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CNMI, U.S. Initial "Section 702" Funding Agreement

Keith Parsky 202-208-4070


[(from left to right) Deputy Assistant Secretary of the Interior David Cohen, CNMI Resident Representative to the U.S. Pete A. Tenorio, CNMI Lt. Governor Diego T. Benavente]

(February 9, 2004) Commonwealth of the Northern Mariana Islands Lieutenant Governor Diego T. Benavente and Deputy Assistant Secretary of the Interior David B. Cohen today initialed an agreement to provide long-term financial assistance to the Northern Mariana Islands. Also present to witness the initialing of the agreement was CNMI Representative to the United States Pedro A. Tenorio. The agreement would provide up to $13,000,000 per year for the next six years for capital improvement projects and would continue financial assistance indefinitely or until the US Congress chooses to discontinue it.

"This agreement is critically important to the CNMI," said Benavente, who was appointed by Governor Juan N. Babauta to represent the Commonwealth of the Northern Mariana Islands in financial assistance negotiations under Section 702 of the US-CNMI Covenant. "It will allow us to have a stable source of infrastructure funding and will also allow us to compete for additional funds. I am very pleased with the course of the negotiations with Mr. Cohen and I am grateful for the ongoing support of Governor Babauta at every step of the process."

Benavente revealed that under the agreement, the CNMI would be allocated a baseline target of $11,000,000 per year for at least the next six years, but could receive as much as $13,000,000 or as little as $9,000,000 in any year depending on the CNMI's performance with respect to fiscal management and specific project proposals compared with those of other insular areas. For the fiscal year starting in September 2004, the Bush Administration will request $12,423,000 in capital improvement funds for the CNMI.

Cohen, appointed by President George W. Bush to be his special representative in the "Section 702" talks, said that both parties got what they wanted. "This is a win-win situation," said Cohen. "The US wanted to allocate capital improvement funds among the CNMI, Guam, American Samoa and the US Virgin Islands on a competitive basis. The CNMI wanted a stable source of funding so that it could plan its economic development. With this compromise, a significant amount of funding is up for competition. However, the CNMI will have a substantial amount of minimum funding so long as the US Congress doesn't terminate the capital improvement program for the territories, and no one expects Congress to do that."

Section 702 of the Covenant provided for an initial seven-year period of financial assistance to the CNMI Government and, after the expiration of that initial period, the US has continued to provide assistance to the CNMI Government through a series of long-term funding agreements. The most recent long-term funding agreement was executed in 1992. That agreement, which, after being extended by the US Congress, expired September 30, 2003, generally provided the CNMI Government with $11,000,000 per year for capital improvement projects. That funding is being continued by OIA for the current fiscal year.

The 1992 agreement required the CNMI Government to match, dollar for dollar, all capital improvement funds provided by the US. Largely through the efforts of Resident Representative Pedro A. Tenorio, that matching requirement is made optional by the current agreement.

The CNMI's capital improvement funding comes out of a mandatory annual appropriation of $27,720,000 that the Office of Insular Affairs receives to fund infrastructure projects in Guam, the Virgin Islands, American Samoa, the Commonwealth of the Northern Mariana Islands and certain other jurisdictions. "This negotiation was complicated because it was a bilateral negotiation in a multi-lateral context," said Cohen. "The Covenant provides for the US to negotiate directly with the CNMI regarding this funding, and at one time the CNMI was receiving the entire $27.72 million under the Covenant. But in 1996, Congress made this money available to all of the insular areas. So anything that we negotiated with the CNMI would have an effect on what was available to the other insular areas. I always had to make sure that we were being fair to all of the insular areas."

Cohen stressed that there are still a number of steps that need to occur before the agreement can take effect. "Today's initialing means that Diego and I are finished negotiating," said Cohen. "The agreement still needs final approval from the Department of the Interior and approval from the Office of Management and Budget before we take it to the appropriations committees in Congress."