A Report on the
STATE OF THE ISLANDS
Chapter 1: The Department of the Interior's Role in the Insular Areas
1.1 The Department's Evolving Role in Insular Affairs.
As a result of the President's National Performance Review, the Department took a major step in 1995 to redefine and restructure its relationship with the U.S. insular areas. In recognition of the political advancement and increased self-government of the insular areas, the Office of Territorial and International Affairs and the positions of Assistant Secretary and Deputy Assistant Secretary were abolished. A new Office of Insular Affairs was created on August 4, 1995, by Secretary's Order No. 3191, and the Secretary's responsibilities for insular affairs were delegated to that office. The new office is headed by a Director who reports to the Deputy Assistant Secretary for Policy under the Assistant Secretary for Policy, Management and Budget.
This streamlining resulted in a reduction of staff from 45 to 25, and a cost savings of $l.2 million annually. Two of the five field offices were closed. Coordination of international activities was transferred to the Department's Office of Policy Analysis and certain budget activities were transferred to the Office of Budget.
The mission of the Office of Insular Affairs is to build mutually beneficial partnerships between insular areas and federal and other sources of assistance and to provide financial and technical assistance to help the insular governments attain locally determined economic, social and political goals. The office also facilitates the development and implementation of federal policies regarding the insular areas.
The streamlining of insular affairs was an appropriate step both in terms of the Administration's reinvention initiative and the evolving nature of the Department's relationship with the U.S. insular areas. That relationship has changed markedly over the last decade. As the insular areas achieved greater degrees of self-government and self-sufficiency, the Department's role has become that of facilitator of federal relations and assistance.
Interior's role began in 1931 with the Navy Department's transfer to the Department of jurisdiction for the United States Virgin Islands (USVI). Guam, which had been under Navy control since its acquisition during the Spanish American War in 1898, was transferred to the Department's jurisdiction in 1950. American Samoa, parts of which had been ceded to the United States as early as 1900, was similarly transferred from the Navy to the Department in 1951.
In the past, the Secretary of the Interior exercised broad authority in the insular areas. Chief executives of the insular governments were appointees of the President or the Secretary, and the Secretary had the legal authority to supervise and give binding directions to them. Since the installation of popularly elected legislatures (Guam-1950, USVI-1954, American Samoa-1961, and the CNMI-1979) and governors (Guam and USVI 1971, American Samoa 1978, the CNMI, 1979), each of the U.S. insular areas has become responsible for the administration of local government functions. Although the Congress has placed with the Secretary certain continuing budget and program coordination authority and responsibility concerning U.S. insular affairs, the local governments are not entities of the Department, nor are they agencies or instrumentalities of the Federal Government.
Interior's relationship with other U.S.-affiliated Pacific islands stemmed from a post-World War II trusteeship. The Northern Mariana Islands, the Marshall Islands, and the Caroline Islands were grouped into the Trust Territory of the Pacific Islands (TTPI) by the United Nations in 1947. Under the Trusteeship Agreement with the U.N. Security Council, the United States exercised administrative jurisdiction over the TTPI. The Navy administered the TTPI until 1951, when that authority was given to the Secretary of the Interior. Under the trusteeship, the Secretary had broad legal authority over the trust islands, including the power to appoint governing officials, amend budgets, and veto local laws.
Following an act of self-determination by its voters, the Northern Mariana Islands became a U.S. Commonwealth in 1976. The Covenant between the CNMI and the United States became fully effective by Presidential Proclamation in 1986. The Marshalls and the Federated States of Micronesia became sovereign states in 1986. As the Republic of the Marshall Islands and the Federated States of Micronesia (FSM), these islands are now affiliated with the United States as freely associated states. Palau became a freely associated state on October 1, 1994. As freely associated states, Palau, the Marshalls, and the FSM are sovereign and their relations with the United States are handled by the Department of State. The Secretary of the Interior, however, continues to have Federal program coordination and disbursement and monitoring responsibilities for U.S. funds annually provided these island states under the terms of the Compacts of Free Association.
1.2 Fiscal Year 1996 Insular Affairs Budget
In April 1996, the FY 1996 Omnibus Appropriations Act was passed which included funding for insular areas and the new Office of Insular Affairs.
The Act included, as Section 118, the language of the Insular Development Act which was recommended to the Congress by the Administration for enactment in February 1995. Section 118 reallocates $16.72 million of the $27.72 million in mandatory Covenant funding. The CNMI will continue to receive $11 million annually for seven years subject to an equal local match and all other requirements of the December 1992 Agreement of the Special Representatives. Guam will receive $4.58 million annually for six years to mitigate impacts caused by the Compacts of Free Association. American Samoa will receive $7.72 million for capital infrastructure projects in FY 1996 and will be eligible for additional funding in future years. A total of $4.42 million is allocated for the resettlement of Rongelap in 1996 and additional funds would also be available, if necessary, in future years. In FY 1997, the College of the Northern Marianas will receive $3 million. For FY 1997 and beyond, up to $3 million may be allocated for use by federal agencies and the CNMI to address immigration, labor, and law enforcement issues in the CNMI.
For FY 1996, the act provides American Samoa with $23.046 million for operations. It includes $24.938 million for Compact of Free Association funding for federal services assistance ($6.964 million), health and education grants ($14.9 million), Enewetak food assistance ($1.081 million), and Rongelap resettlement ($l.983 million). With respect to Rongelap resettlement, the act stipulates that the total of all additional contributions from any federal source may not exceed $32 million and shall be contingent upon an agreement satisfactory to the President that such contributions are a full and final settlement of all obligations of the United States to assist in the resettlement of Rongelap Atoll.
Technical assistance program funding includes $5.65 million for general technical assistance, $2.4 million for maintenance assistance, $595,000 for brown tree snake eradication, $750,000 for disaster assistance, and $l,500,000 for insular management controls. A total of $3.527 million was included for the smaller, reorganized Office of Insular Affairs.
The OIA workload consists of management of financial and technical assistance grants, and policy responsibilities for seven insular governments. OIA manages and continuously monitors several hundred grants, ranging from major insular government operations and construction funds to small technical assistance awards, to ensure that these grants are used in accord with federal laws and regulations. In addition, mandated audits must be reviewed, answered, and monitored for corrective action.
OIA's program and policy coordination is carried out with numerous federal departments and agencies. This work is often performed through issue specific working groups of federal representatives which meet with insular officials to address issues. Memoranda of understanding and other cooperative agreements are used to set out common goals and courses of action, and to assign responsibilities for accomplishing the aims of the groups. Continuous liaison with island officials is maintained. OIA also tracks and analyzes pending federal legislation which could affect insular areas. Frequent requests for information must be answered by OIA staff.
A detailed description of the major insular assistance programs funded and monitored under OIA's FY 1996 budget follows:
Compacts of Free Association
OIA has responsibility for coordinating and monitoring appropriations made pursuant to the Compacts of Free Association with the FSM, the Marshall Islands, and Palau. The relationship with these governments is defined by the Compact of Free Association Act of 1985 (Public Law 99-239) and the Palau Compact of Free Association Act (P.L. 99-658). Under the compacts, the United States agreed to provide financial assistance for fifteen-years ending in 2001 for the FSM and Marshalls and in 2009 for Palau.
Government Operations Subsidies
American Samoa's economy is currently unable to generate a level of local revenues to assure that essential public services are provided to its citizens. Therefore, the Federal Government annually provides direct support for American Samoa general government operations through OIA. In FY 1996, American Samoa received $23.046 million under this program. The allocation of the Department's operations grants in American Samoa is made according to American Samoa's administrative and legislative practices.
Capital Improvement Grants
The Department has annually budgeted for the construction of needed capital improvements in the insular areas when the lack of local funding poses a threat to health and safety or when such improvements are essential to economic development.
Construction grants are made subject to terms and conditions that include the insular governments' compliance with the provisions of OMB Circular A-102, OMB Circular A-128 (requirements of the Single Audit Act), and other laws and regulations governing federal grant funds. OIA uses the services of the Army Corps of Engineers, Honolulu Engineer District, to provide engineering expertise in its review and oversight of construction grants in the Pacific insular areas.
Covenant Grants
Section 702 of the Commonwealth Covenant (P.L. 94-241 as amended by P.L. 99-396) provided multi-year financial support to the CNMI to attain the mutual goals of the U.S. and the CNMI to improve the CNMI's standard of living, develop the CNMI economy, and lessen its dependence on U.S. assistance. The first agreement provided $192 million from 1978 to 1985 for government operations and capital improvements. The second multi-year agreement, covering the fiscal years 1986 through 1992, provided a total of $228 million for government operations and capital development.
Congress was not able to reach agreement on the disposition of this program for FY 1992 through FY 1995, and therefore the CNMI continued to receive $27.7 million in each of those years. Use of these funds is subject to the terms of an agreement made between the CNMI and the Department. These grants are subject to the Department's oversight and audit.
In the FY 1996 Appropriations Act, the Congress reallocated the Covenant funding, with the CNMI to receive $11 million annually for the next seven years, subject to an equal local match and all other requirements of the December 1992 Agreement of the Special Representatives. In addition, in FY 1997, the College of the Northern Marianas will receive $3 million. For FY 1997 and beyond, up to $3 million may be allocated for use by federal agencies or the CNMI to address immigration, labor, and law enforcement issues.
Fiscal Assistance to U.S. Territories
In FY 1996, OIA has budget authorization for $92.6 million for fiscal assistance payments to Guam and the USVI. This permanent, indefinite appropriation, authorized under the Guam and USVI organic acts, provides the mechanism to transfer to the island treasuries certain tax revenues collected by the U.S. Treasury. For Guam these funds consist of federal income tax collections, mainly from federal employees on Guam. For the USVI, they are federally collected excise taxes on USVI rum imported into the United States customs territory.
Each year, Guam and the USVI governments estimate these tax collections for the upcoming fiscal year and are given an advance payment (before the fiscal year begins) based on that estimate. The amounts advanced for FY 1996 were $39.9 million to Guam and $43.6 million to the USVI. When actual tax collection figures are available from the U.S. Treasury, an adjustment is made to correct any under or over-payment that was made in advance. Figures included in the budget are only preliminary estimates of those advances and do not restrict in any way the final estimates development by the governments or the amount of the advance payment.
Technical Assistance Program
A total of $5.65 million was appropriated for general technical assistance projects in FY 1996. General technical assistance funds are used to provide the insular areas with funding for projects designed to encourage economic development opportunities, to enhance health care and education, to improve government efficiency, and to assist the economies in becoming self-sufficient.
Technical assistance is provided through grants, reimbursable support agreements with other federal, state and local agencies, contracts with private firms, or through direct assistance by OIA staff. It may be in the form of research, planning and program assistance, studies, demonstration projects or personnel services. A list of recent technical assistance grants is appended to this report.
In addition, to the general technical assistance funding, $595,000 was included for the Brown Tree Snake program; $750,000 for Disaster Assistance; and $1.5 million for Insular Management Controls.
Operations and Maintenance Improvement Program
In FY 1996, the OIA budget included $2.4 milliion for the Operations and Maintenance Improvement Program (OMIP) for the insular areas. These funds, when matched by local government funds, are used to protect federally-funded infrastructure components and to assist the islands in providing consistent and reliable utility services. The islands' geographic isolation, tropical climate, and the frequency of major storms require that construction conform to exacting standards and be optimally maintained.
1.3 Major Issues and Initiatives in Federal-Insular Area Relations
In carrying out its responsibilities, the Department and the Office of Insular Affairs, at the request of insular governments, and in cooperation with them and Congressional oversight committees, participated in several initiatives aimed at addressing insular area issues. Major FY 1996 projects included:
Federal-CNMI Initiative on Labor, Immigration and Law Enforcement
This initiative was funded with a $7 million appropriation by the Congress in Public Law 103-332 for fiscal years 1995 and 1996. Of this amount, $4 million was allocated by the Department of the Interior for Federal agency action and $3 million for CNMI action. The latter included $l.5 million for a computer system to track alien workers in the CNMI. In FY 1997, Congress has authorized the Secretary to allocate up to $3 million for the initiative.
The Congress endorsed the initiative due to concerns about immigration and law enforcement, and allegations of maltreatment of alien workers in the CNMI.
On June 4, 1996, the Administration submitted its second annual report on the Federal-CNMI Labor, Immigration, and Law Enforcement Initiative to the U.S. Congress. The report contained two recommendations: l) to establish in Federal law the annual 30-cent the minimum wage contained in the then-existing CNMI law; and 2) to use Covenant funds for prison and detention facilities.
In the report, the Administration noted areas of progress through the combined efforts of the Government of the CNMI and the federal agencies. Governor Tenorio has strongly endorsed the CNMI's actions and the increase of federal law enforcement presence. The federal agencies and the CNMI are working cooperatively, with the Office of Insular Affairs acting as an ombudsman, to address the problems with labor, immigration, and law enforcement in the CNMI.
As a result, the Initiative has brought increased federal resources and staff from the U.S. Departments of Labor, Justice, and Treasury to the CNMI to enforce federal law. Full-time federal staffing in the CNMI increased by eight (six full-time and two temporary duty personnel). Federal agencies are also providing training to local agency personnel. Caseloads for the Federal District Court, the United States Attorney, the U.S. Department of Labor, National Labor Relations Board, and law enforcement agencies have all risen dramatically.
The following areas of concern were highlighted in the report: CNMI difficulty in controlling immigration, lack of consistent CNMI policy on implementing a minimum wage analogous to the federal minimum wage, and infrastructure and social costs of uncontrolled immigration.
The report sets an agenda for the next year, including l) the possible development of options on an increased federal role in immigration into the CNMI, 2) assurance of payment of unpaid wages to employees and unreimbursed costs to the CNMI government, 3) investigation of shadow contracts that are forced on alien workers, 4) investigation of prostitution activities, 5) development of a construction plan for correction and detention facilities, and 6) continuation of international cooperation to complement federal efforts in the CNMI regarding labor, immigration, and law enforcement policies.
American Samoa Fiscal Management and Law Enforcement Improvement
Over the past several years, the American Samoa Government (ASG) has experienced a deteriorating financial situation. Government spending increased, debts rose, public employment remained high, while revenues decreased or remained flat. Local government mismanagement and corruption exacerbated the problem. In response to an Interior Department Inspector General's audit which indicated ASG's deficit was more than $60 million, Governor A.P. Lutali and other local leaders requested federal assistance to improve the fiscal management, accountability, and law enforcement capabilities of the ASG. At the direction of Congress, an ASG-Interior Joint Working Group was established two and a half years ago to implement a plan of action to address the problems identified in a 1992 GAO report. OIA concluded several agreements with the ASG and federal agencies to address these problems.
To assist ASG in improving its overall financial management, OIA worked with local leaders to identify and hire a financial planning group to help ASG prepare a long-term financial recovery plan. CORE, Inc. began its work in American Samoa in May 1995 to assist ASG in preparing a long-term financial recovery plan. After their preliminary review, CORE officials concluded that ASG can institute immediate revenue-enhancing measures, including modest increases in local government fees for hospital, court, airport, seaport, telephone, hotel, and golf course services. This enhancement could provide $3 million in annual additional revenue to the cash-strapped government. CORE also recommended mid and long-term cost containment measures for ASG. On October 1995, CORE submitted an immediate-term financial recovery plan to the ASG-Department Joint Working Group. Governor Lutali endorsed the financial plan and committed to support implementing the recommendations of the Joint Working Group.
In addition, CORE and the JWG plan to proceed with Phase II of the financial recovery plan in the fall of 1996. This mid-term plan will include more aggressive cost-cutting and revenue enhancement measures, options for restructuring the current operations of the ASG, opportunities for partial or complete privatization of selected ASG operations, opportunities for additional grant revenues, and a strategy for enhancing industrial productivity, economic development, and direct foreign investment in the island.
OIA and Interior's Information Resources Management Office have worked with ASG to fully automate ASG's financial accounting systems. OIA signed a grant with Governor Lutali, providing the local government with an additional $800,000 (bringing the total grant to $2.4 million) for the purchase and installation of a computerized financial management system. The grant will also be used for procuring auditing and accounting support services. In addition, a team from the Internal Revenue Service set up a training program for local officials in tax collection and enforcement. OIA assisted ASG in improving local government fiscal management practices through the Insular Management Control Initiative, which funds training of local government financial management personnel. The ASG and OIA are also working together to establish a cooperative management and maintenance program to improve medical services in the local hospital.
At Governor Lutali's request, a team from the Department of Justice/FBI, in cooperation with ASG, conducted an assessment of white collar crime involving public funds and the need for investigative and prosecutorial assistance to supplement local capabilities. The Justice report concluded that major local government fraud, including the theft and misuse of federal funds, is contributing significantly to American Samoa's worsening financial condition and neither local nor federal law enforcement capabilities are adequate to deal with the problem.
One of the recommendations of that report was for the Administration to submit legislation providing limited federal court jurisdiction in American Samoa. This jurisdiction would also provide for the collection of debts owed to the United States by residents of American Samoa. At present, but for a few minor exceptions, no federal court has jurisdiction over American Samoa and this void has made it extremely difficult for the United States to enforce its laws in that territory and to collect debts owed to it by inhabitants of that territory.
The jurisdiction would be limited to civil, criminal, and regulatory statutes of the United States and only at the suit of the United States. This is intended to allow American Samoa to protect its culture and customs, especially the extended family, traditional chiefs (Matai), and communal land tenure systems. The legislation would specifically provide that the court not have jurisdiction over litigation that directly affects a Matai title or communal property. This limitation stems from the U.S. legal obligations under the Treaties of Cession.
Freely Associated State Economic Restructuring
OIA is working closely with the State Department to review economic development under the Compact. As a part of a three-year-long review, freely associated state (FAS) and Asian Development Bank (ADB) officials recommend refocusing, restructuring, and improving economic performance in the FAS for the second half of the Compact period. The recommendations include continuing the annual bi-lateral consultations, started in 1994, under the Compact; and the establishment of multilateral donor consultative groups and in-country economic advisory teams.
As part of this effort in FY 1996, OIA coordinated an international effort that worked with FSM and Marshalls leaders and representatives of the ADB to develop a systematic plan for comprehensive economic reform in those FAS. The project aims at helping those islands institute investment, trade, and other economic policy reforms, and thus use U.S. funding more effectively under the Compact and to prepare the islands for the post-Compact era. The goal is to assist the islands in achieving economic growth through greater private sector development, thereby increasing economic self-reliance.
Currently, U.S. Compact funds account for more than 50 percent of the islands' Gross National Product, but have gone primarily to maintain large public sectors. The islands are not achieving the private sector development needed to prepare them for the phase-out of U.S. Compact funding in 2001. All of the major parties to the effort agreed that the ADB would send Policy Advisory Teams to the islands to develop recommendations for achieving these reforms. All major aid donors (U.S., Japan, ADB) agreed to support the reform recommendations developed by the teams. The donors expect the islands to adopt and implement the ADB's recommendations and they have indicated that any post-Compact aid would be tied to the success of these reforms. OIA technical assistance funded the $666,000 requested for the first year, U.S. share of the reform project's cost. The ADB meetings on the FAS took place in Auckland in May 1995, and in Manila in December 1995, at which time the islands began to present detailed policy reform and public investment programs modelled on the ADB's recommendations.
Insular Development Act
In April 1996, the FY 1996 Omnibus Appropriations Act was passed which included funding for insular areas and the new Office of Insular Affairs.
The Act included, as Section 118, the language of the Insular Development Act which was recommended to the Congress by the Administration for enactment in February 1995. Section 118 reallocates $16.72 million of the $27.72 million in mandatory Covenant funding. The CNMI will continue to receive $11 million annually for seven years subject to an equal local match and all other requirements of the December 1992 Agreement of the Special Representatives. Guam will receive $4,58 million annually for six years to mitigate impacts caused by the Compacts of Free Association. American Samoa will receive $7.72 million for capital infrastructure projects in FY 1996 and will be eligible for additional funding in future years. A total of $4.42 million is allocated for the resettlement of Rongelap in 1996 and additional funds would also be available, if necessary, in future years. In FY 1997, the College of the Northern Marianas will receive $3 million. For FY 1997 and beyond, up to $3 million may be allocated for use by federal agencies and CNMI to address immigration, labor, and law enforcement issues.
Insular Fisheries Amendment
An Exclusive Economic Zone fisheries initiative developed in FY 1995 by an OIA-led federal team resulted in the Administration's submission to Congress of an amendment to the Magnuson Fisheries Conservation and Management Act. The amendment would empower the U.S. Pacific insular areas to manage the renewable Exclusive Economic Zone (EEZ) fishery resources in cooperation with the Secretary of Commerce. The legislation would allow the governments of Guam, the Northern Mariana Islands, and American Samoa, where practicable, to benefit from the sustainable exploitation of these resources, while retaining in the Federal Government all of its authority over these U.S. EEZ fisheries. Federal fees collected for fishing in the EEZ adjacent to these islands would be transferred from the U.S. Treasury to the island treasuries under the same federal policy that provides for the coverover of other federal taxes and fees to the island governments. The proposal was developed over the past two years with fishery officials from the Pacific insular areas through the auspices of the Western Pacific Regional Fisheries Management Council. Guam Delegate Robert Underwood introduced a modified version of Administration bill as a floor amendment to H.R. 39 -- the Magnuson Act reauthorization. Senator Daniel Inouye introduced a similar measure in the Senate.
Disposition of Federal Lands in the Insular Areas
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