumstances petition that we have submitted. As I
stated, we have submitted a changed circumstances petition to
Congress in 2000 and updated it in 2001. We have not heard any
reply on this changed circumstances petition, and, therefore, I
have to ask that we make another hearing on specifically--
Mr. Faleomavaega. My time is really going and I appreciate
the Chairman's patience. Here is my bottom-line question to
both of you gentlemen. Are these issues serious enough that you
honestly believe that the proposed Compact ought to be returned
in a way that you need to continue to negotiate these aspects
of the Compact that you feel very strongly about that is not in
agreement with your government's position? It is like saying,
well, we are getting a half-a-loaf of bread, at least better
than nothing, but at the same time, it is so unfair.
It seems that the parties were not negotiating in good
faith. It seems that you were suggesting that there was a lot
of duress and undue influence in the way this whole thing has
been negotiated. And if I am wrong in that observation to both
of you gentlemen, please tell me that I am wrong.
Mr. Zackios. I would answer that question in this way. If
these issues are not resolved by the Congress, we would have
great difficulty in passing this piece of legislation within
our national parliament.
Mr. Faleomavaega. Thank you, Mr. Chairman. Thank you to
both gentlemen.
Mr. Rehberg. [Presiding.] Thank you. Are there additional
questions from the Committee? Seeing none--
Mr. Faleomavaega. Mr. Chairman, I want to apologize. I
forgot to ask unanimous consent that the statement of my good
friend, Mr. Pallone, be made part of the record, unless if he
does have some questions he may want to raise.
Mr. Rehberg. Without objection.
Mr. Faleomavaega. Thank you, Mr. Chairman.
[The prepared statement of Mr. Pallone follows:]
Statement of the Honorable Frank Pallone, Jr., a Representative in
Congress from the State of New Jersey
I am pleased that we are meeting today to hear about the Compacts
of Free Association with the Federated States of Micronesia and the
Republic of the Marshall Islands (RMI), and the effect of these
Compacts upon Guam.
I understand that time is of the essence with respect to the
reauthorization of the Compacts, due to their impending expiration.
These Compacts have been very useful to both the island nations and to
the United States, and I look forward to passage of the
reauthorization.
While I realize that this is not a controversial document, I have
been informed that there are several items that may need to be
addressed in an amendment to the Compact after the negotiations have
concluded. These include FEMA eligibility, access to U.S. education
programs such as Head Start, and the Nuclear Claims issue.
From 1946-1958, the Marshall Islands were the site of 67
atmospheric and atomic thermonuclear weapons tests. Of course these
tests had an immediate and lasting effect upon the health of the Island
citizens, as well as upon their environment. To address the need for
``just and adequate'' compensation for these effects upon RMI citizens,
the original Compact established a Nuclear Claims Tribunal (NCT) as an
adjudicative forum to ensure the adequacy of nuclear claim settlements.
The RMI submitted a ``Changed Circumstances'' petition to Congress
in 2000, according to a provision in the original 1986 Compact, which
alleges new information about the effects of nuclear testing on the
Marshall Islands. The petition requests funding that would enable the
NCT to fully pay all claims and to provide for medical infrastructure
and services. Although House and Senate Members have requested a review
of the petition from the State Department, that review has still not
been provided.
Again, I hope that we can rapidly move HJ Res 63 out of committee
so that we can continue our relationship with the RMI in a mutually
beneficial manner. However, I hope that we can hold another hearing
after the Compact negotiations to address this issue of the Changed
Circumstances petition. Thank you.
______
Mr. Rehberg. Mr. Zackios, we are also hopeful that we will
soon receive the report from the administration regarding the
changed circumstances petition so that Congress can better
decide how to progress.
I thank the witnesses for their valuable testimony and the
members for their questions. The members of the Committee may
have some additional questions for the witnesses and we will
ask you to respond to those in writing. The hearing record will
be open for these responses.H.R. 2522
Mr. Rehberg. Panel No. 4 is next, consisting of Nik Pula,
the Director of the Office of Insular Affairs, who will testify
on H.R. 2522.
Mr. Pula, before you sit down, we have a standard oath of
office that I would like you to recite with me, as well,
please. Please raise your right hand.
Do you solemnly swear or affirm under the penalty of
perjury that the statements made and the responses given will
be the whole truth and nothing but the truth, so help you, God?
Mr. Pula. I do.
Mr. Rehberg. Thank you very much.
The Chairman now recognizes Mr. Nik Pula.
STATEMENT OF NIKOLAO PULA, DIRECTOR, OFFICE OF INSULAR AFFAIRS,
U.S. DEPARTMENT OF THE INTERIOR
Mr. Pula. Mr. Chairman, I will submit my full statement for
the record--
Mr. Rehberg. Without objection.
Mr. Pula. --and I will summarize my remarks.
Mr. Chairman and members of the House Committee, I am
pleased to appear before you today to discuss H.R. 2522. The
economic and fiscal situation in Guam is dire. Entering office
in January 2003, Governor Felix Camacho inherited a fiscal
crisis that took root in the mid-1990's. Government of Guam
revenue has shrunk from $660 million in 1996 to $340 million in
2003. Employment has shrunk by 5,000 since 1999, and annual
deficits are ballooning to over $200 million by the end of
2003.
Against this economic backdrop, the legislative intent of
this bill would be to forgive debt as an offset against costs
of migration from the Freely Associated States.
The impact of the Compact was included in Section 104 of
the Compact Act in 1986. It states that, I quote, ``The
Congress will act sympathetically and expeditiously to redress
those adverse consequences,'' and it also provides an
authorization of funds. Representatives of Guam and other
eligible jurisdictions often note that these appropriations
have not fully compensated for amounts expended on behalf of
FAS migrants.
The goal of Guam officials in H.R. 2522 is to offset
accrued cost associated with the impact of the Compact against
debts owed by Guam. Action to achieve this goal can be
indirect, such as asking the Secretary of the Interior to
intervene under authority proposed in H.R. 2522, or direct,
such as dealing with individual agencies that hold debt or
requesting appropriations.
We in the Department of the Interior sympathize with the
leaders of Guam as they struggle to reconcile current needs
with past policies and actions. The question is how to proceed
in dealing with Guam's debt.
H.R. 2522 would give the Secretary of the Interior complete
discretionary authority to abolish debt owed to another
Department or agency. These Departments or agencies may have no
parts in the decision. Such unprecedented authority would put
the Secretary in an untenable position. Relations between
Interior and other Federal Departments or agencies could be
damaged to such an extent that other Interior missions could be
significantly impaired. Such action could have a severe fiscal
effect on an individual agency and have impacts on the overall
Federal budget.
The only situation where the Secretary's authority would
have any meaning would be where the affected agency was
unwilling to forgive the debt. It is precisely in that
situation where no Secretary of the Interior would likely be
willing to exercise such authority that would be granted in
this bill over the objections of another Department or agency.
H.R. 2522 would, therefore, not have its intended effect
because of the unlikelihood that authority granted would ever
be exercised.
The mere fact that the authority exists could have a very
harmful effect on Guam. Federal agencies might be extremely
reluctant to extend essential credit to Guam, knowing that
there was a possibility that the debt could be forgiven by the
Secretary of the Interior without the creditor's consent. H.R.
2522 could thus result in Guam being denied access to credit in
time of its most dire need.
While the funding suggests a connection between debts
forgiven and cost of migration, the operative Subsection B of
Section 2 does not limit the forgiving of Guam debt but is
open-ended.
For these reasons, the Department of the Interior opposes
the enactment of H.R. 2522. It is worth noting that Compact
legislation H.J.Res. 63 would, for the first time, provide a
mandatory annual appropriation to defray impact costs. This new
program on the part of the administration will provide $300
million over 20 years. The administration proposal would
provide welcome relief for Guam, Hawaii, and the Northern
Mariana Islands.
Guam might consider a more direct approach to these debt
problems, such as approaching individual agencies for relief
under the agency's authority. Another avenue could be the
utilization of the Interagency Group on Insular Areas, which
was created on May 8 when President Bush signed Executive Order
13299. Our first interagency organizational meeting is taking
place today. We would be glad to place this issue of debt on
the group's agenda.
We look forward to working with the leaders of Guam in an
effort to help Guam address its financial challenges. Thank
you.
Mr. Rehberg. Thank you.
[The prepared statement of Mr. Pula follows:]
Statement of Nikolao Pula, Director, Office of Insular Affairs,
U.S. Department of the Interior
Mr. Chairman and members of the House Committee on Resources, I am
Nikolao Pula, Director of the Office of Insular Affairs in the
Department of the Interior. I am pleased to appear before you today to
discuss H.R. 2522, entitled ``Compact Impact Reconciliation Act.''
While we understand the fiscal plight of the Government of Guam and
want to assist, a more appropriate forum for addressing the issues
raised in the bill may be the new Interagency Group on Insular Areas
(IGIA), established by President Bush. The IGIA could consider in more
depth the opinions and authorities of all agencies affected by the
bill.
ECONOMIC BACKGROUND
The economic and fiscal situation on Guam is dire. Entering office
in January 2003, Governor Felix Camacho inherited a fiscal crisis that
took root in the mid 1990s. The Asian economic crisis struck hard at
Guam's tourism industry, which is responsible for 60 percent of Guam's
economy. At the same time, the Federal Government was closing or
consolidating United States military bases, with direct effect on the
Navy and Air Force bases on Guam. Government of Guam revenue shrunk
from $660 million in 1996 to $340 million in 2003. Employment on the
island has shrunk by 5,000 since 1999.
Spending reductions by the Government of Guam have not kept pace
with revenue reductions. The result is that annual deficits are
ballooning from $74 million in 1996 to $123.1 million in 2002 to over
$200 million by the end 2003.
Faced with the unenviable task of bringing government expenditures
in line with severely reduced revenue, Governor Camacho is implementing
an austerity program, including a cut in work hours for many government
employees from 40 hours per week to 32 hours.
COSTS OF MIGRATION
Against this is the economic backdrop, the apparent legislative
intent of H.R. 2522 would be to forgive debt owed by Guam to various
Federal agencies as an offset against costs borne by Guam as a result
of migration from the freely associated states (FAS).
One congressional initiative in 1986, the provision entitled
``Impact of the Compact on U.S. areas,'' was included in subsection (c)
of section 104 of Public Law 99-239.
Paragraph (4) of the subsection, entitled the ``Commitment of
Congress to redress adverse consequences,'' states that ``...the
Congress will act sympathetically and expeditiously to redress those
adverse consequences.'' Paragraph (6) authorized the appropriation of
funds ``to cover costs, if any, incurred by the State of Hawaii, the
territories of Guam and American Samoa, and the Commonwealth of the
Northern Mariana Islands resulting from any increased demands placed on
educational and social services by immigrants from the Marshall Islands
and the Federated States of Micronesia.''
Based on this congressional authorization, the Congress has
followed-up with various appropriations over the years as contributions
toward the costs, borne by Hawaii and the territories, of the migration
of citizens of the freely associated states. Representatives of Guam
and other eligible jurisdictions often note that these appropriations
by the Congress have not fully compensated for amounts expended on
behalf of FAS migrants.
INDIRECT VS. DIRECT ACTION
The goal of Guam officials in H.R. 2522 is to offset accrued cost
associated with the impact of the Compact against debts owed by Guam.
Action to achieve this goal can be indirect, such as asking the
Secretary of the Interior to intervene under authority proposed in H.R.
2522, or direct, such as dealing with individual agencies that hold
debt or requesting appropriations.
Indirect Action
Subsection (b) of section 2 of H.R. 2522 would authorize the
Secretary of the Interior to ``reduce, release, or waive all or part of
any amounts owed by the Government of Guam (or its autonomous agencies
or instrumentalities) to any department, agency, independent agency,
office, or instrumentality of the United States.'' Among other debts
that would be eligible for action by the Secretary, the bill
specifically identifies $9 million owed to the Department of the Navy,
$3 million owed to the Department of Education, $40 million owed to the
Department of Homeland Security, and $105 million owed to the
Department of Agriculture.
We in the Department of the Interior fully understand the difficult
financial choices that Guam faces. We sympathize with the leaders of
Guam as they struggle to reconcile current needs with past policies and
actions. The question is how to proceed in dealing with Guam's debt.
H.R. 2522 would give the Secretary of the Interior complete
discretionary authority to abolish debt owed to another department or
agency. These departments or agencies may have no part in the decision.
Such unprecedented authority would put the Secretary in an untenable
position. Relations between Interior and other Federal departments or
agencies could be damaged to such an extent that other Interior
missions, outside the realm of the territories, could be significantly
impaired. Such action could have a severe fiscal effect on an
individual agency or an unacceptable effect on the overall Federal
budget.
As a practical matter, there would be no need for the Secretary to
exercise such authority, given that the debt could be dealt with
directly by the affected agency to the extent of its legal authority.
The only situation where the Secretary's authority would have any
meaning would be where the affected agency was unwilling to forgive the
debt. It is precisely in that situation where no Secretary of the
Interior would likely be willing to exercise the authority that would
be granted in this bill over the objections of another department or
agency. H.R. 2522 would therefore not have its intended effect, because
of the very remote possibility that the authority granted therein would
be exercised in any situation where such exercise would matter.
Although the Secretary of the Interior would be unlikely to
exercise the authority granted in H.R. 2522 in a meaningful fashion,
the mere fact that the authority exists could have a very harmful
effect on Guam. Federal agencies might be extremely reluctant to extend
essential credit to Guam, knowing that there was a possibility that the
debt could be forgiven by the Secretary of the Interior without the
creditor's consent. H.R. 2522 could thus result in Guam being denied
access to credit in time of its most dire need.
The title of the bill and a number of the findings suggest a
connection between debts forgiven and costs associated with the
migration by citizens of the freely associated states to Guam. However,
the operative subsection (b) of section 2 does not limit the forgiving
of Guam debt to some determinable amount of impact on from migration.
The authorization is open ended, with no reference to the impact of
migration.
For these reasons, the Department of the Interior opposes enactment
of H.R. 2522.
It is worth noting that Compact legislation (H. J. Res. 63)
currently before the Congress would, for the first time, provide a
mandatory annual appropriation of $15 million to defray costs
associated with the migration of individuals from the freely associated
states to Hawaii, Guam, the Northern Mariana Islands and American
Samoa. This new program effort on the part of the Administration would
provide more than $300 million over 20 years to address the effects of
Compact migration. This is a significant departure from unreliable ad
hoc appropriations of past years. The Administration's proposal would
provide welcome relief for the jurisdictions most heavily affected by
the migration of Micronesians--Guam, Hawaii and the Northern Mariana
Islands.
Direct Action
Guam might consider a more direct approach to these debt problems.
Guam could approach the agencies listed in paragraph (7) of the
findings. Given its severe financial crisis, Guam might qualify for
relief under the authority of an individual agency. The Office of
Insular Affairs would be glad to assist Guam in exploring the
possibility for debt relief with the relevant agencies.
On May 8, President Bush signed Executive Order 13299 creating the
Interagency Group on Insular Areas. Our first interagency
organizational meeting is taking place today. We would be glad to place
the issue of debt on the group's agenda. We look forward to working
with the leaders of Guam in an effort to help Guam address its
financial challenges.
______
Mr. Rehberg. The Chair will now recognize Ms. Bordallo for
an opening statement.
STATEMENT OF HON. MADELEINE Z. BORDALLO, A DELEGATE TO CONGRESS
FROM GUAM, ON H.R. 2522
Ms. Bordallo. Thank you very much, Mr. Chairman and members
of the Committee. I thank you for being here for such a long
morning. I want to thank you and, of course, Chairman Pombo and
Ranking Member Rahall for holding this hearing today on H.R.
2522 and for their gracious invitation to Governor Felix
Camacho and Speaker Ben Pangelinan to testify.
I would like to first say Hafa Adai to the Governor and the
Speaker and to our guests from Guam who have traveled 10,000
miles to be here for this important hearing. We welcome them
and we look forward to hearing their views.
I also want to acknowledge former Congressman Ben Blaz, my
good friend, who honored us with his presence and who was
instrumental in working with the first Compact of Free
Association back in 1986.
I am also pleased that the Governor of the Commonwealth of
the Northern Mariana Islands, the Honorable Juan Babauta, had
attended this hearing earlier and he has expressed to me his
interest in the Committee's work on the Compact.
Today, Mr. Chairman, is a remarkable day for the Committee
because we had the rare privilege earlier of receiving
testimony on the renegotiated Compacts of Free Association and
now we are considering my bill, H.R. 2522, that addresses
Compact impact issues for Guam. I am very grateful for the
support for H.R. 2522 from its original cosponsors, Mr. Rahall,
Mr. Gallegly, Mr. Faleomavaega, Mr. Rehberg, Mr. Abercrombie,
and Mr. Case. Si Yu'os Ma'ase and thanks to all of you for
helping Guam with this issue by lending your early support to
the bill.
I would also like to acknowledge the testimonies and the
statements that the Chair has placed into the record from the
interested parties on Guam, notably from the Senators of the
Guam legislature, the Mayors Council of Guam, the Guam
Waterworks Authority, the Guam Recovery Coordination Office,
the Guam Telephone Authority, the Guam Chamber of Commerce, and
interestd citizens.
H.R. 2522, the Compact Impact Reconciliation Act, is
informally referred to as a debt relief bill for Guam. That may
be a matter of perspective, and perspective is what separates
Guam from the Federal Government on many issues. From our
viewpoint, H.R. 2522 is debt relief for the Federal Government
for a debt owed to Guam from an unfulfilled promise, and that
is why the words ``reconciliation act'' were carefully chosen
for the title of this bill. In common usage here in Congress,
we understand what budget reconciliation means, and I am
confident that Governor Camacho and Speaker Pangelinan will
make the compelling case for us regarding Guam's economic
situation and the reasons why this bill would be enormously
helpful to Guam.
The time to resolve the Compact impact issue is upon us. We
are at the end of the first 17-year authorization for the
Compacts, and with the amendments that have been suggested, we
are looking to a new 20-year authorization. In order to go
forward, we should address the remaining issues surrounding the
adverse impact of the Compact on Guam and other affected
jurisdictions.
Guam has been impacted, Mr. Chairman, more significantly
than any other jurisdiction. Our geography places us closest to
the islands in the Freely Associated States, and I do have a
handout here of a map showing our close proximity to the other
islands. All members should have this map. I think it was
distributed.
[The map submitted by Ms. Bordallo follows:]
[GRAPHIC] [TIFF OMITTED] T8192.003
Ms. Bordallo. In 1986, Congress stated that these adverse
consequences would be reimbursed by Compact impact assistance,
and as we now know, the full reimbursement has never been
realized, and we assert with some assurance from the General
Accounting Office and a previous report by Ernst and Young that
the unreimbursed costs are approximately $187 million. Again, I
have a chart showing the monies that had been spent by the
Government of Guam and what has been the Federal reimbursement.
[The chart submitted by Ms. Bordallo follows:]
[GRAPHIC] [TIFF OMITTED] T8192.004
[GRAPHIC] [TIFF OMITTED] T8192.005
Ms. Bordallo. H.R. 2522 is a means to resolving this debt,
to starting fresh, and to giving Guam a much needed economic
boost. We are also introducing a bill later today that would
address the Compact impact reimbursement mechanism for the next
20 years so that we avoid the great disparity between costs and
reimbursement. Together, these proposals will set us on the
right course for the next 20 years.
Mr. Chairman, the U.S. Government made a promise to Guam 17
years ago that the adverse consequences of the Compacts which
the Federal Government negotiated would not be left to Guam to
shoulder alone. Guam simply does not have the resources to bear
the costs of the impact of immigration to Guam.
In our island communities, honor is an important virtue and
one's word, one's commitment to do something, is a matter of
honor. The United States has kept its word to the Federated
States of Micronesia, the Republic of the Marshall Islands, and
the Republic of Palau, by providing the assistance that was
promised to them in the Compacts. Are we no less worthy of
honor? Are commitments made to us meaningless? Let us move
forward together with a united purpose in renewing the Compacts
and let us reconcile this debt. Let us put to rest this issue
that causes great hardship on Guam and that causes us to view
the Compact renewal with some skepticism and suspicion.
As we close out the first 17 years of the Compact, Guam is
here today to say, wait a minute. There is a debt to reconcile
and will the United States honor its commitment to the
Territory of Guam?
Thank you, Mr. Chairman.
[The prepared statement of Ms. Bordallo on H.R. 2522
follows:]
Statement of Hon. Madeleine Z. Bordallo, a Delegate to Congress from
Guam, on H.R. 2522
Chairman Pombo, Ranking Member Rahall, and Members of the
Committee:
Thank you for holding this hearing today on H.R. 2522 and for your
gracious invitation to Governor Felix Camacho and Speaker Ben
Pangelinan to testify. I would like to first say Hafa Adai to the
Governor and Speaker and to our guests from Guam who have traveled
10,000 miles to be here today for this important hearing--we welcome
them and we look forward to hearing their views.
I also want to acknowledge former Congressman Ben Blaz, my good
friend, who has honored us with his presence and who was instrumental
in working to implement the first Compact of Free Association back in
1986 when he served on this Committee.
I am pleased that the Governor of the Commonwealth of the Northern
Mariana Islands, the Honorable Juan Babauta, had attended this hearing
earlier on the compact legislation, and he has expressed to me his
interest in the Committee's work on the Compact and the changes to
Compact-impact provisions which also affects the Northern Marianas.
Today is a remarkable day for the Committee because we had the rare
privilege earlier of receiving testimony on the re-negotiated Compacts
of Free Association and now we are considering my bill, H.R. 2522, that
addresses Compact-impact issues for Guam. I am very grateful for the
support for H.R. 2522 from its original co-sponsors, Mr. Rahall, Mr.
Gallegly, Mr. Faleomavaega, Mr. Rehberg, Mr.Abercrombie, and Mr. Case.
Si Yu os Ma ase (thank you) to all of you for helping Guam with this
issue by lending your early support to the bill.
I would also like to acknowledge the testimonies and statements
that the Chair has placed into the record from interested parties on
Guam, notably from Senators of the Guam Legislature, the Mayors Council
of Guam, the Guam Waterworks Authority, the Guam Recovery Coordination
Office, the Guam Telephone Authority, the Guam Chamber of Commerce, and
interested citizens.
H.R. 2522, the Compact-Impact Reconciliation Act, is informally
referred to as a debt relief bill for Guam. That may be a matter of
perspective, and perspective is what separates Guam from the Federal
Government on many issues. From our viewpoint, H.R. 2522 is debt relief
for the Federal Government, for a debt owed to Guam from an unfulfilled
promise. That is why the words ``Reconciliation Act'' were carefully
chosen in the title of this bill--in common usage here in Congress, we
understand what budget reconciliation means.
I am confident that Governor Camacho and Speaker Pangelinan will
make the compelling case for us regarding Guam's economic situation and
the reasons why this bill would be enormously helpful to Guam. The time
to resolve the Compact-impact issue is upon us. We are at the end of
the first seventeen year authorization for the Compacts, and with the
amendments that have been suggested, we are looking to a new twenty
year authorization. In order to go forward, we should address the
remaining issues surrounding the adverse impact of the Compact on Guam
and other affected jurisdictions.
Guam has been impacted more significantly than any other
jurisdiction. Our geography places us closest to most of the islands in
the Freely Associated States. All Members should have a map before them
that illustrates this point. In 1986, Congress stated that these
adverse consequences would be reimbursed by Compact-impact assistance.
As we now know, the full reimbursement has never been realized, and we
assert, with some assurance from the General Accounting Office and a
previous report by Ernst and Young, that the unreimbursed costs are
approximately $187 million. All Members should also have a chart before
them that reports the impact estimates over the years, as well as the
reimbursement figures that Congress has provided from time to time in
appropriations, and finally, in red figures, the outstanding
discrepancies between the two.
H.R. 2522 is a means to resolving this debt, to starting fresh, and
to giving Guam a much needed economic boost. We are also introducing a
bill later today that would address the Compact-impact reimbursement
mechanism for the next twenty years so that we avoid the great
disparity between costs and reimbursement. Together, these proposals
would set us on the right course for the next twenty years.
Mr. Chairman, the United States Government made a promise to Guam
seventeen years ago that the adverse consequences of the Compacts which
the Federal Government negotiated would not be left to Guam to shoulder
alone. Guam simply does not have the resources to bear the costs of the
impact of immigration to Guam. In our island communities, honor is an
important virtue--and one's word, one's commitment to do something, is
a matter of honor. The United States has kept its word to the Federated
States of Micronesia, the Republic of the Marshall Islands, and the
Republic of Palau by providing the assistance that was promised to them
in the Compacts. Are we no less worthy of honor? Are commitments made
to us meaningless?
Let us move forward together with a united purpose in renewing the
Compacts, and let's reconcile the debt. Let's put to rest this issue
that causes great hardship on Guam and that causes us to view the
Compact renewal with some skepticism and suspicion. As we close out the
first seventeen years of the Compact, Guam is here today to say, ``Wait
a minute...there is a debt to reconcile. Will the United States honor
its commitment to Guam?''
______
Mr. Rehberg. Thank you.
Questions from the Committee? The Chair recognizes Mr.
Abercrombie.
Mr. Abercrombie. Thank you, Mr. Chairman.
Mr. Pula, aloha.
Mr. Pula. Aloha.
Mr. Abercrombie. Going to your testimony, this is about
money. The bottom line, this is about money. You were here
before when I said before, it is all well and good to talk
about intentions, but it comes down to money. Is it your
testimony--does your testimony represent the position of the
Bush administration that the appropriate forum for addressing
this issue is this Interagency Group in Insular Areas?
Mr. Pula. In my testimony, I say that is one of the
avenues, Congressman. I think--
Mr. Abercrombie. Do they have any authority to make
recommendations to this Committee with regard to money?
Mr. Pula. The--
Mr. Abercrombie. That you do not have?
Mr. Pula. I think the idea there, Congressman, is for the
Federal agencies to come together and the administration and
have a forum where they can discuss some of the issues that are
related to the insular areas. I was referring in my testimony
back to the H.J.Res., the bill that we had discussed earlier
where the Compact impact funds of $300 million for the next 20
years is addressed, and--
Mr. Abercrombie. I know. That is just before your testimony
on page three of direct action. But surely you would not
contend to the Committee that the $15 million even remotely
approaches the existing impact, let alone that which might come
at a future time should some of these payments from some of
these agencies not be forthcoming if the bill passed in its
present form.
Mr. Pula. No, I am not saying that, Congressman.
Mr. Abercrombie. So, I mean, aside from being exercise--
wouldn't it be an exercise in futility?
Mr. Pula. To respond--
Mr. Abercrombie. In other words, Mr. Pula, I guess what I
am asking you, if you are opposed to this, if the
administration is opposed to it, they should just say so and
let it go and not throw out something, $15 million over the
next 20 years, $300 million. Three-hundred-million dollars,
maybe that would take care of 10 years of what is being spent
in Hawaii right now, let alone the rest of it. I mean, if you
folks are opposed to it, I understand that. I might not like it
or agree with it, but just say so.
Mr. Pula. I believe I said so--
Mr. Abercrombie. I know, but your point, though, is that
there are all these other things to take into consideration as
if that is resolving the issue. That doesn't do us any good. It
really doesn't. It pushes me toward the idea that we simply
have to get to the money part of it and resolve that one way or
the other.
The reason I asked this about the position, is the
Secretary, or is the present administration opposed to an
authorization number in excess of $15 million?
Mr. Pula. Is the administration opposed to a number--
Mr. Abercrombie. Yes. In other words, what has been
negotiated is $15 million. If this Committee sets the figure at
$30 or $40 or $115 million, is the administration opposed to
that?
Mr. Pula. I am not at liberty to say that we are not--
Mr. Abercrombie. Could you inquire?
Mr. Pula. We could inquire.
Mr. Abercrombie. And could you make the answer to that
available, because that is what this is going to come down to.
I am just trying--
Mr. Pula. I understand.
Mr. Abercrombie. I am not trying to waste your time. I am
not trying to trick you or give you a bad time, because believe
me, that is what this is going to come down to. The discussion
in this Committee--and we are not going to try to rewrite
negotiations or anything of that nature. We are not going to
try and second-guess all the work that has been done here. On
the contrary, I think I know the Chairman as well as anybody on
the Committee. I expect what he is going to do is make a
recommendation that if we accept the terms and conditions of
this negotiation as manifest in the Compact proposal, then we
must finance it accordingly. As sure as I am talking to you
now, I know that that is what he is going to take into account.
Now, whether we can do it or not, I don't know. That
remains a point. So my question to you, as the representative
of the administration, and my sincere solicitation of you is
that if the Committee determines that another number should be
used in furtherance of the terms and conditions of the Compact
proposal, would the administration find that acceptable?
Mr. Pula. I can respond by saying that the administration
will probably have to consider it based on its budget
constraints and, you know--
Mr. Abercrombie. Well, so do we.
Mr. Pula. --that would be as the blessing. But at this
time, I am not at liberty to say.
Mr. Abercrombie. OK.
Mr. Rehberg. The gentleman's time has expired. If somebody
else would like--Mr. Pallone?
Mr. Pallone. Thank you. First of all, let me say that I
agree with Mr. Abercrombie and I don't really understand the
opposition to the legislation. But it seems to me that the
problem that Guam faces and that, you know, I guess Hawaii and
other places face is the fact that you have people immigrating
from some of the other nations, Micronesia, whatever, and when
they immigrate and they become--there is a certain cost to
either the State of Hawaii or the Government of Guam when they
use services, and increasingly, that is a problem in terms of
the amount because there are more people coming and it is more
and more difficult for Guam and Hawaii to bear the expenses,
particularly with the economy being the way it is.
Now, a big part of that is health care related and using, I
guess, the public hospital in Guam or similar facilities in
Hawaii, and I just wanted to ask, and we have this problem in
other areas, as well. We had a hearing yesterday, Mr.
Faleomavaega was the Ranking Member, on Native American issues.
I have seen the same thing with some of the Indian nations
where there has been immigration from Mexico and people use the
hospital on the Indian reservations and there is no
reimbursement from the Federal Government.
The suggestion has been made that the Federal Government
should simply provide coverage through Medicaid and Medicaid
reimbursement to Guam or to the State of Hawaii when these
individuals come there and use the health facilities. Has the
administration taken a position on that, simply covering these
people through Medicaid and providing funding through Medicaid?
Mr. Pula. I would have to say, I don't speak for the other
agencies. That deals more directly, like HHS. So just a short
answer, I don't think we have considered that.
Mr. Pallone. Well, could we get a written response,
perhaps, through the Chairman? It would seem to me that one way
of alleviating the burden is to have these people covered by
Medicaid and have either Guam or Hawaii or both reimbursed in
that fashion. And if you could get, through the Chairman, if I
could ask that there be a written response to that from the
Department--
Mr. Rehberg. Yes, you may.
Mr. Pallone. --I would appreciate it. Thank you.
Mr. Pula. We will do so.
Mr. Pallone. Thank you. Then I wondered, obviously, the
administration is opposed to the bill to utilize the debt
reconciliation as a means to address the issue of Compact
impact. What do you then propose and support in terms of
addressing this issue that my colleagues are bringing up with
this legislation?
Mr. Pula. I would just like to clarify something, sir, and
I appreciate the question. The administration is opposing to
the authorities that would be given to the Secretary of
Interior to forgive debts of other agencies that the Secretary
of Interior doesn't have jurisdiction over. But we are not--I
understand that Compact impact is a longstanding issue, and I
don't speak for previous administrations or my predecessors.
However, I said this administration, this is the first time
that they have put down mandatory funding of $15 million.
Granted, it is way below the sums and amounts of reports that
are presented to the administration and to Congress by the
three jurisdictions, but I can honestly say that we are not
objecting to that.
Mr. Pallone. Well, what are you proposing to do for the
difference? I mean, you said there is 15, but also you also
acknowledge that there is a lot more out there that has to be
dealt with. What are you proposing to do for the rest?
Mr. Pula. I think that is something that we want to work
with Congress. Originally, the law in 1986--
Mr. Pallone. No, I understand, but, I mean, you are saying
you don't like this bill. You have got to give us some idea
about what you do like or what you want to do to address the
problem.
Mr. Pula. Well, I would go back to what Congressman
Abercrombie said. It boils down to resources. With the limited
constraints and budgets--
Mr. Pallone. So essentially, you are saying you are not
going to do anything beyond the 15.
Mr. Pula. Well, that is something that Congress can do
something about.
Mr. Pallone. So you want us to appropriate the difference?
Mr. Pula. Well, we certainly can't appropriate.
Mr. Pallone. But the Department doesn't have any
suggestions itself, in other words?
Mr. Pula. I am only authorized to say that we already
have--this administration has $15 million for the next 20
years.
Mr. Pallone. OK. Thank you.
Mr. Rehberg. Mrs. Christensen?
Mrs. Christensen. Thank you, Mr. Chairman. I, too, want to
take this opportunity before I ask my question to welcome Mr.
Pula, but also to welcome Governor Camacho and to congratulate
my colleague from Guam, Congresswoman Bordallo, for her hard
work and dedication in sponsoring H.R. 2522, which would create
a framework for addressing the long-existing problem of
inadequate reimbursement to the Government of Guam for Compact
migration impact expenses. And so I look forward to working
with my colleague and you, Mr. Chairman, to move this
legislation through the House.
I guess I have one question. You talk about the indirect
way of dealing with the debt and the direct way. You know that
we had a Hurricane Hugo debt that was forgiven through a
process that was developed with FEMA. But this is different. In
our case, the Office of Insular Affairs was very supportive and
worked with us with FEMA to develop a formula whereby we could
forgive that debt. But this is different.
This is a situation where Congress said that we will
compensate Guam for the adverse impact of the Compact and
migration, and don't you see this as a different situation, and
looking at the huge discrepancy between what Guam has expended,
the debt that they have gotten into and the paltry
reimbursement that they have received, don't you see this as
being different?
I would just add that when the territories owe any agency
of the Federal Government, it doesn't make any difference which
one, say we owe Treasury some money--I will just say that one--
money going from EPA to our EPA would be taken, no question, no
notification. It doesn't matter that it was a different agency
that that money was coming from and going to. It is taken.
So let me go back to the question. This is different. Don't
you see this as being different? This is Congress said, we are
going to compensate Guam. There is a huge discrepancy here, and
shouldn't we treat this differently than, for example, the way
that we would classify Hurricane Hugo?
Mr. Pula. I understand the question. I think Congress said
that they provide authorization. It didn't say it will provide
appropriation. Therefore, there is no appropriation.
Now, just to go back to your question with the comparison
of the Virgin Islands FEMA situation, of the forgiveness of
their loan versus Guam's situation, I don't see any difference
in terms of FEMA's program. I see the difference in the content
of this bill, trying to forgive the debts of Guam based on the
migration of Freely Associated States. And I think I don't want
to mix apples and oranges and say--I definitely don't have
FEMA's authorization to say, OK, we will go ahead and forgive
Guam of that loan. I guess we will have to deal with FEMA and
their authorizations and their regulations or whatever they
have.
Mrs. Christensen. But that is what I was saying. Ours is
different and we dealt with it in the direct way with the
agency to which we had owed the money and you were very
supportive and we relied on your support to find the correct
formula and get that done. This is different.
Mr. Pula. Yes, we are supportive of all the insular areas
when they come to the Secretary and we, on their behalf, we
wear the hat of advocating to other Federal agencies--
Mrs. Christensen. This bill asks Congress to grant the
authority to the Secretary of Interior to waive, and I see this
as being a completely different process because of the
commitment that we made to Guam. Well, I guess I was trying to
get you to agree that it should take a different process and
the indirect way that is suggested in this bill is appropriate
given the fact that money is owed. I mean, this is a
reconciliation of debt.
Mr. Pula. I understand.
Mrs. Christensen. The Federal Government owes Guam. Guam
owes the Federal Government a lot less. This is a
reconciliation. Wouldn't you agree that this is a different
approach to what we have had to go through?
Mr. Pula. I can say that Congress can do whatever Congress
wants to do and we will try to execute the law that Congress
passes.
Mrs. Christensen. Thank you. My time is up, Mr. Chairman.
Mr. Rehberg. Thank you. I'd like to point out to the
Committee members that there will be an opportunity for a round
two.
Ms. Bordallo?
Ms. Bordallo. Thank you, Mr. Chairman. I just have one
short question to Mr. Pula. I want to thank you for coming here
to testify. I realize that Section 2(b) of the bill dictates
pretty much what you have to say here today, but you have left
the door open and have agreed that there should be some debt
relief, isn't that correct in assuming that?
Mr. Pula. I guess that is my personal opinion.
Ms. Bordallo. That is right. And I want to say, we are
focusing on Guam here, but my colleague, Mr. Abercrombie, too,
Hawaii is owed millions of dollars, as well as the CNMI. So we
are all pretty much in the same situation.
But you have said here emphatically that you don't have any
plan to reconcile the U.S. debt to Guam and Hawaii and CNMI,
isn't that correct?
Mr. Pula. We work cooperatively, as you know, with the
territories when they come to our office and we try to do
everything in our power within the constraints of the
administration to assist our insular areas. So I don't want to
be on the record saying that we don't have any plans. As a
matter of fact, the Governor will meet with our office, Deputy
Assistant David Cohen, today to discuss some of the things that
could help Guam and provide some technical assistance with the
situation that is--
Ms. Bordallo. Let me ask you this. You do agree, then, that
this debt exists?
Mr. Pula. Oh, the debt exists on the authorization, not on
the appropriation.
Ms. Bordallo. All right. I just want to thank you. I
realize it is a difficult position to be in, but, you know, it
has come to the point now where the Federal Government has
promised us over the years. I was a member, five-term Senator
in the Guam legislature, and I remember at the time going
through the same dialog. Promises were made and the debt is
mounting and mounting. Certainly, during these times, economic
times on Guam, we could surely try to relieve some of our debts
to the Federal Government. We thought this was a good idea.
I just want to thank you again. Thank you very much for
appearing.
Mr. Pula. You're welcome.
Mr. Rehberg. Thank you. Mr. Faleomavaega?
Mr. Faleomavaega. Thank you, Mr. Chairman. I want to
initially offer my apologies for not taking the initiative to
introduce our witness before the Committee who happens not only
to be my constituent, and I say is a relative, but I certainly
want to commend him for--
Mr. Abercrombie. Mr. Chairman, I think for purposes of
disclosure, the delegate should indicate that from what I have
been able to gather, everybody is his cousin.
[Laughter.]
Mr. Rehberg. Mr. Abercrombie, I was going to say exactly
the same thing.
[Laughter.]
Mr. Rehberg. I traveled with him to Samoa and I have never
met so many cousins in my life.
[Laughter.]
Mr. Faleomavaega. Well, I do want to personally welcome Mr.
Pula this morning, or this afternoon, in our Committee.
Mr. Pula. Thank you.
Mr. Faleomavaega. I know he is doing a tough job here in
answering some very excellent questions from my colleagues.
Initially, I want to say also, if Mr. Abercrombie needs
some additional time, I would be more than happy to yield.
We have got a problem. I believe it was two or 3 years ago
that we forgave the country of Jordan $500 million in debts
owed to our government. We did the same thing for several other
foreign nations. We are doing it to this day.
Mr. Pula. I just want to remind the Congressman that the
State Department was here before, on the bill before. Maybe
these questions should have been asked then. They were the ones
negotiating the Compact impact.
Mr. Faleomavaega. But Mr. Pula, we are all Americans.
Mr. Pula. OK.
Mr. Faleomavaega. See, this is my point. People or
countries who will spit in our face, we were willing to give
$500 million in debt forgiveness to these foreign countries.
And here, we are talking about true blue Americans.
The problem here is not even a debt. We are just simply
discussing the fact that the good lady from Guam is saying, our
Federal Government owes the Territory of Guam some $187 million
since the implementation of this Compact on Compact impact aid,
and I can't find a more reasonable way of saying that I think
the Federal Government owes the Territory of Guam. In other
words, what would they have done with the $187 million? They
would not be in a deficit, in the serious financial situation
as they are now.
I cannot help but to commend the gentlelady from Guam for
bringing this to the attention not only of the Committee, but
certainly to the Members of Congress in realizing that it is
such a reasonable proposed legislation and I totally approve
the proposed legislation, by the way.
You mentioned, Nik, that you don't have the authority to
say otherwise in terms of the questions that we raised here,
but do you agree that the concept is quite firm. These are not
some figures that the good lady from Guam has just picked out
of thin air. This is proven by way of record and audits or
whatever financial research, the study that was done of this
since 1986, that Guam has had to expend over $187 million to
provide for the needs of our Micronesian brothers and sisters
who have had to migrate to Guam for educational, health, and
whatever reasons.
Can't we see some sense to this? Because the Department of
the Interior is the lead agency for the insular areas, would it
be unreasonable to suggest that the Secretary of the Interior
should have first shot or the primary person in the President's
cabinet saying, all of you other agencies, the Department of
the Navy, the Department of Agriculture, the Homeland Security,
this is my turf. Our government owes Guam $187 million and they
should be forgiven this debt.
Mr. Pula. Thank you, Congressman, for the question. As of
right now, I had mentioned, alluded in my testimony that that
is what the Secretary of the Interior is actually at right now,
having this interagency group, a first organizational meeting
with the Federal agencies over at the White House, to kind of
tell the agencies why the President signed this Executive
Order. We hope that we will bring some of these issues before
our sister agencies in the administration and address it there.
Mr. Faleomavaega. In reference to what you said earlier
about the interagency group, and I want to publicly express my
appreciation for the President and the White House for inviting
me and the good ladies from the Virgin Islands and Guam to
witness this historical signing ceremony at the White House. I
certainly appreciate the President's consideration that this is
not a partisan issue.
But as you had mentioned about the interagency group, and
following up on what Congressman Abercrombie had alluded to
earlier, procedurally, and this is certainly within the
prerogative of the President to organize and to do this
interagency group, as you may, does this mean that before
anything is done in reference to the insular areas, it has to
go through this interagency group before we get some answers
from the administration? Can you help us exactly how the
interagency is going to function with reference to what
Congressman Abercrombie was concerned about?
Mr. Pula. OK, and I want to go back--
Mr. Faleomavaega. Because it seems that we are putting
another layer of bureaucracy again and not going right to the
meat of things and saying this is either it or no or what.
Mr. Pula. OK. I would be happy to respond. The notion and
the idea behind the interagency group is for the
administration, with all the Federal agencies, to come together
and discuss issues regarding the insular areas. I don't think
it is in any way everything has to funnel through that
interagency. It is another forum where we can present the
issues of the areas to our sister agencies so that we can
better coordinate, communicate, and have a comprehensive idea
to attack some of the problems.
Mr. Faleomavaega. My time is running, Mr. Pula. Would you
say that right now, at this moment, if the good Governor of
Guam is conducting consultations with the Secretary if the
Interior to seriously consider the proposed legislation that we
are very hopeful that at some point in time later the
administration will be supportive of this--this is not as if
Guam is asking for additional funding. This is just simply to
reimburse or to give us the money back so that we can pay some
of the debts and obligations that we currently have. I can't
see this to be so unreasonable.
I really would plead with you to please take the message
back to Secretary Norton and to the administration, this bill
is absolutely sound. There is no reason why we cannot do this
for the government of Guam.
And again, my good friend, the gentlelady from Guam, I
thank her for her initiative in proposing this legislation and
I sincerely hope that there will be a change of heart on the
part of the administration to support this bill.
Thank you, Mr. Chairman.
Mr. Rehberg. Mr. Abercrombie?
Mr. Abercrombie. Just one last point. Mr. Pula, the
interagency group is under the jurisdiction of the Department
of the Interior, right?
Mr. Pula. It has the authorization of the White House.
Mr. Abercrombie. I beg your pardon?
Mr. Pula. The Secretary of the Interior is the chairperson
of the--
Mr. Abercrombie. Of the group. So it still comes back to
the Department of the Interior. The bill speaks about the
Secretary of the Interior making these decisions. So you say
the more appropriate forum for discussion of this is the
Interagency Council, but the interagency group still is under
the Secretary of the Interior.
Mr. Pula. Thank you. Well, I would like to kind of follow
up on that Congressman. Let us take an example. Let us say Guam
owes FEMA, you know, X amount of dollars and the Secretary of
Interior could not just forgive the debt from FEMA.
Mr. Abercrombie. I understand that is what you are
maintaining, but you are suggesting to us, the Department is
suggesting to us the more appropriate forum, and, in fact, that
is your exact word, if I am not mistaken, a more appropriate
forum for addressing the issues raised is the interagency
group, but the interagency group is under the jurisdiction of
the Secretary of the Interior. So it is going to go back to the
Secretary of the Interior anyway, and if the Secretary's
position is that they are opposed to this bill, then to go
through the interagency discussion, I am not sure advances
anything other than to retard the Committee's ability to come
to a swift conclusion.
Mr. Pula. Well--
Mr. Abercrombie. That is all. I appreciate the suggestion,
but I am not sure it is efficacious for the business of the
Committee. What I would hope is that you would keep in mind as
you go back to discuss this, whether with the interagency group
or not, and with the Secretary, that the delegates' position
with respect to debt relief is something that is well
established with other countries and areas, Africa. I think we
will be able to provide for the Chairman very quickly the
amount of debt relief that has taken place in other areas.
And the reason I would hope, again, that the Secretary
might reconsider and the Bush administration might reconsider
whether this is an appropriate way of dealing with it where
Guam is concerned or other insular areas, should a similar
situation take place, as opposed to Hawaii, is because Hawaii,
after all, is a State, and I recognize that the same kind of
consideration couldn't be given to another State. Even though
the problems may be the same, the solution for them has to take
a different context. I understand that.
But where insular areas are concerned, maybe this debt
relief thing is a kind of unique, or shows an initiative that
has some particular insight that maybe has escaped some of us
before. Just because it is unique doesn't mean that it needs to
be resisted. It may provide a way of dealing with it for the
administration that simply hasn't been thought of before and
might be appropriate in the Guam instance and, perhaps, the
Northern Marianas and so on, and might be appropriate only in
those circumstances. I don't think it is being put forward as a
universal solution, but it might provide some relief upon
reconsideration by the administration that hadn't really been
taken into account before, given the context of debt relief in
other situations.
Mr. Faleomavaega. Will the gentleman yield?
Mr. Abercrombie. Yes, of course.
Mr. Faleomavaega. Just for the benefit of my colleagues,
because I serve on the International Relations Committee, the
administration has announced a $3 billion aid package to
Pakistan. In addition to that, Pakistan owes our government
$2.3 billion. The administration plans to cancel $379 million
of debt. Why is it that we seem to be harder on ourselves in
trying to correct some of these inequities than we are with
foreign countries that would spit in our face or other areas
where there was never any real sense of continued support with
some of the policies of what we stand for in other parts?
And I realize, Mr. Pula, maybe I should have directed this
question to Mr. Short while he was here, but I hope that you
understand the concerns that we face here.
Mr. Pula. Yes, sir.
Mr. Faleomavaega. This is an American territory. American
citizens bleed and die in the wars that we fight. And here, the
fact of this $187 million debt that our government owes to the
Territory of Guam, and yet we are unwilling to find a solution
and to see that there is a reconciliation that be taken in
place in the proposed bill.
Mr. Rehberg. The gentleman's time has expired.
Mr. Faleomavaega. But anyway, I want to thank the gentleman
for yielding and thank you, Mr. Chairman, and I want to thank
Mr. Pula for his testimony.
Mr. Pula. Thank you.
Mr. Rehberg. Mrs. Christensen?
Mrs. Christensen. Thank you. Just one follow-up to my
previous question, and I, too, want to thank Mr. Pula for
having us invited to the White House and for really reviving
the IGIA. But that is not to say that I agree with the
approach, either.
Guam is looking at a very severe financial crisis right now
and I don't see, while they themselves would agree that
management of money has a role, it is not entirely of their own
fault. They had to deal with the Japan economic crisis, SARS
war, and a lot, and typhoons. So this crisis is not entirely of
their own making. I am assuming that the Office of Insular
Affairs is seeking ways to support Guam addressing the crisis.
Mr. Pula. You assume correctly.
Mrs. Christensen. OK. Now, in that context, looking at
that, don't you see this in the context of their need to
resolve their financial crisis, and doesn't that put this H.R.
2522 in another light, as a way that the office would assist
them in this, and if not, what specifically is the Office of
Insular Affairs proposing for Guam in terms of help?
Mr. Pula. Just a quick answer. The Office of Insular
Affairs, like I mentioned earlier, we will be meeting with the
Governor and discuss the concerns with Guam and will do what we
can within our power to assist. Should the Congress pass this
resolution, the administration will deal with it accordingly.
Mrs. Christensen. Thank you.
Mr. Rehberg. Ms. Bordallo? Seeing no other questions from
the Committee members, I thank the panelist.
Again, as I mentioned, the members of the Committee may
have some additional questions for you and we will ask that you
respond in writing. The hearing record will be held open for
these responses.
Mr. Pula. Thank you.
Mr. Rehberg. Thank you.
Mr. Pula. Thank you, Mr. Chairman.
Mr. Rehberg. Panel No. 5, which consists of two witnesses.
If you would please come up, and before you sit down, I will
administer the oath. Please raise your right hand and repeat
after me.
Do you solemnly swear or affirm under the penalty of
perjury that the statements made and the responses given will
be the whole truth and nothing but the truth, so help you, God?
Mr. Camacho. I do.
Mr. Pangelinan. I do.
Mr. Rehberg. Note that the witnesses answered in the
affirmative.
The Chairman now recognizes the Governor of Guam, Mr. Felix
Camacho, and Mr. Vicente Pangelinan. Mr. Camacho, welcome.
STATEMENT OF HON. FELIX P. CAMACHO,
GOVERNOR OF GUAM
Mr. Camacho. Good morning, Mr. Chairman and members of the
House Committee on Resources. I am Felix Camacho, Governor of
Guam. It is a great pleasure and distinct honor to make my
first appearance before Congress today to testify on H.R. 2522,
introduced by Guam's delegate to Congress, Congresswoman
Madeleine Bordallo, on behalf of the people of Guam.
As fellow Americans and America's Westernmost gateway, the
people of Guam have proven their patriotism and loyalty to the
principles of democracy that make this nation great. Ours is a
long history of defending those principles. Our sons and
daughters have consistently boasted the highest per capita
enlistment into our Armed Forces.
Ours was the only piece of American soil occupied during
World War II, for two-and-a-half years, from December 8, 1941,
to July 21, 1944. As bombs fell on Pearl Harbor, they fell on
Guam, followed by invasion and occupation. Battles for Guam and
other parts of the Northern Marianas were among the bloodiest
of the war. Our parents and grandparents fought gallantly to
defend our piece of America against invasion, and during untold
atrocities, starvation, and death. Concentration camps at
Manengon and other interior sites were established by the 29th
Division of Japan's army. Six-hundred Chamorus were officially
executed. Some were beheaded due to the local people's 3-year
patriotic efforts to successfully feed and hide the last
remaining U.S. Navy radioman, George Tweed, from capture during
occupation. In defiance of their occupiers, our people coined a
song so telling of our deep patriotism, ``Uncle Sam, Won't You
Please Come Back to Guam?''
A simple visit to the War in the Pacific National Memorial
Park tells the tale of the true cost of the war on our people.
Upon a haunting crescent-shaped wall, you can see the thousands
of names of Americans and our Chamorro people who lost their
lives and those who survived, standing up in the face of
tyranny for the democracy and the country that they so loved.
You will see the names of men like Pedro Cruz, Vicente
Chargualaf, Ramon Camacho, who defended their island and their
nation and mounted a brave but futile defense of Government
House against overwhelming Japanese forces. You will find the
name of Beatrice Emsley, a woman who was nearly beheaded by
Japanese troops during the occupation. She survived and lived
to testify before this great Congress about the atrocities of
war on Guam. She recently passed away.
Our people have sacrificed for many years, including the
Vietnam War, where our young Chamorro soldiers had one of the
highest per capita death rates in that conflict. My father, the
late Governor Carlos Camacho, was the only Governor in the
United States to visit our soldiers in Vietnam during two
successive Christmases to ensure that the sons of Guam knew
that their people supported their efforts during that conflict.
More recently, Guam played a major role as a refueling
point for bombers flying to the Gulf War and as the first
staging area for Kurdish refugees, and we stand ready to serve
our nation as she needs us. Time and again, Guam has borne the
great responsibility of being American, proudly and with
unwavering patriotism.
Today, I come before you representing the people of Guam in
support of H.R. 2522, or similar legislation, to bring balance
to a commitment that our nation made to the Freely Associated
States and to your fellow Americans on Guam. While we recognize
our responsibilities as Americans to provide a beacon of
freedom and hope for those who seek to participate in our great
democracy, Guam is, unfortunately, not in the financial
position to carry out this duty without further assistance.
I wish I could appear before you to deliver the message
that Guam can carry this burden alone. I cannot. I wish I could
tell you that the Government of Guam stands ready to fulfill
its commitment on behalf of our great nation, but we cannot do
so without your assistance.
Like every State and territory in this nation, Guam has
been affected by a changing world economy, one that has caused
a serious contraction in our local economy and has left us with
the enormous responsibility of providing for our citizenry with
ever-dwindling resources. Guam's unemployment rate prior to the
devastation of super-typhoon Pongsona on December 8 of 2002 was
at 11.4 percent. Our government revenues have decreased by more
than 40 percent in the last 2 years.
As we stand at our airport welcoming Compact citizens, we
watch as our own local residents leave our island to pursue
better opportunities in the mainland. Guam is--we are
experiencing a ``brain drain'' similar to that of the 1970's,
which severely limited our intellectual and technical ability
to support economic diversity.
We have an economy in the midst of its longest and deepest
recession, and recovering from that destruction of Guam's most
damaging super-typhoon in 26 years. Super-typhoon Pongsona
caused nearly one-quarter of a billion dollars in damage, more
than seven times as much per capita as any in our nation, a
national record we would rather not have. Our per capita costs
for recovery from these storms is $1,599. To put this in
perspective, the nation's highest per capita cost for a
disaster prior to Pongsona on Guam was the Northridge
earthquake in California. The per capita cost for that disaster
was $211.
It damaged every one of Guam's 35 public schools. It
crippled our utilities. It caused mandatory gas rationing. Two-
thousand-two was indeed a disastrous year for our island.
Several months before the super-typhoon, we were hit by Typhoon
Chata'an, which caused massive damage. We were finally on a
road to recovery when Pongsona came around. We must not forget
the earthquake that year, which knocked out power lines,
bridges, and other critical infrastructure.
These natural disasters, coupled with an economic recession
mirroring the Asian economic crisis that has been with us for
10 years, has unfortunately led our people into the worst
economic times in the history of our island. Despite our
hardships, the people of Guam continue to do our part to uphold
our nation's Compact with the Freely Associated States. But
given our dire situation, we are less and less capable of doing
so without causing great harm to our local community.
While Guam, the CNMI, and even Hawaii have been active
participants in the Compact negotiations from its initial
negotiations in 1969, or at any time since, we have all
accepted our roles in its implementation. Upon enactment of
U.S. Public Law 99-239, the people of Guam have embraced
residents of FSM and the Republic of the Marshalls and the
Republic of Palau who have migrated to our island, providing
them with essential services, from education and health care to
public assistance and economic support, and we have done so
with limited support from the Federal Government.
Guam continues to provide the children from the FAS with
public education, even though we lost some $10 million annually
with the opening of the Department of Defense schools on Guam.
We continue to assist their underprivileged, even though we are
limited by a funding cap of $4.86 million placed on Guam's
Federal public assistance programs, while the impact of Compact
residents in 2002 alone was $12.1 million. We continue to care
for their sick and elderly through Guam's local medically
indigent program, as they do not qualify for Federal Medicaid.
Our only public hospital continues to bear the cost, which last
year eclipsed $7.8 million, to care for 6,729 of their sick,
even though they could not afford the cost of health care.
All three branches of Guam's government fulfill their
collective responsibility to uphold the Compact our nation
negotiated. We do so not so much because we are legally
required to do so, but because it is the very American ideal of
equality that we embrace.
In the past, other Guam leaders have appeared before this
Committee, taking the position that more must be done to
properly compensate the impact of the Compact of Free
Association on our island. The basis of that claim was Section
104 of Public Law 99-239, which states, ``In approving the
Compact, it is not the intent of Congress to cause any adverse
consequences for the United States territories and
commonwealths or State of Hawaii.'' Further, as stated in H.R.
2522, Congress provided that if any adverse consequences to
Guam resulted from the implementation of the Compact, Congress
would act sympathetically and expeditiously to redress those
adverse consequences, and every leader who has appeared before
this body has asked for that compensation.
This lack of Federal funding has always placed us in an
awkwardly adversarial relationship, forcing the Federal
Government to defend its own position, just as Guam has been
forced to speak to the realities of the Compact's impact on our
people.
Today, in the spirit of unity and bipartisanship,
Congresswoman Bordallo and I offer a different approach, a
commitment to work with the Federal Government to bring balance
to our desire to uphold the ideals of our great democracy and
to do so within the bounds of our local economic realities.
Since assuming office in January of this year, my
administration has worked closely with the Department of
Interior, more specifically with the Office of Insular Affairs.
We have developed a strong cooperative relationship that
reflects a mutual respect for the duties of each. I personally
met with Secretary Norton and have spent a significant amount
of time with the Deputy Assistant Secretary for Insular
Affairs, David Cohen, on many outstanding issues on Guam. We
are coming to a resolution on many of those, including prior
inefficiencies of the Government of Guam, to correct concerns
raised by the DOI Inspector General's audits.
And at home, my administration has taken major steps,
unprecedented, strides at controlling the cot of government and
bringing it back in line with the meager revenues that we have.
We have acted decisively to avoid payless paydays and a
governmentwide shutdown. We have been forced to make the
difficult choice to reduce hours and consolidate services and
outsource to lower the costs of government. We have reduced the
work week to 32 hours, implemented governmentwide furloughs,
reduced benefits packages, eliminated the practice of double-
dipping, those who work in government and collecting GovGuam
retirement pensions, as well.
We have restricted overtime, implemented a plan to
outsource government services, and expedited the construction
of CIP projects to inject millions into our shrinking economy.
We are in the process of reducing the number of government
agencies from 52 down to only 12, which will reduce our payroll
by more than 1,000 government employees by the end of the
fiscal year. We have begun aggressive tax collections and
audits and we are now working with the Department of Interior
to bring Federal agents to assist in these efforts.
I believe that my administration has shown our commitment
to work with the Department of Interior to resolve many issues
that have in the past been ignored or inadequately addressed. I
am confident that we can build on the respect and cooperation
we have forged over the past 7 months to bring mutually
beneficial resolution to the issues addresed in H.R. 2522, or
similar legislation. Measures like these will assist our island
and our government in staying afloat during these difficult
times. Through measures like H.R. 2522, we will be able to work
directly with the Department of Interior on an issue that they
know better than any Federal entity, the effect of Compact
migration on the insular areas.
I could sit before you and cite various provisions of the
Compact of Free Association Act of 1985 and the General
Accounting Office's findings that support Guam's case on the
need for additional funding. However, your Committee has more
intimate knowledge of those provisions and findings than I
could ever expect to enhance.
What I will offer through my testimony today is a
commitment of the government and the people of Guam to work
through the enactment of measures like H.R. 2522 with the
Department of Interior to bring much needed balance to the
level of impact the Compact has had on our people, through a
balancing of the books, a reconciliation of debt between the
Government of Guam and the Federal Government, debts we owe and
are owed. H.R. 2522, or similar legislation, would allow us the
opportunity to honor both debts in a just and fair manner.
My commitment is, with Congress's blessings, to offer my
full support to the Department of Interior to provide timely
and accurate reporting on the Compact's impact and progress,
with the ultimate goal of ensuring that all participants, the
U.S. Government, the people of the Freely Associated States,
and the people of Guam all benefit from this relationship.
We simply ask that the people of Guam have fulfilled their
commitment to the Compact, that the Federal Government do its
part in ensuring that the people, the faithful U.S. citizens,
are fully protected from the impact of the Federal Government's
agreement with the Freely Associated States.
The people of the Freely Associated States will continue to
be welcomed members of our democratic society. We will continue
to encourage their participation in our community and we will
provide, as we are capable, the full extent of our social
services to them as full-fledged members of Guam's community.
We simply ask for your support in providing a mechanism for our
people to bring about equity and balance to the process.
As proud Americans, the people of Guam continue to support
our nation's mandates. As proud Americans, we embrace our
responsibilities of freedom and democracy. However, we ask for
greater latitude to adjust to the complexities of this unique
and very American relationship with the people of the Freely
Associated States.
I thank Madam Bordallo, Congresswoman, for her work in
drafting H.R. 2522. I thank the good Chairman and members of
this Committee for providing a venue for voicing our support
for this bill. And I hope that the members of this Congress
will allow the people of Guam the opportunity to work with the
Department of Interior to rectify imbalances that were created
long before either of us assumed our roles of leadership.
I thank you, si yu'os ma'ase, and God bless America.
Mrs. Cubin. [Presiding.] Thank you, Governor. I would like
to apologize for the confusion in the beginning of your
testimony when I came in. As you know, we have a lot of
business on the floor and that is where other members are. I
thank you very much for your testimony.
[The prepared statement of Mr. Camacho follows:]
Statement of Hon. Felix P. Camacho, Governor of Guam
Good morning and Hafa adai Chairman Pombo and members of the House
Committee on Resources. I am Felix Camacho, Governor of Guam. It is a
great pleasure and distinct honor to make my first appearance before
Congress today, to testify on H.R. 2522, introduced by Guam's own
Delegate to Congress, Ms. Madeleine Bordallo, on behalf of the people
of Guam.
As fellow Americans and America's westernmost gateway, the people
of Guam have proven their patriotism and loyalty to the principles of
democracy that make this nation great. Ours is a long history of
defending those principles.
Our sons and daughters have consistently boasted the highest per
capita enlistment into our armed forces. Ours was the only piece of
American soil occupied during World War II for two and a half years,
from December 8, 1941 to July 21, 1944. As bombs fell on Pearl Harbor,
they fell on Guam--followed by invasion and occupation. Battles for
Guam and other parts of the Northern Marianas were among the bloodiest
of the war. Our parents and grandparents fought gallantly to defend our
piece of America against invasion--enduring untold atrocities,
starvation and death. Concentration camps at Manengon and other
interior sites were established by the 29th Division of Japan's Army.
Six hundred Chamorus were officially executed. Some were beheaded due
to the local people's 3-year patriotic efforts to successfully feed and
hide the last remaining U.S. Navy radioman, George Tweed, from capture
during occupation. In defiance of their occupiers, our people coined a
song so telling of our deep patriotism... Uncle Sam, Won't You Please
Come Back to Guam.
A simple visit to War in the Pacific National Memorial Park Park
tells the tale of the true cost of the war on our people. Upon a
haunting crescent-shaped wall, you can see the thousands of names of
Americans and our Chamorro people who lost their lives and those who
survived standing up in the face of tyranny for the democracy and the
country that they so loved. You will see the names of men like Pedro
Cruz, Vicente Chargualaf and Ramon Camacho who defended their island
and their Nation and mounted a brave but futile defense of Government
House against overwhelming Japanese forces. You will find the name of
Beatrice Emsley, a woman who was nearly beheaded by Japanese troops
during the occupation. She survived, and lived to testify before this
great Congress about the atrocities of war on Guam. She recently passed
away.
Our people have sacrificed for many wars... including the Vietnam
War, where our young Chamorro soldiers had one of the highest per
capita death rates in that conflict.
My father, the late Governor Carlos G. Camacho was the only
Governor in the United States to visit our soldiers in Vietnam during
two consecutive Christmases, to ensure that the sons of Guam knew that
their people supported their efforts during that conflict.
More recently, Guam played a major role as a refueling point for
bombers flying to the Gulf War and as the first staging area for
Kurdish refugees. And we stand ready to serve our Nation, as she needs
us.
Time and again, Guam has borne the great responsibility of being
American, proudly and with unwavering patriotism.
Today, I come before you, representing the people of Guam, in
support of H.R. 2522, or similar legislation, to bring balance to a
commitment that our nation made to the Freely Associated States and to
your fellow Americans on Guam. While we recognize our responsibilities
as Americans to provide a beacon of freedom and hope for those who seek
to participate in our great democracy, Guam is, unfortunately, not in
the financial position to carry out this duty without further
assistance.
I wish I could appear before you to deliver the message that Guam
can carry this burden alone... I cannot. I wish I could tell you that
the government of Guam stands ready to fulfill this commitment on
behalf of our great nation... but we cannot do so without your
assistance.
Like every state and territory in this nation, Guam has been
affected by a changing world economy, one that has caused a serious
contraction in our local economy and has left us with the enormous
responsibility of providing for our citizenry with ever dwindling
resources. Guam's unemployment rate prior to the devastation of Super
Typhoon Pongsonga on December 8, 2002, was at 11.4 percent. Our
Government revenues have decreased by more than 40% in the last two
years.
As we stand at our airport welcoming compact citizens, we watch as
our own local residents leave our island to pursue better opportunities
here in the mainland. Guam is experiencing a ``brain drain'' similar to
that of the 1970s, which severely limited our intellectual and
technical ability to support economic diversity.
We have an economy in the midst of its longest and deepest
recession--and recovering from the destruction of Guam's most damaging
super typhoon in 26 years.
Super Typhoon Pongsona caused nearly one-quarter of a billion
dollars in damage--more than seven times as much per capita as any in
our nation--a national record we would rather not have. Our per capita
cost for recovery from these storms is $1,599.03. To put this in
perspective, the Nation's highest per capita cost for a disaster, prior
to Pongsona on Guam, was the Northridge Earthquake in California. The
per capita cost for that disaster was $211.
It damaged every one of Guam's 35 public schools. It crippled our
utilities. It caused mandatory gas rationing. 2002 was indeed a
disastrous year for our island--several months before the super typhoon
we were hit by Typhoon Chata an--which caused massive damage. We were
finally on our road to recovery when Pongsonga came around. We must not
forget the earthquake that year'' which knocked down power lines,
bridges and other critical infrastructure. These natural disasters--
coupled with an economic recession mirroring the Asian economic crisis
that has been with us for 10 years--has unfortunately led our people
into the worst economic times in the history of our island.
Despite our hardships, the people of Guam continue to do our part
to uphold our Nation's Compact with the Freely Associated States--but
given our dire situation we are less and less capable of doing so
without causing greater harm to our local community.
While Guam, the CNMI and even Hawaii have not been active
participants in the Compact negotiations, from its initial negotiations
in 1969 or at any time since, we have all accepted our roles in its
implementation. Upon the enactment of U.S. Public Law 99-239, the
people of Guam have embraced residents of the Federated States of
Micronesia and the Republic of the Marshall Islands who have migrated
to our island, providing them with essential services, from education
and healthcare to public assistance and economic support. And we have
done so with limited support from the Federal Government.
Guam continues to provide children from the FAS with public
education even though we lost some $10 million annually with the
opening of DODEA schools on Guam. We continue to assist their
underprivileged even though we are limited by a funding cap of $4.86
million placed on Guam's Federal public assistance programs, while the
impact of Compact residents in 2002 alone was $12.1 million. We
continue to care for their sick and elderly through Guam's local
medically indigent program, as they do not qualify for Federal
Medicaid. Our only public hospital continues to bear the costs, which
last year eclipsed $7.8 million, to care for 6,729 of their sick, even
when they could not afford the cost of healthcare.
All three branches of Guam's government fulfill their collective
responsibility to uphold the Compact our nation negotiated. We do so--
not so much because we are legally required to do so--but because it is
the very American ideal of equality that we embrace.
In the past, other Guam leaders have appeared before this Committee
taking the position that more must be done to properly compensate the
impact of the Compact of Free Association on our island. The basis of
that claim was Section 104 of Public Law 99-239, which states ``In
approving the Compact, it is not the intent of Congress to cause any
adverse consequences for the United States territories and
commonwealths or the State of Hawaii.'' Further, as stated in H.R.
2522, ``Congress provided that if any adverse consequences to Guam
resulted from the implementation of the Compact, Congress would act
sympathetically and expeditiously to redress those adverse
consequences.'' And every leader who has appeared before this body has
asked for that compensation.
This lack of Federal funding has always placed us in an awkwardly
adversarial relationship, forcing the Federal Government to defend its
own position, just as Guam has been forced to speak to the realties of
the Compact's impact on our people.
Today, in the spirit of unity and bipartisanship, Congresswoman
Bordallo and I offer a different approach: a commitment to work with
the Federal Government to bring balance to our desire to uphold the
ideals of our great democracy and to do so within the bounds of our
local economic realities.
Since assuming office on January 6th of this year, my
Administration has been working closely with the Department of Interior
and more specifically with the Office of Insular Affairs. We have
developed a strong, cooperative relationship that reflects a mutual
respect for the duties of each. I have personally met with Secretary
Norton and spent a significant amount of time with Deputy Assistant
Secretary for Insular Affairs, David Cohen, on many outstanding issues
on Guam. We are coming to resolution on many of those, including prior
inefficiencies of the government of Guam to correct concerns raised by
the DOI Inspector General's audits.
Back at home, my Administration has taken major--unprecedented--
strides at controlling the cost of government and bringing it back in
line with the meager revenues we have. We have acted decisively to
avoid payless paydays and a government-wide shutdown. We have been
forced to make the difficult choice to reduce hours... consolidate
services... and outsource... to lower the cost of government. We have
reduced the workweek to 32-hours, implemented government-wide
furloughs, reduced benefit packages, eliminated the practice of double-
dippers--those working in government and collecting GovGuam Retirement
pensions as well.
We've restricted overtime, implemented a plan to outsource
government services and expedited the construction of CIP projects to
inject millions into our shrinking economy. We are in the process of
reducing the number of government agencies from 52 down to only 12,
which will reduce our payroll by more than 1,000 government employees
by the end of this fiscal year. We have begun aggressive tax
collections and audits... and we are now working with the Department of
Interior to bring Federal agents to assist in these efforts.
I believe that my Administration has shown our commitment to work
with the Department of Interior to resolve many issues that have, in
the past, been ignored or inadequately addressed. I am confident that
we can build on the respect and cooperation we have forged over the
past seven months to bring mutually beneficial resolution to the issues
addressed in H.R. 2522, or similar legislation. Measures like these
will assist our island and our government in staying afloat during
these difficult times.
Through measures like H.R. 2522, we will be able to work directly
with the Department of Interior on an issue that they know better than
any other Federal entity'' the affect of Compact migration on the
insular areas.
I could sit before you and cite the various provisions of the
Compact of Free Association Act of 1985 and the General Accounting
Office's findings that support Guam's case on the need for additional
funding. However, your Committee has more intimate knowledge of those
provisions and findings than I could ever expect to enhance.
What I will offer through my testimony today is a commitment of the
government and people of Guam to work, through the enactment of
measures like H.R. 2522, with the Department of Interior to bring much
needed balance to the level of impact the Compact has had on our
people, through a balancing of the books... a reconciliation of debt
between the government of Guam and the Federal Government. Debts we owe
and are owed. H.R. 2522, or similar legislation, would allow us the
opportunity to honor both debts in a just and fair manner.
My commitment is--with Congress's blessing--to offer my full
support to the Department of Interior to provide timely and accurate
reporting on the Compact's impact and progress, with the ultimate goal
of ensuring that all participants--the United States government, the
people of the Freely Associated States and the people of Guam--all
benefit from this relationship.
We simply ask that as the people of Guam have fulfilled their
commitment to the Compact, that the Federal Government do its part in
ensuring that the people--faithful U.S. citizens--are fully protected
from the impact of the Federal Government's agreement with the Freely
Associated States.
The people of the Freely Associated States will continue to be
welcomed members of our democratic society. We will continue to
encourage their participation in our community and we will provide, as
we are capable, the full extent of our social services to them as full-
fledged members of Guam's community. We simply ask for your support in
providing a mechanism for our people to bring about equity and balance
to the process.
As proud Americans, the people of Guam continue to support our
nation's mandates. As proud Americans, we embrace our responsibilities
of freedom and democracy. However,
we ask for greater latitude to adjust to the complexities of this
unique and very American relationship with the people of the Freely
Associated States.
I thank Ms. Bordallo for her work in drafting H.R. 2522. I thank
the good Chairman and the members of this committee for providing a
venue for voicing our support for this bill. And I hope that the
members of this Congress will allow the people of Guam the opportunity
to work with the Department of Interior to rectify imbalances that were
created long before either of us assumed our roles of leadership.
Thank you. Si Yu'os Ma'ase. And God bless America.
______
Mrs. Cubin. At this time, I would like to recognize the
Honorable Vicente Pangelinan and welcome your testimony.
STATEMENT OF HON. VICENTE (BEN) C. PANGELINAN, SPEAKER,
LEGISLATURE OF GUAM
Mr. Pangelinan. Thank you very much. Hafa adai, Madam
Chairman and members of the Committee. It is with great esteem
and highest honor and six plane changes and four time zones
later that I appear before you and the Committee to present my
strong support for H.R. 2522.
For the record, I would also wish to present the 27th Guam
Legislature's Resolution 52, unanimously supporting H.R. 2522.
Mrs. Cubin. With unanimous consent, that will be entered in
the record. Hearing no objection, so ordered.
Mr. Pangelinan. Thank you.
[The resolution of the Legislature of Guam follows:]
[GRAPHIC] [TIFF OMITTED] T8192.006
[GRAPHIC] [TIFF OMITTED] T8192.007
Mr. Pangelinan. H.R. 2522 is an act to amend the Organic
Act of Guam to authorize the Secretary of Interior to reduce,
release, or waive amounts owed by the Government of Guam to the
Federal Government to offset unreimbursed Compact impact
expenses.
Since the passage of the Compact of Free Association 17
years ago, Guam has fulfilled a promise made by the United
States to the Freely Associated States of Micronesia. The
United States opened the doors to America to their citizens,
and they came to Guam searching for better health, education,
and economic opportunities. They came and stayed, availing
themselves of the services and resources that we provided for
all. We knew that it was costing us to provide and take care of
our own neighbors and America's newest partners in the Pacific,
but we, as good neighbors, welcomed them, and we were assured
and reassured by the provisions of the Compact, U.S. Public Law
99-239, that the United States knew this and provided for the
mitigation of the effects.
Congress, with great foresight, foresaw the consequences
migration would have on our small island. Congress clearly
stated that in approving the Compact, it is not the intent of
Congress to cause any adverse consequences for the United
States territories and commonwealths or the State of Hawaii. In
clearly stating its intent, I commend Congress for being able
to see around the corners and include provisions to address the
integration of these FAS citizens into our communities and the
strain it places on our limited resources. It tasked the
President to report to Congress with respect to the impact of
the Compact of the United States territories, and then later,
it allowed the Governors to submit these reports directly to
Congress for its consideration and action.
We are not coming to Congress with empty pockets and open
hands, asking for Congress to fill them, without justification
or authority. We have fulfilled Congress's promise to our
newest Pacific partners and we appear here today asking that
Congress fulfills its commitment to its territories, and in
this specific instance, our home, Guam.
In Public Law 99-239, the Compact of Free Association,
Congress was declaratory in its commitment to redress adverse
consequences. It stated, ``If any adverse consequences to the
United States territories and commonwealths and the State of
Hawaii result from the implementation of the Compact of Free
Association, the Congress will act sympathetically and
expeditiously to redress these adverse consequences.''
We appear here today without shame, not seeking charity,
but seeking the grace of Congress and its honorable members.
With H.R. 2522, Guam is not asking for special treatment with
regards to repayment of Federal funds. In this case, Guam is
both a lender and a borrower. We only seek an equitable
repayment plan. It is estimated that the Federal Government has
yet to reimburse Guam more than $150 million in Compact impact
expenses through Fiscal Year 2003, which is about 80 percent of
the total impact costs.
Guam has met the commitment the United States made in the
Compacts of Free Association and we will continue to honor them
as long as they are in effect and as long as our resources
permit. This is our duty as Americans and our sincere desire to
continually advance our nation's interests in the Western
Pacific. Guam has honored these pledges in good faith, despite
our absence from direct participation in Compact negotiations
regarding migration and despite the stress the migration places
on our finances.
Years of increasing Compact immigration have contributed to
the debilitation of our local government service upon which all
of our people rely. Among the many systems operated by the
Government of Guam, public education and the public health care
system, cornerstones of any government, have absorbed the
hardest impact. Our public schools are overcrowded and linger
in disrepair. Our only civilian hospital as of Fiscal Year 2001
was owed $21 million by FAS citizens. Many of our public
services are already spread thin by other factors and they are
spread even more thinly by the effects and demands placed upon
them by Compact migration.
H.R. 2522 should not be seen as an indicator that Guam
cannot properly manage our responsibilities. On the contrary,
we have been vigilantly mindful of our obligations. It is
precisely this mindfulness that has brought us here today. We
have been fulfilling our obligations to the U.S. Government and
we expect nothing less than likewise from the U.S. Government.
The financial considerations that bring us before this
Committee today are largely due to circumstances that have not
befallen other communities. In the past decade, Guam has been
subjected to several highly destructive typhoons and
earthquakes. Furthermore, because our small economy is highly
dependent on tourism, the effects of the Asian economic crisis,
September 11, and the recent SARS scares have drastically
affected island business. Compact migration is only one of a
list of factors beyond Guam's control that adversely impact our
economy and ability to pay our debt to the Federal Government.
In short, the money that we could have used to repay these
debts to the Federal Government have been used for disaster
recovery, economic recovery, and Compact impact.
As we struggle to repay our Federal obligations, we have no
choice but to burden our citizens. This comes in the form of
increased costs for services and higher taxes on our local
population in order to continue essential services to everyone
living on Guam. If we were to receive full reimbursement for
Compact impact as foreseen by Congress in 1986 when it passed
the Compacts, we can reduce this burden to our people.
H.R. 2522 is not a way for Guam to wash its hands of the
spirit of the Compact of Free Association. Rather, Guam, in
every way an integral member of its Western Pacific
neighborhood, and the success of our island neighbors
represents the success of the region as a whole. Compact
migration does have some positive effects on Guam's economy.
Citizens of Freely Associated States who reside on Guam
contribute to the island's economy in terms of employment and
taxes. Still, many migrants from the FAS who live on Guam
continue to liver under poverty level, though. Moreover,
additional population did not bring a corresponding expansion
to our economy. As a result, more people have had to share the
same level of services.
Guam recognizes that as the hub of Micronesia, it must take
the lead in promoting greater economic prosperity for the
region. However, this cannot occur if Guam is hindered by the
diversion of limited resources to Compact obligations without
prompt and proper compensation.
In reports submitted to the Federal Government in the area
of education, an area specifically identified qualifying for
compensation, we find over 3,500 students of FAS citizens
enrolled in Guam's public schools during Fiscal Year 2000-2001.
Once upon a time, the Federal Government paid the local
school system the cost of educating military and other Federal
dependents attending schools. It calculated and paid a per
pupil cost of approximately $4,000 per pupil. This is the cost
that the Federal Government accepted and remitted to the local
government as the cost impact for providing education to each
child. If we are to use this Federally accepted cost to
calculate the impact on our educational system on FAS children,
Guam should have received over $14 million in that year alone
for education alone.
The costs are just as extraordinary for the other areas,
public health and other social services. Our prison impact is
over $5 million. Police services are over $11 million. And
health and welfare totals over $64 million over the life of the
Compact.
We ask that Congress recognize the increased demands on the
limited resources that we have shared with Freely Associated
citizens on behalf of the United States. As Congress so
righteously embedded in Public Law 99-239, providing for
Compact impact costs, it stated, ``There are hereby authorized
to be appropriated for fiscal years beginning after September
30, 1985, such sums as may be necessary to cover the costs, if
any, incurred by the State of Hawaii, the Territories of Guam
and American Samoa, and the Commonwealth of the Northern
Mariana Islands resulting from increased demand placed on
educational and social services by immigrants from the Marshall
Islands and the Federated States of Micronesia.''
We are now at a time when the United States and the Freely
Associated States are reauthorizing the Compact and it is our
fortune to avail ourselves of a path not taken in H.R. 2522.
One of my favorite poems is ``The Road Not Taken,'' by
Robert Frost, the nation's Poet Laureate, bestowed that title
by President John F. Kennedy. It speaks about coming upon a
fork in the road and deciding to take one road over the other,
and how once we set upon one path, time and circumstances
prevent us from ever having the opportunity to return to that
fork and change paths.
In addressing the Compact impact reimbursement, Congress
has set upon a path over the last 17 years. Today, H.R. 2522
gives us an opportunity to set upon a different path, for we
know the path we have traveled over the last 17 years has not
done right for the United States territories and commonwealths
and the State of Hawaii. Seldom is one presented such an
opportunity, and when fortune embraces one with such, he must
take what he has learned from his first choice when returning
to that fork in the road and setting upon the road not taken.
Today, let us at this fork in the road embark upon the road not
taken, take on H.R. 2522, and we will all be better for it.
Once again, on behalf of the 27th Guam Legislature, I am in
full support of H.R. 2522 and I thank you again for the
opportunity to present our position.
[The prepared statement of Mr. Pangelinan follows:]
Statement of The Honorable Vicente Pangelinan, Speaker,
Legislature of Guam
Hafa adai, Mr. Chairman. It is with great esteem and high regard
that I appear before you and the Committee to present my strong support
for H.R. 2522.
H.R. 2522 is an act to amend the Organic Act of Guam to authorize
the Secretary of the Interior to reduce, release, or waive amounts owed
by the Government of Guam to the Federal Government to offset un-
reimbursed Compact impact expenses.
I want to present to the Committee Legislative Resolution 52
unanimously passed by the 27th Guam Legislature in full support of H.R.
2522.
For the past 17 years, Guam has fulfilled a promise made by the
United States to the Freely Associated States of Micronesia, by
providing health, educational and economic opportunities to its
citizens.
With the provision for open immigration and habitual residency
granted to FAS citizens in the United States, Congress with its
foresight recognized that the choice most attractive to these new
members of the American umbrella in the Pacific was the migration to
the closest American community, such as Guam. It also foresaw the
consequences migration would have on our small island. Congress clearly
stated that ``in approving the compact, it is not the intent of
Congress to cause any adverse consequences for the Unites States
territories and Commonwealths or the State of Hawaii.''
In clearly stating its intent, I commend Congress for being able to
``see around corners'' and include provisions to address the
integration of these FAS citizens into our communities and strain it
places on our limited resources. It tasked the President to report to
Congress with respect to the impact of the Compact on the United States
territories and Commonwealths and on the State of Hawaii. It later
allowed the Governors to submit these reports directly to the Congress
for its consideration and action.
It has been 17 years since we since we have walked the path of
political and economic development with our neighboring freely
associated states. While progress has come slowly in the development of
local opportunities in these states, Guam and our sister Pacific
American communities, the Commonwealth of the Northern Marianas and
Hawaii, have attracted the migrating citizens seeking education, health
and economic advancement for themselves and their families. And we have
supported and paid for their opportunities, paid for them with our
limited resources.
We are not coming to Congress with empty pockets and open hands
asking for Congress to fill them without justification or authority. As
we have fulfilled Congress' promise to its newest Pacific partners, we
appear here today to ask that Congress fulfills its commitment to its
territories, and in this specific instance, our home, Guam.
In U.S. P.L. 99-239, the Compact of Free Association, Congress was
declaratory in its commitment to redress adverse consequences. It
stated ``...if any adverse consequences to the United States
territories and commonwealth and the State of Hawaii result from the
implementation of the Compact of Free Association, the Congress will
act sympathetically and expeditiously to redress those adverse
consequences.''
We appear here today, without shame, not seeking charity but
seeking the grace of Congress and its honorable members. With H.R.
2522, Guam is not asking for special treatment with regard to repayment
of Federal funds. In this case, Guam is both a lender and a borrower;
we only seek an equitable repayment plan. It is estimated that the
Federal Government has yet to reimburse Guam for more than
$150,000,000.00 in Compact impact expenses through Fiscal Year 2003,
which is about 80% of the total impact costs.
Guam has implemented the commitment of the United States in the
Compacts of Free Association, and we will continue to honor them as
long as they are in effect and as long as our resources permit. This is
our duty as Americans and our sincere desire to continually advance our
nation's interests in the Western Pacific. Guam has honored these
pledges in good faith, despite our absence from direct participation in
Compact negotiations regarding migration and despite the stress this
migration places on our finances.
H.R. 2522 will help Guam recover the costs that have accumulated
since the implementation of the Compacts of Free Association, which
allowed unrestricted migration to the United States from the Federated
States of Micronesia and the Republic of the Marshall Islands. Guam has
been disproportionately impacted by the influx of immigrants resulting
from the Compact of Free Association, due to its physical proximity to
those newly-established sovereignties.
Years of increasing Compact immigration have contributed to the
debilitation of our local government services upon which all of our
people rely. Among the many systems operated by the government of Guam,
public education and the public health care system--cornerstones of any
government--have absorbed the hardest impact. Our public schools are
overcrowded and linger in disrepair. Our only civilian hospital as of
Fiscal Year 2001 was owed $21 million by FAS citizens. Many of our
public services are already spread thin by other factors and they are
spread even more thinly by the effects of demands placed upon them by
the compact migration.
At this point, the offsetting of costs, instead of direct
reimbursement, appears to be a more realistic and immediate Compact
impact relief for Guam. Guam has not received the entire amounts it has
been submitting to the Federal Government for Compact impact
reimbursement for 17 years, and likely will not be receiving those
amounts in the near future. Guam, like the rest of the United States
and the Federal Government itself, in recent years has had to operate
with decreased revenues. Indeed, Interior officials have indicated in
the past that budgetary pressures have been one of the reasons that
Compact impact funding for Guam has remained inadequate. Consequently,
Guam may not be able to expect a full reimbursement of Compact impact
costs. At the same time, Guam will encounter challenges in finding a
way to repay its obligations to the Federal Government. From our cash-
strapped standpoint, this indirect approach is more attractive than
receiving a partial reimbursement or no reimbursement at all.
H.R. 2522 should not be seen as an indicator that Guam cannot
properly manage our responsibilities. On the contrary, we have been
vigilantly mindful of our obligations--it is precisely this mindfulness
that brought us here today. We have been fulfilling our obligations to
the United States government, and we expect nothing less than likewise
from the United States government.
The financial conditions that bring us before this Committee today
were largely due to circumstances that befall other communities. In the
past decade, Guam has been subjected to several highly destructive
typhoons and earthquakes. Furthermore, because our small economy is
highly dependent upon tourism, the effects of the Asian economic
crisis, September 11, and the recent SARS scare have drastically
affected the island's businesses. Compact migration is only one of a
list of factors beyond Guam's control that adversely impact our economy
and ability to pay our debt to the Federal Government. In short, the
money that could have been used to repay these debts to the Federal
Government have had to be used for disaster recovery, economic
recovery, and Compact impact.
As we seek to meet to repay our Federal obligations, we have no
choice but to burden our citizens. These come in the form of increased
cost for services and higher taxes on our local population in order to
continue essential services to everyone living on Guam. If we were to
receive full reimbursement for compact impact as foreseen by Congress
in 1986, when it passed the compacts, we can reduce this burden to our
people.
H.R. 2522 is not a way for Guam to wash its hands clean of the
spirit of the Compacts of Free Association. Rather, Guam is in every
way an integral member of its Western Pacific neighborhood, and the
success of our island neighbors represents the success of the region as
whole. Compact migration does have some positive effects on Guam's
economy. Citizens of the freely associated states who reside on Guam
contribute to the island's economy in terms of employment and taxes.
Still, many migrants from the FAS who live on Guam continue to live
under the poverty level. Moreover, the additional population did not
bring with it a corresponding expansion in our economy. As a result,
more people have had to share the same level of services. Guam
recognizes that as the hub of Micronesia, it must take the lead in
promoting greater economic prosperity for the region. However, this
cannot occur if Guam is hindered by the diversion of its limited
resources to Compact obligations without proper and prompt
compensation.
In reports submitted to the Federal Government in the area of
education, specifically identified as an area of impact that qualifies
for compensation, we find 3,530 children of FAS citizens enrolled in
the local public schools during school year 2000-2001.
Once upon a time, the Federal Government paid the local school
system the cost of educating military and other Federal dependents
attending the local schools. It calculated and paid a per pupil cost of
approximately $4,017.00. This is the cost that the Federal Government
accepted and remitted to the local government as the cost impact for
providing education to each child. If we are to use this Federally
accepted cost to calculate the impact on our education system of FAS
children, Guam should have received $14,180,010.00 in that year in
compact impact for education alone.
The costs are just as extraordinary for the areas of public health
and other social services. Our prison impact is over $5,000,000.00.
Police services are over $11,000,000.00, and health and welfare totals
over $64,000,000.00 over the current life of the compact.
We ask that Congress recognize the increased demands on the limited
resources that we have shared with freely associated citizens on behalf
of the United States. As Congress so righteously embedded in U.S.
P.L.99-239, providing for the impact costs, ``there are hereby
authorized to be appropriated for fiscal years beginning after
September 30, 1985 such sums as may be necessary to cover the costs, if
any incurred by the State of Hawaii, the territories of Guam and
American Samoa, and the Commonwealth of the Northern Mariana Islands
resulting from increased demands placed on educational and social
services by immigrants from the Marshall Islands and the Federated
States of Micronesia.''
We are now at the time when the United States and the Freely
Associated States are reauthorizing the compact and it is our fortune
to avail ourselves of a path not taken in H.R. 2522.
One of my favorite poems is ``The Road Not Taken'', by Robert
Frost, the nation's poet laureate bestowed the title by President John
F. Kennedy. It speaks about coming upon a fork in the road and deciding
to take one road over the other and how once we set upon one path, time
and circumstances prevent us from ever having the opportunity to return
to the fork and change paths.
In addressing the compact impact reimbursement, Congress had set us
upon a path over the last 17 years. Today H.R. 2522 gives us an
opportunity to set upon a different path. Seldom is one presented such
an opportunity and when fortune graces one with such, he must take what
he has learned from his first choice, when returning to the fork in the
road and setting anew upon the road not taken. Today, let us at this
fork in the road, embark upon the road not taken and we will all be
better for it.
Once again, on behalf of the 27th Guam Legislature, I am in full
support of H.R. 2522, and I thank you once again for this opportunity
to present our position.
______
Mrs. Cubin. Thank you, Mr. Speaker and Governor for coming
four time zones, did you say?
Mr. Camacho. Yes, ma'am.
Mrs. Cubin. I know that is a hard thing to do.
We will start our questioning. I would like to recognize
Mr. Faleomavaega to begin questioning.
Mr. Faleomavaega. Madam Chairman, I appreciate the
courtesy, but I would like to defer to my good friend, the good
lady from Guam, the chief sponsor of this legislation. I would
certainly like to give her the opportunity to ask questions at
this time. Thank you.
Ms. Bordallo. Thank you very much to my colleague for
extending that courtesy to me.
I would like to direct a question to the Governor. The
Department of Interior suggested an alternative direct
approach. Guam recently tried this direct approach in resolving
a $9 million debt to the U.S. Navy for the use of water. Could
you enlighten the Committee on how the Navy responded to debt
relief and how the $9 million debt has now come for us to raise
water rates. Could you explain that?
Mr. Camacho. From what I understand, the Combined
Commission on Utilities had worked with the Department of the
Navy in settlement. There is a long-term commitment to pay this
over the period of, I believe, the next 10 years, and that
would be paid by increasing the water rates that our residents
would have to bear again. So it would be basically a rate
increase to be spread out over a number of years and then
payment of this debt. So I do know that this amount is one of
the items that you have listed in your bill here, and so--
Ms. Bordallo. Governor, let me also add to that, did the
Secretary of Interior ever intervene to try to assist us with
this?
Mr. Camacho. Directly, no.
Ms. Bordallo. I just bring this up to the Committee because
this is one of the debt reliefs we are asking for in this bill,
and that is the monies owed for the use of water, monies owed
to the U.S. Navy. So I just wanted to clarify that.
Again, here we are, now committed to pay this, and we, in
turn, will have to raise the water rates, another tremendous
problem for the people of our community. So I just wanted to
point that out.
Thank you, Madam Chairwoman.
Mr. Camacho. If I may add, Congresswoman--
Ms. Bordallo. Yes.
Mr. Camacho. --what makes it such an interesting twist,
again, is that this is, of course, a resource. Water, which is
collected from the only surface lake on Guam, which is
administered or controlled by the government and distributed to
our local population. So it is a resource from Guam which is
then distributed to our people, and yet we have to pay for it.
Ms. Bordallo. Thank you, Governor.
Mrs. Cubin. I would like to just ask a few questions. It
doesn't seem like too much that when two parties enter a
contract that both parties keep their commitments to that
contract. Certainly, I think that the government ought to do
what it says for Guam and I would like to see this legislation
move forward.
I would like to ask you, Mr. Speaker, how much money does
Guam currently owe the Federal Government in general?
Mr. Pangelinan. In general, if you take a look at what is
outlined in the bill, those are both from the general fund and
the different Departments and agencies. In addition, there is a
debt owing to the Bureau of Prisons for housing our prisoners
of about $3.5 million. In addition to that, a new loan was
signed by the University of Guam for the construction of a new
College of Business and Public Administration amounting to
about $13.5 million.
If you take that plus what is outlined in the bill, you are
looking at about $180 million, maybe somewhere in that
neighborhood, of debt that is owed, the majority and the bulk
of that being our U.S. loans to the Guam Telephone Authority in
the early years of upgrading our telephone system.
Mrs. Cubin. Thank you. If we should be able to waive the
debt as would be made possible by H.R. 2522, how can Guam work
with the FAS to ensure that debts of these amounts don't
continue?
Mr. Pangelinan. I think that is something that the
Department of Interior is going to be challenged to do. They
have developed this new scheme, I understand, with regards to
trying to target the grants of the Compact into targeted areas
that they think has lured these FAS citizens to the islands.
I tell you, the quickest way to keep them home is develop
an economy there that pays a living wage in a Western economy.
The imposition of the Compact into Micronesia has resulted in
the change in the lifestyle of the countries, and they have
moved from a subsistence economy to a Western economy over the
last years and this has placed some demands on them with
regards to a money economy.
To support that, you have to have livable, wage-paying
jobs, and absent the development of economic opportunities and
that, we will continue to have migration of these Compact
citizens, looking for economic opportunities so that they can
provide better health care and better education for their
children.
Mrs. Cubin. So, Governor, do you think the amended Compact
will have the strong effect in the future in lessening the
influx of migrants if Guam sees the economic development, that
they will seek to--
Mr. Camacho. Most definitely. I echo the comments made by
the good speaker. If I may liken Guam to a big city in America,
the only difference is that here, if there is a need for any
opportunities, let us say from a rural area, you hop in your
car and go across the State and into the city and look for job
opportunities. Well, in Micronesia, you hop on a plane and you
come to Guam and that is where you look for opportunities in
health and education and welfare and improvement of your
lifestyle.
In answer to your earlier question about what can be done
to provide some kind of relief, there are, for example, caps
that are placed on our Medicaid or Medicare systems of roughly
below $5 million. We obviously service a lot of--provide
medical care to many of the FAS residents that are on Guam. If
for some reason or other we could lift the caps that are there
and maybe not have these residents apply toward our limited
resources or the caps available, that is one way of doing it.
But I think a very comprehensive approach would also be to
work with the respective governments of FAS and their island
governments in the way of preventative health care, for
example, in the way of strengthening, also, their education
system. We have spent tremendous amounts of resource on Guam
with the children that come with English language speaking
courses, just the very basic courses to get them started in our
school system.
But I would like to take an approach in working with the
leadership of FAS as we come together as brothers and sisters
to find ways to work together, and in the way of education, in
health and education and also public safety and indoctrination
or ways of working with them, we can find some relief. But it
is going to be with a cooperative effort as we approach things,
moving down the line, that the impact could be lessened. But
ultimately, just as it would apply on Guam, if we can provide
for economic stimulus, if we can provide for opportunities for
the residents to stay on their respective islands, because that
is where the opportunities are, that can lessen the amount of
immigration outside into areas like Guam and Hawaii.
Mrs. Cubin. Thank you. The Chair now recognizes Mrs.
Christensen for questioning.
Mrs. Christensen. Thank you. I guess I would ask just one
question. Governor, I want to commend you on what you reported
in your testimony on the measures that you have taken so far to
deal with the economic situation in Guam. I am going to send a
copy, if you don't mind, home to my Governor with some
suggestions.
[Laughter.]
Mr. Camacho. We have a cooperative legislature, too.
Mrs. Christensen. Yes. That is very helpful. Maybe I will
send a copy to our legislature, too.
[Laughter.]
Mrs. Christensen. But I am really concerned because I think
you have done, as I said, you have done a lot. I wonder if this
bill doesn't get passed and you receive the assistance that you
would get through this, are there other sources of income, of
revenue, that you can look to? I shudder to think what happens
in the face of not having this bill pass, what happens in the
case of the school system and health care delivery system that
have been so impacted by the immigration. So do you have--what
would happen if we are not able to pass this H.R. 2522?
Mr. Camacho. What happens is, as we are looking, there
would probably have to be more managed care. In other words,
the type of care we are providing right now to the medically
indigent, the poor on island, both for local and non-residents,
is pretty much an unlimited type of coverage. In fact, it
provides more coverage than those who are on paid plans. So
there would have to be some control on the level or type of
service granted. But we have to be sensitive to the fact that
many of these individuals or people do not have the capacity or
can avail themselves to any type of insurance program.
We are going to have to focus more and more, again, on, as
I have mentioned, preventative health care, but for the
immediate financial needs, there really is no other source,
other than to drive the economy even more so to the point where
we can't afford to pay for more of these services. But we are
in a real bind right now and it only means that more and more
of our public assistance programs are strained and the ability
to provide adequate health care and education and public safety
are, again, strained and limited.
Mrs. Christensen. And it will affect the entire Guamian
population. The strain on the services will cause problems for
everyone on Guam.
Mr. Camacho. Absolutely. There is no way around the impact.
It is there. Again, we continue to play our role and are
supportive as we welcome all people into our island, but we are
also sensitive to the fact that it does take away from
providing for our own people.
We, by law, cannot turn anybody away in our hospitals, nor
can we turn anyone away from our public health system. The
greatest impact, of course, are from those that do not have the
capacity or the ability to pay for such services. But we
continue, again, with the policymaking body of the legislature
and the leadership of the Speaker to do what we can in
providing for our people.
Mrs. Christensen. We commend both of you for the efforts
that you have put forward to make sure that everyone living in
Guam receives a basic level of services, whether they are
natives of Guam or whether they have immigrated there. Thank
you.
Mr. Camacho. Thank you.
Mrs. Christensen. Thank you, Madam Chair.
Mrs. Cubin. Thank you. I would now like to recognize Mr.
Faleomavaega.
Mr. Faleomavaega. Thank you, Madam Chairwoman. I first
would like to thank you for extending the time allotted to the
distinguished Governor and our Speaker for their statements. I
cannot agree with you more, given the fact that these gentleman
have traveled such long distances. They at least should be
given that courtesy of presenting their statements the way they
did and I thank you for that.
Having lived and having visited Guam several times, I feel
like I am at home and I want to offer my personal welcome to
the good Governor Camacho and my good friend Ben Pangelinan for
being here this afternoon and for their testimony. And I want
to say, Governor Camacho, that was a very moving and most
profound statement that I have ever heard as a member of this
Committee in expressing the serious needs that are confronted
now by the Government of Guam and the good people of Guam and I
just want to say that.
And my friend Ben, I am so happy to see you. You haven't
lost much weight, but that is all right.
[Laughter.]
Mr. Faleomavaega. You must have good--
Mrs. Cubin. Neither have I.
[Laughter.]
Mr. Faleomavaega. I want to ask Governor Camacho and also
Speaker Pangelinan, the proposed Compact, there is a provision
in there that directs the Governors of Guam and Hawaii, NMI, to
submit a report to the President with reference to the effect
of immigration to these localities. Apparently, there are some
serious problems in the way that this was done in this
provision of the proposed Compact. Do you agree with this? Were
you made aware that this was the proposal that was going to be
put in the proposed Compact?
Mr. Pangelinan. No, we were not. We passed a local law that
would allow us observation status, self-appointed observation
status of the Guam legislature. But, of course, the Federal
Government did not respond positively to that. Really, since we
were most impacted--
Mr. Faleomavaega. What I meant in my question is this
provision which required the yearly reporting--
Mr. Pangelinan. Right.
Mr. Faleomavaega. --on this impact has now been stricken.
It is not in the proposed Compact. This provision or this
requirement is no longer in the proposed Compact.
Mr. Pangelinan. That is correct.
Mr. Faleomavaega. And I was wondering, were you made aware
of this change?
Mr. Pangelinan. No, not made aware.
Mr. Faleomavaega. And do you agree with this proposed
change?
Mr. Pangelinan. No. I think that there should be some
methodology and mechanism for the territories to express and
document the impact that migration has on the territories and
the State of Hawaii.
Mr. Camacho. And I also believe that without information,
without accurate data, then it would be difficult for the
territories to make their case in requesting for additional
funding. So it is absolutely interesting.
Congressman, may I just make one clarification and ask you
a question. I know that when we were before the President, he
couldn't pronounce your name, so you introduced yourself as
John Wayne.
[Laughter.]
Mr. Faleomavaega. Madam Chair, I want to share this little
experience.
[Laughter.]
Mr. Faleomavaega. The President was so kind to invite us to
the signing of the founding of the interagency group at the
White House, and as he did, he introduced the good Governor and
introduced Congresswoman Bordallo and also Congresswoman
Christensen. And when he came to my name, he stood there in
total silence for about 10 seconds.
[Laughter.]
Mr. Faleomavaega. He looked at me and still was in silence.
[Laughter.]
Mr. Faleomavaega. So I just yelled out amidst some 200
Asian-Pacific Americans in that whole hall and I said, ``Just
call me John Wayne, Mr. President.''
[Laughter.]
Mr. Faleomavaega. And for that, I said he owes me a round
of golf for not being able to pronounce my name. Yes, I do
remember that, Governor.
Mr. Camacho. And I want to thank you for continuing to
fight for the territories.
Mr. Faleomavaega. You mentioned about this typhoon, and I
also experienced what it means to go through a typhoon, Madam
Chair, in Guam, believe it or not. The typhoon that I was
exposed to was only 150 miles an hour. You talk about a
whistling wind, Madam Chair. You will never experience such an
awful experience of going through a typhoon.
I want to ask Governor Camacho, this Typhoon Pongsona, how
many miles per hour was that typhoon?
Mr. Camacho. I believe it was recorded at up to 180 miles
an hour.
Mr. Faleomavaega. Almost 200 miles an hour.
Mr. Camacho. Yes, and gusting up to almost 200, I believe.
Mr. Faleomavaega. See, west of the date line, it is called
a hurricane, but when it comes to those of us in the Pacific,
it is called a typhoon. It has the same effect. And also, the
Chata'an typhoon, how many miles an hour was that typhoon?
Mr. Camacho. I think that was sustained about 150 miles an
hour, sustained winds, but again, it may gust up to 180 or
more.
Mr. Faleomavaega. I want to commend Speaker Pangelinan for
being the senior poet here on the Committee. I also enjoy
reading some of the poems by Robert Frost. You had mentioned
about ``The Road Not Taken.'' I want to share a little
experience with my good friend Ben here that, actually, this
road has been taken and has been taken several years, several
times, as I had expressed earlier, Madam Chair.
A couple of years ago, I said I served on the International
Relations Committee, our government by the stroke of the pen,
the President forgave $500 million in debt to Jordan. And now,
as I speak, Madam Chair, in our dealings with our good friends
from Pakistan, we are offering a $3 billion package aid to the
Government of Pakistan. And in addition to that, Pakistan owes
us some $2.4 billion and we are forgiving Pakistan $379
million.
So this is not a road as if we have never taken before, Mr.
Speaker. We have taken the road before. Now, the entities may
not be the same, but I would think, I would think that of all
the people that we ought to be giving some sense of a priority,
it should be our own people, our own government, our States,
our territories.
And again, as both the Speaker and the Governor have
eloquently stated, this is not something as if they are asking
for handouts. This is an expenditure that the Guam government
has simply taken and all they are simply saying, asking the
Congress and the government, please, reimburse us for the
expenditures that we have taken in taking care of our
Micronesian brothers and sisters, and that is basically the
situation.
I want to ask the Governor and Speaker Pangelinan, what is
your opinion of the administration's position on this bill?
Obviously, they are against it, but I would like to ask what
your opinion is. Can you think of some other creative ways to
convince my good friend Mr. Pula and Mr. Cohen and Secretary
Norton that this issue should be taken to the cabinet meeting
in such a way that the Department of the Interior, as the lead
agency for the insular areas, that this reconciliation bill
should have the administration's stamp of approval? Governor?
Mr. Camacho. Well, I certainly will be meeting with David
Cohen and the group there. I understand they have taken a
position, and basically, again, they feel that it is a matter
of jurisdiction with them as to whether or not they can speak
to the release of any obligation from any respective Department
or agency to that of the Government of Guam. I can certainly
respect that position.
But I believe there is still an avenue of negotiation, as
they mentioned. Should this not prevail, then we could perhaps
work directly with the respective agencies or Departments
within the administration with the endorsement and support of
Department of Interior as an alternative way of addressing each
of the respective debts or obligations that we have.
But again, I think in so doing, we must continue to make
the case that the reasoning behind this is, of course, to
offset any debt or obligation that the United States may have
in the way of living up to its obligation to the territory for
the costs of Compact impact on Guam.
Mr. Faleomavaega. You know, President Truman had on his
desk a little phrase saying, ``The buck stops here.'' I can
understand the agencies are constantly fighting among
themselves, who has jurisdiction. This goes on all the time.
But don't you think that this should have the President's
personal attention? Wouldn't it be nice to see that the
President directs these Federal agencies, this is the way it is
going to go?
Mr. Pangelinan. I agree and--
Mr. Faleomavaega. Do you think that this will be the
solution to the problem that we are seeing here?
Mr. Pangelinan. I agree. You know, if the Secretary of
Interior feels that they don't have the jurisdictional
authority to do so, perhaps the bill should just be changed and
say, the President shall direct the Secretary of Interior to
offset these amounts.
And on the issue of the road not taken, I agree with you.
It has just never been taken for loyal Americans. It has been
taken for people who have opposed us in the international
arena. It has been taken for people who charge us air landing
rights when we have to prosecute a war for the protection of
our country on terrorism and the abolishment of terrorism
around the world. I remember reading where Turkey was
negotiating with the United States $200 million in aid in order
to have their planes land, while they were taking off and
landing every single day in Guam at Anderson Air Force Base.
Mr. Faleomavaega. Mr. Speaker, if I might interrupt you,
the Turkish people got smart.
Mr. Pangelinan. Yes.
Mr. Faleomavaega. You see, the last time, we made all
promises to Turkey during the Gulf War--
Mr. Pangelinan. I remember.
Mr. Faleomavaega. --we never--
Mr. Pangelinan. Paid up.
Mr. Faleomavaega. --we never fulfilled our promises. So the
Turkish people and the government said, hey, I want something
in writing, and that is the problem that we face with Guam.
You made a very interesting statement, Mr. Speaker, about
why not change the bill just to say that the President
directs--
Mr. Pangelinan. The Secretary of Interior.
Mr. Faleomavaega. No, not even the Secretary of Interior,
the appropriate Federal agencies to forgive these debts.
Mr. Pangelinan. I would be certainly pleased with that, I
am sure as well as the good author of that change.
Mr. Faleomavaega. Again, I want to offer my fondest
thoughts to the Governor and the Speaker and my good friend,
the gentlelady from Guam, for proposing this legislation that I
sincerely hope, Madam Chair, that it will pass the Committee
and it will pass the House and it should pass the Congress.
Thank you, Madam Chair.
Mrs. Cubin. Ms. Bordallo?
Ms. Bordallo. Thank you very much. It has been a long
morning and now we are into the afternoon. I want to thank you,
Madam Chairwoman Cubin, and, of course, our acting Ranking
Member here, Eni Faleomavaega. And I want in particular to
thank the Governor of Guam, the Honorable Felix Camacho, and
our Speaker, the Honorable Ben Pangelinan, for traveling over
10,000 miles to be here. And certainly for our two top island
leaders to come all of this way, and knowing the economic
situation and the monies involved, to travel this distance to
testify, you understand, Madam Chairwoman, the serious economic
situation and the need for this legislation to go forward.
I want to point out, too, that I am so very proud to say
this is truly a bipartisan effort. I feel that every citizen on
Guam, if they could all travel here, would be here to testify
on behalf of this particular bill, particularly when we are
currently laying off people in our government, cutting their
hours.
I will say that I took note of Governor Camacho's comments
during his speech and he mentioned, while we are welcoming our
Micronesian brothers and sisters, we are saying farewell to our
own people because they cannot find work, the banks are taking
over their homes, and it is a truly sad situation. So I just
wanted to point that out and to extend a very warm thanks to
both of you.
Madam Chairman, without objection, I would like to enter
several testimonies for the record.
Mrs. Cubin. Hearing none, so ordered.
[NOTE: The information submitted for the record by Ms.
Bordallo has been retained in the Committee's official files.]
Ms. Bordallo. Thank you very much.
Mrs. Cubin. I would like to thank the witnesses for their
valuable testimony and the members for their questions.
The members of the Committee may have some additional
questions for the panel and we will ask that you respond to
these in writing. The hearing record will be held open for
these responses, and we thank you for that.
If there is no other business before the Committee, then
the Committee is now adjourned.
Mr. Camacho. Thank you very much.
[Whereupon, at 1:57 p.m., the Committee was adjourned.]
[Additional material submitted for the record follows:]
[A letter submitted for the record by Hon. Linda Lingle,
Governor, State of Hawaii, follows:]
[GRAPHIC] [TIFF OMITTED] T8192.008
[GRAPHIC] [TIFF OMITTED] T8192.009
[Responses to questions submitted for the record follow:]
Response by Senator Peter Christian, Federated States of Micronesia, to
a Question Submitted for the Record
Question from Hon. Ken Calvert
What is the rate of population growth in the Federated States of
Micronesia and what is the standard of living like throughout the four
states?
The 2000 census indicated a population growth rate of 0.3 percent
over the preceding census conducted in 1994. The growth rate has
declined significantly since a peak in the mid-1980s, and today is the
lowest in the region.
The standard of living varies widely from state-to-state, and
between the main urban areas and the outer islands (where 20 percent of
the total population resides). It is important to recognize that these
were subsistence economies only slightly more than 50 years ago, and
these traditional patterns continue to dominate in the outer islands.
Conditions in the main urban areas are comparable with mid-tier
developing countries. However, there is a narrower gap between the rich
and poor than one might expect to find in most developing countries due
to the system of familial and community ``safety nets'' that provide a
basic standard of living for nearly everyone.
The infrastructure is reasonably well developed. Most areas have
good electricity and communications access. Access to clean water and
sanitation is often a problem in many areas, particularly in the
outlying villages and the outer islands. The greatest infrastructure
challenges are in the areas of health and education. There is a severe
shortage of adequate clinics and schools throughout the country. Many
facilities date to the early days of the Trusteeship or even earlier.
The harsh climate has taken its toll on these buildings, many of which
were not constructed from appropriate materials. As a result services
have suffered.
Like most small island developing countries, the FSM has few
exploitable natural resources and suffers constraints due to factors
such as distance from markets. Efforts to develop the FSM's tourism
industry began to bear fruit in the late 1990s and early 2000s, but has
suffered a severe setback in recent years due to September 11 and SARs-
related reductions in travel.
For these reasons, the FSM remains heavily reliant on assistance
from its primary development partner, the United States. Reductions in
levels of financial and program assistance invariably manifest
themselves in the standard of living, often immediately and
dramatically. It is for this reason first and foremost that the FSM
government has expressed its concern over the adequacy of financial
assistance under the proposed Compact amendments.
______
Response by Susan Westin, U.S. General Accounting Office, to Questions
Submitted for the Record
Question from Mr. Rahall
How will annual economic assistance under the new proposed Compact
term maintain its real value with both an annual decrement and a
partial inflation adjustment? How would the real value be affected if a
full inflation adjustment is used? Has GAO examined this issue?
Through the amended Compacts, the United States provides the FSM
and the RMI with annual grants targeted to priority areas (such as
health, education, and infrastructure), audit assistance, and disaster
assistance; contributions to a trust fund; and certain Federal
services. Annual grant amounts to each country would be reduced each
year as U.S. contributions to the trust funds increase each year by the
grant reduction amount.
Under the amended Compacts, U.S. payments are adjusted for
inflation at two-thirds of the percentage change in the U.S. gross
domestic product implicit price deflator. With this adjustment and the
Congressional Budget Office's forecasted inflation rate, grants for
priority areas to the FSM increase from $76.7 million in 2004 to $82.8
million in 2023. The real value of the FSM grants falls over the time
period, from $76.7 million in 2004 to $55 million in 2023, expressed in
2004 U.S. dollars. Grants for priority areas to the RMI increase from
$33.8 million in 2004 to $36.5 million in 2023. The real value of the
RMI grants falls over the time period, from $33.8 million in 2004 to
$24.2 million in 2023, expressed in 2004 U.S. dollars.
If U.S. payments under the amended Compacts were fully adjusted for
inflation the grant amounts increase more in current dollars and
decline less in real, 2004 U.S. dollars. Grants for priority areas to
the FSM increase from $76.7 million in 2004 to $94.7 million in 2023.
The real value of the FSM grants falls over the time period, from $76.7
million in 2004 to $62.9 million in 2023, expressed in 2004 U.S.
dollars. Grants for priority areas to the RMI increase from $33.8
million in 2004 to $41.5 million in 2023. The real value of the RMI
grants falls over the time period, from $33.8 million in 2004 to $27.6
million in 2023, expressed in 2004 U.S. dollars.
Question from Ms. Bordallo
Other than U.S. assistance, what level of assistance does the FSM
and the RMI receive from other governments? Has assistance from other
governments increased or decreased in the recent past?
GAO conducted a review of donors' experiences in the Pacific region
that was published in August 2001. The review used annual assistance
development assistance statistics from 1987 through 1999 as reported by
the Development Assistance Committee of the Organization for Economic
Cooperation and Development (OECD). For the FSM and the RMI, GAO also
included data from annual financial audits to establish the level of
U.S. assistance data. For the most recent 5-year period that we
examined, 1995-1999, U.S. assistance accounted for 87 percent of total
assistance from all OECD donors to the FSM and 78 percent of total
assistance from all OECD donors to the RMI. Non-U.S. assistance over
the 5 years amounted to $81 million to the FSM and $72 million to the
RMI. Key donors to the FSM and the RMI included the United States, the
Asian Development Bank, and Japan. Over the 5-year period, non-U.S.
assistance to both countries fluctuated. [The OECD database does not
report assistance provided by China and Taiwan because they are not
members of the OECD's Development Assistance Committee. Despite our
attempts to collect data from China and Taiwan, these countries were
unwilling to provide the information. Further, assistance from these
nations may not be fully reflected in the FSM and RMI financial
audits.]