PACIFIC ISLANDS REPORT

Pacific Islands Development Program/East-West Center
With Support From Center for Pacific Islands Studies/University of Hawai‘i

By Jaime Espina

KOLONIA, Pohnpei (Marianas Variety, Nov. 6) — Although described by some as a "major breakthrough" in consensus building between the national and state governments of the Federated States of Micronesia, Pohnpei Lt. Gov. Jack Yakana said the recently agreed distribution formula for sector grants under the amended Compact of Free Association with the United States was more a matter of "no choice."

The agreement, reached last week during a meeting of the Economic Planning and Implementation Council — composed of executive and legislative leaders of the four states and the national government —reduces the national government’s share of sector grants while increasing those of the states.

Sources who attended the meeting, which was declared "closed" by the FSM public information office, said the new distribution formula was meant to "balance out the loss" of the 20 percent additional tax revenue, or ATR, the states had previously enjoyed but which was taken away by a recently passed law that restored to equal the level of revenue sharing between the national and state governments.

Yakana said he "would rather have the ATR" than the additional $1.2 million Pohnpei stands to get under the new distribution formula because "revenues can grow," thus increasing the state’s share, while the additional sector grants money is fixed.

"But the state governments have no choice because control of the ATR lies with the national government."

He said the new distribution formula was "the only way (the states) could get additional (money) from the national government."

He also said that, while the ATR had specifically been earmarked for education and health, the new agreement does not stipulate how the additional sector grants funding should be used by the states.

"My personal view is I would like to dedicate all the additional money to education and health, to build more classrooms and upgrade our hospitals," Yakana said.

Yakana also corrected earlier statements by sources who attended the EPIC meeting that the new distribution formula has yet to be approved by the FSM Congress.

"The deal is already approved," Yakana said. "Congress doesn’t have to approve it."

He also said that the agreement covered only the 2005 and 2006 fiscal years, although he added there was a "likelihood of (the agreement’s effectivity) continuing" through the 20-year lifespan of the amended Compact once it is ratified.

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