[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
THE COMPACTS OF FREE ASSOCIATION AND LEGISLATIVE HEARING ON H.R. 2408,
H.R. 3407 AND H.R. 4938
=======================================================================
OVERSIGHT AND LEGISLATIVE HEARING
before the
COMMITTEE ON RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
July 17, 2002
__________
Serial No. 107-141
__________
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
JAMES V. HANSEN, Utah, Chairman
NICK J. RAHALL II, West Virginia, Ranking Democrat Member
Don Young, Alaska, George Miller, California
Vice Chairman Edward J. Markey, Massachusetts
W.J. ``Billy'' Tauzin, Louisiana Dale E. Kildee, Michigan
Jim Saxton, New Jersey Peter A. DeFazio, Oregon
Elton Gallegly, California Eni F.H. Faleomavaega, American
John J. Duncan, Jr., Tennessee Samoa
Joel Hefley, Colorado Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland Solomon P. Ortiz, Texas
Ken Calvert, California Frank Pallone, Jr., New Jersey
Scott McInnis, Colorado Calvin M. Dooley, California
Richard W. Pombo, California Robert A. Underwood, Guam
Barbara Cubin, Wyoming Adam Smith, Washington
George Radanovich, California Donna M. Christensen, Virgin
Walter B. Jones, Jr., North Islands
Carolina Ron Kind, Wisconsin
Mac Thornberry, Texas Jay Inslee, Washington
Chris Cannon, Utah Grace F. Napolitano, California
John E. Peterson, Pennsylvania Tom Udall, New Mexico
Bob Schaffer, Colorado Mark Udall, Colorado
Jim Gibbons, Nevada Rush D. Holt, New Jersey
Mark E. Souder, Indiana Anibal Acevedo-Vila, Puerto Rico
Greg Walden, Oregon Hilda L. Solis, California
Michael K. Simpson, Idaho Brad Carson, Oklahoma
Thomas G. Tancredo, Colorado Betty McCollum, Minnesota
J.D. Hayworth, Arizona Tim Holden, Pennsylvania
C.L. ``Butch'' Otter, Idaho
Tom Osborne, Nebraska
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
Tim Stewart, Chief of Staff
Lisa Pittman, Chief Counsel/Deputy Chief of Staff
Steven T. Petersen, Deputy Chief Counsel
Michael S. Twinchek, Chief Clerk
James H. Zoia, Democrat Staff Director
Jeffrey P. Petrich, Democrat Chief Counsel
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C O N T E N T S
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Page
Hearing held on July 17, 2002.................................... 1
Statement of Members:
Bono, Hon. Mary, a Representative in Congress from the State
of California, Statement submitted for the record on H.R.
3407....................................................... 66
Gallegly, Hon. Elton, , a Representative in Congress from the
State of California, Statement submitted for the record on
the Compacts of Free Association,.......................... 109
Hansen, Hon. James V., a Representative in Congress from the
State of Utah.............................................. 2
Prepared statement on H.R. 2408, H.R. 3407 and H.R. 4938. 2
Osborne, Hon. Tom, a Representative in Congress from the
State of Nebraska, Prepared statement on H.R. 2408......... 109
Rahall, Hon. Nick J. II, a Representative in Congress from
the State of West Virginia, Prepared statement on the
Compacts of Free Association............................... 110
Thune, Hon. John R., a Representative in Congress from the
State of South Dakota, Prepared statement on H.R. 2408..... 111
Underwood, Hon. Robert A., a Delegate in Congress from Guam.. 3
Prepared statement on the Compacts of Free Association... 4
Statement of Witnesses:
Brookes, Peter T.R., Deputy Assistant Secretary for Asian and
Pacific Affairs, U.S. Department of Defense................ 5
Prepared statement on the Compacts of Free Association... 7
Christian, Hon. Peter, Chief Negotiator, Joint Committee on
Compact Economic Negotiations, Government of the Federated
States of Micronesia....................................... 45
Prepared statement on the Compacts of Free Association... 46
Response to questions submitted for the record........... 114
Cohen, David B., Deputy Assistant Secretary for Insular
Affairs, U.S. Department of the Interior................... 9
Prepared statement on the Compacts of Free Association... 11
Cournoyer, Robert, Tribal Vice Chair, Yankton Sioux Tribe,
Marty, South Dakota........................................ 91
Prepared statement on H.R. 2408.......................... 92
Keys John W. III, Commissioner, Bureau of Reclamation, U.S.
Department of the Interior................................. 73
Prepared statement on H.R. 4938.......................... 73
Lawson, Michael L., Ph.D., Senior Associate, Morgan, Angel &
Associates, L.L.C.......................................... 94
Prepared statement on H.R. 2408.......................... 96
McCaleb, Hon. Neal A., Assistant Secretary, Indian Affairs,
U.S. Department of the Interior............................ 68
Prepared statement on H.R. 2408.......................... 71
Prepared statement on H.R. 3407.......................... 69
Minthorn, Les, Treasurer, Board of Trustees, Confederated
Tribes of the Umatilla Indian Reservation.................. 76
Prepared statement on H.R. 3407.......................... 77
Peralta, Alberto, Vice President, Wells Fargo Bank New
Mexico, N.A................................................ 79
Prepared statement on H.R. 3407.......................... 80
Short, Albert V., Director, Office of Compact Negotiations,
Bureau of East Asian and Pacific Affairs, U.S. Department
of State................................................... 15
Prepared statement on the Compacts of Free Association... 16
Response to questions submitted for the record........... 115
Trudel, Roger, Chairman, Santee Sioux Tribe.................. 83
Prepared statement on H.R. 2408.......................... 84
Prepared statement on H.R. 4938.......................... 89
Westin, Susan S., Managing Director, International Affairs
and Trade, U.S. General Accounting Office.................. 23
Prepared statement on the Compacts of Free Association... 24
Response to questions submitted for the record........... 117
Zackios, Gerald M., Minister of Foreign Affairs, Republic of
the Marshall Islands....................................... 52
Prepared statement on the Compacts of Free Association... 54
Response to questions submitted for the record........... 117
Additional materials supplied:
Loeak, Hon. Christopher J., Senator and Chairman, Kwajalein
Negotiation Commission, Statement submitted for the record
on the Compacts of Free Association........................ 111
Merski, Paul G., Chief Economist and Director of Federal Tax
Policy, Independent Community Bankers of America, Statement
submitted for the record on H.R. 3407...................... 67
OVERSIGHT HEARING ON THE COMPACTS OF FREE ASSOCIATION AND LEGISLATIVE
HEARING ON H.R. 2408, TO PROVIDE EQUITABLE COMPENSATION TO THE YANKTON
SIOUX TRIBE OF SOUTH DAKOTA AND THE SANTEE SIOUX TRIBE OF NEBRASKA FOR
THE LOSS OF VALUE OF CERTAIN LANDS. YANKTON SIOUX TRIBE AND SANTEE
SIOUX TRIBE EQUITABLE COMPENSATION ACT; H.R. 3407, TO AMEND THE INDIAN
FINANCING ACT OF 1974 TO IMPROVE THE EFFECTIVENESS OF THE INDIAN LOAN
GUARANTEE AND INSURANCE PROGRAM. INDIAN FINANCING ACT REFORM AMENDMENT;
AND H.R. 4938, TO DIRECT THE SECRETARY OF THE INTERIOR, THROUGH THE
BUREAU OF RECLAMATION, TO CONDUCT A FEASIBILITY STUDY TO DETERMINE THE
MOST FEASIBLE METHOD OF DEVELOPING A SAFE AND ADEQUATE MUNICIPAL,
RURAL, AND INDUSTRIAL WATER SUPPLY FOR THE SANTEE SIOUX TRIBE OF
NEBRASKA, AND FOR OTHER PURPOSES.
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Wednesday, July 17, 2002
U.S. House of Representatives
Committee on Resources
Washington, DC
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The committee met, pursuant to call, at 2:03 p.m., in room
1324, Longworth House Office Building, Hon. James V. Hansen
(Chairman of the Committee) presiding.
STATEMENT OF THE HON. JAMES V. HANSEN, A MEMBER OF CONGRESS
FROM THE STATE OF UTAH
The Chairman. Today we have a number of things going on and
so members will be in and out throughout this hearing. We
always have trouble with this room and our other room where we
never have enough seats for everybody. Now, I am of the
opinion, that there are not going to be members that are going
to sit down there. So if you folks standing would like to take
this bottom tier here, why don't you come up and take it. Now,
if you would rather not, and if we are going to intimidate you
and embarrass you, then stay where you are. But if you think
you can handle it, come on up and take this lower tier here. We
would be pleased.
Senator, good to see you again.
Today we are conducting an oversight hearing on the
Compacts of Free Association and a legislative on hearing on
three Native American bills. The Compact of Free Association
outlines the United States relationship with the Federated
States of Micronesia and the Republic of the Marshall Islands.
The first bill the Committee will hear testimony on is H.R.
3407, which Congresswoman Mary Bono introduced. This
legislation seeks to amend the Indian Financing Act of 1974 to
improve the effectiveness of the Indian loan guarantee and
insurance program.
The second bill we will hear is H.R. 2408. This bill
introduced by Congressman Tom Osborne seeks to provide
equitable compensation to the Yankton Sioux tribe of South
Dakota and the Santee Sioux tribe of Nebraska for the loss of
value of certain lands resulting from the Pick-Sloan Missouri
River Basin Program.
The last bill before the Committee is H.R. 4938, also
introduced by Congressman Osborne. This legislation seeks to
direct the Secretary of the Interior through the Bureau of
Reclamation to conduct a feasibility study to determine the
best method of developing a safe and adequate municipal rural
and industrial water supply for the tribe.
We look forward to hearing from all witnesses today. I
would like to express special thanks to the tribal leaders and
Compact negotiators for traveling such a long way to be with us
at this hearing.
[The prepared statement of Mr. Hansen follows:]
Statement of Hon. James V. Hansen, a Representative in Congress from
the State of Utah
Today we are conducting an oversight hearing on the Compacts of
Free Association and a legislative hearing on three Native American
bills. The Compacts of Free Association outline the United States'
relationship with the Federated States of Micronesia and the Republic
of the Marshall Islands.
The first bill the Committee will hear testimony on is H.R. 3407,
which Congresswoman Mary Bono introduced. This legislation seeks to
amend the Indian Financing Act of 1974 to improve the effectiveness of
the Indian loan guarantee and insurance program. The second bill we
will hear is H.R. 2408. This bill, introduced by Congressman Tom
Osborne seeks to provide equitable compensation to the Yankton Sioux
Tribe of South Dakota and the Santee Sioux Tribe of Nebraska for the
loss of value of certain lands resulting from the Pick-Sloan Missouri
River Basin program. The last bill before the Committee is H.R. 4938,
also introduced by Congressman Osborne. This legislation seeks to
direct the Secretary of the Interior, through the Bureau of
Reclamation, to conduct a feasability study to determine the best
method of developing a safe and adequate municipal, rural, and
industrial water supply for the Tribe.
We look forward to hearing from all the witnesses this morning. I
would like to express special thanks to the tribal leaders and compact
negotiators for traveling such a long way to be with us at this
hearing.
______
The Chairman. The ranking gentleman on this is Mr.
Underwood from Guam, and we will now turn to Mr. Underwood for
any opening statement he may have.
STATEMENT OF THE HON. ROBERT A. UNDERWOOD, A DELEGATE TO
CONGRESS FROM GUAM
Mr. Underwood. Thank you, Mr. Chairman. And thank you for
holding these very important hearings on the bills that you
have outlined as well as most especially the hearing today on
the Compacts of Free Association with the Republic of the
Marshall Islands and the FSM. Considering that the Senate held
a hearing last December, I am pleased that the House is also
moving forward on reviewing the ongoing compacts.
I would like to reiterate my strong statement, my strong
support for the Compact Agreement. I believe it is in the
national interest to ensure that we continue to strengthen our
relationships with these two Freely Associated States by
continuing U.S. financial assistance and by promoting economic
self-sufficiency. I was pleased to help in hosting a briefing
last Friday for Senate and House staff to hear firsthand from
RMI and FSM officials on the importance of the Compact
Agreement to their respective countries.
When the U.S. first entered into the Compacts of Free
Association in 1986, many of our Congressional colleagues who
were themselves World War II veterans or Peace Corps.
Volunteers in the Pacific were familiar with the history of the
former U.S. Trust Territory and their strategic importance to
this country. Now, nearly 20 years later, one of the greatest
challenges we face seems to be the lack of institutional memory
on the RMI and FSM among Congressional members and staff. This
is why today's hearings and staff briefings are crucial.
Given my home island's geographic proximity and economic
and political interdependence with each of these two nations, I
believe the Compacts have generally been beneficial to Guam,
the region, and most especially U.S. national security in the
Western Pacific. In the context of the ongoing negotiations, I
know that there are issues of accountability, the nature of
economic development, and the role of various Federal agencies
and the implementation of the Compacts. However, we must always
be mindful of the fundamental basis for the Compacts and the
historical development in the region. We were and still are the
primary force in the region's development; their economic
difficulties or political setbacks, we have to examine our own
historical record and influence.
We have a fundamental obligation to adequately fund the
Compacts, to ensure political stability, and most importantly
to foster economic development. The fruits of our efforts will
be enjoyed by Micronesians and Americans alike in the region.
And we must also recognize that the economies of Guam, the
Northern Mariana Islands and Hawaii are also enhanced by the
economic assistance of the Compacts.
Last, as we look at the issues of financial assistance and
continuing Federal services, I want to say that the issue of
migration should also be reviewed by Congress. It is
frustrating sometimes for impacted jurisdictions like Guam to
have to continually fight to secure Compact impact aid from the
Office of Insular Affairs budget at the Interior Department
since O I A's budget is very small to begin with. Any Compact
agreement that leaves Congress must have a provision that would
ensure that perhaps U.S. Department of Education, Health and
Human Services be provided with the authority to provide
Compact impact aid to affected U.S. jurisdictions. The U.S.
Government should redouble its efforts to address the adverse
impacts on the U.S. Areas of the Pacific.
I look forward to working with members of the House
Resources Committee and the International Relations Committee
on these important issues, and I would like to acknowledge,
again, the presence of so many friends here today.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Underwood follows:]
Statement of Hon. Robert A. Underwood, a Delegate to Congress from Guam
Mr. Chairman, thank you for holding this important hearing today on
the Compacts of Free Association with the Republic of the Marshall
Islands and the Federated States of Micronesia. Considering that the
Senate Energy and Natural Resources Committee held a hearing last
December, I am pleased that the House is also moving forward on
reviewing the ongoing Compact negotiations.
I would like to reiterate my strong support for the Compact
agreements. I believe that it is in the national interest to ensure
that we continue to strengthen our relationships with these two Freely
Associated States by continuing U.S. financial assistance and promoting
economic self-sufficiency. I was pleased to help in hosting a briefing
last Friday for Senate and House staff to hear first hand from RMI and
FSM officials on the importance of the Compact agreements to their
respective countries. I understand that the State Department has
provided similar briefings.
When the United States first entered into the Compact of Free
Association in 1986, many of my Congressional colleagues who were World
War II veterans or Peace Corps volunteers in the Pacific, were familiar
with the history of the former U.S. trust territories and their
strategic importance to our country. Now, nearly twenty year later, one
of the greatest challenges we seem to face is the lack of institutional
memory on the RMI and FSM among Congressional Members and staff. That
is why today's hearings and staff briefings are crucial.
Given Guam's geographical proximity and economic and political
interdependence with each of these two nations, I believe that the
Compacts of Free Association has been beneficial to Guam, the region
and to U.S. national security in the Western Pacific. In the context of
the ongoing negotiations, I know that the issues of accountability, the
nature of economic development, the role of various federal agencies in
the implementation of the compacts. However, we must always be mindful
of the fundamental basis for the compacts and the historical
development of the region. We were and still are the primary force in
the region's development. If there are economic difficulties or
political setbacks, we have to examine our own historical record and
influence. We have a fundamental obligation to adequately fund the
compacts, to ensure political stability and, most importantly, to
foster economic development. The fruits of our efforts will be enjoyed
by Micronesians and Americans alike in the region. We must recognize
that the economies of Guam, the Commonwealth of the Northern Mariana
Islands, and even Hawaii are enhanced by the economic assistance of the
compacts.
Lastly, as we look at the issues of financial assistance and
continuing federal services for these nations, I simply want to say
that the issue of migration should be reviewed by Congress. It is
frustrating at times for impacted jurisdictions to have to fight to
secure Compact Impact Aid from the Office of Insular Affair's budget at
the Interior Department, particularly since OIA's budget is small to
begin with. Any Compact agreement that leaves Congress must have a
provision that would ensure that the Departments of Education and
Health and Human Services, at a minimum, be provided with the authority
to provide Compact Impact Aid to affected U.S. jurisdictions. The U.S.
government should redouble its efforts to address the adverse impact on
the U.S. areas of the Pacific.
I look forward to working with the members of House Resources
Committee and the International Relations Committee on these important
issues.
______
The Chairman. I will thank the gentleman.
The gentleman from Nebraska, Mr. Osborne? Mr. Rehberg?
If not, we are grateful for having you here at this time.
And our first panel is Mr. Peter T.R. Brookes, Deputy Assistant
Secretary for Asian and Pacific Affairs, Department of Defense;
Mr. David B. Cohen, Deputy Assistant Secretary of Insular
Affairs, Department of Interior; Albert V. Short, Chief Compact
Negotiator, Bureau of East Asian and Pacific Affairs,
Department of State; and Susan S. Westin, Managing Director of
International Affairs and Trade, General Accounting Office.
The Chairman. Now, folks, you see in front of you this
little gizmo? It is just like a traffic light. The green means
go, the yellow means wrap it up, and the red means stop. If you
happen to go over a little bit, I normally would be happy to
let you go a short time, but Mr. Osborne may gavel you down, I
don't know. That is up to him. But we would appreciate it if
you would kind of hold it in that time.
And there is going to be votes coming up. We have been
waiting for a vote on a very interesting amendment right now
and a lot of things, so it is the in-and-out game. And we
apologize to you, but that is the way it is played around here.
With that, I will turn the gavel over to Mr. Osborne. And
Mr. Brookes, we recognize you for 5 minutes.
STATEMENT OF PETER T.R. BROOKES, DEPUTY ASSISTANT SECRETARY,
ASIAN AND PACIFIC AFFAIRS, DEPARTMENT OF DEFENSE
Mr. Brookes. Thank you. Mr. Chairman and members of the
Committee, thank you for the opportunity to present the
Department of Defense's views on the Compact of Free
Association and our security relationship with the Freely
Associated States (FAS). The Department of Defense has a deep
appreciation for the value of our relationship with the Freely
Associated States. We cannot and should not forget the price
paid by American servicemen in liberating these islands during
World War II. During the cold war, these islands and the
peoples also played a critical role in development of crucial
U.S. defense programs. Even now, the FAS is playing an
important role in development of U.S. Missile defenses, which
will guard the U.S. and its allies and friends in the decades
to come. Moreover, FAS citizens are also involved in the war of
terrorism, serving alongside of American servicemen and women
in the U.S. Armed Forces.
Mr. Chairman, as you know, the U.S. has unique defense
responsibilities to these sovereign nations under the Compact
of Free Association. The Compact and subsequent agreements
commit the United States to provide for the security and
defense of the Freely Associated States in perpetuity. We are
committed to defend these nations and their peoples from attack
or threat of attack as ``the United States and citizens are
defended.'' This is an obligation greater than the United
States has assumed under any of its other mutual defense
treaties.
In return, the United States has the right for certain
military uses and access, including Kwajalein Atoll, for
missile testing and space operations, the right to deny access
to the Freely Associated States to third countries, and the
ability to block actions by the FAS governments that might be
incompatible with U.S. defense authority and responsibilities.
DoD believes that it is in our best interest to maintain the
full range of military access, use, and security cooperation
options that the Compact provides.
The primary goal of the Compact and the assistance provided
thereunder is to maintain our special relationship with the
Freely Associated States while helping them to become
economically self-sufficient. Continued Compact assistance will
help preserve key U.S. national security interests while
denying potentially hostile forces access to the region, and
supporting the Freely Associated States' efforts to work toward
their international goals. This is a win-win situation for both
the United States and the Freely Associated States.
In 1999, in preparation for the Compact of Free Association
negotiations, the Department of Defense conducted a study to
determine our defense and security-related interests in the
Freely Associated States for the post 2001 era. The study
looked at issues such as the need for continued access, current
and future threats, and the roles that the Freely Associated
States might play in future conflicts. The study found an
important defense interest in continuing the use of the
Kwajalein missile range and the facilities on Kwajalein Atoll.
The requirements are missile defense, intercontinental
ballistic missile, space operations and surveillance programs
combined with the uniqueness of Kwajalein's location and
infrastructure investment make renewal of the Compact in the
best interests of the Department of Defense.
The study also concluded that the defense rights contained
in the current Compact should be retained. This year, a DoD
reassessment determined that the study was, in fact, still
valid.
Mr. Chairman, it would be unwise to assume that the end of
the cold war events or events since then have lessened the
strategic importance of the Freely Associated States to U.S.
national security interests. In fact, the 2001 Quadrennial
Defense Review highlighted uncertainty as an important
characteristic of the likely future security environment in
Asia as well as the increasing importance of the region to our
future.
Further, unrest and points of potential military conflict
continue to populate the Asian Pacific region. For instance,
North Korea retains the offensive capability of inflicting
massive damage on South Korea and U.S. forces stationed there
and in the region.
Regrettably, a peaceful resolution to Taiwan's future
cannot be taken for granted. Territorial disputes in the South
China Sea and Northeast Asia remain unresolved, and could serve
as potential flashpoints. Indonesia's road toward democracy
faces both opportunities and challenges. As we are all aware,
terrorist groups are or have been present in many countries in
Southeast Asia, including the Philippines, Malaysia and
Singapore.
Mr. Chairman, in conclusion it is our judgment that the
current threats and future uncertainty make it essential that
we continue the Compacts of Free Association and our associated
defense rights contained therein. Thank you very much.
Mr. Osborne. [presiding.] Thank you, Mr. Brookes.
[The prepared statement of Mr. Brookes follows:]
Statement of Peter T.R. Brookes, Deputy Assistant Secretary of Defense
for Asian and Pacific Affairs, Office of the Assistant Secretary of
Defense for International Security Affairs, Department of Defense
The Department of Defense has a deep appreciation of the value of
our relationship with two of the Freely Associated States (FAS) the
Republic of the Marshall Islands (RMI) and the Federated States of
Micronesia (FSM). We cannot, and should not, forget the price paid by
American servicemen in liberating these islands during World War II.
During the Cold War, these islands and peoples also played a critical
role in the development of crucial US defense programs. Even now, the
FAS is playing an important role in the development of U.S. missile
defenses that will guard the U.S. and its allies and friends in the
decades to come. Moreover, FAS citizens are also involved in the war on
terrorism, serving alongside American servicemen and women in the U.S.
armed forces.
Defense relationship with the Freely Associated States (FAS)
The U.S. has unique defense responsibilities to these sovereign
nations under the terms of the Compact of Free Association. The Compact
and subsequent agreements commit the United States to provide for the
security and defense of the Freely Associated States in perpetuity. We
are committed to defend these nations and their peoples from attack or
threat of attack ``as the United States and its citizens are defended.
This is an obligation greater than the United States has assumed under
any of its mutual defense treaties. In return, the United States has
the right to certain military uses and access, the right to deny access
to third countries (``strategic denial'') and the ability to block
actions by the FAS governments that might be incompatible with U.S.
defense interests (the ``defense veto'').
In the absence of the Compact, the Mutual Security Agreement (MSA)
provides for U.S. defense obligations to the FAS, albeit at a slightly
reduced level, and the denial of military access by third countries.
The MSA is indefinite in duration and remains in force until terminated
or amended. The rights of the defense veto and provisions for military
access and use currently contained in the Compact, however, will
terminate with the expiration of the Compact on 30 September 2003
unless the Compact is extended. DoD believes that it is in our best
interest to maintain the full range of military access, use, and
security cooperation options and rights that the Compact provides.
In addition, U.S. rights for access and use on Kwajalein Atoll were
negotiated with the RMI under the Military Use and Operating Rights
Agreement (MUORA) pursuant to, but separate from, the Compact. The
MUORA had an original term of 15 years that was due to expire in 2001.
Given the importance of the agreement to our operations on Kwajalein
Atoll, the U.S. opted in 1999 to extend the MUORA for an additional
term of 15 years to 2016. This extension allows continued U.S. access
to, and use of, Kwajalein Atoll defense sites.
While the use of Kwajalein can be extended under the MUORA separate
from Compact negotiations, the two are nevertheless inextricably
linked. The daily routine at the Kwajalein Missile Range and the
facilities on Kwajalein Atoll depend upon a positive working
relationship with the people of the Marshall Islands. Provisions in the
Compact help provide the basis for U.S. support to the Marshallese
people who provide much of the labor force on Kwajalein Atoll. The
Compact therefore helps to maintain a positive local attitude toward
U.S. facilities and operations on Kwajalein.
The primary goal of the Compact and the assistance provided
thereunder is to maintain our special relationship with the Freely
Associated States while helping them to become economically self-
sufficient. In addition, continued Compact assistance will help
preserve key U.S. national security interests while denying potentially
hostile forces access to the region and supporting the Freely
Associated States'' efforts to work toward their national goals.
DoD Study of Defense Interests in the FAS
In 1999, in preparation for the Compact of Free Association
negotiations, the Department of Defense conducted a study to determine
our defense and security-related interests in the Freely Associated
States for the post-2001 era. The study looked at issues such as the
need for continued access, current and future threats, and the roles
that the Freely Associated States might play in future conflicts. The
study found an important defense interest in continuing the use of the
Kwajalein Missile Range and the facilities on Kwajalein Atoll. The
requirements of our missile defense, intercontinental ballistic
missile, and space operations and surveillance programs, combined with
the uniqueness of Kwajalein's location, and infrastructure investment
make renewal of the Compact in the best interest of the Department of
Defense. The study also concluded that the defense rights contained in
the current Compact should be retained.
This year DoD reviewed the 1999 study to ensure that its
conclusions had not been affected by several key changes in the
strategic environment since the study was completed. The DoD
reassessment determined that the results of the study are, in fact,
still valid.
The Quadrennial Defense Review
The October 2001 Department of Defense Quadrennial Defense Review
(QDR) recognized that Americans must prepare for a wider array of
threats to our security at home and abroad than before. As evidenced by
the terrorist attacks of September 11th, the future security
environment will be characterized by uncertainty. The QDR's assessment
of the global security environment acknowledges uncertainty about the
potential sources of military threats, the conduct of war in the
future, and the form that threats and attacks against the U.S. and
American interests will take. While contending with uncertainty is a
key challenge for U.S. defense policy and planning, maintaining the
Compact will support our efforts to confront these current and future
challenges in the Asia-Pacific region.
The QDR identifies Asia as a region of tremendous importance that
is gradually emerging as an area susceptible to large-scale military
competition. It identifies an ``arc of instability'' stretching from
the Middle East to Northeast Asia containing a volatile mix of rising
and declining regional powers. Many of these states also field large
militaries that possess or have the potential to develop or acquire
weapons of mass destruction. The QDR also sees the possibility of the
rise of a military competitor to the U.S. with a formidable resource
base emerging in the region.
Distances in the Asian theater are vast, and the density of U.S.
basing and en route infrastructure is lower than in other critical
regions. Moreover, the U.S. has less assurance of access to facilities
in the Asia-Pacific region than in some other regions. The QDR,
therefore, identifies the necessity of securing additional access and
infrastructure agreements and developing military systems capable of
sustained operations at great distances with minimal theater-based
support.
The QDR also calls for a reorientation of the U.S. military posture
in Asia. The U.S. will continue to meet its defense and security
commitments around the world by maintaining the ability to defeat
aggression in two critical areas in overlapping timeframes. As this
strategy and force planning approach is implemented, the U.S. will
strengthen its forward deterrent posture. Over time, U.S. forces will
be tailored to maintain favorable regional balances in concert with
U.S. allies and friends with the aim of swiftly defeating attacks with
only modest reinforcement.
To this end, the U.S. Navy will increase aircraft carrier
battlegroup presence in the Western Pacific and will explore options
for homeporting an additional three to four surface combatants and
several guided cruise missile submarines (SSGNs) in the region. The
U.S. Air Force will develop plans to increase contingency basing in the
Pacific and Indian Oceans and ensure sufficient en route infrastructure
for refueling and logistics to support operations in the Western
Pacific area and beyond. The Marine Corps will explore the feasibility
of conducting training for littoral warfare in the Western Pacific.
While it is too soon to say whether the FAS will be considered as
candidates for increased U.S. access, basing, or operations, our rights
under the Compact provide for sympathetic and prompt consideration by
the FAS governments of any such request by the U.S. In this region of
potential instability and conflict, the U.S. right of strategic denial
and the defense veto under the Compact are significant. Strategic
denial effectively creates a stable and secure zone across a broad
swath of the Western Pacific in which we can deny military basing
rights to any potentially hostile third country, as well as prevent
other actions that might be incompatible with U.S. security interests.
Missile Defense
Another important change since the 1999 study is President Bush's
strong commitment to missile defense. The President took this step as
part of a broader change in our defense and security policy to reflect
new threats that we and our allies and friends face. As a result of the
withdrawal from the Anti-Ballistic Missile Treaty we are now free to
develop, test, and deploy effective defenses against missile attack by
rogue states like North Korea, Iraq, and Iran--states that are
investing a large percentage of their resources to develop weapons of
mass destruction and offensive ballistic missiles.
This growing threat to the U.S., our allies and friends is
compounded by the fact that the states that are developing these terror
weapons have close links to a variety of terrorist organizations.
States or even non-state actors could launch missiles against the U.S.
As the President said in this year's State of the Union address, we
must not allow the world's most dangerous regimes to threaten us with
the world's most dangerous weapons.
The U.S. missile defense program is now executing an aggressive
research, development, test, and evaluation (RDT&E) program focusing on
a single integrated ballistic defense missile system designed to defend
against ballistic missiles of all ranges and in all phases of flight.
Although we have not identified specific tests beyond 2008, we envision
that testing will continue well beyond the expiration of the current
use agreement for the U.S. Army Kwajalein Atoll test site in 2016.
Therefore, we anticipate that Kwajalein Atoll will remain a significant
resource for future missile defense testing.
Conclusion
It would be unwise to assume that the end of the Cold War or events
since then have lessened the strategic importance of the FAS to U.S.
national security interests, especially in light of the uncertainty
that will characterize the future security environment in Asia. North
Korea retains the offensive capability to inflict massive damage on
South Korea and U.S. forces stationed there and elsewhere in the
region. Regrettably, a peaceful resolution to Taiwan's future cannot be
taken for granted. Territorial disputes in the South China Sea and
Northeast Asia remain unresolved and could serve as potential
flashpoints. Indonesia's road toward democracy faces both opportunities
and challenges. Terrorist groups are, or have been, present in many
countries in Southeast Asia including the Philippines, Malaysia and
Singapore. These threats and uncertainties make it essential that we
continue the Compact of Free Association and our associated defense
rights.
______
Mr. Osborne. Mr. Cohen.
STATEMENT OF DAVID B. COHEN, DEPUTY ASSISTANT SECRETARY,
INSULAR AFFAIRS, DEPARTMENT OF INTERIOR
Mr. Cohen. Thank you. Mr. Chairman and members of the
Committee, I am David Cohen, Deputy Assistant Secretary of the
Interior for Insular Affairs. It is we pleasure that I make my
first appearance before you today to discuss proposed
amendments to provisions of the Compact of Free Association
with the Republic of the Marshall Islands and the Federated
states of Micronesia.
I will focus my comments on the fiscal and economic
provisions found in Title 2 of the Compact. In particular, I
will discuss how proposed amendments to these provisions are
designed to address the very legitimate concerns that the
General Accounting Office, the Department of the Interior, and
others have raised with respect to the lack of accountability
for Federal funds provided under the Compact.
Over the 17-year life of Compact funding, it is expected
that the U.S. will ultimately have paid a total of $1.04
billion in direct grants to the RMI and 1.54 billion to the F
SM. There have been few restrictions on these grants.
Over the last several years, the G A O has issued a number
of reports that have raised valid concerns about the
effectiveness of the Federal assistance that has been provided
under the Compact. We at the Department of the Interior have
had similar concerns for quite some time.
The Department of the Interior, and particularly the staff
at the Office of Insular Affairs, has been greatly frustrated
with not having the tools to properly administer or track
Federal assistance in a manner that could reasonably ensure
that such assistance is having the intended effect. Most
importantly, we have been hampered by the fact that the Compact
provides for large, loosely defined grants with no enforcement
mechanisms to ensure the efficient and effective expenditure of
funds. I am pleased that the U.S. proposal in this round of
Compact negotiations has been very focused on addressing the
concerns raised by the GAO, by the Department of the Interior,
and by others.
Specifically, the U.S. proposal is that direct financial
assistance under the amended Compact and related agreements
will be provided as follows:
First, U.S. assistance will be in the form of annual
performance-based sector grants for each of the following
purposes: Education, health, private sector development,
capacity building in the public sector, environmental
protection, and public infrastructure.
Second, the allocation of the sector grants for each state
initially will be proposed by the applicable state but must be
approved by a joint Committee of representatives of the U.S.
and the applicable state. The majority of the members on each
of these joint Committees will represent the U.S. Each joint
Committee will be obligated to ensure that U.S. funds are
allocated in a manner consistent with the goals and objectives
of the Compact.
In addition to approving the allocation of the sector
grants, the joint Committee would review macroeconomic progress
against defined goals and objectives, coordinate programmatic
assistance from other donor countries and organizations,
address issues raised in audits, review sector grant
performance outcomes, budgets, and terms and conditions and
evaluate progress with an eye to increasing the effectiveness
of U.S. assistance.
Third, the sector grants would be subject to terms and
conditions similar to those applicable to grants provided to
State and local governments in the U.S. These grants would
include conditions and objective performance measures. Other
special conditions or restrictions that may be imposed by the
U.S. in appropriate circumstances include payment on a
reimbursement basis, denial of authority to proceed to the next
phase until there is acceptable performance, additional
reporting, additional project monitoring, additional technical
or management assistance, and additional prior approvals.
Fourth, U.S. assistance would be subject to appropriate
remedies for non-compliance including the withholding of
assistance and the right to recover funds spent improperly.
Fifth, the Department of the Interior has requested funding
to hire eight additional full-time employees to ensure that
such funds go to the prescribed sectors for approved purposes
and according to express grant conditions.
Finally, Mr. Chairman, I would like to address the very
important question of the effect that migration from the RMI
and FSM as authorized by the Compact has had on Hawaii, Guam,
and the Northern Mariana Islands. Migrants have made important
contributions to these states and territories, but have placed
additional burdens on the local governments because of their
utilization of services. The GAO reported significant outlays
by Hawaii, Guam and the Northern Mariana Islands in aid of the
migrants and their families. With this history in mind, we are
working to address the impact of Compact migration. Primarily,
we are looking at ways to provide compensation to the affected
jurisdiction of Guam, Hawaii, and the Northern Mariana Islands
to mitigate the impact of migration.
Mr. Chairman, the Department of the Interior believes that
when the U.S. comes to full agreement with our negotiating
partners, we will have the means to ensure that future U.S.
financial assistance will be spent in a manner that gives us a
chance to achieve meaningful results. The Compact has already
achieved its purpose in the geopolitical sphere, with districts
of the former trust territory having successfully transformed
themselves into sovereign states. We now have to duplicate that
success in the economic arena by helping these states create
conditions to eventually achieve true economic empowerment and
self-reliance.
Thank you, Mr. Chairman.
Mr. Osborne. Thank you, Mr. Cohen.
[The prepared statement of Mr. Cohen follows:]
Statement of David B. Cohen, Deputy Assistant Secretary for Insular
Affairs, United States Department of the Interior
Mr. Chairman and members of the Committee on Resources, I am David
B. Cohen, Deputy Assistant Secretary of the Interior for Insular
Affairs. It is with pleasure that I make my first appearance before you
today to discuss this nation s negotiations regarding proposed
amendments to the funding, program assistance, and other provisions of
the Compact of Free Association (Compact) with the Republic of the
Marshall Islands (the RMI) and the Federated States of Micronesia (the
FSM).
I will focus my comments on the fiscal and economic provisions
found in Title Two of the Compact. 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 Compact.
COMPACT DESCRIPTION
Under the direction of the Interagency Group on Micronesia, chaired
by the Department of State, the President s Personal Representative for
Micronesian Status Negotiations negotiated the original Compact with
representatives of what would become the RMI and the FSM. As a result
of the Compact, these nations are commonly referred to as the ``freely
associated states'' (FAS). The Compact was implemented in 1986. Palau
also became a freely associated state through a subsequent Compact of
Free Association, but I will use the term FAS to refer only to the
original freely associated states of the RMI and the FSM.
The documents that define the relationship between the United
States and the FAS include: the Compact as negotiated; the numerous
subsidiary agreements to the Compact; Public Law 99-239, through which
the Congress approved the Compact; and other legislation subsequently
enacted by the Congress.
The Compact sets forth the elements of the relationship between the
United States and each of the FAS in four titles: Governmental
Relations, Economic Relations, Security and Defense Relations and
General Provisions. However, the Governmental Relations and Economic
Relations titles were substantially altered by the Congress during and
after the approval process. Title One of the negotiated Compact
(Governmental Relations) did not originally envision recognition of the
FAS as fully independent nations in the international community.
Shortly after the Compact was implemented in 1986, the Administration,
in office at the time, proposed legislation, which Congress approved,
upgrading diplomatic relations so that they conformed to the standards
of the Geneva Convention.
The role of the Department of the Interior is focused on Title Two
Economic Relations--because the Congress, in section 105(b) (2) of
Public Law 99-239, provided that all appropriations under the Compact
must be made to the Secretary of the Interior. Congress also assigned
responsibility to the Secretary of the Interior to coordinate and
monitor United States domestic programs in the FAS.
Title Two of the existing Compact deals with both financial
assistance and program assistance.
First, I will briefly describe financial assistance. Over the
seventeen-year life of Compact funding, it is expected that the United
States will ultimately have paid a total of $1.04 billion to the RMI
and $1.54 billion to the FSM in direct financial assistance. These
amounts exclude federal program assistance. Most of this financial
assistance has been guaranteed by the full faith and credit of the
United States. There have been few restrictions on the ability of each
FAS to use this direct financial assistance; this approach was thought
at the time to be consistent with each FAS's newly acquired rights of
national sovereignty. One restriction, however, was a provision in the
Compact requiring forty percent of the direct financial assistance
under section 211 to be spent on capital development. Even this
restriction was of questionable use because the requirement was over
the life of the Compact, not annual; it did not include inflation
adjustments even though such adjustments were identified with specific
Compact provisions; and the definition of acceptable capital uses was
extremely broad.
Second, with respect to program assistance, under section 221(a),
the United States agreed to provide the FAS with the services of the
Weather Service, the Federal Emergency Management Agency, the Postal
Service, the Federal Aviation Administration and the Civil Aeronautics
Board (which was abolished prior to Compact implementation). While the
costs of these services cannot be exactly determined until after they
are rendered, the Department of the Interior has provided partial
reimbursement to these agencies of nearly $100 million for their
operations in the two countries.
Section 224 of the Compact currently provides that additional
United States program assistance may be extended from time to time by
the Congress. The Congress has utilized its authority extensively.
Section 105(h)(1) of the legislation approving the Compact (P.L. 99-
239) extended to the FAS the programs of the Legal Services
Corporation, the Public Health Service and the Farmers Home
Administration. The Compact legislation, in sections 102(a) and 103(a),
extended law enforcement and illegal drug enforcement programs to the
RMI and the FSM, and section 103 also extended agricultural and food
programs and radiological health care to the RMI. Additionally, as
partial compensation for the removal by Congress of tax and trade
incentives that had been negotiated into the Compact, the Congress
extended to the FAS, in section 111(a) of the Compact legislation, the
programs of the Federal Deposit Insurance Corporation, the Small
Business Administration, the Economic Development Administration, the
Rural Electrification Administration, the Job Training Partnership Act,
the Job Corps and the marine resource and tourism programs of the
Department of Commerce. The Compact legislation in section 105(l)
authorizes the following federal agencies to provide technical
assistance (nonreimbursable) to the FAS: the Forest Service, the Soil
Conservation Service, the Fish and Wildlife Service, the National
Marine Fisheries Service, the United States Coast Guard and agencies
providing assistance under the national Historic Preservation Act.
Finally, all United States domestic programs originally scheduled for
immediate termination upon implementation of the Compact were instead
subject to a three-year phase-out under sections 105(c)(2) and
105(i)(2) of the Compact legislation.
This pattern of extending FAS eligibility for United States
domestic programs and services under Compact section 224 has continued
since the enactment of the legislation that originally approved the
Compact. Under the terms of the Compact as originally negotiated, FAS
citizens would have been eligible for Pell post-secondary education
grants only for the first four years of the Compact; this four-year
limitation was removed by Congress in legislation enacted in 1988. The
FAS also were allowed to receive Department of Education programs
through the Pacific Regional Education Laboratory.
It is important to note that the Compact, as originally negotiated,
anticipated that all United States domestic assistance programs would
be terminated and the few remaining services would be budgeted under
Compact section 221(a) through the Department of the Interior. When the
Congress extended additional domestic assistance programs to the FAS,
however, it did not direct that they be budgeted and administered
through this unified appropriation to the Department of the Interior.
They were instead budgeted and administered by each United States
federal agency. These individual extensions by the Congress compromised
the concept of a supervisory role for the Department of the Interior as
stated in section 105(b)(3) of the legislation approving the Compact.
This lack of budgeting through a unified appropriation for the FAS made
it difficult to track such programs, and made it virtually impossible
for the Department of the Interior to direct or even influence
programatic decisions of other federal agencies. The GAO estimates that
from 1987 through 2001, federal agencies have provided approximately
$700 million in federal program benefits to the RMI and FSM.
GENERAL ACCOUNTING OFFICE ASSESSMENT
Over the last several years, the GAO has issued a number of reports
that have raised valid concerns about the effectiveness of the federal
assistance that has been provided to the FAS under the Compact. We at
the Department of the Interior have had similar concerns for quite some
time. The Department of the Interior, and particularly the staff at the
Office of Insular Affairs, has been greatly frustrated with not having
the tools to properly administer or track federal assistance in a
manner that could reasonably ensure that such assistance is having the
intended effect. Most importantly, we have been hampered by the fact
that the Compact provides for large, loosely-defined grants to be
provided to the FAS, backed by the full faith and credit of the United
States, and with no enforcement mechanism to ensure the efficient and
effective expenditure of funds. I'm pleased that the United States'
proposal in this round of Compact negotiations has been very focused on
addressing the concerns raised by the GAO, by the Department of the
Interior and by others.
ADDRESSING CONCERNS
The Office of Insular Affairs has endured years of frustration with
having been given an ill-defined mission with respect to the Compact
and with not having the tools to do its job. Officials of the Office of
Insular Affairs began insisting, prior to the current negotiations and
before the issuance of the GAO reports, that the ``no strings
attached'' grants of the original Compact be replaced by a program with
clearly defined goals, clear and detailed terms and conditions,
effective reporting and monitoring provisions and effective enforcement
procedures, including the withholding of funds. The United States'
proposal addresses these concerns.
Specifically, the United States' proposal is that direct financial
assistance to the FAS under the amended Compact and related agreements
will be provided as follows:
First, United States assistance will be in the form of annual,
performance-based sector grants for each of the following purposes:
education, health, private sector development, capacity building in the
public sector, environment, and public infrastructure.
Second, the allocation of the sector grants for each FAS initially
will be proposed by the applicable FAS, but must be approved by a joint
committee of representatives of the United States and the applicable
FAS. The majority of the members on these joint committees will
represent the United States. This joint committee will be obligated to
ensure that United States funds are allocated in a manner consistent
with the goals and objectives set forth in the Compact. In addition to
approving the allocation of the sector grants, the joint committee
would (1) review macroeconomic progress against FAS goals and
objectives, (2) coordinate programatic assistance from other donor
countries and organizations, (3) address issues raised in audits, (4)
review sector grant performance outcomes, budgets, and terms and
conditions and (5) evaluate progress with an eye to increasing the
effectiveness of United States assistance.
Third, the sector grants provided under the Compact would be
subject, at a minimum, to terms and conditions similar to those
applicable to grants provided by the federal government to state and
local governments in the United States. The grants would include
conditions and objective performance measures. A subsidiary fiscal
procedures agreement would memorialize these procedures. Generally,
grant terms and conditions will include conformance with plans,
strategies, budgets, project specifications, architectural and
engineering specifications and performance standards. Moreover, the
United States may add requirements needed to achieve sector grant
goals. Other special conditions or restrictions that may be imposed by
the United States in appropriate circumstances include: (1) payment on
a reimbursement basis, (2) denial of authority to proceed to the next
phase of the grant until there is evidence of acceptable performance on
the prior phase, (3) additional reporting, (4) additional project
monitoring, (5) additional technical or management assistance and (6)
additional prior approvals.
Fourth, United States assistance would be subject to appropriate
remedies for noncompliance with conditions and requirements, including
the withholding of assistance and the right to recover funds spent
improperly. Thus, if an FAS government failed to cooperate on the
prosecution of an individual responsible for improprieties with respect
to Compact funds, the United States would have the right to withhold
funds from either the specific sectoral grant involved, or, if serious
enough, all of the funding for the country involved.
Fifth, United States assistance would be the subject of oversight
by Department of the Interior officials. The Department has requested
that the Congress appropriate funding to hire eight full-time employees
who will analyze the spending of United States funds and ensure that
such funds go to the prescribed sectors, for approved purposes, and
according to express grant conditions.
It is not our intention to micromanage the affairs of the RMI or
the FSM. Our highest duty, however, is to ensure that the hard-earned
money of the American taxpayer is not wasted and that RMI and FSM
become self-reliant. The United States proposed amended Compact would
not undermine the sovereignty or policy choices of the governments of
the RMI and FSM within the sector grant framework. To the extent,
however, that either government chooses to accept United States
financial assistance pursuant to the Compact, we intend to impose
conditions that are reasonably designed to ensure that our taxpayer
dollars will achieve the intended results.
On the related subject of federal program coordination, we are
exploring within the Administration the establishment of a mechanism to
clearly define the roles of federal agencies, including a requirement
that those agencies providing program assistance report to the
Departments of the Interior and State on relevant details of the
programs they administer in the RMI and FSM.
Finally, Mr. Chairman, I would like to address the very important
question of the impact of FAS migration on Hawaii and those United
States territories that have experienced a heavy influx of people from
the FAS. Since the Compact became effective in 1986, thousands of
citizens of the RMI and FSM have migrated to Hawaii, Guam and the
Northern Mariana Islands. This migration has brought us many
hardworking tax paying individuals who have contributed significantly
to these American economies. At the same time, however, these migrants
have placed additional burdens on the state and territorial governments
because of their utilization of education, health and law enforcement
services. Hawaii, Guam, and the Northern Mariana Islands annually
report on these impacts of the Compact. The General Accounting Office
reported significant outlays by Hawaii, Guam, and the Northern Mariana
Islands in aid of the migrants and their families.
With this history in mind, we are working to address the impact of
FAS migration. We are considering three approaches to the issue. First,
we are looking at ways to provide compensation to the affected
jurisdictions of Guam, Hawaii, and the Northern Mariana Islands to
mitigate the impact of migration. Second, we are working with the
Compact negotiator to explore mechanisms to minimize the costs
associated with migration, particularly including important
Administration proposals for reform of the Compact to strengthen
application of immigration laws. Third, the new financial assistance
proposal is aimed at improving the health and education of potential
migrants, which may reduce the volume and impact of migration.
Mr. Chairman, the Department of the Interior believes that, when
the United States comes to full agreement with our negotiating
partners, we will have the means to ensure that future United States
financial assistance to the Marshall Islands and the Federated States
of Micronesia will be spent in a manner that gives us a chance to
achieve meaningful results. The Compact has already achieved its
purpose in the geopolitical sphere, with components of the former Trust
Territory having successfully transformed themselves into sovereign
countries. We now have to duplicate that success in the economic arena,
by helping these countries create conditions to achieve true economic
empowerment and self-reliance.
The achievement of economic self-reliance will be not be easy for
the isolated, resource-poor islands that make up these FAS. However, I
am confident that the United States' proposal, with its creation of a
trust fund, is adequate to meet our overall objective.
______
The Chairman. Mr. Short.
STATEMENT OF ALBERT V. SHORT, CHIEF COMPACT NEGOTIATOR, BUREAU
OF EAST ASIAN AND PACIFIC AFFAIRS, DEPARTMENT OF STATE
Mr. Short. Mr. Chairman, members of the Committee, thank
you for this opportunity to testify on the Administration's
progress in Compact negotiations with the Federated States with
Micronesia (FSM) and the Republic of the Marshall Islands
(RMI).
Over the past 6 months, the U.S. has tabled language with
both countries to amend the Compact of Free Association. The
U.S. proposal reflects the following:
First, the U.S. and the two Freely Associated States have
reaffirmed their commitment to the special relationship of free
association.
Second, to end annual mandatory financial assistance from
the United States after a period of 20 years and to replace
these with trust fund arrangements.
The RMI and the FSM have affirmed their commitment to an
economic development strategy based on public sector
accountability and private sector expansion, and to maintain
mutually acceptable comprehensive development plans.
Finally, the U.S., FSM, and RMI have agreed to continue
their defense and security relationship. The U.S.
Administration is now seeking final ad referendum agreement
from the FSM and RMI on our financial and other Compact
proposals in order to submit the amended Compact package with
key subsidiary agreements to the Congress.
The U.S. financial proposal. The U.S. proposes to extend
economic assistance annually to the FSM and the RMI for a
period of 20 years, and will establish trust funds to foster
prudent financial management and to replace the annual grant
funding after year 2023.
These annual grants to the FSM and RMI will be targeted to
sectors most in need of assistance, principally education,
health, and infrastructure, and, in addition, the areas of
capacity building the environment and private sector
development.
It should be noted that U.S. assistance to the RMI and the
FSM will cease unless the amended Compact is approved and
implemented by the Congress prior to 1 October 2003. That is
the beginning of FY`04.
With regard to the trust fund, we propose to establish
trust funds for the FSM and RMI. These trust funds are designed
to offset the loss of direct U.S. financial assistance after
year 2023.
Management and oversight. To bolster accountability,
transparency, and oversight of U.S. Compact funding, the
administration has proposed a planning and review mechanism to
ensure that our assistance goes to those areas of the economy
where the greatest need exists and are used most effectively.
Reporting procedures are being clearly defined in a subsidiary
agreement.
The government of the United States, after consultation
with the FSM and RMI, will attach grant terms and conditions to
ensure that reasonable progress is being made toward
established objective. The government of the United States may
withhold funds for violation of grant terms and conditions, and
both states will also be subject to the Single Audit Act.
Where are we going? The United States has been successful
in fostering a political transition from a trust territory
administration to stable self-governing democracies. We now
confront a critical challenge affecting the economic transition
toward increased budgetary self-reliance. We believe the U.S.
proposal now on the table is adequate to meet the objectives of
Title 2 of the Compact, quote, ``to assist the RMI and FSM in
their efforts to advance the economic self-sufficiency of their
peoples.''
Our goals in the Compact negotiations are, first of all, to
maintain economic stability, to improve the education, health,
and social conditions in the relative states, sustaining the
political stability and close ties which we have developed, and
last, assuring our strategic interests continue to be
addressed. We recognize that too sharp a reduction in U.S.
assistance at this time in their economic development could
result in economic instability and other disruptions, and could
encourage an increase in the level of migration to the United
States. Thus, maintaining financial and other assistance will
help to assure economic stability while the RMI and FSM
continue to implement their development strategies.
The Congress has requested several reports from the GAO,
which address U.S. assistance to the FSM and the RMI. These
reports have raised questions about the effectiveness of
current U.S. assistance. We are working to assure the Congress
that the U.S. proposal addresses the GAO concerns.
Migration impact. The past 15 years has ushered in an era
of increased impact on health, education, and welfare programs
on the U.S. jurisdictions in the Pacific based on Micronesian
migration. The Administration will address the need to
reimburse U.S. jurisdictions for the added costs they bear in
honoring our commitment on migration.
In the wake of the September 11th attacks, we have proposed
to amend certain aspects of the immigration provisions of the
Compact.
As I noted previously, the Administration hopes to complete
these negotiations soon with the FSM and Marshals and to fund
and to submit the necessary agreements to the Congress for
their consideration, including key subsidiary agreements on
fiscal procedures, the trust fund agreement, and the
immigration provisions.
In conclusion, let me assure you that we welcome this and
every opportunity to keep this Committee informed of these
negotiations as they come to a close. Just as importantly, we
look forward to submitting the amended Compact of Free
Association to the Congress for review and enactment into law
by the commencement of fiscal year 2004. Thank you.
[The prepared statement of Mr. Short follows:]
Statement of Albert V. Short, U.S. Negotiator for the Compact of Free
Association with the Federated States of Micronesia and the Republic of
the Marshall Islands
Mr. Chairman and Members of the Committee,
Thank you for this opportunity to testify on the Administration's
progress in Compact negotiations with the Federated States of
Micronesia (FSM) and the Republic of the Marshall Islands (RMI).
Over the past six months, the U.S. has tabled language with both
countries to amend the Compact of Free Association. This effort began
with Title Two (containing replacements for the expiring economic
provisions of the Compact) followed by the remaining titles: Title One
where several provisions deal with immigration, Title Three defining
our defense and security relationship (which remains essentially
unchanged), and Title Four setting out administrative, termination, and
survivability provisions.
The U.S. proposal reflects the basic approach laid out in previous
testimony:
The U.S. and the two freely associated states (FAS) have
reaffirmed their commitment to the special relationship of free
association, and to the end of annual mandatory financial assistance
from the U.S. after a period of twenty years.
The U.S. has affirmed its commitment to providing annual
financial and program assistance (including contributions to a trust
fund) to the FSM and RMI, for a period of twenty years, to support the
efforts of these nations to promote economic advancement and budgetary
self-reliance.
The RMI and FSM have affirmed their commitment to an
economic development strategy based on public sector accountability and
private sector expansion, and to maintaining mutually acceptable
comprehensive national development plans.
The U.S., FSM and RMI have agreed to continue their
defense and security relationship unchanged.
The U.S. Administration is now seeking final ad referendum
agreement from the FSM and RMI on our financial and other Compact
proposals in order to submit the amended Compact package with key
subsidiary agreements to Congress by the end of August.
U.S. Financial Proposal
The U.S. Administration proposes to extend Title Two economic
assistance annually to the FSM and RMI for a period of twenty years,
commencing with $76 million for the FSM and $35.8 million for the RMI
in U.S. FY-2004 (beginning on October 1, 2003) and providing declining
annual assistance from these amounts through FY-2023, as described in
Tab 1 to this statement. The annual decrements to annual assistance
will be paid into the trust funds described below to foster prudent
financial management and to safeguard the viability of the trust funds.
The annual grants to the FSM and RMI will be targeted to sectors
most in need of assistance: (a) education, (b) health, and (c)
infrastructure. Other areas of special need include capacity building,
the environment, and private sector development. The U.S. also proposes
to provide an additional $4.1 million per year to the RMI for the
special needs of Ebeye (the main island community housing the U.S.
defense sites' Marshallese work force) and other Kwajalein atoll
communities.
The U.S. proposed to extend specific Federal services and programs
to the FSM and RMI, with certain modifications, through fiscal year
2023. It should be noted that this assistance, currently totaling
approximately $35 million per annum, may be discontinued or amended at
the discretion of the U.S. Congress.
RMI assistance includes certain funds already agreed to under the
U.S. Military Use and Operating Rights Agreement in connection with
U.S. Defense Department use of defense sites at Kwajalein Atoll through
FY-2016. We are discussing with the RMI a possible extension to the
Military Use and Operating Rights Agreement.
It should be noted that U.S. assistance to the RMI and FSM will
cease unless the amended Compact is approved and implemented by
Congress prior to October 1, 2003, the beginning of FY-2004.
Trust Fund
We propose to establish general trust funds for the FSM and RMI.
The trust fund is designed partially to offset the loss of direct U.S.
financial assistance after FY-2023.
The trust fund will receive a U.S. contribution of $16 million for
the FSM and $7 million for the RMI in FY-2004 and increasing U.S.
annual contributions from this amount as described in Tab 1 through FY-
2023. The U.S. offer on trust funding is conditioned on contributions
of at least $30 million from each FAS. In addition, additional FAS and
third-party contributions to the funds are anticipated.
Management and Oversight
To bolster accountability, transparency, and oversight of U.S.
Compact funding, the U.S. Administration has proposed a mechanism to
review the use of Compact funds, including the trust funds, to ensure
that they go to those areas of the economy where the greatest need
exists and are used most effectively. Payment and reporting procedures
are being clearly defined in a subsidiary agreement to be submitted to
the U.S. Congress with the amended Compact language. To the extent
applicable, these procedures will be based on the U.S. Federal Grants
Management Common Rule.
The U.S. Administration has proposed to create joint management
committees for the FSM and RMI, each consisting of three U.S. members,
including the Chair, and two FAS members. The Committees will assess
the performance of the FSM and RMI governments using mutually agreed
macroeconomic performance standards. The Committees will meet, as
needed, each year to:
review the single audits and annual report;
evaluate progress made for each grant;
discuss the coming fiscal year's grant;
discuss any management problems associated with each
grant; and
discuss ways to respond to these problems and otherwise
to increase the effectiveness of future U.S. assistance.
The Government of the United States, after consultations with the
FSM and RMI, will attach grant terms and conditions to ensure that
reasonable progress is being made toward established objectives. The
Government of the United States may withhold funds for violation of
grant terms and conditions. Both FAS will also be subject to the Single
Audit Act.
In addition to periodic reporting, the FSM and RMI will submit
annual reports on the use of U.S. financial assistance during the
previous fiscal year and on the proposed use of U.S. financial
assistance for the coming fiscal year. The report will include
additional information needed to assess the performance of the economy
and the effectiveness of U.S. assistance.
Additional Amendments to Title Two
The U.S. Administration proposes to amend section 236 (the full
faith and credit provision) of the Compact. The amendment will ensure a
multi-year mandatory appropriation for Compact funding but not extend
the ability to pledge or assign future Compact funding as a source for
repaying debt, without specific prior approval of the U.S. Government.
We also propose to extend the inflation indexation adjustment
adopted in the previous Compact period (capped at 5 percent per annum)
to the annual payments for the base grant and trust funds in the new
twenty-year period. This indexation strikes the right balance to
promote prudent financial management by the FSM and RMI while
facilitating the transition to the termination of mandatory U.S.
financial assistance in FY-2024.
Subsidiary Agreements
The U.S. Government has tabled subsidiary agreements on specific
services and programs involving:
U.S. Postal Service (USPS)
U.S. Federal Aviation Administration (FAA)
Department of Transportation (DOT)
Department of Defense Humanitarian Assistance Projects
(CHAP)
Telecommunications Services
Federal Deposit Insurance Corporation (FSM only)
Foreign Disaster Assistance
Trust Fund
In addition, the U.S. Government is considering amending the
subsidiary agreements involving:
National Weather Service
Mutual Assistance in Law Enforcement Matters
Status of Forces Agreement
Fiscal Procedures Agreement
Where are we going?
The U.S. has been successful in fostering a political transition
from Trust Territory Administration to stable, self-governing
democracies in the FSM and RMI. The Compact has also been successful in
transforming the relationship between the United States and these
island nations from one of trust territory administration to two of our
closest bilateral relationships and staunchest friends in the United
Nations. These achievements are solid and lasting, and one the
American, FSM, and RMI peoples can be proud of.
We now confront a critical challenge effecting the economic
transition toward increased budgetary self-reliance. I believe the U.S.
proposal is adequate to meet the objective of Title Two of the Compact:
``to assist the RMI and FSM in their efforts to advance the economic
self-sufficiency of their peoples.''
Goals of Compact Assistance
The United States has strong interests in these countries that
justify continued economic assistance. These interests include:
Maintaining economic stability. In this regard, we
believe the United States should 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 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; and
Assuring that our strategic interests continue to be
addressed.
We recognize 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 migration to the United States by citizens of
those countries. We continue to believe that maintaining substantial
financial and other assistance will help to assure economic stability
while the RMI and FSM continue to implement economic development and
reform strategies.
Migration Impact
The past fifteen years have ushered in an era of increased impact
on the health, education, and welfare programs of U.S. jurisdictions in
the Pacific because some migrants from the FSM and RMI have come with
low work skills, poor health, and dependent children. The
Administration will address the need to reimburse U.S. jurisdictions
for the added costs they bear in honoring our commitment on migration
to the FSM and RMI peoples. Every new arrival in our country imposes
costs on our communities by drawing on social services. But, most
arrivals also add to our economy and pay taxes that support those
public services. Many FSM and RMI arrivals to the U.S. come with job
skills, work hard like any American, spend money here, and pay U.S.
taxes. Their contribution should not be ignored or forgotten in
reaching an understanding of the impact of migration on U.S.
jurisdictions.
Just as importantly, these migratory flows follow established trade
and business routes. U.S. business looms large in the trade and
commerce of the FSM and RMI, earns money for many U.S. companies, and
reinforces our special relationship.
Section 104(e) of the Compact Act requires the President to report
annually to Congress on the impact of the Compact. The annual reports
and a recent GAO study document the substantial impact of FSM and RMI
migration to the State of Hawaii, Guam, and the Commonwealth of the
Northern Mariana Islands (CNMI). Of particular concern are migrants who
have communicable diseases, criminal records, or are likely to become a
public charge as a result of chronic health or other problems. These
conditions are currently all grounds for inadmissibility to the United
States under the Immigration and Nationality Act.
One way to address the issue of Compact impact on Hawaii, Guam, and
the CNMI is to increase the compensation to those jurisdictions for the
negative impacts of migration, as authorized by section 104 of the
Compact Act. This solution, while helpful, would not decrease the
adverse impact of migration from the FSM and RMI. It would, instead,
shift the cost burden to the U.S. Government.
Compact impact can also be addressed, in part, through our plan to
commit a substantial portion of future U.S. assistance through sector
assistance to improve the general health and education of citizens of
the FSM and the RMI. We believe that over time, improving the quality
of life in the FSM and the RMI will reduce the incentives for citizens
of those countries to migrate to the United States. Further, it would
ensure that those persons who do migrate would be healthier and better
educated, and therefore in a better position to contribute to the
communities where they choose to live within the United States.
In the wake of the September 11th attacks, we have proposed an
amended section 141 of the Compact. This section 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.'' We
intend to establish that Micronesian entrants to the U.S. will have a
FSM or RMI passport in an effort to halt the entry of inadmissible
people who might seek to exploit this route of entry into the U.S. This
and other immigration-related issues are the subject of ongoing talks
with the FAS representatives.
In conclusion, we are considering three new responses to the
migration issue.
First, we are looking at ways to provide compensation to
Hawaii, Guam, and the CNMI for the negative impacts of migration, as
authorized by section 104 of the Compact Act.
Second, we have proposed various mechanisms for improving
our ability to ensure on a timely basis that RMI and FSM migrants to
the United States are eligible for admission.
Third, we are committing a substantial portion of U.S.
assistance during the second Compact term to improve the health and
education of potential migrants from the FSM and RMI in order to reduce
significantly Compact impact.
As I noted at the beginning of my statement, the U.S.
Administration hopes to complete its negotiations soon with the FSM and
the RMI negotiating teams on the Compact language and appropriate
funding levels. We also hope to wrap up, subject to final approval,
several key subsidiary agreements including the trust fund agreement.
In general, talks with both FAS are progressing well. We have had five
negotiating sessions with the FSM, and three with the RMI. Upcoming
rounds to conclude Compact funding and language issues should occur
this August.
Conclusion
Thank you for this opportunity to present the Administration's
views on Compact negotiations. The U.S. proposal is the product of over
two years of discussions with, and contains input from, U.S. officials
representing dozens of agencies, members of Congress and their staffs,
representatives of international financial institutions, as well as
potential bilateral donors. In developing our proposal, we have also
carefully considered the input of the FSM and RMI.
In addition, Congress has requested several reports from the
General Accounting Office (GAO) on U.S. assistance to the FSM and RMI.
These reports have raised questions about the effectiveness of current
U.S. assistance. We are working to assure the Congress that the U.S.
proposal addresses the planning and management problems identified by
the GAO.
Let me assure you that we continue to welcome any and every
opportunity to keep the Committee informed as these negotiations come
to a close. Just as importantly, we look forward to submitting the
amended Compact of Free Association to the Congress for review and
enactment into law.
Thank you.
[GRAPHIC] [TIFF OMITTED] T0761.001
Notes to Tab 1A:
Grant funds are decremented by $.5 million per year, with the
decremented funds going to the trust fund.
Trust funds are increased by $.5 million per year, with these
incremented funds coming from the grant account.
An inflation adjustment will be applied similar to that in section
217 of the current Compact to all except the Kwajalein impact
assistance of $1.9 million per year.
RMI to contribute funds, at least $35 million in addition to the
U.S. contribution to the trust fund by FY-06.
Grant and trust amounts do not account for other RMI or third party
contributions. In FY-2016 through FY-2021, the RMI may contribute $3
million per year to be matched by $1.5 million by the U.S. government,
as stated within parentheses.
Under Article X(4)(a) of the Military Use and Operating Rights
Agreement (MUORA)--$7.1 million with inflation adjustment.
Compact section 213 and Article X(4)(b) of the MUORA provides $1.9
million per year not inflated.
[GRAPHIC] [TIFF OMITTED] T0761.002
Notes to Tab 1B:1. Commencing in FY-2007, grant funds are
decremented by $.8 million per year, with the decremented funds going
to the trust fund.2. Commencing in FY-2007, trust funds are increased
by $.8 million per year, with these incremented funds coming from the
grant account.3. An inflation adjustment will be per the proposed
section 217 of the draft Title II language.4. FSM to contribute funds
(at least $30 million) in addition to the U.S. contribution to the
trust fund in FY-04.5. Grant and trust fund amounts do not account for
other FSM or third party contributions.
______
Mr. Osborne. Thank you, Mr. Short.
At this time, I would like to call on Congresswoman Bono.
If you would care to appear before the Committee. I ask
unanimous consent that following their testimony, the
gentlewoman from California, Ms. Bono, be allowed to sit on the
dais and participate in the hearing. Is there objection?
Hearing none, so ordered. OK. Thank you, Mr. Short.
At this time, we will have testimony from Ms. Westin.
STATEMENT OF SUSAN S. WESTIN, MANAGING DIRECTOR, INTERNATIONAL
AFFAIRS AND TRADE, GENERAL ACCOUNTING OFFICE
Ms. Westin. Mr. Chairman, members of the Committee, thank
you for inviting me to testify on the Compact of Free
Association between the United States and the FSM and the RMI.
Today, I will discuss our review of the current U.S. proposals
to extend economic assistance to these countries. Specifically,
I will discuss three topics: One, the potential cost of
assistance to the U.S. government; two, the amount per capita
assistance for the FSM and the RMI; and, three, the
accountability measures that are in the proposals, and whether
these proposed measures address past GAO recommendations.
I must emphasize that all of the above issues are still
under negotiation, and therefore, final Compact assistance
levels and accountability measures could differ from those I
will discuss today.
Turning first to the potential cost of assistance. And I
refer you to our chart. Under the most recent U.S. proposals to
the FSM and the RMI, new Congressional authorizations of
approximately $3.4 billion would be required for U.S.
assistance over a period of 20 years beginning in fiscal year
2004. The share of new authorizations to the FSM would be about
2.2 billion, while the RMI would receive about 1.1 billion.
This new assistance would be provided to each country in
the form of annual grant funds, extended Federal services,
including weather, aviation, and postal services, and
contributions to a trust fund for each country.
For the RMI, the U.S. proposal also includes funding to
extend U.S. access to Kwajalein Atoll for U.S. military use
from 2017 through 2023.
In addition to new authorized funding, the U.S. Government
will provide continuing program assistance amounting to an
estimated $1.1 billion to the two countries over 20 years, and
payments previously authorized of about 189 million for U.S.
access to Kwajalein through 2016. If new and previous
authorizations are combined, the total U.S. cost for all
Compact-related assistance under the current U.S. proposals
would amount to about $4.7 billion over 20 years, not including
costs for administration and oversight that are currently
unknown.
Under the U.S. proposals, annual grant amounts to each
country would be reduced over time, while annual U.S.
contributions to the trust funds would increase by the grant
reduction amount. The U.S. proposals are designed to build
trust funds that earn a rate of return such that trust fund
yields can replace grant funding in fiscal year 2024 once
annual grant assistance expires.
Second, on the issue of per capita grant assistance to the
two countries, the decrease in grant funding combined with
estimated FSM and RMI population growth would also result in
falling per capita grant assistance over the funding period,
particularly for the RMI. The real value of grants per capita
to the FSM would decrease from $684 to $396 over 20 years. And
these are estimated amounts. In the RMI, per capita grant
assistance would fall from $623 to $242. In addition to grants,
however, both countries would receive Federal programs and
services, and the RMI would receive funding related to U.S.
access to Kwajalein. So, what we have here is just talking
about the grant assistance alone.
As I previously mentioned, the U.S. proposals are designed
to build trust funds that earn a rate of return such that trust
fund yields can replace grant funding. We analyze the trust
fund proposals to determine if the trust fund yields would
replace grant funding as intended, assuming a 6 percent rate of
return.
According to our analysis, the U.S. proposal to the RMI
would meet its goal while the U.S. proposal to the FSM would
not. Moreover, at 6 percent, the U.S. proposal to the RMI would
cover the estimated value of expiring Federal services while
the U.S. proposal to the FSM clearly would not. At a 6 percent
rate of return, neither proposed trust fund would generate
surplus funds to serve as a buffer against years with low or
negative trust fund yields.
Turning to the third topic, the accountability measures and
our past recommendations. The strengthened accountability
measures in the current U.S. proposals have addressed many of
our recommendations regarding future Compact assistance. To
give one example, the proposals require that grants with
typical grant conditions would be targeted to priority areas
such as health, education, and infrastructure. Furthermore, the
United States could withhold funds for violations of grant
terms and conditions as we have recommended.
However, not all of our recommendations have been
addressed. For example, U.S. proposals for future assistance do
not address our recommendation that consideration should be
given to targeting future health and education funds in ways
that effectively address specific adverse migration impact
problems, such as communicable diseases identified by Guam,
Hawaii, and the CNMI.
As a final observation, I would note that specific details
on how some key accountability provisions would be carried out
are contained in separate agreements that remain in draft form
or have not yet been released.
Mr. Chairman, members, this competes my prepared statement.
I would be happy to answer any questions.
Mr. Osborne. Thank you very much, Ms. Westin.
[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 FSM, and the Republic of the
Marshall Islands, or 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 (U.N.) Trust
Territory of the Pacific Islands. The Compact, which consists of
separate international agreements with each country, 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 more than 15 years. Further, the
Compact allows for migration from both countries to the United States
and establishes U.S. defense rights and obligations in the region.
Provisions of the Compact that deal with economic assistance were
scheduled to expire in 2001; however, they will remain in effect for up
to 2 additional years while the United States and each nation
renegotiate 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 2003 if not
renegotiated and approved. 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 (defense veto); and (2) federal services
listed in the Compact.
---------------------------------------------------------------------------
Today I will discuss our review of the current U.S. proposals to
extend economic assistance to the FSM and the RMI. Specifically, I will
discuss the potential cost of assistance to the U.S. government, the
amount of per capita assistance for the FSM and the RMI, and the
projected earnings of proposed trust funds. Further, I will identify
accountability measures that are in the proposals and discuss whether
the proposals address past GAO recommendations in this area. It is
worth emphasizing that all of the above issues are still under
negotiation, and therefore final Compact assistance levels and
accountability measures could differ from those I will discuss today.
Summary
Current U.S. proposals to the FSM and the RMI to renew expiring
assistance would require the Congress to approve about $3.4 billion in
new authorizations. 3 The proposals would provide decreasing
levels of annual grant assistance over a 20-year term (2004 through
2023). Simultaneously, the proposals would require building up a trust
fund for each country with earnings that would replace grants once
those grants expire. Per capita grant assistance would fall during the
term of Compact assistance, particularly for the RMI. At the Department
of State's assumed trust fund rate of return (6 percent), the RMI trust
fund would cover expiring assistance at the 2023 level, while the FSM
trust fund would not achieve this goal. Further, at this rate of
return, neither trust fund would build up buffer funds that could be
used during years of low or negative trust fund earnings.
---------------------------------------------------------------------------
\3\ Our analysis is based on U.S. proposals submitted to the FSM
and the RMI governments in May 2002.
---------------------------------------------------------------------------
The U.S. proposals include strengthened accountability measures,
though details of some key measures remain unknown. The proposals have
addressed many, but not all, recommendations that we have made in our
past reports regarding assistance accountability. For example,
proposals call for grant terms and conditions and eliminate a pledge of
``full faith and credit'' for funds. Proposals also allow for the
withholding of funds and give the United States control over the annual
consultation process and trust fund management. The details of grant
and trust fund management will be addressed in separate agreements that
remain in draft form or have not yet been released. Some of our
recommendations, such as those calling for a review of program
assistance and ways to specifically target health and education grants
to address the adverse impact of migration, have not been addressed at
this point.
Background
In 1986, the United States and the FSM and the RMI entered into the
Compact of Free Association. 4 This Compact represented a
new phase of the unique and special relationship that has existed
between the United States and these island areas since World War II. It
also represented a continuation of U.S. rights and obligations first
embodied in a U.N. trusteeship agreement that made the United States
the Administering Authority of the Trust Territory of the Pacific
Islands. 5 The Compact 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 assure certain national
security rights for all the parties, and (3) to assist the FSM and the
RMI in their efforts to advance economic development and self-
sufficiency. The first two goals have been met through the Compact and
its related agreements. The third goal, advancing economic development
and self-sufficiency, 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. However, 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. assistance. In 1998, U.S. funding accounted for 54 percent and 68
percent of FSM and RMI total government revenues, respectively,
according to our analysis. This assistance has maintained standards of
living that are artificially higher than could be achieved in the
absence of U.S. support. 6
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\4\ At the time that the Compact was negotiated, the United States
was concerned about the use of the islands of the FSM and the RMI as
``springboards for aggression'' against the United States, as they had
been used in World War II, and the Cold War incarnation of this
threat--the Soviet Union. In addition, the economic viability of both
nations was uncertain at the time the Compact was negotiated.
\5\ From 1947 to 1986, the United States administered this region
under a trusteeship agreement that obligated it to foster the
development of political institutions and move the Trust Territory
toward self-government and promote economic, social, and education
advancement. In addition, the agreement allowed the United States to
establish military bases and station forces in the Trust Territory and
close off areas for security reasons as part of its rights.
\6\ The economic growth potential of these countries and their
ability to generate revenue to replace U.S. assistance was limited by
factors such as geographic isolation, limited natural resources, and
the large and costly government structure that the United States
established. Major donors (such as Australia) to Pacific Island nations
expect that most of these countries will need assistance for the
foreseeable future in order to achieve improvements in development. In
addition, achieving economic self-sustainability is seen as a difficult
challenge for many of these island nations and an unrealistic goal for
others. See U.S. General Accounting Office, Foreign Assistance: Lessons
Learned From Donors' Experiences in the Pacific Region, GAO-01-808
(Washington, D.C.: Aug. 17, 2001).
---------------------------------------------------------------------------
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 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 exempts FSM and RMI migrating citizens from
meeting U.S. passport, visa, and labor certification requirements.
Unlike economic assistance provisions, the Compact's migration
provisions are not scheduled to expire in 2003. In recognition of the
potential adverse impacts that Hawaii and nearby U.S. commonwealths and
territories could face as a result of an influx in migrants, the
Congress authorized Compact impact payments to address the financial
impact of migrants on Guam, Hawaii, and the CNMI.
---------------------------------------------------------------------------
\7\ Typically, nonimmigrants include those individuals who are in
the United States temporarily as visitors, students, and workers.
---------------------------------------------------------------------------
Finally, 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 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.
Current U.S. Compact Proposals Would Cost Billions and Create Trust
Funds
Under the most recent (May 2002) U.S. proposals to the FSM and the
RMI, new congressional authorizations of approximately $3.4 billion
would be required for U.S. assistance over a period of 20 years (fiscal
years 2004 through 2023). The share of new authorizations to the FSM
would be about $2.3 billion, while the RMI would receive about $1.1
billion (see table 1). This new assistance would be provided to each
country in the form of annual grant funds, extended federal services
(that have been provided under the original Compact but are due to
expire in 2003), and contributions to a trust fund for each country.
(Trust fund earnings would become available to the FSM and the RMI in
fiscal year 2024 to replace expiring annual grants.) For the RMI, the
U.S. proposal also includes funding to extend U.S. access to Kwajalein
Atoll for U.S. military use from 2017 through 2023. In addition to new
authorized funding, the U.S. government will provide (1) continuing
program assistance amounting to an estimated $1.1 billion to the two
countries over 20 years and (2) payments previously authorized of about
$189 million for U.S. access to Kwajalein Atoll in the RMI through
2016. 8 If new and previous authorizations are combined, the
total U.S. cost for all Compact-related assistance under the current
U.S. proposals would amount to about $4.7 billion over 20 years, not
including costs for administration and oversight that are currently
unknown.
---------------------------------------------------------------------------
\8\ 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).
[GRAPHIC] [TIFF OMITTED] T0761.003
Under the U.S. proposals, annual grant amounts to each country
would be reduced over time, while annual U.S. contributions to the
trust funds would increase by the grant reduction amount. Annual grant
assistance to the FSM would fall from a real value of $76 million in
fiscal year 2004 to a real value of $53.2 million in fiscal year 2023.
9 Annual grant assistance to the RMI would fall from a real
value of $33.9 million to a real value of $17.3 million over the same
period. 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). The real value of grants per capita to the FSM would decrease from
an estimated $684 in fiscal year 2004 to an estimated $396 in fiscal
year 2023. 10 The real value of grants per capita to the RMI
would fall from an estimated $623 in fiscal year 2004 to an estimated
$242 in fiscal year 2023. 11 In addition to grants, however,
both countries would receive federal programs and services,
12 and the RMI would receive funding related to U.S. access
to Kwajalein Atoll. 13
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\9\ While new authorization figures are provided in current dollars
so that total costs to the U.S. government can be identified, grant
assistance is provided in fiscal year 2004 constant dollars for
comparative purposes. In addition to the reduction in grants, the real
value of grants would be eroded over time by a partial, rather than
full, inflation adjustment.
\10\ Our per capita calculations assume FSM and RMI migration and
population growth rates that are at the same level as in recent years.
\11\ The U.S. proposal to the RMI allocates $4.1 million of grant
assistance in fiscal year 2004 to the island of Ebeye in Kwajalein
Atoll. As such, grants per capita to residents of Ebeye would be higher
than grants per capita to the rest of the RMI population.
\12\ For fiscal year 2004, federal programs and services, excluding
federal emergency management assistance, are estimated to be worth
$36.4 million for the FSM and $16.5 million for the RMI.
\13\ For fiscal year 2004, Kwajalein landowners would receive $16
million, and the Kwajalein Atoll Development Authority would receive
$1.9 million.
[GRAPHIC] [TIFF OMITTED] T0761.004
The U.S. proposals are designed to build trust funds that earn a
rate of return such that trust fund yields can replace grant funding in
fiscal year 2024 once annual grant assistance expires. The current U.S.
proposals do not address whether trust fund earnings should be
sufficient to cover expiring federal services or create a surplus to
act as a buffer against years with low or negative trust fund returns.
At a 6 percent rate of return (the Department of State's assumed rate)
the U.S. proposal to the RMI would meet its goal of creating a trust
fund that yields earnings sufficient to replace expiring annual grants,
while the U.S. proposal to the FSM would not cover expiring annual
grant funding, according to our analysis. Moreover, at 6 percent, the
U.S. proposal to the RMI would cover the estimated value of expiring
federal services, while the U.S. proposal to the FSM clearly would not.
At a 6 percent return, neither proposed trust fund would generate
buffer funds. If an 8.2 percent average rate of return were realized,
then the RMI trust fund would yield earnings sufficient to create a
buffer, while the FSM trust fund would yield earnings sufficient to
replace grants and expiring federal services. 14
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\14\ An 8.2 percent average rate of return is the expected rate of
return for a fund with a mix of equities and fixed-income securities
based on historical earnings in the stock market and projected
government bond rates.
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Current U.S. Proposals Contain Stronger Accountability Measures and
Address GAO Recommendations, Some Key Details Remain Unknown
I now turn my attention to provisions in the current U.S. proposals
designed to provide improved accountability over, and effectiveness of,
U.S. assistance. This is an area where we have offered several
recommendations in the past 2 years. As I discuss key proposed
accountability measures, I will note whether our past recommendations
have been addressed where relevant. In sum, many of our recommendations
regarding future Compact assistance have been addressed with the
introduction of strengthened accountability measures in the current
U.S. proposals. However, specific details regarding how some key
accountability provisions would be carried out will be contained in
separate agreements that remain in draft form or have not yet been
released.
The following summary describes key accountability measures
included in the U.S. proposals that address past GAO recommendations:
The proposals require that grants would be targeted to
priority areas such as health, education, and infrastructure. Further,
grant conditions normally applicable to U.S. state and local
governments would apply to each grant. 15 Such conditions
could address areas such as procurement and financial management
standards. U.S. proposals also state that the United States may
withhold funds for violation of grant terms and conditions. We
recommended in a 2000 report that the U.S. government negotiate
provisions that would provide future Compact funding through specific
grants with grant requirements attached and allow funds to be withheld
for noncompliance with spending and oversight requirements.
16 However, identification of specific grant terms and
conditions, as well as procedures for implementing and monitoring
grants and grant requirements and withholding funds, will be addressed
in a separate agreement that has not yet been released.
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\15\ Grant conditions will be based, in large part, on the U.S.
Federal Grants Management Common Rule, as set forth in revised Office
of Management and Budget Circular A-102 (Washington, D.C.: Aug. 29,
1997).
\16\ 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.
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The U.S. proposals to the FSM and the RMI list numerous
items for discussion at the annual consultations between the United
States and the two countries. Specifically, the proposals require that
consultations address single audits and annual reports; evaluate
progress made for each grant; discuss the coming fiscal year's grant;
discuss any management problems associated with each grant; and discuss
ways to respond to problems and otherwise increase the effectiveness of
future U.S. assistance. In the previously cited report, we recommended
that the U.S. government negotiate an expanded agenda for future annual
consultations. Further, the proposals give the United States control
over the annual review process: The United States would appoint three
members to the economic review board, including the chairman, while the
FSM or the RMI would appoint two members.
Recommendations from our 2000 report are being addressed
regarding other issues. The U.S. proposals require U.S. approval before
either country can pledge or issue future Compact funds as a source for
repaying debt. The proposals also exclude a ``full faith and credit''
pledge that made it impracticable to withhold funds under the original
Compact. In addition, the U.S. proposals provide specific uses for
infrastructure projects and require that some funds be used for capital
project maintenance.
We also recommended that Interior ensure that appropriate resources
are dedicated to monitoring future assistance. While the U.S. proposals
to the two countries do not address this issue, an official from the
Department of the Interior's Office of Insular Affairs has informed us
that his office has tentative plans to post five staff in a new
Honolulu office. Further, Interior plans to bring two new staff on
board in Washington, D.C., to handle Compact issues, and to post one
person to work in the RMI (one staff is already resident in the FSM). A
Department of State official stated that the department intends to
increase its Washington, D.C., staff and overseas contractor staff but
does not have specific plans at this point.
Trust fund management is an area where we have made no
recommendations, but we have reported that well-designed trust funds
can provide a sustainable source of assistance and reduce long-term aid
dependence. 17 The U.S. proposals would grant the U.S.
government control over trust fund management: The United States would
appoint three trustees, including the chairman, to a board of trustees,
while the FSM or the RMI would appoint two trustees. The U.S. Compact
Negotiator has stated that U.S. control would continue even after
grants have expired and trust fund earnings become available to the two
countries; in his view, ``the only thing that changes in 20 years is
the bank,'' and U.S. control should continue. He has also noted that it
may be possible for the FSM and the RMI to assume control over trust
fund management at some as yet undetermined point in the future.
---------------------------------------------------------------------------
\17\ See GAO-01-808.
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Finally, while the departments of State and the Interior have
addressed many of our recommendations, they have not implemented our
accountability and effectiveness recommendations in some areas. For
example, our recommendation that annual consultations include a
discussion of the role of U.S. program assistance in economic
development is not included in the U.S. proposals. Further, the
departments of State and the Interior, in consultation with the
relevant government agencies, have not reported on what program
assistance should be continued and how the effectiveness and
accountability of such assistance could be improved. 18
Finally, U.S. proposals for future assistance do not address our
recommendation that consideration should be given to targeting future
health and education funds in ways that effectively address specific
adverse migration impact problems, such as communicable diseases,
identified by Guam, Hawaii, and the CNMI. 19
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\18\ See 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) for an evaluation of 13 U.S. domestic programs, including the
largest programs that the United States provides to the FSM and the
RMI.
\19\ 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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Current U.S. Proposals Also Amend Nonexpiring Immigration Provisions
I would also like to take just a moment to cite proposed U.S.
changes to the Compact's immigration provisions. These provisions are
not expiring but have been targeted by the Department of State as
requiring changes. I believe it is worth noting these proposed changes
because, to the extent that they could decrease migration rates (a
shift whose likelihood is unclear at this point), our current per
capita grant assistance figures are overstated. This is because our
calculations assume migration rates that are similar to past history
and so use lower population estimates than would be the case if
migration slowed.
Proposed U.S. language on immigration stresses that travel to the
United States by FSM or RMI citizens is intended to be temporary; the
Compact is not intended to provide a stepping-stone for permanent
residence or citizenship in the United States. Proposed U.S. changes to
the Compact immigration provisions include
a new requirement for FSM and RMI visitors to carry a
machine-readable passport;
a new requirement that FSM and RMI citizens visiting the
United States have a specific purpose for their term of stay--such as
employment, school, or tourism - that is listed in the provisions
(under the original Compact, a specific purpose is not required for FSM
or RMI citizens to enter or remain in the United States);
a statement that FSM or RMI children entering the United
States for adoption purposes are not eligible to do so under the
Compact, as they are intending immigrants;
a restriction that naturalized FSM and RMI citizens are
not eligible for entry into the United States unless they are an
eligible spouse or dependent of an admissible Compact migrant (under
the original Compact, naturalized citizens are allowed into the United
States 5 years after they are naturalized so long as they are a
resident in the FSM or the RMI during that time); and
a new ability for the U.S. Attorney General to promulgate
regulations that could limit the ability of FSM and RMI visitors in the
United States to stay in the country beyond 6 months. 20
---------------------------------------------------------------------------
\20\ Such regulations could take into account the ability of FSM or
RMI citizens to support themselves and their immediate relatives. The
option to reduce the ability of FSM and RMI visitors to stay in Guam
and other U.S. territories was provided for in the original Compact. In
2000, regulations were put in place that required Compact migrants to
be self-supporting after 1 year on Guam or be subject to removal. When
we met with Immigration and Naturalization Service officials, they
informed us that enforcing this regulation would prove difficult, since
they did not have the necessary enforcement resources.
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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.
______
Mr. Osborne. We have a vote coming up. I would suggest that
possibly we entertain questions here for about 5 minutes, then
we will adjourn and come back. So, I think Mr. Underwood is an
expert in this area. I will ask a couple questions and then
defer to him.
First of all, for Mr. Brookes, how long will the United
States require access to Kwajalein Atoll, and are there
alternatives to the Atoll?
Mr. Brookes. Mr. Chairman, as you know, under the existing
military use and operating rights agreement with the RMI, DoD
access and use of Kwajalein is guaranteed through the year
2016. This was extended for 15 years in 1999 for the period
2001 to 2016. As it is an important element of our missile
defense program and our intercontinental ballistic missile
program, it is reasonable to expect that DoD access and use
will be required beyond that time, beyond the year 2016.
However, at this time, it is not possible to foresee with
any accuracy exactly how long DoD use will be required beyond
then. We have proposed a 7-year extension to the existing use
agreement in response to a RMI government proposal for a longer
term agreement. There are alternatives to Kwajalein Atoll, but
it is a question of time and money. The capital investment on
Kwajalein would be hard and expensive to replicate elsewhere,
but it is not impossible. The capabilities could be dispersed
to other locations such as potentially Wake Island or the
Pacific missile test range, but at an unspecified cost to the
U.S. taxpayer. Withdrawal from the ABM treaty gives us greater
flexibility in developing missile defense since we are now no
longer restricted to testing only at Kwajalein, which we were
under the ABM treaty.
In sum, Kwajalein is an important national asset that would
be costly and difficult to replace but not impossible.
Mr. Osborne. Thank you very much, Mr. Brookes.
I think in the interest of time and maybe level of
involvement, I will defer at this point to Mr. Underwood for
his questions.
Mr. Underwood. Thank you very much, Mr. Chairman. And thank
you very much for your testimonies these afternoon. I once
asked General Shinseki if Kwajalein was absolutely vital, and
he said it was irreplaceable. And I am just wondering whether
today, as we speak, whether the Department of Defense has
somewhat shifted in that point of view over time, or--because,
in my estimation, I think it is still pretty much
irreplaceable, particularly in terms of national missile
defense.
Mr. Brookes. Yes, sir. I am not familiar with the General's
testimony or when that was. I think that the differentiation
here that I would try to make is that replacing it in one place
in itself would be extremely difficult, if not impossible. But
we do have other test ranges. There is a western test range, we
have an eastern test range. There is Barking Sands. That,
potentially, with the changes in technology, that over time we
could disperse the capabilities that are currently located in
one place on Kwajalein Island elsewhere. That is my
understanding. I wouldn't say that I am the absolute expert on
it, but that is my understanding.
Mr. Underwood. Thank you very much for that. And you know,
as--obviously, as someone who has been involved in trying to
understand our defense posture in the Pacific, it occurs to me
that we really need to hone in on the value of the Marshall
Islands as well as the Federated states of Micronesia. We don't
want to go over all of this territory, 5 years or 10 years
hence, in the way, for example, that we are now rethinking our
relationship with the Philippines and understanding what the
value of the Philippines is to this country. And I am certainly
hopeful that we continue to keep that in mind.
Mr. Cohen and Mr. Short, you know, your testimonies were
obviously music to my ears, especially as you concluded talking
about how we are going to finally include in here some kind of
a funding stream or how we are going to take care of Guam. I
also heard the CNMI in Hawaii, but I heard Guam more. So I just
wanted to know, how do you envision that happening?
Mr. Cohen. Congressman, I am actually going to defer to the
negotiator; given the stage that we are at in process, I think
that would be appropriate.
Mr. Short. Sir, the first issue is that we will consult
with the Congress in that regard. We intend to include in the
package that is submitted to the Congress, the Compact
amendment package a provision to address impact. We will be
consulting further with you and other interested Members of the
Congress on how best to structure that.
Mr. Underwood. Well, I certainly have my own view of how we
can best take care of that. So, at this point in time there is
not a precise proposal for this, other than a commitment to
ensure that it is addressed as we proceed with the finalization
of these negotiations.
Mr. Short. Yes, sir. That is correct.
Mr. Cohen. Congressman, what we can tell you at this time,
obviously the details of any sort of compensation package, you
know, will follow and are being worked on. But what we can tell
you is that we view this as a three-prong strategy. And, of
course, strategy No. 1 is to improve conditions in the RMI and
the FSM to decrease the incentive to migrate. Also, improving
conditions will hopefully ensure that those citizens of the RMI
and the FSM that do choose to migrate are less likely to be as
burdensome to the local services as have been the previous
migrants.
And also, you know, we are looking at tightening up the
migration--well, you know, the right to migrate of course, you
know, is absolute inviolate. But as you know, they have taken a
look at making sure that everyone who chooses to migrate
actually has the right to do so, to make sure that we don't
have problems in that regard as well.
So, the financial component is perhaps the most important
component, and the details of that will follow, but there are
other prongs to this strategy as well.
Mr. Underwood. Well, and certainly I appreciate that. You
know, it is important to understand that the economic viability
of these countries will actually benefit surrounding U.S.
jurisdictions. So it is not just an issue of dealing with
migration. Although, I would like to add that all Pacific
peoples migrate and have been migrating, as my personal
experience and your own, Mr. Cohen, have indicated; that we are
all kind of, just by the nature of being Pacific peoples, we
all migrate.
In that context, I want to make sure that we understand
each other fully. You know, the right to migrate is part of the
Compacts. And I know that the two countries that we are talking
about want to be mutually engaged in trying to ensure that
whatever kind of new arrangements, or even, in my estimation,
there is some old arrangements that haven't been fully
enforced, either. Whatever arrangements that we seek to pursue,
you know, involve some level of consultation with them.
It is important to note that the economic viability of
these countries is absolutely essential to a healthier stream
of migration, and that the economies of all the islands,
particularly in Micronesia, are very much interrelated and all
of the things that are here are mutually beneficial for all
involved.
Mr. Osborne. I think probably I should interject here, Mr.
Underwood.
Mr. Underwood. Sure.
Mr. Osborne. At this time we will go vote. Hold that
thought, and you will have plenty of time to prepare for the
answer. We will be back in probably 20 minutes. We have a 15-
minute vote, two 5-minute votes. And so we will be back in
shortly.
[Recess]
Mr. Osborne. The Committee will come to order.
Mr. Underwood had a question. You can answer it, and then
we will move on.
Mr. Underwood. Thank you, Mr. Chairman.
I was asking a question about where we are at with
discussion on immigration and any proposed changes. Mr. Short.
Mr. Short. With regard to the immigration provisions of the
Compact--and there is a further explanation in the long
statement that was submitted for the record, first of all the
Compact of Free Association provides for visa-free entry for
Micronesian citizens to enter the United States for work and
study and other purposes. There is no attempt to abridge that
basic right. However, in light of 9/11 and just the passage of
15 years experience, we feel it is useful to review certain
aspects of the immigration provisions. Part of that concerns
the use of passports and current technology with passports.
I should note that the respective governments have agreed
to many of these provisions. We will be holding discussions
commencing on Friday this week with the senior representatives
of the Federated States and the Marshall Islands delegation to
address this issue.
So there are some specific aspects of the immigration
provision we want to look at. These will be incorporated into
the document in a manner that is still to be determined that
will preserve the basic rights of the Micronesian citizens to
enter the United States for the purposes stated in the Compact
but basically fine tune and regularize some of the implementing
aspects of that.
Mr. Osborne. Thank you. I believe the gentleman's time has
expired. Mr. Otter.
Mr. Otter. Thank you, Mr. Chairman.
Mr. Chairman, are the mikes on? There we go.
Mr. Brookes, could you summarize very briefly the
Department of Defense's interest in the locations we are
talking about here?
Mr. Brookes. Yes, sir. I think I would say that the
Department of Defense interests are as follows: One is the
continued rights of strategic denial and defense veto,
strategic denial being denying the basing access and use of a
third country in the Freely Associated States, the defense veto
being the right to veto policies, FAS policies, that are
incompatible with U.S. security and defense role in the Freely
Associated States.
Following that, I think the Kwajalein Atoll missile range
is where DoD has a very strong interest in continued, unimpeded
operations there. As I mentioned, we do ICBM testing and
missile defense testing as well as space operations and
surveillance. Beyond that, I would say access by U.S. military
forces for transit of overflight, occasional emergency use as
well as possible contingency use of land areas, air fields and
harbors.
I think it is also important that the FAS support U.S.
security policies in international fora such as the United
Nations. I also think that the Freely Associated States'
proximity to important certain sea lanes and air lanes are
important to the United States.
Finally, I would say their proximity to Southeast Asia as
well as the U.S. military facilities in Guam are important and
basic to defense interests.
Mr. Otter. It is pretty obvious from that list it is a very
strategic, very important effort that we are involved in right
now; and it is probably worth every dime that we just talked
about, Ms. Westin from the GAO and Mr. Short, that we are
paying for it, right?
Mr. Brookes. Yes, sir, we support the ongoing negotiations.
Mr. Otter. You support the money that is going to be paid
in favor of these services for these important aspects that you
just outlined.
Mr. Brookes. Yes, sir. I would ask Mr. Short to probably,
you know, address this. But I think that we are--you know, we
do have important strategic interests there and that we are
paying fairly for the uses and rights that we have.
Mr. Otter. So that brings me to my next question. We just
came from the floor and voting on an absolute dismal effort by
our own government, the Department of Interior specifically, in
trying to overcome hundreds and maybe even longer than that,
but a long time, the abuse of a trust. That was with the native
Americans, and we find that we have no idea what it is going to
cost us.
So, given that history, given that performance or lack of
performance, I would ask Mr. Short, I would also ask the GAO,
why in Heaven's name--why don't we just pay the money that we
owe and don't try to tell them how to set up an education
system, where it seems like we have our own problems, set up
the housing like we have our own problems? If these people are
smart enough and if they are intelligent enough to negotiate a
good treaty with us, why in Heaven's name aren't they smart
enough to be the architects of their own destiny?
Mr. Short.
Mr. Short. Yes, sir. Well, they are; and they are the
architects of their own destiny. We are dealing with sovereign
states that develop their own budgets, have their own internal
structure. We provide assistance to keep that structure afloat,
and we are putting in place a regime that will provide
oversight and accountability for those funds, much like the
relationship that between a Federal and a State relationship.
There will be accountability of where the funds are expended
and the purposes for which they go, but the structure, the
purposes, the goals will all be determined by the sovereign
states.
Mr. Otter. Mr. Short, one of the things that I was confused
about is, Mr. Brookes calls it rent, you are calling it grants
and in five or six cases here in your testimony I read where
the grant can be denied, the grant can be withheld if certain
performances aren't met. Yes, Ms. Westin, can you answer that?
Ms. Westin. Yes, may I speak to that?
I think that it is important to keep in mind that the
Compact negotiations on economic assistance are not involving
our defense rights. We have already taken up the option. The
U.S. has to extend the use of Kwajalein through 2016, and all
we are talking about is extending it for another 6 years to
2017 through 2023.
What we are talking about with the grants is economic
assistance, and I think that it is important to have
accountability provisions in there. My staff did a report 2
years ago on which we looked at the economic development from
the assistance the U.S. had given under the first 13 years of
the Compact, and we did not find very much economic
development. So I can understand your point of view, why don't
we just give them the money, but from the General Accounting
Office point of view, where accountability is important, I
think that the recommendations that we have made about
accountability of future compact funds are important.
Mr. Otter. Well, you know, I might pursue that, but then
that would be a different subject because, you know, it seems
to me this isn't much different than the PILT funds that we
have to fight over each and every year, no matter what the
negotiations were.
If this is this administration's idea of new federalism, I
am a little disappointed. I don't think our track record is so
good at taking care of our own house. Now, through forced
negotiations and withholding of it is either rent or grants or
it is or it isn't or these people are in charge of their own
destiny or their not, I am just very, very skeptical of us
trying to tell somebody else how to live with their own
property, with their own cultures. We have just not done--we do
not have a very good record of keeping our promises, whether
they are negotiated and whether they are really--heavily relied
on or not.
I think it is--I would not be too excited about this, Mr.
Chairman, but that is the end of my statement. I will not ask
for a response to that. But, Mr. Short, you look anxious like
you had like to give one. It could be a short answer.
Mr. Short.I think the important point is, as I stated
before, we are dealing with sovereign governments; and, as the
GAO has pointed out, there are certain concerns that the United
States has brought to the fore based on 15 years of experience.
We are not trying to create an onerous or overbearing set of
conditions, but we do need to account for the funds. The
purpose, is to achieve a balance between sovereignty on one
hand and accountability on the other hand. I think the
mechanism that we are putting in place will do that.
Mr. Osborne. Thank you, Mr. Short.
Thank you, Mr. Otter.
Mrs. Christensen.
Mrs. Christensen. Thank you, Mr. Chairman.
Let me welcome my panelists. I want to extend a special
welcome to Deputy Assistant Secretary Cohen, who also has
oversight responsibility for my territory, the U.S. Virgin
Islands.
I share some of my colleague's, Mr. Otter's, concern. And
listening--I came in during Mr. Cohen's testimony and missed
most of the first panelist's testimony, but when Mr. Cohen was
talking about the lack of accountability, et cetera, I have to
admit I was somewhat suspicious in light of the fact that Mr.
Cohen also said that the Office of Insular Affairs also had
lack of staff and lack of tools to monitor. That says to me
that probably there was also not even sufficient staff or tools
to provide the kind of technical assistance that is usually
necessary to provide a better outcome. But I am just getting
the GAO report, and I will look at that.
I am not going to really ask that question, but I wanted to
ask a question and probably direct it first to Ms. Westin, but
anyone else can jump in.
I work with the Black Caucus which does work with rural,
small and minority organizations and minority-serving colleges
and universities. We have been able to get special funding for
some of those institutions to do research and provide different
kinds of services and what we are finding is that, even though
we have provided the funding, they don't have the
infrastructure, the capacity to handle those grants; and,
therefore, they are not able to get the grants or they have
accountability and productivity problems. I wonder to what
extent the GAO investigation found that some of these
infrastructure deficiencies were responsible for what may be
lacking in the outcomes that you had anticipated.
Ms. Westin. We have done, as you know, a series of reports
on the Compact assistance. In the first report that we put out
looking at the impact of the economic assistance and what it
had meant for economic development, we did have examples of
money going to schools, hospitals, et cetera, where there were
infrastructure problems, lack of textbooks, et cetera, and that
did have an impact on education. But we also noted that the
money had gone to set up the college in the Federated States of
Micronesia.
The countries also receive money in these areas from U.S.
domestic programs such as Head Start and some of the other
health and education programs; and in our report on looking at
programs, we had recommended that the State Department and
Interior coordinate responses from the agencies responsible for
those programs to really look at the results of the programs.
Because we did note problems on occasion for a domestic program
trying to deliver the same type of service they might in the
United States to a small, remote island country.
The last thing that I did want to mention again, that in
our report on the impact of migration, we made a recommendation
to really look at targeting health and education benefits,
whether it is through programs or whether it is through the
grants to those problems that could perhaps have an impact both
on the country and on those countries where people tended to
migrate to. In other words, if you can make the population of
FSM healthier or RMI healthier, whether they stay or whether
they migrate to Guam, Hawaii, CNMI or the United States, either
way people are winners.
Mrs. Christensen. Mr. Cohen, it looked like you wanted to
answer. Did you want to respond to my assumption that maybe you
also didn't have the tools or staff to provide the technical
assistance that might have been required as well?
Mr. Cohen. Sure, Congresswoman. The lack of tools that we
refer to, that I referred to in my testimony, really has two
components to it. One, the Department of the Interior lacked
the tools to ensure that our funds were spent wisely, primarily
because the documentation, you know, the Compact agreement
itself, the subsidiary agreements did not provide the tools. So
that--
Mrs. Christensen. The framework to make that determination.
Mr. Cohen. Correct. There were no enforcement mechanisms.
So even if my office were to determine that funds were not
being spent wisely, there really wasn't very much that we could
do. So we are trying to correct that problem by making the
documents tighter by giving us more tools at our disposal to
make sure that the funds that we are spending are achieving the
results that we want them to achieve.
The second component, as you pointed out, is a lack of
staff. When we entered into these Compacts of Free Association,
we really created an entirely new type of relationship that was
very extensive in terms of the financial assistance that we
provided. The Compacts were signed under certain assumptions,
the main assumption being on the economic front that these
large grants, essentially block grants, would replace
programmatic assistance that the Freely Associated States had
relied upon when they were part of the trust territory.
As the relationship evolved, we kept the block grants, but
Congress then started to authorize additional programs to be
provided to the Freely Associated States; and you know there
was real need to do that. But that made it a little more
difficult for the Department of Interior to manage, because it
was not clear whether those additional programs that came on
board after the Compacts were originally signed were subject to
our oversight and control. You know, there was always an
ambiguity there. So we would like to solve that ambiguity, and
we think we are going to solve it going forward.
Then, finally, the lack of staff. We think it is very
important that, if we are serious about oversight and making
sure that Federal dollars are being spent wisely, that we have
sufficient staff to do it. These new documents have in place
very specific reporting and monitoring provisions and other
accountability provisions, and we need the staff to actually
implement those. So, you know, we are attacking this on at
least three fronts and hope to make the situation a lot better
than it was the first time around.
Mr. Osborne. Thank you, Mr. Cohen.
Mr. Faleomavaega.
Mr. Faleomavaega. Thank you, Mr. Chairman.
I certainly wish the best for Nebraska this coming fall. I
still have one of my cousins playing for Nebraska, Mr.
Chairman, and I hope he will be a help to the Corn Huskers.
Mr. Osborne. All of your cousins have been very helpful.
Mr. Faleomavaega. Thank you, Mr. Chairman.
Mr. Chairman, for the record, I want to ask unanimous
consent that I be placed as a cosponsor of H.R. 2408, as you
had sponsored, Mr. Chairman.
I also want to note to the record unanimous consent that I
also become a cosponsor of H.R. 3407.
Mr. Osborne. Without objection.
Mr. Faleomavaega. Thank you for calling this hearing. It is
long overdue.
I just don't know exactly where to begin, except to first
extend my personal welcome to Mr. Short, Mr. Cohen and Ms.
Westin representing the GAO. I am probably one of the few
Members, Mr. Chairman, that has been to the Marshalls, to
Ebeye, to Truk, to Chuuk, to Yap, to Palau.
I want to say that there is a gentleman's memory who served
as a long-standing member of this Committee, we are talking
about Federal programs knowingly, the real sense of vision, in
seeing that the Micronesians be given assistance in these
Federal programs, and that is the spirit of Phil Burton.
Mr. Chairman, I don't know where to begin in terms of
sharing with the members of our Committee, it is so difficult;
and I just wish that every member of this Committee would go to
Micronesia and see for themselves the kind of situation that
these people have been subjected to, colonial administrations
from the Japanese, the Germans; and during World War II I
should say that we have become their colonial masters,
certainly as a credit to our Nation in holding them in high
esteem and establishing this unique relationship under a
Compact of Free Association.
We have some serious problems. And I still recall,
reverberate the statement made by the great Henry Kissinger
when we were at the height of the cold war, there are only
90,000 of them. Who gives a damn?
That was the kind of attitude that some of our leaders
nationally had toward the Micronesians, which I personally
resent and did not take as a compliment. These people did not
even have schools. I could count on my fingers those that went
to college or even graduated from high school when this thing
started.
I have even heard that our senior members of the
administration who retired from high office have said that the
$2 billion that we have expended for these people have been a
total waste. I think that is a bunch of baloney.
When you consider the fact that our multi-trillion-dollar
nuclear testing program that was conducted in the Pacific and
that these Marshalls--these people were subject directly to
nuclear contamination with the 66 nuclear detonations that our
government did to these people--and they didn't ask for much,
and I don't think that they want to be considered as leeches or
as coming here begging our government for help. With the $2.1
trillion budget that we are discussing right now to suggest
that the amount of money that we have expended for these people
is far too much would, given the fact that these people have
sacrificed their lives, their lives, and us expending money to
win the cold war, as it was an integral part of our efforts, I
think what these people have done in sacrificing their fortune,
their property so that we could be successful in blasting those
islands apart so that we could learn better how to vaporize
other human beings in the name of democracy and so we could
understand in the height of the cold war, to suggest that--
I could still recall--Mr. Chairman, I have been to Rongelap
and Utirik, and we detonated this hydrogen bomb that was 1,000
times more powerful than the nuclear bombs that we exploded in
Nagasaki and Hiroshima. Despite what our military leaders said
about the wind drift, when the wind drifted right toward where
these islanders were living--and to this day we still have not
resolved the problem of them being subjected directly to
nuclear contamination. We are still fumbling with the idea that
we may be giving too much to these people.
How much more can we ask from these people in giving their
lives--is there an amount of monetary money that can be given
to the life of any person subjected to these kinds of
hardships? I submit Mr. Chairman, we have a long ways to go.
We are debating the issue of native Americans. I tell you,
I have said earlier, Mr. Chairman, that probably no other
people in the world have been studied to death more than the
people from the Pacific Island cultures. If I catch another
anthropologist coming to my island, I am going to shoot him.
I am sick and tired of being studied like specimens. I can
just cite you right now the first Americans--oh, 70 Federal
studies have been made. I hear now from our friends at the GAO
that not much economic development has happened for the past 15
years. How can you expect for 15 years in expending $2 billion
that these people have hardly had a chance to establish a
nucleus of professionals, accountants, teachers? It is so
common here in America, but it is a tremendous hardship for
those people to leave their villages and just to get an
education, tremendous, tremendous problem of what they are
constantly trying to face here.
I could go on, Mr. Chairman, but I do have some questions
that I hope that, even after this first round, I will be asking
in the second round. I guess my time is over, Mr. Chairman. Can
I ask at least one question?
Mr. Osborne. The gentleman's time is up.
Mr. Holt, do you care to yield or do you have questions of
your own?
Mr. Holt. I would be happy to yield to my friend.
Mr. Faleomavaega. Thank you, Mr. Chairman.
I want to ask Mr. Short if the proposed compact of renewal
with the Marshall Islands, is this satisfactory to both the
administration as well as to the Marshall Islands government?
Mr. Short. Well, sir, I can't speak for the Marshall
Islands. They will be up in a few minutes.
We feel that the offer that we have put on the table
addresses the assistance that is sufficient to fund activities
in the Marshall Islands for the next 20 years under the grant
procedure. Most important, we are interested in establishing a
trust fund that at the end of that 20-year period will have a
sufficient corpus to take the place of the annual
appropriations; and that money needs to accrue for 20 years.
We have agreed with the Marshall Islands government on the
basic structure, that they will contribute an amount of money,
$35 million, on the front end, we will make annual
contributions. There are other activities in the trust such as
third-party participation that we envisioned.
Mr. Faleomavaega. Has the administration taken a position
to cut a lot of these Federal grant programs for the Marshall
Islands?
Mr. Short. No, sir, we have not.
Mr. Faleomavaega. Mr. Chairman, I will wait for the second
round. Thank you.
Mr. Holt. No further questions, Mr. Chairman.
Mr. Osborne. Mr. Duncan.
Mr. Duncan. I don't have any questions, although Mr.
Faleomavaega told me that one of his cousins was getting ready
to play for the University of Tennessee. I am sitting wondering
how many cousins he has playing football.
Mr. Faleomavaega. He happens to be the most sought-after
lineman in the State of Hawaii. He decided to come to the
University of Tennessee. Would you believe that? He loved the
people there.
Mr. Duncan. We are glad to have him. My people in east
Tennessee have been studied a lot, too; and I understand what
you mean.
Mr. Osborne. Returning to the subject at hand, Mrs.
Christensen.
Mrs. Christensen. Thank you, Mr. Chairman.
I did have two other questions. Hopefully, you could answer
these quickly. Maybe to Mr. Cohen or whoever else might be
better able to answer it, I am not sure who I should direct
this to.
Did I understand that at the end of the 20 years trust
funds would be short for the FSM? And if so, what would--are
there any proposals to address that gap or special programs or
initiatives being planned to help the FSM be able to overcome
that deficiency themselves? Is that what I understood to you
say, Ms. Westin?
Ms. Westin. I can answer the first part, that in our
analysis, assuming a 6 percent rate of return, which was the
same rate of return that the administration used in its
analysis, the trust fund yield for the FSM would not cover the
expiring annual grant assistance, that is correct.
But to the second part about is there a proposal to deal
with this, I will--
Mrs. Christensen. Maybe someone else on the panel could
answer that question.
Mr. Short. In estimating the return on a trust fund, of
course, you are making a lot of assumptions over 20 years, rate
of return, over the 20 years and then rate of return even in
the outyears.
The proposal that we have on the table comes very close to
replacing the grant assistance that would be available in year
2023. Part of this gets to your assumptions on the inflation
rate also, what inflation we are going to experience between
now and 2023.
Mrs. Christensen. OK. My last question is along the lines
of the comments that were made by my colleague from American
Samoa. Apparently, the answer to Congressman Underwood's
question on the continued testing, continuation of the testing
in Kwajalein after 2016 was yes. Shouldn't we be negotiating
with the people of Kwajalein to address some of those harsh
living conditions and other hardships and inequities that they
now suffer as a part of the displacement from the atoll?
I have been to Ebeye. I haven't been to the other ones. So
I have seen some of those harsh conditions for myself. So I
wanted to know what specific plans would be in place to address
some of those hardships and inequities that they are suffering.
Mr. Short. Yes, ma'am. I would be pleased to address this
issue.
In Kwajalien, the Island of Ebeye is the residence island
where the majority of the Marshallese citizens reside. It
represents approximately 25 percent of the population in the
Marshall Islands, and it represents not only Kwajalein
landowners and their descendants but also other people from the
Marshall Islands who have gravitated to that location because
of the economic opportunities associated with Kwajalein. So 25
percent of the population in the Marshalls lives there. Thus,
obviously, a healthy proportion of any of the resources of the
Marshall Islands government will go to activities in and around
Kwajalein; and I will let the Marshall Islands representatives
get into more detail.
The one area that we have earmarked funds in the grant area
is directly to address conditions on Ebeye, and this is self-
serving. The United States has a facility there, and the
comparison between the conditions on Ebeye and the conditions
on Kwajalein are not favorable.
We have dedicated, first of all, under the previous
Compact, $1.9 million a year that was passed through the
government to an organization on Kwajalein to address
conditions on the island. It has not been effectively used, and
we have asked the government of the Marshalls to basically
recapture that money so it is auditable and goes where it
should go.
Further, we have dedicated $4.9 million a year directly to
conditions on Ebeye. I should note that we deal with the
government, and we help that government to effect change on
Ebeye, not the landowners per se.
It is the job of the government to, of course, work with
its own people in its own sovereign area regarding conditions
on Ebeye. So the total is basically $6 million a year dedicated
to addressing conditions on Ebeye.
When the government of Marshalls testifies, they can point
out the actions that they have taken on their own in the last
year or two to significantly impact the hospital, power, water
and basic utility situation on Ebeye; and it has been very
favorable.
Mrs. Christensen. OK.
Mr. Osborne. Thank you, Mr. Short.
Just might mention to everyone there are six more panels to
go. We want to make sure everybody gets a chance to ask their
questions, but we do have to keep that in mind.
Mr. Otter.
Mr. Otter. Thank you, Mr. Chairman.
Ms. Westin, just one question in response to a question
that was asked by my colleague, Ms. Christensen. You said there
was a return in investment on the trust fund of 6 percent per
year.
Ms. Westin. That was our assumption.
Mr. Otter. That would not be enough then to create the same
kind of revenue that they were getting after we amortized this
newest contract that we are going into, is that right? Because
it runs out that the new funds coming off plus the earnings
coming off the trust would not match the revenue stream that we
had been providing for the last 20 years, is that right?
Ms. Westin. That is right. The way the proposal is
structured is that there is an annual grant amount that goes
for the next 20 years. That continually decreases over time as
the contribution to the trust fund increases over time.
Assuming a 6 percent rate of return, at the end of 20 years for
the FSM the amount that can be taken out of the trust fund is
not going to be enough to cover the lapsed grant assistance,
the annual grant.
Mr. Otter. If through these negotiations--if these economic
development and social development and educational development
and health development schemes work, why wouldn't the entire--
if they work, and I hope--we believe they will work, and in 20
years why would that revenue stream from the trust fund be the
sole source of income to provide the stability, the economic
stability that we are looking to supply here?
Ms. Westin. It would not be the sole supply of income. In
the report that we did--
Mr. Otter. Then let me ask you this question. How much of
an additional revenue stream did you factor in for the economic
development and for the other benefits that you are going to
get from all these grants? Has the return on investment for the
last 20 years for all this other structure that we are putting
into place--
Ms. Westin. That is not an analysis that we did. We do have
information of the first 13 years of the Compact looking at the
results of the money that we had given. We put out a report on
that, and we did not find very much economic development.
But let me be really clear on the analysis that we did. We
were not saying that the trust fund at the end of the time--it
wasn't GAO's assumption that this should cover the retiring
annual grant stream, but that was the proposal of the trust
fund. It is an exit strategy so that the United States does not
keep giving annual appropriations and grant assistance after 20
years.
As we looked at other countries and terrorist funds they
had set up, we had seen that these can be successful in
providing not the total amount of revenue that a country needs
but some.
Mr. Otter. Well, I guess my concern certainly would be the
stability that is provided and the general well-being of the
people as we exit. But I would question--it seems like our
attitude toward that is we are making all the decisions and
getting them to do what we think is the right thing to do by
whether or not we give them a grant or not. And part of the
development of--part of our help and development ought to be
them being stakeholders in where it is going, then being the
designers of their system, not us.
Because, as we leave, if they don't have buy-in on this, if
they haven't been able to develop in their business acumen and
their health acumen and their education acumen, if it is all
endowed from us, it seems to me we are just going to leave
these folks there no better off except with a piggy bank that
may last a little while.
I am not asking for a response to that. I guess it is maybe
not as clear to me as it is to you. Thank you. Thank you, Mr.
Chairman.
Mr. Osborne. In the interest of time, those of you who have
other questions we will just open it to the Committee.
Mr. Faleomavaega, do you have any further?
Mr. Faleomavaega. If you allow me just a couple of
questions that I have, because I really, really--this is a
very, very critical hearing. And I do respect the fact that we
have other bills pending for a hearing. So I would really
appreciate if you would allow me to ask these questions.
Mr. Osborne. Certainly.
Mr. Faleomavaega. Thank you, Mr. Chairman.
Ms. Westin, you say the GAO couldn't find much economic
development, I guess, in the course of the 13 years that you
have done this audit study. What standard are you using to
measure this so-called economic development? In my district, we
don't even apply the minimum wages that we apply here in the
United States. So I want to ask you, what standards are you
using that there is not much economic development in these
areas?
Ms. Westin. We went to the RMI and the FSM, visited all
states in the MSM, visited all the governments, looked at the--
what kind of documentation there was to use the money that the
U.S. had given over the last 13 years at that point, asked for
examples of where there had been economic development being--
went and visited businesses and whatever.
Mr. Faleomavaega. Give me your bottom line.
Ms. Westin. The bottom line, sir, is we could not find very
many viable businesses that were still in business from the
result of this U.S. assistance.
Mr. Faleomavaega. You are suggesting here that we are not
going to give more money because we couldn't find economic
development.
Ms. Westin. No. What we suggested was that we do support
the idea that it not just be a check that is given but grant
assistance where proposals have to be put in, terms and
conditions put in and accountability measures in place; and I
certainly share the hope of everybody that this will lead to
viable economic development.
Mr. Faleomavaega. Mr. Short, on the question of--two basic
things in terms of this grant, the funding proposal, and I see
two basic problems here, one with the operations that we give
yearly to the government. But one problem that has really
bothered me over the years is the compensation for the victims
of nuclear contamination. I wanted to know what the
administration's position is in reference to what kind of
funding are we prepared to give to these victims, to these
people. For the past 50 years we still have not resolved this
issue.
Mr. Short. Sir, the nuclear claims issue is not on the
table right now. That is not in my mandate. But I will brief
you on where we are.
The Compact of Free Association, pursuant to section 177,
established a claims--
Mr. Faleomavaega. I understand.
Mr. Short. The Marshall Islands government on behalf of its
people have put together a proposal for so-called changed
circumstances that indicates that they do not agree that the
settlement under 177 is adequate. That was submitted to the
Congress. Various Members of Congress have referred it to the
President. The Department of State has established an inter-
agency group. We are reviewing that petition for changed
circumstances, and we will respond to the Congress and to the
RMI government.
Mr. Faleomavaega. Thank you, Mr. Short.
Ebeye, 8,000 people live on this little island, probably
the most dense population per capita anywhere that I have
known, even here in the United States. I guess this matter
comes under the Marshallese government. It doesn't come under
your jurisdiction, correct?
Mr. Short. We are concerned about Ebeye simply because it
represents such a large block of the Marshallese population and
also because of the proximity to Kwajalein. But it is the
responsibility of the Marshall Islands government.
Mr. Faleomavaega. Do you consider the Kwajalein arrangement
very critical as far as our missile defense program that is now
being proposed by the administration?
Mr. Brookes. Yes, we do. Kwajalein is an important national
asset to national defense, our ICBM testing as well as
operations.
Mr. Osborne. Thank you.
Mr. Underwood had a quick statement.
Mr. Underwood. I wanted to thank everyone again on the
panel for their testimony and to just take the time to point
out that we do have a number of issues related to immigration
which continue to be of concern not only in terms of the impact
of migration.
I just--well, maybe I will just take the opportunity to ask
one final question. Do either of you, Mr. Cohen or Mr. Short--
and I know is there a neat separation between what is the
immigration policy and rules and regulations that is possible
for the 50 States as opposed to the territories in reference to
the implementation of the Compacts. Do you know what is the
existing status of the proposed FAS regulations?
Mr. Short. In regard to the latter point, there is a draft
regulation that has been commented on by all concerned. My
understanding is that draft regulation is still at the INS and
has not been published, and I don't believe they have a target
date for publication.
Mr. Osborne. Thank you, panel. I think we are going to have
to move on to the next panel. We appreciate very much your
coming and appreciate your testimony today.
At this point, we will move on with Panel II.
Mr. Osborne. We have the Honorable Peter Christian, Chief
Negotiator for the Federated States of Micronesia, and we have
Gerald Zackios, Compact Negotiator for the Republic of the
Marshall Islands.
Mr. Osborne. Gentleman, we appreciate your being here. Each
one will have 5 minutes for an opening statement. The lights in
front of you, when they hit red, you have had your 5 minutes,
so we will appreciate your staying within the time constraints.
We will start out with Mr. Christian.
STATEMENT OF THE HONORABLE PETER CHRISTIAN, CHIEF NEGOTIATOR
FOR THE FEDERATED STATES OF MICRONESIA
Mr. Christian. Thank you very much, Mr. Chairman, members
of your Committee, and lady gentlewoman of the Committee, too,
as well as the honorable members at the other table.
Mr. Chairman, we from the Federated States are very
grateful to you and the members of your Committee for affording
the government of the Federated States of Micronesia to appear
before you today to address issues regarding the ongoing
negotiations between the Federated States of Micronesia and the
U.S. Government.
Before I continue, sir, I would like to express the
appreciation of the government of and people of the Federated
States of Micronesia to the United States for its prompt
response to the recent landslides in Chuuk, in which over 50 of
our citizens lost their lives, hundreds injured, and homes and
food supplies destroyed. We thank you very much for that
response.
We would like to also take this opportunity to express the
gratitude of our government and our people not only for the
very considerate assistance which has been provided to us by
the United States for the past 16 years, but also for the
constant friendship you have extended to us.
This has been an important contributing factor to our
political, social and economic advancement during the Compact
period.
Mr. Chairman, I invite you and the Committee members'
attention to the discussion in my written statement regarding
the origins of the U.S.-FSM relationship that found expression
in the Compact of Free Association. I stress the important fact
that the Compact has been a success. It has enabled the
establishment of a stable and democratic political system
throughout a vast and strategically sensitive area in the
Pacific and the Pacific Rim.
The FSM has taken its place as a full participant in the
international community and is a strong supporter of the United
States foreign policy. The Compact has also facilitated
tremendous economic progress in a relatively short time, having
started from a very low point in that regard.
Mr. Chairman, I was born in 1947, the first year of the
trusteeship. I can testify with certainty that the FSM of today
bears little resemblance to the impoverished, war-torn islands
of my youth. During the past 16 years especially, rapid
advancements in transportation and communication
infrastructure, education, health care, and, yes, private
sector development have transformed our society and our quality
of life, despite the many obstacles that we face.
Undeniably, sir, there have been mistakes and our journey
toward economic self-reliance is far from over. Nevertheless,
we feel that all parties who have been involved should feel
justifiable pride in the accomplishments of the Compact's first
16 years.
Both the Federated States of Micronesia and the United
States are determined in the amended Compact to reinforce those
policies that have been successful and correct those which have
not. Central to this approach is a shared desire for better
administration, for transparency, better accountability in the
management of Compact funds.
Again, referring to my written statement, my purpose in
going into some detail about the history of our renewed
negotiations is twofold: First, of course to give you our
perspective on the events that have brought us to where we
stand today; second, to inform this Committee of the diligence
that we have shown consistently throughout the negotiating
process. I assure you that we will continue to work hard to
arrive at a document that adequately serves the objectives of
both sides. Still, it must be said that significant challenges
remain to be overcome.
Mr. Chairman, while the gap between the two assistance
proposals has narrowed considerably in recent months through
concessions made by both sides, we have not yet been able to
agree to the offer of the United States. The ability of the
Federated States of Micronesia to sustain and accelerate its
economic progress over the next 20 years is, for us, a bottom
line requirement. It is also a prerequisite to the successful
implementation of the trust fund we have been speaking about.
One of our greatest concerns, sir, at this stage, is the
preservation of FSM eligibility for Federal programs and
services. Continued extension of these programs to the
Federated States has been a mutually shared intention of both
sides since the start of the original Compact negotiations and
has not changed over time. The economical calculations of both
the Federated States and the United States negotiators are
based on an assumed continuation of current levels of Federal
programs and activities.
However, we are alarmed by recent rumors or signs that the
Congress may seek to remove our eligibility in certain critical
areas such as health and education.
We are already facing the loss of substantial Federal
program components. For example, under the new U.S. proposal,
we would no longer be eligible for FEMA. As we have seen in the
tragic events that just took place in Chuuk, acts of God, or
acts of nature if you will, now hold the potential to wipe out
the investments of both the United States and the Federated
States in the essential infrastructures of our islands.
One of the aspects of the United States proposal most
alarming to us is the move to amend a Compact provision that is
not expiring; namely, the immigration section of Title I.
Existing Compact privileges of free entry into the United
States for FSM citizens to work, study and otherwise acquire
useful skills has been a key element in the progress that we
have made. We had expected that these negotiations would be
limited to expiring provisions of the Compact, thus enabling a
relatively speedy consideration and approval by both
governments.
Mr. Osborne. Excuse me, but we are about 2 minutes over.
Are you about to wrap up? We need to move on with our next
panelist.
Mr. Christian. Mr. Chairman, I will end my testimony right
there. Thank you very much for the time.
[The prepared statement of Mr. Christian follows:]
Statement of The Honorable Peter Christian, Chief Negotiator, Joint
Committee on Compact Economic Negotiations, Government of the Federated
States of Micronesia
We are grateful to you, Mr. Chairman, and to the Committee Members,
for affording the Government of the Federated States of Micronesia
(FSM) this opportunity to appear and present our testimony regarding
the negotiations between the FSM and the United States Government (US)
to amend certain provisions of the Compact of Free Association,
primarily those relating to financial and other assistance that are
expiring, after fifteen years.
First, we would like to take this opportunity to reiterate the
gratitude of our Government and our people, not only for the very
considerable assistance which has been provided to us by the United
States for the past fifteen years, but also for the constant friendship
you have extended to us. This has been an important contributing factor
to our political, social and economic advancement during the Compact
period. I am sure that I speak for every citizen of the FSM in saying
that we are proud of our close association with the greatest Nation on
earth. We are motivated in no small part by this association to
maintain principles of freedom and democracy that we share with you.
The US and the FSM share important historical ties in the western
Pacific. The tragedies of World War II brought our two peoples
together, with some of the fiercest battles of the war in the Pacific
being fought on our soil. The experience of the war, and the tragic
loss of so many American and Micronesian lives, vividly underscored the
strategic value of our islands. At the time, some in the US Congress
even went so far as to suggest that Micronesia should remain in US
hands indefinitely. Given the historic anti-colonial attitude of the
US, we were eventually designated as the only Strategic UN Trust
Territory. Our sovereignty was never assumed by the United States.
Under this arrangement, the US would maintain military control of the
region while pledging a solemn commitment to the ``economic and social
advancement of the inhabitants.''
The early years of the Trust Territory were difficult for both
sides. Early on, the US embraced what became known as the ``zoo
theory,'' under which it believed a hands-off approach to the
Micronesian people, thereby leaving us in a traditional subsistence
environment, would be best for us. It soon became apparent that it was
too late for that kind of thinking, and it amounted to economic neglect
of the Micronesians. As a result little or no development took place,
with basic services lacking and only rudimentary infrastructure in
place. This would change in the mid-1960s with a sudden increase in the
levels of assistance from the US, and also the first concrete steps
toward the establishment of political institutions and eventual self-
governance. In 1979, the Constitution of the FSM was implemented and
our nation was born.
In 1986 the Trusteeship was terminated, and the US and FSM entered
into a new relationship under the Compact of Free Association at the
time the first of its kind in international affairs. The Compact
recognized the FSM, the Republic of the Marshall Islands, and later
Palau, as self-governing sovereign states in free association with the
United States. These entities, to be termed the ``freely associated
states,'' or FAS, would contribute to the peace and security in the
central Pacific through the granting of certain defense and security
rights to the US. In exchange, the US would promote the economic and
social well-being of the Micronesian people through continuation of
financial and other assistance. These arrangements served the US and
the FAS well during the first fifteen years of the Compact, and,
hopefully, will be reaffirmed and strengthened in the amended document
currently under discussion.
In most important respects, the first fifteen years of the Compact
have been successful. Great strides have been made in improving
economic and social conditions in the FSM and the quality of life of
FSM citizens. A stable and democratic political system has been
established in the FSM, determined solely through the will of its
people. The FSM has taken its place as a full and active participant in
the international community. As such, it has been a strong and
consistent supporter of United States foreign policy, in its bilateral
relations, regionally and at the United Nations. During the Compact
period the central Pacific has remained peaceful, secure, and free of
foreign interference, in marked contrast to its previous history and to
developments elsewhere in the broader Asia-Pacific region.
As with any new relationship, and as with any newly emerging
developing country, mistakes were inevitable. Most that involved the
Compact were remedied along the way through US/FSM consultations. Not
once did either party resort to formal dispute resolution. Not once did
the United States invoke the Compact defense veto against any FSM
Government action. After about ten years and with the support of the
Asian Development Bank, the FSM National and State governments carried
out one of the most successful government reform and restructuring
programs on record.
Both the FSM and the US are determined in the amended Compact to
reinforce those policies that have been successful and correct those
which have not. Central to this approach is a shared desire for better
administration, transparency and accountability in the management of
Compact funding.
This brings us to the negotiations over the past several years to
continue this historic relationship. Negotiations on the original
Compact began in 1969 and lasted 17 years. Of course, the talks this
time are focused primarily on the expiring provisions. Nevertheless, it
is a credit to all involved that these talks are nearing completion in
less than three years.
Even though the scope of the current renegotiation is much more
limited than that of the original negotiations, many of the original
principles and formulations have had to be reassessed in a
substantially different post-Cold War international relations
environment. Also, proper account has to be taken of technological
innovations that were nearly unimaginable when the Compact was signed
in 1986. Further, with fifteen years of history behind the two nations,
both must now reinforce and build upon the positive accomplishments of
the Compact while addressing the problems that have arisen.
Still, it is understandable that some might ask why these talks
have taken this long. Please allow me briefly to trace a history of the
renegotiation process, which we hope will shed light on the reasons for
the delays that have occurred.
The FSM Joint Committee on Compact Economic Negotiations (JCN) was
created by the FSM Congress in 1997, to begin preparations for the
Compact negotiations which were mandated to begin in 1999. The JCN was
formed a full two years before a similar agency was established by the
US.
During these first years, the FSM developed the mechanisms
necessary to ensure proper representation by the FSM in the talks, and
conducted extensive research into some of the major issues likely to
arise in the renegotiation. Keys to this research were a comprehensive
survey of the FSM's economic needs and the development of projections
for the twenty years following the end of the current Compact. These
figures have since been fine-tuned and examined by economists from the
FSM, the US, and international organizations. They constitute a
detailed and useful picture of the FSM's economic prospects, especially
in the near future.
At the opening round of negotiations, mandated by the Compact to be
held in November 1999, the two sides agreed to four principles that
would guide the work on a renewed Compact agreement. These were: a
rededication to the goals of Title Two (economic provisions) and Title
Three (security and defense provisions) of the Compact; commitment to
completion of public sector reform and to private sector development in
the FSM; and greater accountability for the use of Compact funds. This
meeting accomplished its purpose as a forum to establish the broad
constructs for the new agreement.
The comprehensive FSM economic study that we mentioned before
served as the basis for the FSM's original economic proposal put
forward at the second round of talks in April 2000. In this document,
the FSM proposed ongoing grant assistance for a period of twenty years,
and the formation of a US-funded trust fund during the same period,
which would provide a funding stream at the end of twenty years
adequate to eliminate the need for further US grant assistance. This
was accompanied by a macroeconomic strategic planning framework that
was the result of a series of nationwide economic summits held in the
FSM. The first FSM proposal called for a total of $84 million annually
in grant funding along with annual $20 million trust fund
contributions. We presumed at the time that the inflation adjustment
and full faith and credit provisions were not expiring.
Also at the second session, the FSM made a very important
concession, agreeing in principle to the US proposal that grants would
be specified in sectoral areas.
Work continued in a series of technical meetings between the sides.
The FSM waited, meanwhile, for the US reply to its economic proposal.
The FSM proposed a third formal round to be held in Yap, in September
2000, to receive the US counterproposal. The US agreed, and the FSM
negotiators assembled in Yap, only to be notified from Washington that
the US was not yet ready to present its counterproposal.
Two months later, in November 2000, a US economic concept paper was
presented in Washington. The FSM was gratified that the US had accepted
the need for a trust fund and adopted other elements of the FSM
proposal. Still, the financial gap between the two proposals was huge.
The US proposed annual grants for fifteen years not twenty amounting to
a grant level of $56 million per year and a trust fund contribution of
$13 million per year, all without inflation adjustment. An additional
$5 million in grant funding would be available if the FSM met a vague
macroeconomic performance standard.
In the FSM's view, this proposal, if accepted, quickly would lead
to economic chaos and political instability in the FSM and would not
result in anything resembling a viable trust fund at the end of the
agreement. Further, the FSM viewed the US proposals regarding
accountability as over-reaching, despite both parties' commitments to
improvement in that area.
In January, 2001, when the third round finally convened, it was not
possible to narrow the gap between the FSM and US proposals, but the
parties executed a Joint Statement of Principles, reiterating the four
original principles and memorializing progress made up to that time.
That statement is provided as an annex to our testimony. This statement
expressed agreement on a sector grant approach and a trust fund.
The FSM agreed to another series of technical discussions focusing
on the US and FSM financial positions. In one such meeting, in April
2001 in Honolulu, the FSM tabled a revised version of its original
proposal, which now offered a $5 million reduction in our earlier
request for grant funding, applying somewhat more optimistic
assumptions about the future performance of the FSM economy. The key
feature of the revised proposal was to establish an entirely new
structure for accountability centered on a Joint (US/FSM) Economic
Management Mechanism (``JEMM'') that would be supported by a full-time
joint secretariat. The idea was to move beyond simple oversight, as
embodied in the US counterproposal, to the principle of a proactive
partnership for FSM economic development and accountability. The
revised FSM proposal also specified an inflation adjustment formula and
full faith and credit guarantee, as well as continuation of all federal
programs.
The longest delay in the negotiating process came about as the
result of the uncertainty over the US Presidential results and the
eventual change in administrations. A new negotiator was named in the
fall of 2001, but the tragic events of September 11 resulted in still
more delays.
Finally, with the new negotiator in place, the US agreed to meet in
a fourth formal round in Honolulu, last December. The meeting served to
reaffirm key principles from past sessions as well as to outline the
new US Administration's vision for the renegotiations. Additionally,
the two sides agreed to an ambitious negotiating schedule with a view
toward completing draft Compact amendments by the summer of 2002. The
first agreed document of the negotiations, a subsidiary agreement on
Civil Aviation Safety, was initialed ad referendum at the fourth round.
Progress was also made on agreements relating to postal services,
telecommunications, FDIC and US military civic and humanitarian
assistance (CHAP).
A full slate of technical meetings took place leading up to the
fifth formal round in San Francisco in May 2002. During these meetings,
the US and FSM discussed for the first time in detail the US recently-
proposed language for Title Two, regarding economic assistance. The new
US proposal narrowed the gap between the sides substantially, offering
an initial grant amount of $72 million annually, for a period of twenty
years, and provided for sufficient trust fund contributions to ensure
viability at the end of the period. Both were subject to partial
inflation adjustment and a multi-year appropriation variation of full-
faith and credit. These contributions would, however, be conditioned on
an initial FSM contribution to the fund of $30 million.
In addition to detailed discussion of new US drafts for Title Two,
the San Francisco round was marked by consideration of newly-proposed
US draft language for Titles One, Three and Four. The two sides made
significant progress on the former, initialing many sections. The
latter, however, created a series of unexpected problems for the FSM,
as the US draft proposed changes to important elements of the Compact
that are not expiring, and are thus beyond the JCN's mandate to
negotiate. The sides also initialed agreements related to the FDIC,
postal services, and CHAP.
Nearly continuous technical meetings have been held since the San
Francisco Round, resulting in further progress on many fronts. We are
currently in the process of reviewing the US draft agreements on
telecommunications, law enforcement, and military use and operating
rights. We are awaiting promised drafts on topics such as the trade
provisions of Title Two, status of forces, and the US Weather Service.
We have just provided to the US a proposed redraft of the existing
agreement relating to economic regulation of civil aviation.
In early 2002, the US announced that it was proposing changes to
non-expiring provisions of the Compact in a number of areas, primarily
immigration. As the JCN was not granted a mandate to discuss issues
other than expiring provisions, we have been unable to negotiate these
elements thus far in the process. We am pleased to report that a
special negotiating body appointed by the President of the FSM to
consider US proposals to amend non-expiring provisions of the Compact,
will hold its first meetings with US representatives next week.
That is where we stand today. It had been the mutual goal of both
sides to approach the Committee today with an agreed document, and to
outline the ways in which this will strengthen our bilateral
relationship, enhance the economic development of the FSM and serve US
security interests in the region. While we are not quite there yet,
these remain our goals. I assure you that we are working hard to arrive
at a document that adequately reflects these aspirations. Still, we
cannot in good faith gloss over the significant challenges that remain
in the talks.
We are cognizant of the time constraints we face, and we think the
record clearly shows that the FSM has, at every stage in the process,
done its part to keep the discussions moving. The process has been
subject to several unfortunate delays, and while these were beyond the
ability of the FSM to control, and often beyond that of the US, they
have placed us in a difficult situation with the deadline for
Congressional consideration looming. That said, the issues remaining
are too vital not to consider thoroughly.
While the gap between the two assistance proposals has narrowed
markedly, and we are appreciative of the US efforts in this regard, the
ability of the FSM to sustain and accelerate its economic progress over
the next twenty years is a bottom-line requirement. It is also a key to
the successful implementation of the trust fund. We are told that the
US negotiator has reached the limits of his authority in this regard,
and we have looked for any conceivable way in which we could
accommodate the figure we are currently offered.
That problem, however, does not exist in a vacuum. Our position on
the matter of financial assistance is complicated by a number of other
unresolved issues with significant financial implications. Some of
these, such as the still-emerging US Fiscal Procedures draft, are
highly complex.
As the documents now stand, in the first year of the proposed US
draft, the FSM economy would need to absorb a $12 million reduction in
grant assistance; repatriate migrants who would no longer be allowed
unlimited stays in the US under the more restrictive immigration
provisions; scramble to produce the initial $30 million trust fund
contribution; adjust to a nearly incomprehensible series of new
administrative procedures; bear, for the first time, the cost of audits
required by the US at an estimated cost of $1 million annually; prepare
for an increase in postal rates; and adjust to the new pay-as-you-go
CHAP scheme, as opposed to the $1 million provided for the former Civic
Action Teams.
One of our greatest concerns at this stage is the preservation of
FSM eligibility for federal programs and services. Extension of these
to the FSM has been a mutually shared intention of both sides since the
start of the original Compact negotiations, and has not changed over
time. The economic calculations of both the FSM and the US negotiators
are based on an assumed continuation of current levels of federal
program activity. However, we are alarmed by recent signs that Congress
may seek to remove eligibility in certain important program areas.
Federal programs have always represented a critical portion of the
overall Compact package, providing vital services and technical
expertise which still cannot otherwise be funded by grants as currently
offered by the US, or by local revenues. Given the proposed reduction
in the levels of grant assistance, they will become even more important
under the amended Compact. The FSM's health and education sectors are
particularly reliant on eligibility for these programs. Any cutback
would have a devastating effect. No matter how much the negotiators may
agree that these programs should be continued, that is, of course,
ultimately subject to the will of the US Congress. It is for these
reasons that we seek to work with the Congress to address, in advance
of adverse actions, any concerns you may have regarding our eligibility
for these programs and to ensure that maximum benefit is derived from
their provision. Believe me, we are not talking about ``double-
dipping'' here. Programs as currently provided are envisioned to be an
integral part of the future Compact assistance package.
Under the new US proposal, we would no longer be eligible for FEMA
disaster assistance should it be required. Acts of God now hold the
potential to wipe out the investments of both the US and FSM in the
essential infrastructure of our islands. As we have seen in the tragic,
storm-driven landslides that struck Chuuk just a few short days ago,
killing more than fifty people, the FSM is not immune to these threats.
With the scientific community pointing to an increase in the intensity,
and possibly the frequency, of tropical storms, this loss of our only
substantial disaster assistance channel could not come at a worse time.
Given the substantial investment the US has made, and will continue to
make in the FSM, the withdrawal of FEMA assistance at this time is
difficult to understand.
When one considers the effect of earlier reductions in grant
assistance under the Compact step-down process, requiring adjustments
far less than those now proposed, it is not difficult to see that the
shock to the economy may be too great to recover from, even after
twenty years. With one of the primary goals of the two sides being
promotion of the private sector, this does not paint an attractive
picture for local businessmen, and certainly not for outside investors.
The earlier step downs prompted one of the most ambitious public
sector restructuring efforts ever undertaken in the region, and
eliminated twenty percent of government jobs. We would face the
prospect of undergoing an even more severe restructuring, less than
five years after the first.
So yes, as some have said, the gap is ``only a few million dollars
a year.'' But a ``few million dollars'' represents a large share of the
FSM economy. And this cannot be considered in isolation, as one must
examine the full slate of increased costs due to changes to other
elements of the relationship proposed by the US. In all, the current US
proposal falls short of meeting one of the key US objectives of the
Compact the promotion of the economic self-sufficiency of the FSM.
Outside of the financial provisions, there are a number of items
remaining on the table which are not consistent with the FSM's status
as a sovereign nation. The first is the provision calling for a grant
of a permanent defense veto. Second, Section 234 of the US draft Title
Two would provide an over-reaching law enforcement role for the US and
would seek to institute intrusive measures such as the enforcement of
US subpoena of documents and testimony of witnesses. Finally, many of
the elements of the proposed Fiscal Procedures Agreement were developed
from legislation applicable to US States, and are not found in other US
aid arrangements. The FSM is not a US State or Territory, and does not
have access to the resources that make those requirements workable in
States and Territories.
Looking at the situation purely as though this were a negotiation
between equals, one can fairly say that both sides have shown movement
and flexibility that has narrowed the remaining gaps. Without question,
the US is offering the FSM a very large amount of assistance, for a
long time. We are not ungrateful, nor are we just looking to squeeze
the last dime out of the negotiating process. We think that our
announced method and intention from the very beginning points in the
opposite direction. We believe, Mr. Chairman, that at the end of a day
which must come very soon, the US and the FSM will reach an agreement
that is faithful to the common interests that we share interests that
were first expressed in the original Compact, and again expressed
repeatedly as the four principles guiding the present negotiations.
With that in mind, now we both must carefully examine the current
proposals to judge their impact on our shared aspirations for the
social, political and economic future of Micronesia, and the
maintenance of peace and security in the greater Pacific region.
We look forward to responding to questions raised by the Committee
on any aspect of the talks, and would be happy to provide a more
detailed explanation of the issues of contention that remain in Titles
One, Two, Three and Four, and with the Fiscal Procedures and Trust Fund
Agreements.
In closing, we wish to reiterate our thanks to the Committee for
holding this important hearing and for inviting us to provide
testimony. We would also like to express our appreciation to the US
negotiating team for the constructive spirit in which they have viewed
these negotiations, and we share the view that we will soon have an
agreement of which both nations can be justifiably proud and one that
should lead to speedy and affirmative Congressional approval.
Thank you, Mr. Chairman.
______
[An attachment to Mr. Christian's statement follows:]
Joint Statement
The United States and the Federated States of Micronesia (FSM)
reaffirm their special relationship, as reflected in the Compact of
Free Association (Compact). This Joint Statement reaffirms the mutual
desire of the FSM and the United States to reach an agreement regarding
certain provisions of the Compact.
Reaffirmation of Principles
1. The parties are jointly committed to continued security and
defense relations as set forth in TITLE THREE of the Compact.
2. The parties are jointly committed to the purpose of TITLE TWO of
the Compact, which is to assist the Government of the FSM in its
efforts to advance the economic self-sufficiency of the people of the
FSM.
3. The parties are jointly committed to public sector reform in the
FSM and to promoting policies, measures and mechanisms that advance the
development of the private sector in the FSM.
4. The parties are jointly committed to more effective
accountability under the Compact.
Economic Assistance
1. The U.S. Administration remains committed, following the
fifteenth anniversary of the effective date of the Compact, to the
economic stability and well-being of the FSM. Accordingly, the United
States intends to provide a substantial level of financial assistance
to the FSM (in a manner that avoids disruptive step-downs), over a
limited period of time. The terms and duration of such assistance would
be the subject of a subsequent Agreement.
2. The United States and the FSM propose that assistance from the
United States would take three forms:
A. Financial assistance, provided on the basis of sectoral grants,
on terms that would ensure effective accountability, and an agreed-to
degree of flexibility, in addressing sectoral needs from year-to-year.
These terms would be set forth in the subsequent Agreement referred to;
B. Annual contributions into a Trust Fund, the governance of which
would be agreed by the United States and the FSM. This Trust Fund would
be intended to meet the parties' mutual objective of terminating
mandatory annual financial assistance from the United States to the
FSM. To this end, contributions to the Trust Fund, from all donors,
would be intended to build a corpus that could provide an annual income
to the Government of the FSM following the termination of annual
mandatory financial assistance from the Government of the United
States. During the period in which the FSM would continue to receive
such financial assistance, no portion of the corpus or earnings of the
Trust Fund would be used.
C. Subject to Congressional approval, appropriate U.S. Federal
programs, services and technical assistance.
Undertakings by the Government of the FSM
The Government of the FSM would:
A. Continue its efforts to maximize assistance from other foreign
sources and from multilateral entities, consistent with the Compact,
including contributions to the Trust Fund;
B. Continue its efforts to increase locally generated revenues;
and
C. Achieve and maintain compliance with accountability
requirements specified in the Compact as it may be amended.
Allen P. Stayman
Special Negotiator
Peter M. Christian
Chief Negotiator
Honolulu, Hawai'i
January 11, 2001
______
Mr. Osborne. Thank you. Mr. Zackios.
STATEMENT OF GERALD M. ZACKIOS, COMPACT NEGOTIATOR FOR REPUBLIC
OF THE MARSHALL ISLANDS
Mr. Zackios. Mr. Chairman, distinguished members of the
House Committee on Resources, ladies and gentlemen. On behalf
of President Kessai Note and the people and government of the
Marshall Islands, I want to thank you for the opportunity to
appear before you today. I want to reassure you that the RMI
will continue to work with the United States in whatever way is
necessary to reduce the threats of global terrorism.
As strategic partners and allies of the United States, we
stand with you in the war on terrorism and missile defense
program.
Before I get to the substance of my remarks, I would like
to clarify that we are not engaged in an exercise to amend the
entire Compact of Free Association. Our mandate is to extend
the expiring provisions of titles II and III pursuant to the
provisions of section 231 of the Compact.
If we had followed the mandate of the Compact that
instructs us to deal only with expiring provisions, I honestly
believe we would have been much closer to a conclusion of title
II today.
I also note that if our mandate had been to amend the
entire Compact, the RMI would have begun with section 177
regarding the nuclear claims.
Since my time is brief, please excuse me while I move
directly to the topic of title II. Other issues of importance
to our bilateral relationship are included in my written
testimony.
I want to thank the Congress and executive branch for
working with the RMI to ensure the success of free association
under the Compact. I strongly believe that the challenges that
have occurred in our implementation of free association have
been strongly outweighed by the mutual benefits of our
relationship. I also want to let you know that I think the RMI
and the U.S. are very close to concluding a title II agreement.
We are actively engaged with the U.S. Chief Negotiator to
remove the final stumbling blocks so we can reach consensus on
an agreement.
There are three specific topics I would like to touch upon:
The base grant, the intergenerational trust fund, and improved
fiscal accountability and management procedures.
On the base grant, the title II agreement is structured in
such a way that the RMI would be given a base grant to provide
essential government services and infrastructure investments.
The base grant will be supplemented by continuation of existing
Federal programs and services and the extension of additional
programs you have if agreed to by the administration and
Congress. One significant difference that remains in our
discussions with the United States regarding the base grant is
the need to maintain the real value of Compact funds. Over the
next 20 years, with the half a million dollar annual reduction
proposed by the U.S., the value of the funding will decrease
substantially at a much faster pace than we think we can
generate other revenue or reduce budget costs. Thus, the RMI
needs to have to adjust it fully for inflation.
The intergenerational trust fund: A new component of title
II economic assistance will be maintaining a trust fund to
supplant U.S. assistance in the future. To demonstrate its
commitment to the trust fund, the RMI has already put $18.5
million into the fund. We plan to make substantial future
inputs and are only potentially deterred from our contributions
to the fund by crucial infrastructure needs, particularly the
urgent need to repave the Majuro International Airport and to
refurbish Majuro Hospital, the principal medical care facility
of our nation.
Mr. Chairman, the U.S. has made a proposal to contribute to
the trust fund, and I am glad that we both agree that the trust
fund is an appropriate mechanism to provide for post-title II
budget stability, to invest in future generations and to
eliminate our reliance on mandatory U.S. grant assistance.
We do question, however, if the U.S. contribution along
with the RMI contributions will be sufficient to provide a
distribution in 2024 to succeed U.S. base grant assistance. If
the U.S. contribution is adequate and has a full inflation
adjustment, we will be in full agreement on the trust fund.
Fiscal monitoring and accountability. From our standpoint,
the RMI needs to reduce its reliance on external grant
assistance. To do this, we need to ensure that funds allocated
over the next 20 years are used effectively and the corpus of
the trust fund reaches an adequate level.
We have developed processes in this respect and have worked
with the Asian Development Bank and the U.S. to improve
planning, monitoring and accountability of our financial
management system. We believe, Mr. Chairman, that the fiscal
procedures agreement that will accompany our final agreement
must be practical for the RMI and the United States and that it
must construct fiscal procedures that are transparent and can
be implemented by both sides.
In conclusion, Mr. Chairman, I think Congress will be
pleased by the agreement you will receive. The final agreement
will increase the economic stability of the RMI and
simultaneously create a mechanism for the RMI and the U.S. to
jointly improve the RMI's financial management and monitoring
systems.
The RMI also established a viable mechanism to reduce our
dependency on U.S. mandatory assistance in 2024. I am also
excited that our new government agreement builds a joint
mechanism to train Marshallese in fiscal management and to
monitor the progress and performance of the trust fund and the
use of Compact funds.
While funding is of crucial importance, the RMI also needs
the active involvement of the U.S. on the ground in the RMI to
strengthen our capacity to achieve sustainable economic
development.
Thank you, Mr. Chairman. Please know that the RMI
government remains fully committed to continuing the success of
our mutually beneficial relationship and unique strategic
alliance. Thank you.
[The prepared statement of Mr. Zackios follows:]
Statement of Gerald M. Zackios, Minister of Foreign Affairs, Republic
of the Marshall Islands
Mr. Chairman, Distinguished Members of the House Committee on
Resources, Ladies and Gentlemen:
I would like to begin my testimony by recognizing the wisdom of the
American and Marshallese leaders who negotiated the Compact of Free
Association. Even though none of us could have foreseen the end of the
Cold War in 1985, they had the vision to realize that new dangers and
new threats to peace would emerge even in a post-Cold War era. This is
why a bipartisan consensus developed in Congress in support of
strategic denial in perpetuity, rather than a period of years.
Unfortunately, strategic planners in the Department of Defense back
in the 1980's were right, the world is still a dangerous place a decade
after the Cold War ended, and the Marshall Islands remains
strategically vital because of its unique location and capabilities. We
do not shrink from our role as a front line defender of democracy and
strategic partner of the United States. We welcome this role and its
accompanying challenges.
We know the only thing more dangerous than standing with the U.S.
led coalition against terrorism would be to hope that somehow we could
stay out of harm's way because of our remote location. We learned the
folly of that naive worldview during World War II and the Cold War arms
race that brought the nuclear age to our homelands.
Today we are realists, which is why the RMI was among the first
nations to give its unconditional and unequivocal support to the U.S.
leadership in the war on terrorism.
The RMI is proud that no other nation in the world is more closely
aligned with the U.S. militarily than the RMI. We are proud of the
Marshallese men and women who serve in every branch of the U.S. armed
forces, and we are proud hosts to the U.S. Government's missile defense
systems development program on Kwajalein Atoll.
I also want to begin my testimony by thanking the Congress and the
Executive Branch of the United States Government for working with the
RMI to ensure the success of free association under the Compact. I
strongly believe that any burden that may be attributed to free
association, and even the trusteeship period, are clearly outweighed by
the mutual benefits of our relationship.
Despite the successes of free association, I recognize that there
are critics in the federal government. A few may even view free
association as some sort of historical accident that is frustrating and
inconvenient because it commingles domestic and international issues
and programs. While some may wish to ``normalize'' our unusual
bilateral relationship, we continue to find greater value in the
special relations defined by the Compact than any other political
status or relationship. I believe the Compact is a success because it
simultaneously reflects the historical linkages between the U.S. and
the RMI, including the previous need to terminate the trusteeship. The
Compact also effectively creates a new model for bilateral relations
that ensures benefits for both of our countries well into the future.
Many of the benefits our nations receive from the Compact have only
recently become evident, and others are yet to manifest. What is
important now is to maintain and to build upon our success.
The Compact is a success.
The Compact was born of optimism and commitment sustained in both
the Carter and Reagan administrations. These administrations, along
with Congress, understood that the most important purpose of the
Compact was to transition the RMI from trusteeship to self-governance.
The architects of the Compact were right, and their vision came true;
the RMI has become a politically stable nation where democracy and
human rights are respected, and where the rule of law is enshrined in
our Constitution and effectively administered by our courts. I am proud
of what the RMI has become--a nation that adopted a participatory
democratic system of governance and which retains the strengths of our
traditional culture.
As a result of free association, the Marshall Islands has been
transformed from a trusteeship to a democratic and stable nation--a
nation that chooses to closely align itself with the United States and
a nation that chooses to contribute to crucial U.S. strategic
interests. The Compact has also enabled the Marshall Islands to begin
recovery from decades of restricted development during the trusteeship.
It has become something of a mantra to admit we made some mistakes in
our economic development strategies. Without ingratitude for all that
was done with the best of intentions, it can be argued, however, that
we have made fewer mistakes in fifteen years under the Compact than the
U.S. federal government made in its developmental program as
Administering Authority during the last fifteen years of the
trusteeship.
We also are building mature political and economic relations with
the U.S. and the rest of the world. For example, as a nation the RMI
unequivocally supports human rights and self-determination; the RMI has
chosen to build strong alliances with Taiwan and Israel, and other
countries, as evident from the RMI's voting record at the United
Nations.
The transition from trusteeship to independence has been a
difficult process. We expected the transition to present challenges and
in some cases the process has proved even more difficult than expected.
We need the continued involvement of the United States to meet these
challenges and to fully realize the value of the investment our nations
have made in the success of free association under the Compact. By
addressing and working through our challenges, I believe the RMI will
become a stronger and more resourceful nation.
The benefits outweigh the burdens.
There is no question that some problem areas have resulted during
the implementation of the Compact. These imperfections to do not
detract from the success of the Compact, and in most cases provide an
opportunity for the RMI to acknowledge its problems, learn from its
mistakes, and make better choices in the future. This learning process
is an integral part of development.
An examination of the economic gains of the RMI provides the
perfect example of how the RMI has had successes, and how the RMI has
had to learn from its mistakes. The RMI has made major improvements in
the quality and extent of the basic infrastructure that it inherited
from the trusteeship especially in the areas of transportation,
electricity, communications, water, and roads. We have also
significantly reduced the size and cost of an excessively large public
sector resulting from the trusteeship. The size of the Government was
reduced by nearly one third between 1997-2000, and we are striving to
create a professional public service that is both effective and
efficient. We also have succeeded in attracting investment in fish
processing, aquaculture, and in tourism.
While we have made significant progress in developing our economy,
the RMI has also made some misjudgments that have slowed our growth.
For example, the previous administrations made Government investments
in commercial enterprises that were not successful. The Note
Administration has learned from these mistakes and our policy is to
reduce Government investment and create an enabling environment for the
development of our small, but growing private sector.
Another area that has been difficult, but one where we have made
significant progress, is the reform of our financial management and
accountability systems. As you know, having strong financial systems
and properly trained people to work them is a challenge in all
countries. The General Accounting Office (GAO) has been extremely
helpful in identifying problem areas in the RMI, problems that
primarily resulted from the shortcomings in our fiscal and financial
mechanisms. We have been working consistently with the Asian
Development Bank to strengthen these systems and to minimize the
opportunity for inappropriate use of government resources, including
Compact funds.
The other area where growth has been frustrating is our human
development. While some progress has been made in the areas of health
and education, such as the completion of the new Ebeye hospital and
successful teacher training and vocational education programs,
substantial deficits exist in these areas. As the GAO notes, the
deficiencies in our public health and education may be one reason that
some of our citizens are emigrating to the U.S. and its insular areas.
We would like to work with you to strengthen the public health and
education systems in the RMI so that our citizens can reach their full
potential, including maximum participation in the economy, and to
decrease the number of citizens seeking basic services in other
locations.
However, even with a healthy and educated population, emigration
will still persist, as experienced in other island countries and a
general occurrence in international development. We must face the
reality that the RMI is an atoll economy with practical resource
limitations that make emigration a necessary ``safety valve.''
Again, I would like to note that the problems that have emerged
with the Compact in no way detract from the overwhelming success of the
Compact.
Title II.
The RMI position is that it has made great progress on the
negotiations for an effective and beneficial Title II package. We
sincerely appreciate the efforts and consideration of the U.S. Chief
Negotiator Al Short and his team. We believe we are moving much closer
to a final package to be presented to Congress. If approved, the Title
II package would maintain economic stability in the RMI, achieve
budgetary self-reliance, strengthen our economy, and improve the
opportunities available to Marshallese citizens. The RMI's goal for
Title II is to establish fiscal stability and budget flexibility while
simultaneously ensuring the long-term sustainability of our economy. We
believe this is achievable and we have put fiscal incentives in place
to help us meet our goals.
The new Title II agreement is structured in such a way that the RMI
will be given a base grant to provide basic government services and
infrastructure investments. The base grant will be supplemented by the
continuation of existing Federal programs and services, such as the
current health and education programs the RMI receives, and the
extension of additional programs if agreed to by the Administration and
Congress. Federal programs and services are critically important
because they provide essential technical resources that the RMI, given
its size, does not have the capacity or ability to develop.
We do not believe that access to these Federal programs and
services are ``double dipping'' as some have portrayed. These programs
and services are supplemental to other Compact funds. More importantly,
these programs and services add valuable technical resources and
expertise that the RMI simply does not have and would not be effective
and efficient for the RMI to try to duplicate on such a small scale on
its own.
A new component of Title II economic assistance will be maintaining
a trust fund to supplant annual U.S. assistance in the future. The U.S.
will provide annual contributions to the Marshall Islands
Intergenerational Trust Fund. This trust fund was implemented by the
RMI in 2000 to provide for future generations by maintaining future
fiscal stability during the post Title II era. Monies in our trust fund
will be managed by a U.S.-based company and invested in the United
States. The RMI is working closely with the Chief Negotiator's team to
have a trust fund agreement that allows for the build-up of the trust
fund as well as responsible access to the fund at the end of the
proposed term of Title II.
The U.S. has proposed a base grant of $29.8 annually, which will
decrease by half a million dollars each year. In addition to the base
grant, $4.1 million will be provided for the special needs of Ebeye,
the community adjacent to the Ronald Reagan Missile Defense Testing
Site on Kwajalein Atoll. The total annual grant assistance, including
the funding for the special needs of Ebeye, ,is $33.9 million with a
$.5 million reduction each year of the 20 year agreement. These funds
will be allocated to the key sectors of education and health, for which
we hope to double spending in the next three to five years, and also
environment, capacity building, private sector development and
infrastructure development and maintenance. In addition, the $1.9
million available for Kwajalein impact as a result of U.S. military
activities on the atoll will be treated as grant assistance if
inflation adjustment is provided. This amount could increase if the
United States extends its use of Kwajalein as is being contemplated.
We believe the current base grant offer from the U.S can be
improved to nearer the $36.6 million we requested. As you can see Mr.
Chairman, we are not that far apart and we thank the Chief Negotiator
for being responsive in working with us to accomplish our shared goals
in these negotiations.
One significant difference that we do have is in regard to
maintaining the real value of the funds over the proposed period. Over
the 20-year period, with the half million dollar annual reduction, the
value of the funding will decrease substantially--at a much faster pace
than we think we can generate other revenue or reduce budget costs.
Thus, we are striving to have the funds adjusted fully for inflation.
As you may know, Mr. Chairman, the current and proposed inflation
formula in the Compact is only for a two-thirds inflation adjustment.
We see no reason to maintain this formula and have found no real
economic basis for such a reduced rate. We strongly believe that full
inflation adjustment needs to be applied to the grant assistance
otherwise our goal of fiscal stability is undermined from the outset.
I should note that even with the full inflation adjustment, to meet
the U.S. objective of reducing our budget reliance on Compact funds,
the real value of the U.S. grant assistance would substantially decline
over the 20 years on an overall and per capita basis. We should also
take into consideration that given the remoteness of the RMI from major
markets, inflation in the U.S. mainland, where most of our consumer and
capital products and services originate, is often multiplied by the
time these goods and services reach our shores. Thus, during
inflationary periods, we usually receive a double or triple inflation
impact that critically injures our economic performance and reduces
living standards.
For the trust fund, the U.S. has proposed a $7 million annual
contribution, with the addition of the half million dollars annually
deducted from the base grant. The U.S. has also proposed a $1.5 million
bump up between 2016 and 2021 if the RMI provides a matching $3 million
annually during these years. The RMI proposes to contribute $35 million
of its own funds to start the trust fund in 2004. We have already set
aside $18.5 million in 2002 for this purpose. We plan to set aside
another $16.5 million in 2003, pending some crucial infrastructure
needs that I will discuss in a few minutes.
Mr. Chairman, the U.S. contribution offer is generous and I am glad
that we both agree on the importance of the trust fund as a mechanism
to provide for post Title II budget stability, invest in future
generations, and eliminate our reliance on mandatory U.S. grant
assistance. We do question if the U.S. contribution, along with the RMI
contributions, will be sufficient to provide a distribution in 2024 to
supplant U.S. base grant assistance. If the U.S. annual contribution
was $8.5 million annually with the full inflation adjustment, we would
be in full agreement on the trust fund.
We also see the need to have a bilateral review periodically to
review the trust fund's performance to determine if the trust fund is
meeting the RMI-U.S. objective of supplanting U.S. economic assistance.
I must say, Mr. Chairman, that we do see the trust fund as a viable
mechanism to reduce our dependency on U.S. mandatory grant assistance
in 2024. However, we should not shift the responsibility of the RMI-
U.S. economic and political relationship solely to a trust fund that is
more responsive to market forces than the will of our governments' and
people. We have real concerns, and the current U.S. financial situation
is a much too real example, that the RMI may be left with a trust fund
that is not sufficient to replace U.S. assistance. Just as the Compact
has various assurances and reassurances for the United States on the
political, economic and strategic relationship, we hope to have similar
assurances that the trust fund will meet both sides' expectations and
needs.
As mentioned previously, the RMI has set aside funds for the trust
fund. This money has come from delaying infrastructure development
since we believe that the larger our investment to the trust fund in
the early years, the less of a burden making such contributions will be
in the future, and the funds will be allowed to grow. In the last few
months, two infrastructure projects have become urgent:
First, the Federal Aviation Administration has reported that the
Majuro international airport needs to be repaved urgently. If it is not
done in the immediate future, the airport will be shut down, therefore,
closing the RMI's major link to the outside world. The cost of repaving
is about $10 million of which the RMI has committed to contribute $2
million.
The second project is the refurbishing and expansion of the Majuro
hospital, the principal medical facility for our nation. The Government
of Japan prepared the project and has kindly agreed to finance part of
these costs. The RMI does have some of its own funds available for this
major investment to improve health care. However, we have a shortfall
of about $6-7 million.
As stated above, we want to commit to the $35 million initial RMI
contribution. We want to be clear, however, that if we cannot find a
source of funding for these two critical projects, such as from the
United States, than we will have to reduce our initial investment in
the trust fund accordingly.
The RMI takes seriously the need for improved planning, monitoring
and accountability of Compact funds as well as our domestically
generated funds. We are currently establishing a new budget process and
financial management system that will improve our technical and human
resources for these purposes. The RMI has proposed to the U.S. the
inclusion of Compact funds within our Medium Term Budget and Investment
Framework that will show how the Compact funds are planned, allocated
and used, including measuring results. We also plan on implementing a
Performance Scorecard for sectors to transparently evaluate the
accomplishments of each ministry. This approach is similar to the OMB's
approach to departmental budgeting and performance reviews.
Furthermore, we our working with the Chief Negotiator to establish a
Joint Economic Review Board that will help to provide joint oversight
of the Compact economic assistance.
While the RMI is improving its financial management system to
improve planning, monitoring and accountability, we strongly believe
the Fiscal Procedures Agreement, as proposed, needs our joint attention
to make it practical for the RMI and the United States. This is not
only our view, but the view of other third parties, such as the Asian
Development Bank. We are more than willing to work with the U.S. to
help construct fiscal procedures that are transparent and can be
implemented by BOTH sides. We are working with the U.S. Chief
Negotiator and his team to create realistic and appropriate fiscal
procedures. Let me state emphatically that we are not trying to reduce
or deter the need for increased accountability and producing actual
results. We, too, have learned from the past and we do not want
mistakes repeated.
To help establish such procedures, our Compact proposal asks that
the U.S. government place at least two individuals in Majuro to help
provide monitoring and to help establish Compact-related reporting
procedures. We stand by this request and, since learning of the U.S.
interests in depth, would like to add to this request so that there is
a team of at least four individuals in Majuro during the first five
years of the proposed term of the economic assistance and that two
individual be in place thereafter. Such Department of Interior
personnel will be essential to implement the new agreement for Compact
funding including planning, monitoring, reporting, and training
Marshallese to perform these functions. We would also hope to have a
joint training program so that procedures are in place and followed
according to the agreement. We believe that this is the only way that
both governments can implement the new period of financial assistance
from day one and make it work.
Although we are generally pleased with the progress that has taken
place in our Title II negotiations, we do not want see issues like
concluding a viable and realistic fiscal procedures agreement, or
proposed changes to the immigration provisions of the Compact derail
the process.
Issues relevant to, but not included in Title II negotiations.
1. Immigration.
From a Marshallese perspective, one of the most important benefits
in the Compact is the right of citizens to enter, reside, join the
military, work and go to school in the United States. For the first 15
years of the Compact we have had one approach to immigration that
everyone understood; Marshallese citizens entered the U.S. legally with
a visa waiver privilege. It is a cornerstone to the concept and
relationship of ``free association'' itself. The U.S. proposed this
feature to make free association a viable alternative to territorial
status with U.S. citizenship.
In the past few years, the RMI has come to recognize that there are
some problems resulting from the immigration provisions of the Compact.
We do not want our citizens, for example, to overburden the public
health and education systems in the areas where they migrate, primarily
Hawaii and the U.S. mainland. I want to note here that we must be
careful to acknowledge the positive impact that Marshallese citizens
have on areas where they emigrate. Marshallese citizens pay taxes,
spend their wages in the U.S., and take low-skilled jobs that are
difficult to fill. Despite the positive contributions of Marshallese
citizens, we are still prepared to talk to the U.S. about any
overburdening of public services as a result of Marshallese emigration.
The RMI has also grown increasingly concerned about the adoption of
Marshallese children by U.S. citizens. Adoptions began to occur before
the RMI had time to get protection measures in place to monitor the
adoption procedures and to research adoptive families. The RMI had
hoped to work with the U.S. Government to address this problem.
Because the Compact provides Marshallese citizens with the right to
enter the U.S., the RMI believes that any effort to alter existing
provisions in the Compact must be done bilaterally with the consent of
Congress. For almost a year the RMI has requested that the Department
of State engage in bilateral discussions with us to find a solution to
the immigration issue.
Unfortunately, early in 2001 the Immigration and Naturalization
Service (INS) unilaterally decided to change the legal procedures for
entry into the U.S. without any consultation with the RMI. The RMI
citizens subjected to unilateral actions of the INS have challenged the
changes in Compact immigration procedures in the U.S. Immigration
Court, and the courts have ruled that the RMI's legal position is
correct in multiple cases.
Recently the Department of State wrote to me to request that
immigration provisions in Title I of the Compact be included in the
scope of our negotiations on extension of Title II. We are grateful
that the Department of State agrees with our suggestion to discuss
immigration bilaterally. However, we do not feel that immigration
provisions in Title I should be included in our discussions to extend
Title II of the Compact.
Title II negotiations are time sensitive because U.S. funding for
programs will terminate shortly. We would like to begin bilateral
discussions with the U.S. on immigration provisions. If we can reach
agreement before Congress extends Title II then both sides would be
happy, but the RMI does not want to hold Title II negotiations hostage
to an agreement on Title I immigration issues. From our perspective,
this would be like negotiating with a gun to our heads.
In recent days we have opened what we believe may be a promising
dialogue on immigration issues. The RMI is far more receptive to the
reform of immigration procedures than the INS realizes, especially in
matters that involve mutual security and anti-terrorism issues. If the
State Department is now ready to engage in constructive talks we think
the U.S. will be surprised by how forthcoming we will be as long as RMI
interests in maintaining economic, social and family links between our
nations is accommodated in a reasonable way consistent with security
requirements.
2. Changed Circumstances.
In 1982 the Reagan Administration reached agreement with the
Republic of the Marshall Islands (RMI) on a full and final settlement
of claims arising from the U.S. nuclear testing program in the Pacific.
This settlement cleared the way for resolving the political status of
the RMI by terminating the trusteeship and entering into free
association under the terms of the Compact.
The settlement agreement submitted to Congress by President Reagan
included a ``Changed Circumstances'' provision authorizing the national
government of the RMI to petition Congress if it believes developments
since the settlement was approved render the compensation for damages
and injuries from the testing program manifestly inadequate. This
provision operates in tandem with provisions terminating pending claims
cases in U.S. and RMI courts, and establishing a claims tribunal as an
alternative adjudicative forum to ensure the adequacy of remedies and
finality of the settlement. Congress approved the RMI nuclear claims
settlement in 1985.
In 2000 the RMI submitted a petition to Congress, also transmitted
to President Clinton, alleging that changed circumstances render the
settlement manifestly inadequate. The petition, which describes new
information about the effects of the nuclear tests and cites awards of
the claims tribunal created under U.S. and RMI law, was resubmitted to
Congress on November 14, 2001, and transmitted to President Bush.
It is unfortunate that the Congress and the RMI will make decisions
on the renewal of expiring provisions of the Compact of Free
Association without a comprehensive response to the RMI petition. We
understand that federal departments and agencies with policy and
program responsibilities under the settlement are examining the
petition but a response will not be ready until after Compact
renegotiations are complete. While the two issues of Compact renewal
and the RMI petition are not linked in a conditional way, informed
deliberations on both matters require an assessment of the issues
raised in the petition. I would like to request, Mr. Chairman, an
opportunity to discuss the issues in the changed circumstances petition
with the Committee once the Administration's review of the petition is
complete.
3. Kwajalein.
The RMI and U.S. are currently engaged in discussions to consider
extending the MOURA agreement. The RMI is working in close
consultations with the landowners of Kwajalein during these
discussions. The RMI remains committed to its strategic partnership
with the United States and wants to renew provisions of Title III and
remains strategically aligned with the U.S.
We believe that it is in our mutual interest to agree to a long-
term extension for the use of Kwajalein at this time if at all
possible. We feel confident that arrangements could provide the U.S.
with appropriate terms given the uncertainties of the future while
providing the RMI and stakeholders at Kwajalein Atoll with long-term
stability and financial security for the future. In order to fully
explore the possibilities for our future relationship as it concerns
the U.S. defense site at Kwajalein, we ask that the U.S. Department of
Defense consider supplementing authorized Office of Compact Negotiation
budgets.
4. 177 Health Care Program.
Currently, the 177 Agreement of the Compact of Free Association
provides two different medical programs in response to medical needs
resulting from the U.S. nuclear weapons testing program, the Department
of Energy medical monitoring program and the 177 Health Care Program
(HCP).
The 177 Health Care Program is designed to provide primary,
secondary and tertiary medical services to the people of Enewetak,
Bikini, Rongelap and Utrik islands who were affected by the U.S.
nuclear weapons testing program, and referrals from the Nuclear Claims
Tribunal who have contracted radiogenic illnesses. The 177 Health Care
Program's design was developed through the US Public Health Service
(USPHS) in 1985, and is currently managed by Trinity Health
International.
Delivery of the health care proposed by the USPHS has been
impossible because of limitations in funding. Unlike virtually every
Compact program provided by the U.S. Government, there has never been
an inflation adjustment to offset increasing costs of healthcare.
During the 15 years that the program operated during the Compact
funding remained level at $2 million a year although healthcare
delivery costs increased by 10-15 percent a year. At the end of the
fiscal year in 2001 the U.S. stopped providing funds for the 177 HCP
altogether. Since that time, the Nuclear Claims Tribunal has maintained
funding at the U.S. level for the first three-quarters of fiscal year
2002. The Tribunal does not have sufficient funds to pay the awards of
its claimants and should not have to fund the 177 HCP, but without the
Tribunal's assistance the program would terminate.
The 177 HCP has been a great frustration to the RMI since its
inception because the Compact created the expectation that services
would be provided, but inadequate resources and funding exist to
accomplish what it was intended to do by the USPHS and the U.S.
Congress. The 177 Health Care Program, with a budget of $2 million
annually, has been grossly underfunded. Provision of tertiary care
services (off island health care that cannot be provided in the RMI)
has been grossly inadequate. Secondary health care (inpatient and
hospital based healthcare) has been delegated to the current RMI
hospital health system that is not equipped to provide the appropriate
level of inpatient care for the 177 population. Tertiary (off island
referrals) care is not made available for seven to ten months out of
each year. Hence, the people of the 177 Health Care Program have been
subjected to a substandard level of primary, secondary and tertiary
healthcare services since the program's inception.
The chart below illustrates what it would cost per person per month
(PPPM) to achieve basic levels of primary, secondary and tertiary
health care in the United States as compared to the 177 Health Care
Program. These figures, calculated by Trinity Health International, are
based on 1997 Health Care Dollars and do not reflect increased health
care costs during the past five years.
[GRAPHIC] [TIFF OMITTED] T0761.005
There are those in the U.S. Government who believe the inadequate
financial resources of the 177 HCP is a result of over enrollment.
According to Program Eligibility Determination Plan for the Four Atoll
Health Care Program agreed to by the U.S. Government in 1985 it was
determined that participation in the program would be based on land
rights. Although this would increase the enrollment above the people
who were directly exposed to fallout, the designers of the program
recognized the health problems resulting from the resettlement of
contaminated lands, and the failure to occupy land where people have
land rights and access to local foods and a healthy way of life.
The expenditures of the U.S. health care insurance companies and
third party payers is based on the premise that appropriate primary,
secondary, and tertiary healthcare services are available in close
proximity to the patient. Because the health care system of the RMI is
developing or lacking, many of the required primary and secondary
healthcare services are inadequate and tertiary health care services
must be purchased outside the RMI. If the medical care provided to the
people who were affected by the U.S. nuclear weapons testing program is
expected to meet U.S. standards of care, there are two options. One,
the health services could be provided in the United States, i.e.
treating the affected people on site in Hawaii, or two, the RMI health
capacity could be upgraded to meet the need of the target population.
The second goal is consistent with the objectives of the Compact.
Investing in the RMI health infrastructure and supplementing the
tertiary care budget is cost effective and will provide the best health
care alternative to the nation for several reasons. First, such an
approach would represent true development and capacity building of the
health system and not mere health service delivery. Second, the economy
of scale would result in the system being able to care for a greater
number of affected people, on site, at a lesser cost. Third, all
present and future generations affected by the U.S. nuclear weapons
testing program and living in the RMI would receive appropriate health
care within the local infrastructure. Finally, the health care delivery
to all people living in the RMI would improve.
The structure and design of the 177 and the DOE (prior to 1998)
medical program fostered a victim and dependency mind set in the people
it has served. The 177 program does not allow full community
participation in health care promotion and has not positively affected
the capacity for development or self-reliance in health. As such, the
177 health service delivery programs have a great potential for
promoting dependency. The 177 program perpetuates a model of health
care that is destructive to the RMI and the people it serves.
The ideal program should target development of a single system of
healthcare that is capable of providing special services necessary to
the populations affected by the U.S. nuclear weapons testing program.
To this end, full integration of health programs for radiation affected
peoples is essential. The affected communities should be partners in
developing, implementing, and sustaining these programs.
5. USDA supplemental food program for the 4 atolls.
The final issue that I want to raise today, Mr. Chairman, is the
U.S. Department of Agriculture (USDA) supplemental food program for the
4 atolls. Access to safe and regular sources of food is difficult for
the 4 atolls due to residual radiological contamination on their home
islands and the resulting difficulties of securing food for the decades
they have been displaced.
Congress recognized the predicament of the 4 atolls by extending a
USDA supplemental food program to the 4 atolls for three five-year
increments during the Compact. As the administering agency of the
supplemental food program, the USDA decides what foods to purchase, and
which people will receive them. USDA then purchases the food and ships
it to Majuro. The logistics of receiving the foods in Majuro and
shipping them to the atoll communities has been cumbersome.
The residual contamination of the environment and the displacement
of communities caused by the testing program will continue
indefinitely. Therefore, the RMI Government would like to request that
the USDA supplemental food programs for the 4 atolls continue for the
twenty-year duration contemplated in the Title II extension. We would
prefer, however, that money to purchase supplemental foods be wired to
Majuro so that the local communities can decide for themselves what
foods they want to eat. The arrangement that we propose is consistent
with the Compact's goal of local capacity building, and will stimulate
the RMI's economy by purchasing goods from local storeowners.
Conclusion.
In closing, I would like to reiterate what I stated at the outset:
the Compact is a success and our goal in these current negotiations is
to maintain and build upon that success while taking into account that
some mistakes were made by both sides during the past sixteen years. As
you can see from some of the bilateral issues raised today, there are
matters outside of the expiring provisions of the Compact which need to
be addressed by both governments in a timely and mutually satisfactory
manner, but those issues must not distract us from our stated mandate
of addressing the expiring provisions of economic assistance in Title
II of the Compact. If our current Compact negotiations can proceed and
stay focused on the matters that must be addressed at this time, I am
confident that our governments can agree to a new package to be
presented to the Congress in the near future to provide for a smooth
transition into the next period of our relationship of free
association.
If, however, my government continues to be confronted with proposed
amendments to non-expiring provisions of the Compact, matters outside
of the scope of these negotiations, then I will not be able to assure
that we can conclude a new economic assistance package under Title II
in a timely manner.
I remain optimistic that this will not be that case; that we will
be able to conclude our current negotiations in relatively short order,
and that we can address other bi-lateral issues on separate tracks with
an equal sense of importance and weight. The RMI remains fully
committed to the continuing success of the Compact and our mutually
beneficial relationship of free association.
Mr. Chairman, thank you very much for this opportunity to present
our views before the Committee here today.
______
Mr. Osborne. Thank you, Mr. Zackios. In the interest of
time, the majority side is going to yield their time and we
will have to definitely constrain our questions to the 5-minute
limit. We will start with Mr. Underwood.
Mr. Underwood. Thank you very much, Mr. Chairman, and thank
you very much, Mr. Christian and Mr. Zackios, for your
testimony and for the insights that you have given, especially
in the extended statements into where we stand with the
negotiations.
I want to make sure that I understand exactly what are the
issues that you think need clear attention and should be
brought to the attention of the Committee, not in the spirit of
upsetting the negotiations, because that is between sovereign
countries. I do take time to note that everyone loves the trust
fund idea and in fact everyone loves it so much everyone tells
me they originated it. Every time they say you know, we
proposed this. This is a great concept. But, of course, there
are many other things attendant to it.
As you pointed out, Mr. Christian, even though there may be
a few million dollars apart at some point in time in the
negotiations, in your testimony, in your written testimony at
least, you point out this is absolutely critical to the success
or failure of the entire enterprise, because for you it is a
very critical amount.
The two issues that I just want to give you a chance, but
it seems to me, and correct me if I am wrong, other than the
trust fund issues and other than the funding issues, is there
an ongoing concern about the nature of the monitoring and the
nature of the proposals being made in terms of monitoring the
expenditures?
You know, it used to be that they had a six star flag back
here behind me in addition to all the other flags that are
still there, and then it went down to a four star flag, and now
that four star flag representing the FSM is no longer there. I
am just wondering whether all the concern about monitoring is
going in the wrong direction, from your point of view.
Second, the issue of immigration, what is the actual rub
there? Mr. Christian, perhaps you can go first.
Mr. Christian. Mr. Chairman, thank you very much, Mr.
Underwood. Let me first address the issue of immigration.
First of all, we did not anticipate that we would continue
to discuss the issue of immigration as it is an item that does
not expire under the 15 year-- under the anniversary of the 15
years of the Compact. We also have difficulty in light of this
since the Compact of Free Association, the joint Committee
created by Congress of Micronesia to the FSM Congress to
address the renegotiation, did not grant this Committee
authorization to discuss non-expiring compacts.
What we have done then is recommend to the government that
they establish a task force to be able to meet with the U.S.
Government to discuss the issues of immigration.
May I proceed to say that this task force has been
constituted and they are prepared to begin meeting with the
United States as soon as the United States is ready to do so.
Mr. Underwood. Mr. Zackios.
Mr. Zackios. Thank you, Congressman Underwood. If I may
answer on the same issue, as I have stated, we are with the
United States on the war on terror. I agree with Senator
Christian that the issue of immigration is a fundamental
premise of the Compact of Free Association between the United
States and the FSM and Marshall Islands.
Having said that, we are willing to work and we have
started discussions with the U.S. on certain areas of the issue
on immigration, including passports, adoptions and other
issues. But it should be made clear that title I is not an
expiring provision, as I have stated, and that the issue of
people immigrating to the U.S. is very important to the
Marshall Islands, and we feel we should not touch on that
issue.
Thank you.
Mr. Christian. Mr. Chairman, may I elaborate a little more?
Mr. Osborne. If you can do it in 5 seconds. We are going to
have to move on.
Mr. Christian. Thank you very much.
Mr. Osborne. Ms. Christensen.
Ms. Christensen. Thank you, Mr. Chairman. I am going to try
to move quickly. My first question goes to both of you, and you
can answer it as briefly as possible, and then I can get to my
second one. I think both of you said in your statements that
the free association has been a successful-- the compacts have
been successful. As you now renegotiating this Compact, are you
having any second thoughts? Does it still seem successful, the
problems that are arising as you are renegotiating now this
Compact?
Mr. Zackios. If I may start, we still feel that the Compact
is a success and we want to build on the success. As we have
stated, we have been able to achieve a level of political
stability and stable governments that are exercising democracy.
Ms. Christensen. Let me ask you this way: The issue of
sovereignty, do you feel that you are negotiating on an equal
level here?
Mr. Zackios. Congresswoman, I would suggest that it is
difficult to see that, that we are negotiating at an equal
level.
Ms. Christensen. Mr. Christian?
Mr. Christian. Madam, my problem is that if I said a few
things that might hurt the other team, I might end up losing a
few million dollars they have already given me.
Ms. Christensen. I think I have the answer to my question.
Thank you. But I wanted to stay with you, Mr. Christian. I
wanted to first extend a welcome on behalf of the former
Ambassador from the United States to Micronesia, who is now
Congresswoman Dianne Watson, who could not be here due to
another meeting that she could not get out of. I wanted to ask
you, in your testimony you said outside of the financial
provisions there was some other items that were not consistent
with FSM's status as a sovereign nation. Would you like to just
spend a minute on that just talking about those other issues?
Mr. Christian. I think first and foremost is the injection
of so many procedural procedures and rules to help us govern
grants that have been given us under a negotiated agreement
seems to defy the notion of sovereignty. We, however, accept
and invite the United States Government's participation in the
establishment of necessary controls by which we could proceed
to function under the next 20 years' regime.
We have started this process, and I would like to say that
the United States negotiating team has treated us fairly well,
as far as sitting across the table and being very respectful to
each other. I think they recognize the sovereignty of both
countries just as equally.
However, that is lost in the process of initiating certain
controls through the fiscal procedures agreement that the
United States has proposed to us.
Ms. Christensen. In the interest of time, and the fact we
do have another panel, I will stop there. Thank you.
Mr. Osborne. Mr. Faleomavaega.
Mr. Faleomavaega. Thank you, Mr. Chairman. Our relationship
with the FSM, the Marshalls and Palau is one of the most unique
political relationships, and I say this to both our friends now
on the Committee as well as to Mr. Zackios and Mr. Christian.
When you mentioned, Mr. Christian, earlier about
sovereignty and how this touches on the issue of strategic
denial, do you both get the impression that my government and
the Federal Government is anxious to get rid of you, like 20
years from now, we just don't want to hear about you anymore?
Do you get that impression from some of the leaders of my
government in your current negotiations? Please be up front
with us, because I really want to get to the bottom of this.
Mr. Christian. Certainly it is my hope the U.S. Government
is not trying to get rid of us. A few years ago the Federated
States of Micronesia made a very important decision. We had to
decide who to ally itself with, both politically and as a
member of the international community. We decided to go with
the Compact, to become allied to the United States. And this is
simply a continuation of our previous relationship, however
under a trust territory system.
Mr. Faleomavaega. I have to get moving on this. Your sense
is this Compact of Free Association concept is an evolving
relationship. It is going to change in time. Supposing that the
People's Republic of China wants to do a security agreement
with FSM and when we talk about strategic denial, we are
definitely going to have a say to that.
There are about 100 submarines of the Chinese government
running all over the world right now. You can't tell me the
FSM, Marshalls and Palau is not a critical point of geography
of this planet as far as these submarines, where they are, how
they are going, and how this relates to the security interests
of our country. I say this most sincerely, because I wanted to
get your sense, if you feel that--let's be up front.
When we negotiated this treaty in the 1970's, during the
Carter administration, for years this continued because the
attitude of the Department of Defense was take it or leave it.
That was the reason why we had to continue negotiating, because
that was our interest. The interest was strategic denial, not
because of a love for the Micronesians. I sincerely hope this
has evolved to a little more sane relationship and that we are
working properly in every way to make sure that your needs are
met as well as our needs.
I just wanted to convey that to both of you gentleman. You
currently qualify for the Asian Development Bank, World Bank
and International Monetary Fund loans. Do you also qualify to
receive aid from any other countries?
Mr. Christian. Yes.
Mr. Faleomavaega. You are pretty much free to do whatever
you want to do as far as seeking economic assistance from other
nations. My government has no problem with that.
Mr. Christian. No.
Mr. Faleomavaega. Thank you very much. The overall level of
education, bottom line, gentleman, real quickly, where are we
as far as educational level of our people in Micronesia? I
know, Mr. Christian, you say we are making tremendous economic
progress. What about education?
Mr. Christian. We are making good progress, but we are not
where we would like to be.
Mr. Faleomavaega. Is it because of lack of funds?
Mr. Christian. Both lack of funds and our inability to
attract teachers qualified for our high schools and the College
of Micronesia.
Mr. Faleomavaega. Health, immigration and education are
probably three of the most critical issues now pending in terms
of your current negotiations with the administration.
I might say I might be traveling with Congresswoman Watson
to FSM and the Marshalls sometime next month. I look forward to
meeting with you, Mr. Chairman. Thank you for your patience and
kindness.
Mr. Osborne. Thank you very much. I would like to thank the
panelists. We appreciate your being here. We know you came a
long way. We appreciate your testimony.
We will move on with Panel IV at this time. That panel will
consist of Neal McCaleb, Assistant Secretary of Indian Affairs,
Department of the Interior, and also we are going to be calling
the Honorable John Keys.
If we can have everyone's attention, we are going to get
started here fairly quickly. Due to scheduling restraints, Mrs.
Bono is submitting her testimony for the record. I ask
unanimous consent that her testimony be submitted for the
record.
[The prepared statement of Ms. Bono follows:]
Statement of The Honorable Mary Bono, a Representative in Congress from
the State of California
Thank you Mr. Osborne. I would also like to thank Chairman Hansen
for the opportunity to testify before the Committee on my legislation,
H.R. 3407, the ``Indian Financing Act Reform Amendment.'' I am
enthusiastic that through this hearing today, the Committee will be
able to seriously consider the strong role that this legislation will
have in encouraging economic development on Native American lands.
During the Nixon Administration, it became increasingly clear that
the potential for economic improvements within tribal lands throughout
the country could be realized. A crucial facet to allowing tribes to
take their own initiative was providing legislation that would bring
private capital into the hands of Indian tribes. With the enactment of
the Indian Financing Act of 1974, Congress instituted the Indian Loan
Guaranty and Insurance fund, which was a very beneficial step towards
helping tribes to start small businesses on their reservations. In
turn, this law allowed the Secretary of the Interior to insure and
guaranty the repayment of small business loans to qualified Native
American borrowers.
In many instances, this created the first time that a Native
American community could utilize loans that are issued by private
lenders. Many tribes, as a result, were provided with not only
financial assistance whereas previously it was difficult to secure
financing, but were given an incentive for Native American-owned small
businesses to invest substantially in their future.
We have now seen the Indian Loan Guaranty and Insurance Fund grow
over the past 28 years to now guarantee up to $75 million in annual
lending to Native Americans, though the continued need in Indian
economies is far above this amount. The ``Mortgage Finance News''
reports that for housing finance alone, there is $2.7 billion in pent-
up demand in the Indian community. The serious desire for Indian
communities to expand their economic base is clearly being stunted.
As you may know, Mr. Chairman, I was a former small business owner,
and am thus aware of the many financial challenges a new enterprise
faces in its first few years. Securing loans to finance a new business
helps all individuals to realize their dream of economic opportunity
and independence. I also understand, however, that we must work to
minimize government small business intrusion, both on the regulatory
and the fiscal level. H.R. 3407 serves this need by providing a clear
uniformity in lending that does not currently exist.
This legislation provides a strong path towards the expansion of
tribal lending, as can be seen in the evolution of a similar loan
guaranty program within the Small Business Administration (SBA). In
particular, the passage of this legislation will help to encourage a
stronger relationship between private lenders and the communities they
assist. One of the important aspects of the SBA revolving loan program
is the federal government's guarantee of full repayment of the loans
should the loan default. Currently under the Bureau of Indian Affairs'
(BIA) existing Indian Loan Guaranty and Insurance fund, a loan does not
have this federal government guarantee, which is a disincentive for
lenders to work with Native Americans looking to start their own
business. H.R. 3407 will provide this notion of a guarantee of full
repayment of the loans if a loan defaults.
Further, smaller banks, such as Palm Desert National Bank and Palm
Canyon National Bank in California's 44th Congressional district, which
I represent, are not easily accessible for financing tribal economies
because of the existing law. H.R. 3407 will allow for liquidity in the
loan process that provides smaller banks and investors the opportunity
to rid themselves of the burden that a 30 year loan can have on the
capital that they have on hand. Further, currently the secondary market
investors are not offered uniformity in the way that they are able to
pool their loans and then sell of pieces of this pool. This tends to
spread and minimize the risk of default among a number of investors.
Thus we are able to help both smaller banking institutions as well as
those tribes with lands in more rural areas of our country. Proper
inclusion of a efficiently functioning secondary market is essential to
an expansion of the current program that multiple tribes could enjoy.
I am encouraged by the prospect of employing the principles of
entrepreneurship that the Indian Financing Act Amendments of 2002
offers to potential and current Native American small business owners.
Only through the mutually beneficial relationship between the Interior
Department, the private lending community, and tribal entrepreneurs,
can we offer Native Americans the financial tools to help their tribal
economies expand and flourish. Mr. Chairman, we continually witness the
success that the SBA has had in selling guaranteed loans and the
secondary market and I strongly believe this legislation could put us
on a route to have the same impressive results.
Serious consideration and passage of legislation such as H.R. 3407
and S. 2017, its counterpart in the Senate, will further encourage the
growth of small businesses that empowers tribes and excites development
and substantive growth. It is my hope that this Committee will
recognize the importance of this legislation being another key to
allowing Native Americans across the country realize their potential to
become increasingly self-sufficient and economically vibrant
communities.
I would like to thank both Mr. Hayworth and Mr. Kildee on this
Committee for their support of this legislation as key Members of the
House Native American Caucus. Finally, thank you Mr. Chairman for
allowing me to testify today on the ``Indian Financing Act Reform
Amendment.''
______
Mr. Osborne. I also ask unanimous consent that a statement
from the Independent Community Bankers of America be submitted
for the record.
[The information referred to follows:]
Statement of Paul G. Merski, Chief Economist and Director of Federal
Tax Policy, On behalf of the Independent Community Bankers of America
The Independent Community Bankers of America applauds Committee on
Resources Chairman James Hansen and Ranking Member Nick Rahall for
holding this important hearing on the Indian Financing Act Reform
Amendment (H.R. 3407). The ICBA represents more than 5,000 community-
based financial institutions nationwide and our members provide a vital
source of capital, credit and lending--especially throughout rural
America and on many Native American lands. Community banks are
independently owned and operated and are characterized by attention to
customer service, and lending to small businesses, farmers, ranchers,
and consumers. ICBA members alone hold more than $500 billion in
insured deposits, $600 billion in assets and more than $365 billion in
loans. They employ nearly 239,000 citizens in the communities they
serve. Simply stated, our community banks are small businesses that
serve the lending needs of small businesses in communities throughout
America. Community banks are one of the key sources of credit and other
financial services to small businesses--the most prolific job-creating
sector of our economy. Small businesses employ sixty percent of the
nation's workforce and have created two-thirds of all the net new jobs
since 1970.
While providing financial services for urban, suburban, and rural
regions, forty percent of ICBA members are located in towns with a
population of 2,500 or less, where adequate small business lending is
critical to the local economy. We applaud Representative Mary Bono for
introducing the Indian Financing Act Reform Amendment (H.R. 3407). This
legislation would help facilitate a more effective secondary market for
Native American small business loans and free up additional bank
capital to make new loans. H.R. 3407 would help increase the use of
Bureau of Indian Affairs guaranteed loans by lending banks who could
more easily access a secondary market. This, in turn would provide more
stable and sustainable funding for economic development on Native
American lands.
ICBA supports legislation that will enhance the liquidity of the
current market for guaranteed loans to Indian borrowers. Currently,
agencies like Fannie Mae, Freddie Mac, Farmer Mac, as well as the Small
Business Administration facilitate the secondary loan market, provide a
solid resale market for loans and boost the availability of lendable
funds for community banks. Facilitation of an active secondary market
for Native American lending programs is a viable means to increase
lending and economic opportunities on Indian lands. The ICBA supports
H.R. 3407 as an important step in facilitating much needed capital and
lending into the economies of Indian communities served by our
community bank members nationwide. In addition to promoting an
effective secondary market for Native American loans, the legislation
would clarify that good faith investors in Native American small
business loans guaranteed by the Secretary of the Interior will receive
appropriate payments through the pledge of the full faith and credit of
the United States.
Additionally, ICBA's members successfully utilize the existing SBA
guaranteed lending programs to serve the credit needs of rural America
and Native lands. ICBA is urging the Administration and members of
Congress to accurately and adequately fund the successful Small
Business Administration 7(a) and 504 loan programs. These SBA programs
are widely used by many community banks to provide needed capital and
credit to thousands of small businesses nationwide. Unfortunately, the
Administration's Fiscal 2003 federal budget jeopardized the SBA's 7(a)
Loan Guaranty Program. While ICBA estimates 7(a) loan demand could
reach $11 to $12 billion, the Administration's proposed fiscal year
2003 program level to support $4.85 billion in 7(a) loans is grossly
out of sync with historic loan demand figures and current small
business needs.
As the economy gains strength climbing out of recession, we
estimate the proposed fiscal year 2003 funding level for the SBA 7(a)
program will afford only half the expected small business lending needs
next year. Therefore, we urge the Bush Administration and Congress to
restore adequate budget appropriations to support $12 billion in 7(a)
lending in fiscal 2003. Providing needed capital resources to small
businesses will help strengthen economic growth and foster much needed
job creation. Thriving small businesses and a growing economy will in
turn provide greater payroll and business income tax revenue back to
the federal government.
We appreciate the opportunity to express our views to the House
Committee on Resources. The ICBA pledges to work with you to ensure our
Nation's small businesses, particularly Native American businesses,
have the access to capital and credit they need to invest, grow, and to
provide jobs and continued economic growth. Both BIA and SBA lending
programs help facilitate this critical small businesses lending.
Fostering a secondary market for BIA guaranteed loans and fully funding
SBA loan programs would go a long way in preserving a secure and
competitive source of credit for small businesses and rural communities
throughout our nation.
______
Mr. Osborne. Due to time constraints, we are going to
recognize Panel IV. They will now consist of Assistant
Secretary McCaleb, who will testify on H.R. 3407 and H.R. 2408,
and Commissioner Keys, who will testify on H.R. 4938 from the
Department of Interior.
I might just mention Mrs. Bono's bill is H.R. 3407, to
amend the Indian Financing Act of 1974 to approve the
effectiveness of the Indian loan guarantee and insurance
program, Indian Financing Act reform amendment.
So we appreciate you panelists being here today. We are
sorry for the delay, but I am sure you will handle it well.
So, Mr. McCaleb, we will start with you.
STATEMENT OF NEAL A. McCALEB, ASSISTANT SECRETARY INDIAN
AFFAIRS, DEPARTMENT OF THE INTERIOR
Mr. McCaleb. Thank you very much, Mr. Chairman, members of
the Committee, for this opportunity to comment H.R. 3407, the
amendments to the Indian Finance Act.
As you know, or may know, I am an enthusiastic advocate for
economic opportunities for Native Americans and Alaskan
Natives, and I want to thank the Committee for this
opportunity, for its support, for the needed change in the area
of economic development for our people.
The Indian Finance Act was originally passed in 1974 and
the provision we are addressing today has to do with the loan
guarantees. This particular provision of the act has been very
successful. We have right now a loan portfolio of around $500
million and just short of 1,000 different tribes and
individuals are participating in this. It has made loans
available in Indian Country to economic enterprise that would
not have otherwise been there for a number of reasons.
The particular bill provides for the creation,
authorization and creation of a secondary market for these
loans, much like the SBA's secondary market. We want to support
that provision. We might have a few technical things we would
like to discuss with the bill's author and the Committee as it
progresses, but we certainly support the concept.
I am not going to dwell on the issues of the different
tribal and business successes we have had. It is part of my
written testimony, which I have submitted. But the concept of
the bill is a solid one and is the next natural step forward.
I would say that in the last 3 years we have fully loaned
out all the available money that is available by the
appropriation, about $60 million a year against an
appropriation of about $450,000. We think we can subscribe
easily another $60 million each year with the appropriations to
do that. I think a secondary market would help.
This is a fairly small fund at this time. Although half a
billion dollars is a lot of money in terms of a secondary
market, it is not a large amount.
I think I will just stop with that testimony there that
sums up the support of the administration for this bill and
answer any questions you may have.
[The prepared statement of Mr. McCaleb follows:]
Statement of Neal A. McCaleb, Assistant Secretary-Indian Affairs, U.S>
Department of the Interior on H.R. 3407
Good afternoon, Mr. Chairman and Members of the Committee. It is a
pleasure to appear before you today. As you know, I am a staunch
advocate for economic opportunities for American Indians and Alaska
Natives, and I want to thank the Committee for its support of needed
change in the area of economic development for our people.
The Administration supports H.R. 3407, the ``Indian Financing Act
Amendments of 2002,'' and would like to work with the bill's sponsor
and the Committee to improve its provisions, including some technical
Credit Reform issues.
The Indian Finance Act of 1974 (IFA)
The Indian Financing Act of 1974 (Public Law 93-262), is the source
of the authority for the Loan Guaranty, Insurance, and Interest Subsidy
programs within the Bureau of Indian Affairs (BIA). The Congress
envisioned two ways of encouraging commercial lenders to loan funds to
Indian businesses that might otherwise be denied financing. The loan
guaranty part of the program caught on with lenders, but the loan
insurance aspect did not catch on in those early days. Times have
changed however, and the BIA expects to reintroduce the insured loan
features of the Act with the fiscal year 2003 appropriations bills that
are pending final congressional action. There are now numerous, modest
Indian business loan proposals that would make insured loans viable.
BIA Economic Development
The BIA has provided significant economic development assistance to
Indian tribes, tribal enterprises, Indian-owned corporations,
partnerships and proprietorships through the Indian Financing Act of
1974. The total active loan portfolio of direct loans and loan
guarantees totals $470 million and is assisting 757 business entities.
The loan purposes include business, mobile home housing, new housing
construction, land acquisition, relending to tribal members,
agriculture, educational, livestock, refinance, fishing, housing
repair, protective advances, expert assistance, aquaculture and
investment.
In 2001, a $3.5 million dollar loan was guaranteed by the BIA for
the purchase of Dynamic homes, L.L.C., a business that has 118
employees. The Winnebago Tribe of Nebraska has controlling ownership of
the business through its investment company, Ho-Chunk, Inc. The
President of Ho-Chunk, Inc. is a member of the Tribe and a Harvard
educated attorney, who is also one of the managers of Dynamic Homes,
L.L.C.. The business manufactures modular homes which are sold through
a dealer network. It manufactures preconstructed single-family and
multifamily homes, and light commercial buildings. Auxiliary products
include garages, wood basements, and retail sales of home building
components. The Company markets its products within the States of Iowa,
Minnesota, Nebraska, North Dakota, South Dakota, Wisconsin, and Wyoming
principally through a network of approximately 65 independent factory
authorized builders and dealers. The Company concentrates on high
quality workmanship, unbeatable customer service, and a dealer and
builder network that is provided the best information service, and
training to match the right Dynamic Home product with the buyer. In
2001 the Company generated over $13.6 million dollars in gross sales
and paid $156,420 in taxes. The Company was also given a 3A1 rating by
Dunn and Bradstreet last year.
The BIA loan program has been instrumental in supporting the
Nisqually Tribe's community development program over the past 15 years.
The Tribe has utilized loan guarantees to leverage more than $8 million
dollars of private and federal funds, and to complete seven major
community development projects on the reservation. These projects have
provided tribal members with employment, increased revenues to the
Tribe, and helped build the capacity of the tribal organization. A
guaranteed loan in 1998 to a construction company on the Salish and
Kootenai Reservation has allowed it to bid on 500 projects, earn gross
revenues of $4.7 million and generate a payroll of $1.2 million.
Outlook for Economic Development for Indian Tribes and Individual
Indians
At present, the BIA's Program lacks the critical mass needed to
create an active secondary market. However, I believe that the IFA can
be amended to make the program amenable to an organized secondary
market. We believe additional provisions added to the IFA would more
readily accommodate a secondary market.
The BIA has a concern with regard to some of the provisions of H.R.
3407. Under the existing Program, the BIA reviews claims for loss
before making payment, so that it is in the best possible position to
withhold payment in cases of fraud or lender noncompliance. H.R. 3407
would change that. Under the provisions of H.R. 3407 it appears that if
a good faith purchaser of a secondary market interest in a guaranteed
loan were to demand payment, the BIA would have no choice but to pay
before the BIA would have a chance to fully examine any questionable
element of the claim. This could require the BIA to sue to recover
that.
Thank you for the opportunity to present the views of the
Administration on this legislation. I will be happy to take your
questions.
______
Mr. Osborne. Thank you.
At this point I just have one question for you. In your
estimation, is it feasible for the Department to create a
secondary market for the BIA's loan guarantee program?
Mr. McCaleb. Yes, I think it is feasible. I think it can be
done. I think the demand for a secondary market is a little
limited at this time until we have a bigger portfolio.
Mr. Osborne. Thank you.
Mrs. Christensen, any questions?
Mrs. Christensen. I have no questions.
Mr. Osborne. Mr. Faleomavaega?
Mr. Faleomavaega. I want to welcome our Assistant Secretary
for Indian Affairs, and certainly am very happy to hear the
administration does support the provisions of the proposed bill
and look forward in working with our Committee.
Let's move this forward. Thank you very much.
Mr. Osborne. Thank you very much.
At this time, Mr. McCaleb, if you would care to testify on
2408.
Mr. McCaleb. Mr. Chairman, members of the Committee, H.R.
2408 has to do with the Equitable Compensation Act for the
Yankton Sioux Tribe and the Santee Sioux Tribe. I want to thank
you, Mr. Chairman, for introducing this important bill that
addresses the impacts to the Yankton Sioux Tribe and the Santee
Sioux Tribe.
As you may know, this is part and parcel of equitable
adjustments that have been made for a number of tribes along
the Missouri as a result of the Pick-Sloan Public Improvements
Act, in which we built a number of mega-dams along the Missouri
to control the flooding, starting back in the forties. As a
result of that, we inundated a lot of Indian land along the
route.
We have already created an adjustment for the Fort Berthold
affiliated Tribes, the three affiliated Tribes at Fort
Berthold, and the Standing Rock Sioux. In addition, in South
Dakota, we have similarly addressed the impacts on the Crow
Creek Sioux Tribe and the Lower Brule Sioux Tribe. This
particular bill would address the two remaining Tribes along
the Missouri, the Yankton Sioux and the Santee Sioux.
The provisions of the bill provide for a compensation to
the Yankton Sioux of a little over $23 million for 2,851 acres
inundated as a part of the Pick-Sloan projects, and to the
Santee Sioux of $4.789 million for 593 acres inundated along
the bottom lands of the Missouri in their area. We support this
bill and recommend it.
[The prepared statement of Mr. McCaleb follows:]
Statement of Neal A. McCaleb, Assistant Secretary-Indian Affairs, U.S.
Department of the Interior on H.R. 2408
Good afternoon, Mr. Chairman and Members of the Committee. I am
pleased to be here today to present the Administration's views on H.R.
2408, the Yankton Sioux Tribe and Santee Sioux Tribe Equitable
Compensation Act. I want to thank Representative Osborne for
introducing this important bill that addresses impacts to the Yankton
Sioux Tribe and the Santee Sioux Tribe of Nebraska resulting from the
Pick-Sloan Missouri River Basin program and in particular the
development of the Fort Randall and Gavins Point projects. If enacted,
this bill would provide final compensation to the Tribes and extinguish
their claims for damages caused by these projects.
H.R. 2408 is a continuation of the United States' honorable efforts
to correct inequities resulting from a regional Federal project which
severely affected several Indian tribal homelands and resources along
the Missouri River. In the early 1990's the United States addressed
impacts to the Standing Rock Sioux Tribe and the Three Affiliated
Tribes of the Fort Berthold Reservation. In 1996 and 1997,
respectively, the Congress addressed the impacts to the Crow Creek
Sioux Tribe and the Lower Brule Sioux Tribe. Thus, H.R. 2408 continues
those efforts to address and mitigate the impacts that the Missouri
River Basin Pick-Sloan Project has had on the remaining two Tribes, the
Yankton Sioux Tribe and the Santee Sioux Tribe of Nebraska.
The history of the Project is relatively well established. In 1944,
the United States undertook the challenge to reduce flooding in the
lower Missouri River Basin through the construction of monumental dams
capable of harnessing the seasonal raging flows of the Missouri River.
In addition, these dams could generate electrical power and needed
hundreds of thousands of acres of land to serve as reservoirs for the
storage of water over time to release as necessary. So great was the
water resource that a whole regional economy grew from the electric
power generated by these dams.
The pre-project tribal economy, however, was based on working the
rich wooded bottom lands along the Missouri River. These lands were
flooded for the reservoir, and the Tribes have never seen the former
economy again. In addition, the importance of cultural treasures lost
to inundation is now well known. In the 1950's the Yankton Sioux Tribe
and its affected tribal members received a total of $227,510 from the
government for damages associated with the Fort Randall Project. Of
this amount $121,210 was awarded them by the U.S. District Court for
direct damages as the result of condemnation proceedings filed before
the federal district court by the Army Corps of Engineers.
Congress authorized the appropriation of an additional $106,500 in
1954 to be available for relocating the Yankton Sioux tribal members
who resided on tribal and allotted lands. Unfortunately, the Yankton
Sioux Tribe did not receive any additional funding for a rehabilitation
program. This bill proposes to provide the Yankton Sioux Tribe with an
aggregate amount equal to $23,023,743 in additional compensation for
the loss in value of 2,851.4 acres of land taken for the Fort Randall
Dam and Reservoir.
Information concerning the amount paid to the Santee Sioux Tribe of
Nebraska condemnation settlement is not clear because the federal court
docket records are missing from the U.S. District Court in the National
Archives. It appears that the Tribe may have been paid $52,000 on the
basis of the Tribe's 1955 agreement with the Army Corps of Engineers.
We do not know when the settlement money may have been distributed to
the individual landholders. Like the Yankton Sioux Tribe, the Santee
Sioux Tribe of Nebraska did not receive any rehabilitation program
funds. This bill proposes to provide the Santee Sioux Tribe with an
aggregate amount equal to $4,789,010 in additional compensation for the
loss value of 593.1 acres of land located near the Santee village.
The Administration supports the effort to remedy the inequities
caused by the aforementioned federal projects to the Yankton Sioux
Tribe and the Santee Sioux Tribe of Nebraska. However, we recommend
that Section 6(c)(4) be amended to add a new subparagraph (D) to
include an annual report to the Secretary describing any expenditures
of funds withdrawn. Our proposed amendment is as follows:
ANNUAL REPORTS Each Tribe shall submit an annual report to the
Secretary describing any expenditures of funds withdrawn by
that Tribe under this Act.
This concludes my testimony on H.R. 2408. I will be happy to
respond to any questions you may have.
______
Mr. Osborne. Thank you very much, Mr. McCaleb. I guess I
have one question of you on this particular bill, and that is
do you have a particular timetable for repayment of the Yankton
and Santee Tribes?
Mr. McCaleb. We think it ought to proceed with all
deliberate haste since four other Tribes have already been
compensated and not having the money means that opportunities
are missed for these Tribes, so the sooner the better.
Mr. Osborne. I certainly agree with you, but are we talking
a year, or are we talking 2 weeks? Do you have any rough
timeframe that we might look at here?
Mr. McCaleb. Well, I think we would like to see it done
within the year certainly.
Mr. Osborne. All right.
Mr. McCaleb. I think we would like to see--once the
appropriation is made, I think it can be moved on with
dispatch.
Mr. Osborne. Is there any provision made for the lost time,
like accrued interest or whatever, over a matter of years where
these folks--I think they are the last people to receive any
payment at all. Is there any compensation involved here?
Mr. McCaleb. I think that compensation is included. I am
not certain about this, Mr. Chairman, so I would rather not
answer that, since I am not certain.
Mr. Osborne. Fair enough. Mrs. Christensen?
Mrs. Christensen. No questions.
Mr. Osborne. Mr. Faleomavaega?
Mr. Faleomavaega. Mr. Chairman, as I said earlier, I want
to thank you for your leadership and initiative in introducing
this legislation, and again I want to thank our good friend
from the Interior Department, Assistant Secretary McCaleb, for
the administration's position in support of this bill, and I
sincerely hope we move this legislation as fast as possible so
we can get it out before October. But I do want to thank you,
Mr. Chairman, and thank Secretary McCaleb for his support of
this legislation.
Thank you.
Mr. Osborne. Mr. McCaleb, we really appreciate your
patience. I know you have waited for a couple of hours. So we
will let you off the hook at this point if you need to go.
At this point, Mr. Keys, we will hear from you.
STATEMENT OF JOHN W. KEYS, III, COMMISSIONER, BUREAU OF
RECLAMATION, DEPARTMENT OF THE INTERIOR
Mr. Keys. Mr. Chairman, it is a pleasure to be here. I am
John Keys, Commissioner of the Bureau of Reclamation. It is a
pleasure to be here and offer the administration's views on
H.R. 4938, which directs the Secretary of Interior and
Reclamation to conduct a feasibility study for municipal, rural
and industrial water supplies needs for the Santee Sioux Tribe
of Nebraska. H.R. 4938 authorizes the appropriation of $500,000
to conduct this study.
Reclamation has worked with the Santee Sioux Tribe on water
supply issues since 1996. In fact, Reclamation published a
water supply needs assessment report in 1997 that confirmed
that the Santee Sioux Tribe's water supply is degraded and its
distribution system is inadequate. Reclamation could,
therefore, support H.R. 4938 with a modification.
The administration supports the Tribe's initiative to
develop a safe and reliable water supply system. Accordingly,
we believe that the scope of the feasibility study should be
limited to the Santee Sioux Reservation boundary. Once the
feasibility study is completed, we can clearly assess and
determine if it deserves further action.
H.R. 4938 as written raises several long-term issues
relating to funding and, more generally, clarification of the
government's responsibility for rural water supply systems.
Mr. Chairman, I appreciate your leadership and the Sioux
Tribe's willingness to work with Reclamation to address the
water supply needs of the reservation and for including us in
the early stages of the project planning process. The early
collaboration will ensure a quality planning document for us to
consider.
That concludes my testimony, and I would certainly stand
for any questions you might have.
[The prepared statement of Mr. Keys follows:]
Statement of John W. Keys III, Commissioner, U.S. Bureau of
Reclamation, Department of the Interior
My name is John Keys, I am the Commissioner of the Bureau of
Reclamation. I am pleased to provide the Administration's views on H.R.
4938 which directs the Secretary of the Interior (Secretary) to conduct
a feasibility study for the municipal, rural and industrial water
supply needs for the Santee Sioux Tribe of Nebraska and adjacent
communities. H.R. 4938, authorizes the appropriation of $500,000 to
carry out this study.
The Bureau of Reclamation has worked with the Santee Sioux Tribe on
water supply issues since 1996. In fact, Reclamation published a water
supply needs assessment report in 1997 that confirmed that the Santee
Sioux tribe's water supply is degraded and the water supply
distribution system is inadequate. Reclamation could therefore support
H.R. 4938 with a modification.
The Administration supports the Tribe's initiative to develop a
safe and reliable water supply system. However, we believe the scope of
the feasibility study should be limited to the Santee Sioux
Reservation. Once the feasibility study is completed, it would allow
the Administration to clearly assess and ultimately determine if the
situation merits further action. The feasibility study will be based on
the existing Principles and Guidelines for Water and Land Resources
Implementation Studies. This leaves the Secretary with considerable
discretion in deciding whether to proceed with the actual project.
The bill as written also raises issues related to funding, such as
cost-share requirements of tribal and non-Indian communities and, more
generally, Federal and non-federal government responsibility for rural
water supply facilities.
Mr. Chairman, I appreciate Congressman Osborne's and the Santee
Sioux Tribe's willingness to work with Reclamation to address the water
supply needs on the Reservation, and for including Reclamation in the
early stages of the project planning process. This early collaboration
will ensure a quality planning document providing linkage between a
realistic assessment of needs, budget requirements, and scheduling.
That concludes my testimony, I would be happy to answer any
questions.
______
Mr. Osborne. Thank you very much. What do you predict the
actual cost of conducting the feasibility study will be?
Mr. Keys. Mr. Chairman, we think we can do it for $500,000
that is included in the proposed legislation.
Mr. Osborne. Thank you. I guess the second question, your
testimony suggests that the scope of the feasibility study
should be limited to the Santee Sioux Reservation. With this
suggestion in mind, what can be done for the surrounding
communities?
Mr. Keys. Mr. Chairman, to date the only people that have
come forward with agreements to work with us are the Santee
Sioux Tribe. Should other communities wish to participate, we
would certainly be willing to talk to them about cooperative
agreements, for the cost share agreements that are necessary
for those off-reservation communities to be considered. We are
certainly open to that and would be more than willing to talk
with them.
Mr. Osborne. Thank you very much, Mr. Keys. Do you expect
on the feasibility study to go under $500,000, or do you have
any thoughts?
Mr. Keys. Mr. Chairman, $500,000 we think is a good
estimate. The only concern we have is getting it done in 12
months. We would prefer 18 months to get it done. But the
$500,000 is a good estimate. We think we can stay within that.
How much we come in under that, I think I would not hazard a
guess.
Mr. Osborne. Thank you. We think this is a critical project
for that particular area and we appreciate it.
With that, Mrs. Christensen?
Mrs. Christensen. No questions. I am just happy to be able
to support both bills. I have no questions at this time.
Mr. Osborne. Thank you for staying, too.
Mr. Faleomavaega.
Mr. Faleomavaega. Mr. Chairman, I am beginning to believe
you are a member of the Lakota Tribe. They are using the word
Sioux. I have never been acclimated to use this word Sioux,
because it is not really the true description of this great
first American Tribe. They are actually Lakota. Sioux is a
French word, and we have kind of adopted into it. I may be
wrong, but maybe our next witness might straighten me out.
Mr. Keys, I appreciate your testimony and support, the
administration's support for the proposed bill. Talk about
water supply. We are talking about how many of the first
Americans of the Santee Tribe that is involved here?
Mr. Keys. Mr. Chairman, I do not know how many of those
people would receive water. We just know that it would provide
an adequate supply to the reservation for the domestic and
whatever municipal-industrial supplies they need.
Mr. Faleomavaega. You mean, all this time they have never
had adequate water? Obviously that is why we are having the
proposal.
Mr. Keys. In a lot of cases, that is absolutely the case.
Mr. Faleomavaega. My gosh. But you don't know how many
people are involved?
Mr. Keys. I do not. We could certainly supply that number.
Mr. Faleomavaega. This feasibility study of $500,000, is it
sufficient to meet this need for the Tribe?
Mr. Keys. Mr. Chairman, Mr. Faleomavaega, it would provide
us the feasibility study to tell us the economic and
engineering feasibility of providing the water supply system.
So, yes, it is adequate to provide those plans and designs to
be ready to come back to Congress for a construction
authorization.
Mr. Faleomavaega. What kind of water system are they being
subjected to right now?
Mr. Keys. Most of their system right now are for some
wells. A lot of them are contaminated with nitrates, nitrogen
and some forms of coliform.
Mr. Faleomavaega. I suggest this is not just for the Santee
Sioux, it is probably true for other Tribes as well?
Mr. Keys. Yes, sir. There are a number of Tribes that we
are working with on rural water supply systems already.
Mr. Faleomavaega. I just want to make sure we have enough
funding for the feasibility study. I mean, the suggestion that
we do half a million dollars, maybe the study might require a
little more, so that would make sure a one time shot, we don't
want to do another study after this. This is my concern.
Mr. Keys. Mr. Chairman, we have already done an appraisal
level study. In 1996 to 1997 we did an appraisal level study.
That gets us on the right plane. This one follows up and says
these are the specific facilities that we should study in
detail and then be ready to go ahead with the construction
authorization.
Mr. Faleomavaega. Come 16 months after that, there is going
to be a water system?
Mr. Keys. Mr. Chairman, the legislation says 12 months. We
would prefer 18. But if 16 is what we get, that is what we will
do.
Mr. Faleomavaega. I will bargain for 12 months.
Mr. Chairman, thank you. Again, I appreciate the
administration support for this bill. I just want to make sure
that there is sufficient funding and the time scale. I just
don't believe it really needs 18 months to do the work. I think
1 year is more than sufficient, but I am not an engineer. I am
just saying I have seen other projects be done in a similar
manner, but I don't believe it required 18 months to do it.
Mr. Keys. We think the $500,000 is adequate. If we are only
given 12 months, we will get it done in that time.
Mr. Faleomavaega. Thank you very much, Mr. Commissioner.
Thank you, Mr. Chairman.
Mr. Osborne. Thank you very much, Mr. Keys. We will be
working with you on the timetable. As you know, we will be
communicating regularly. We really appreciate your coming. You
have been a regular visitor over here. You have been very, very
patient today. We appreciate your sticking around. So with
that, we will dismiss you, unless you have some other comments.
Mr. Keys. Mr. Chairman, it is a pleasure to be here. We
look forward to working with you on the bill and getting a
feasibility study done.
Mr. Osborne. Thank you very much for coming.
Mr. Osborne. At this time I would like to call the other
panelists on Panel IV, Les Minthorn, Board of Trustees,
Confederated Tribes of the Umatilla Indian Reservation, and
Alberto Peralta, Vice President, Wells Fargo Bank.
We will be continuing testimony on H.R. 3407. Mr. Minthorn,
we will start with you.
STATEMENT OF LES MINTHORN, BOARD OF TRUSTEES, CONFEDERATED
TRIBES OF THE UMATILLA INDIAN RESERVATION
Mr. Minthorn. Thank you. I have a prepared statement here,
but I prefer just to go through and hit the highlights that I
earmarked on the testimony.
Mr. Osborne. That will be fine.
Mr. Minthorn. Primarily my mission here is just to express
our support for the proposed legislation that would facilitate
the sale of these loans to a secondary market. With that, I
will just go through a brief summary of our experience with
this program.
In early 1969, our Tribe had a feasibility study done for
our Reservation. Of course, it suggested a lot of economic
development ventures, hotel, RV park, golf course, those kind
of things on our Reservation. Throughout that period, until
1994, I believe nothing really happened because of the
relationship that we have with our land. It is held in trust,
and not very many parcels were owned in fee, so because of that
relationship between our government and our Tribe where most of
our land was owned by our elders and was allotted, the Tribe
had very little land of its own. All the wealth that was
produced by the land was generated pretty much by the elders,
because it was allotted to them and their heirs now.
So during that timeframe, we had very little activity from
an economic development standpoint, from 1969 to 1994.
In the meantime, of course, we all know the Congress here,
the Indian Finance Act of 1974 came on board and then later the
self-Determination Act, and those were fine. We did a lot of
contracting with the government and had some activities happen
to us.
In 1994, as you go through the statement that I have there,
the Tribe implemented the provisions of the Indian Gaming
Regulatory Act. We have a small, very modest facility on our
Reservation that provided us with some seed money for other
economics.
Up until that point we had hardly any activity from an
economic development standpoint happening, until the Indian
Gaming Regulatory Act allowed some activities to take place on
the Reservation.
Well, prior to the casino, if you will, we had no
relationship with any banking institution because of the lack
of trust between the banking institution and the tribal
government whose land was held in trust by the U.S. Government,
which meant no collateral, which meant no means for the banking
institution to come and seize property if we in fact defaulted.
So without that relationship between the tribal government
and the banking institutions on our geographical area, we had
no relationship develop; as a result of that, no activity.
In 1994, when the Indian Gaming Regulatory Act was passed,
we had an opportunity then to try to utilize this Indian
guaranteed loan program through the Bureau of Indian Affairs
that was available. With that, we had at least a guarantee of
$10 million to assist us with the development of this economic
venture. As we went around the neighborhood in our own State
and our own community, we had no banks willing to enter into
this relationship with the government extending its full faith
and credit for 90 cents of every dollar. We had no takers from
the local banking institutions. As a matter of fact, the first
bank that we had a relationship with was in New Mexico, not in
the State of Oregon, not in the Pacific Northwest, but in New
Mexico.
So as a result of that, we were able to utilize the
guaranteed loan program under the Indian Finance Act. Had we
not had that vehicle, the opportunities to develop our
Reservation going back to the old 1969 plan that was developed
for us, chances are pretty good we would not have had this
opportunity to develop that parcel of land for these economic
ventures.
So it was beneficial for us as a user of the program in
that timeframe, going back to 1994, to use the Indian Financing
Act and this loan guarantee program to get us to where we are
now.
We are probably now in a very short period one of the
largest employers on the Reservation. The State of Oregon is
the largest employer, and the Confederated Tribes is the second
largest employer. So in our limited area, we have done a lot
for the people of our Reservation with the limited amount of
money, and it was all jump-started by the loan guarantee
program that created the golf course, the RV park, the hotel,
the cultural center and the casino.
[The prepared statement of Mr. Minthorn follows:]
Statement of Les Minthorn, Treasurer, Board of Trustees, Confederated
Tribes of the Umatilla Indian Reservation
Good morning Mr. Chairman, my name is Les Minthorn and I am the
Treasurer of the Board of Trustees, the governing body of the
Confederated Tribes of the Umatilla Indian Reservation (CTUIR). It is a
privilege and a pleasure for me to appear before the Committee today to
testify in favor of H.R. 3407, legislation that will permit more tribes
and individual Indians to take advantage of the BIA guaranteed loan
program, as the CTUIR did, to achieve financial independence.
The purpose of H.R. 3407 is to facilitate the sale of BIA
guaranteed loans by the lending bank to the secondary market, along
with transferring the guarantee of the United States to the purchaser
of the loan. This will have the effect of permitting banks and other
lending institutions participating in the BIA guaranteed loan program
to make more such loans available to tribes and individual Indians. I
will leave it to others with more experience in banking matters to
address the mechanics of how H.R. 3407 facilitates the sale of such
loans in the secondary market; I want to address the experience of the
CTUIR with our BIA guaranteed loans as an indication of how the
expansion of this loan program can benefit other tribes and individual
Indians.
On July 18, 2001, Assistant Secretary Neal McCaleb testified before
the Senate Indian Affairs Committee on tribal good governance practices
as they relate to economic development. In the course of his testimony,
Mr. McCaleb made the following statement about the CTUIR:
Another success story is told by the Confederated Tribes of the
Umatilla Indian Reservation located in rural northeast Oregon.
Their original economy was based upon agricultural and natural
resources, primarily fishing, grain and timber.
Today the tribe has diversified into commercial developments
such as a trailer court, a grain elevator, the Wildhorse
Casino, a hotel, an RV park, a golf course, and a solid waste
transfer station.
The tribe is now the second largest employer in Umatilla
County, following the State or Oregon. Their operating budget
has increased from $7.6 million to $94.2 million in the last 9
years.
We appreciate the recognition and kind words by Assistant Secretary
McCaleb. Our government and our people have worked hard for the modest
success we have achieved. The growth in our Tribal budget in the past
decade is due to two factors: First, the CTUIR has taken full advantage
of the opportunity to contract for BIA and IHS programs under the
Indian Self-Determination Act. Second, and much more importantly, the
CTUIR has worked diligently to establish a diversified, self-sustaining
Reservation economy. The BIA guaranteed loan program played a critical
role in providing start-up financing for three Tribal enterprises that
form the core of our economy.
Prior to 1994, the CTUIR budget was derived almost exclusively from
federal grants and contracts. Only a handful of jobs outside the Tribal
government were available for Tribal members and other Reservation
residents. The CTUIR had little Tribal income that it could allocate
pursuant to Tribal priorities and without the strings attached to
federal funds. We knew that governmental jobs and programs were not
enough to increase employment opportunities and to improve the
financial future for our Tribe and its members. Economic development
was necessary to achieve these goals.
The Umatilla Indian Reservation is bisected by Interstate 84 the
major east/west highway from Portland to Boise. Because of our rural
location, we knew our economy needed to take advantage of the freeway
traffic. As far back as 1969, the CTUIR planned for the development of
a destination resort at the base of the Blue Mountains offering a golf
course, hotel, RV park, gas station and convenience store, and a Tribal
museum. Those plans languished for 25 years because the CTUIR was
unable to secure the necessary financing. But recently, with the
assistance of the BIA guaranteed loan program, our dreams have become
reality.
In November, 1994, our small, temporary gaming facilitation opened,
and in March, 1995, moved into our larger, permanent casino. To
diversify our economic enterprises and to increase the amenities
available to our casino patrons, we needed a hotel, RV park and golf
course. Attracting financing for these enterprises posed a difficult
challenge. The CTUIR had few resources and little it could pledge to
secure repayment for loans for these enterprises. The fact that the
enterprises were to be located on trust lands and were to be
constructed and operated by a Tribe with no experience in such
enterprise development or operation made our quest for financing
especially difficult. In fact, we were only able to attract financing
because of the BIA guaranteed loan program authorized under the Indian
Finance Act of 1974.
Working with the agency and regional BIA offices, we received a $10
million loan guarantee. Pursuant to the loan guarantee, the United
States guaranteed 90% of the loan and provided an interest rate subsidy
to the Tribe to lower financing costs in the critical first three years
of operations when our new enterprises were getting off the ground.
If any member of the Committee believes that a Tribe with a BIA
loan guarantee has the ability to get a bank loan for any enterprise,
regardless of its feasibility, and on sweetheart terms, I am here to
tell you your belief is mistaken. We worked with the First Security
Bank of New Mexico on our loans and learned valuable lessons in the
process leading to the negotiation and closing of the loan
transactions. We conducted market feasibility studies for each financed
enterprise, we were required to pledge the full faith credit of the
CTUIR to secure repayment of the loans and had extensive negotiations
on loan terms addressing the construction and management of the
financed enterprises. In other words, while the BIA loan guarantee made
bank financing available, it did not guarantee that we would get the
loan. We were spared none of the rigors that other commercial borrowers
are subjected to, which prepared the CTUIR for the realities of the
loan and bond transactions that followed.
While I was not a participant in these loan negotiations, present
with me today is our Tribal Attorney, Dan Hester, who was. I am certain
that Mr. Hester could explain in excruciating detail the process and
terms associated with the loans if the Committee has any interest in
exploring these issues further.
The CTUIR BIA guaranteed loans closed in May (Hotel Loan) and
December (Golf Course and RV Park Loan) of 1995. All three enterprises
opened in 1996 and 1997. Later, the CTUIR financed and developed our
Tribal museum and educational facility known as the Tamastslikt
Cultural Institute, and have acquired and renovated the Arrowhead Truck
Stop/Gas Station/Convenience Store to add to the enterprises and
amenities of the Wildhorse Resort and to diversify our economic base
and employment opportunities. Currently, the Wildhorse Resort, TCI and
Arrowhead employ about 500 persons. Unemployment rates among CTUIR
members and other enrolled Indians residing on the Umatilla Indian
Reservation have been dramatically reduced from 37% to 17% since
Wildhorse Resort opened. Many Tribal members who had gone away to be
educated and stayed away to pursue employment opportunities that did
not exist at home have returned to their Reservation homeland and to
unprecedented job opportunities and salaries.
Even before the introduction of H.R. 3407, the CTUIR did its part
to free up BIA guaranteed loan resources. Taking advantage of our
increased financial resources, our operating history of Wildhorse
Resort enterprises, and an improved interest rate environment, the
CTUIR issued taxable and tax-exempt bonds in 1999 to refinance the BIA
guaranteed loans and other Tribal commercial loans. We have never
missed a loan or bond payment. But I hasten to add that the loan
guarantees were absolutely essential for the initial development of our
projects. Bonds are difficult to obtain for projects that are just on
the drawing board, and for which no operating history exists. It was
loans, secured with the guaranteed backing of our trustee, that
provided the critical initial financing for the Wildhorse projects that
are a reality today.
The experience of the CTUIR with the BIA guaranteed loan program is
a real success story. The BIA guaranteed loan program made loans
available to our Tribe that would not have been available without the
guarantee of the United States. The CTUIR has seen its economic base
expand to meet the needs of its people and to acquire the resources and
expertise to explore other economic development and financing
opportunities as our capability and resources permit. We have used this
expertise in our pursuit of other economic development projects such as
our proposed Wanapa natural gas-fired power plant, the expansion of our
casino which is now nearly complete, the development of a Reservation
grocery store and the development of housing to meet the needs of our
growing Tribal membership.
While the CTUIR does not foresee the need for future use of the BIA
guaranteed loan program, our individual Tribal members may pursue
financing for their business ventures, and so will other tribes hoping
to break their dependence on governmental grants as the sole source of
funding for tribal governmental programs and employment opportunities.
Based on our experience with the BIA guaranteed loan program, and our
embrace of Tribal economic self-sufficiency, the CTUIR expresses its
support for H.R. 3407.
______
The Chairman. Thank you very much for your testimony. If
you can, when those red lights come on, that is the 5-minute
mark. So we certainly appreciate you. You obviously are well
acquainted with success.
Mr. Peralta, would you go ahead with your testimony at this
time?
STATEMENT OF ALBERTO PERALTA, VICE PRESIDENT, WELLS FARGO BANK
Mr. Peralta. Mr. Chairman and honorable members, my name is
Alberto Peralta. I am here representing Wells Fargo. While I
don't want this to be a commercial about Wells Fargo, I do want
to say our interest is this: We are one of the largest lenders
to tribal governments, to Native Americans, in the United
States, and apart from that we are also the largest housing
lender.
We are in support of H.R. 3407 because we do think it is
going to invite and attract more investors and, thus, more
capital to various economic development plans that the Tribes
have. In New Mexico, we have 21 Pueblos and Tribes. I
personally know quite a few of the Governors there. We have
conducted a number of educational seminars, a number of bank
service seminars, almost all of them focused to a great degree
on economic development. Any element of any component that
would attract investors into this markets and help finance
economic development projects is something that we perceive as
being very good for the market.
In my testimony I talk a little bit more about BIA
guaranteed loans, how tough they are to finance, how large they
could be. Some banks are not interested in them because they
tie up a lot of capital. If they could then resell it, it
brings more liquidity to the markets and more loans to Native
American enterprises.
Thank you, sir.
[The prepared statement of Mr. Peralta follows:]
Statement of Alberto Peralta, Senior Vice President, Wells Fargo Bank,
New Mexico
My name is Alberto Peralta. I am a Senior Vice President of Wells
Fargo Bank New Mexico, N.A.
My primary responsibility at Wells Fargo is to provide commercial
banking services (including loans, depository and other financial
products) to the twenty-one New Mexico pueblos and tribes and to advise
Native Americans in New Mexico about banking services.
During 2002, Wells Fargo Bank New Mexico engaged in an active
outreach program that included holding a number of free seminars for
New Mexico's tribal leaders and members on residential loans,
commercial loans, pension plans and investments. Additionally, I met
personally with a number of tribal leaders to discuss opportunities
available to the pueblos and tribes for economic development on their
respective reservations.
The outreach efforts of Wells Fargo Bank New Mexico are in addition
to Wells Fargo's national initiatives to facilitate economic and
residential development for Native Americans. Wells Fargo's Native
American Banking Services Department, located in Phoenix, Arizona, is
actively involved in providing banking services and financing projects
in Indian country. Additionally, Wells Fargo Mortgage Company is the
largest lender to Native American housing projects in the country.
At Wells Fargo Bank, we are proud to be a part of economic
development and providing financing for housing to Native Americans. I
am also proud and pleased to be here today to represent Wells Fargo
Bank and to testify in favor of passage of H.R. 3407.
As a rule, commercial loans to New Mexico pueblos and tribes are
either secured by cash collateral or are guaranteed by the Bureau of
Indian Affairs under its Indian Financing Act guaranteed loan program.
Often, we receive requests to finance start-up projects for pueblos and
tribes who have done little or no prior economic development. In those
cases, the tribes do not have adequate cash resources or other tangible
assets to offer as collateral for loans, and the availability of the
credit enhancement offered by the BIA loan guaranty program is
critical. As a result, twenty-seven years after its passage, the Indian
Financing Act of 1974 remains an essential component in the success of
economic development projects in Indian country.
In our experience, typical BIA-guaranteed loans are for amounts in
excess of $1,000,000.00. Often they are two-to-three times that amount.
The ability to sell BIA-guaranteed loans in a secondary market will
allow banks to originate more loans to Native Americans because the
banks will be able to sell all or part of the loans and replenish their
liquidity so that they can lend again. As a result, banks will be more
inclined to pursue the Native American lending market and thus provide
much needed capital to Indian country, just as the SBA-guaranteed loan
program and secondary market in home mortgages have generated
additional capital for commercial loans and in home mortgages.
H.R. 3407 provides for the ``incontestability'', or the ``full
faith and credit'' of a BIA-guarantee for a secondary market investor,
like the guarantees offered by the SBA-guaranteed loan program. This
provision is critical because, based on our experience with other
government guaranteed loan programs like SBA, we know that in order for
secondary market investors to purchase guaranteed loans, investors must
be confident that the guarantee will be paid without undue delay or
without the risk that a subsequent event might invalidate the
guarantee. Therefore, we encourage the Committee to use best efforts to
ensure that these provisions in H.R. 3407 remain intact.
We also encourage H.R. 3407 to require BIA to adopt clear, concise
regulations as soon as possible to implement the secondary market
program contemplated by H.R. 3407 and to make clear the responsibility
of the originating lender after it sells a BIA-guaranteed loan in the
secondary market. Delay will only serve to confuse and undermine the
success of the entire BIA-guaranteed loan program and of its secondary
market component. Therefore, we strongly support the provisions in H.R.
3407 that require adoption of final regulations not later than 180 days
after enactment of H.R. 3407.
Thank you very much for the opportunity to appear before you today.
I am happy to answer any questions that you have.
______
The Chairman. Thank you very much for your testimony. We
appreciate it.
I guess I will start with you, Mr. Peralta. In your
estimation, would the creation of a secondary market pose an
increase in cost for securing funding to Indian businesses?
Mr. Peralta. As I mentioned in my written testimony, I am
hoping that it doesn't. I do not know for sure that it will or
not. But if the costs are excessive, it becomes an impediment
to using the program. I expect there will be some costs for it,
but we have to manage those and keep them as low as possible to
make sure that it doesn't have the reverse effect and scare
away investors rather than attracting them.
Mr. Osborne. Mr. Minthorn, you mentioned in your testimony
that the Confederated Tribes of the Umatilla Indian Reservation
do not foresee the need for future use of the BIA guaranteed
loan program. If the proposed amendments to the Indian
Financing Act are implemented, what benefits do you foresee in
the creation of the secondary market to have an established,
self-sustaining Indian enterprise?
Mr. Minthorn. I am not sure that you got it correct.
Mr. Osborne. I probably don't. I probably don't, but you
probably can straighten it out.
Mr. Minthorn. I believe that we will continue to use, if it
is available, the loan guarantee program, because it did have a
very huge impact on our operations as we have it right now. A
lot of that had to do with capacity building. A lot of it had
to do with putting fiscal management policies in place and
developing what we heard earlier in the testimony here about
capacity in the other panel and accountability.
So we think that the future would bring more of these
opportunities to the table and to go out with that loan
guarantee program, we have other projects that we need this
type of support to further our diversified economy, and we need
that type of loan guarantee.
Mr. Minthorn. Sometimes projects that are not on the table,
at least in our community, it takes time for us to move to the
next project. And so the timeframe 1994 until now, we just used
that one loan program, the loan guarantee for the $10 million.
We haven't had a second program. We think we have other
projects that we would like to utilize the same program for.
Mr. Osborne. Thank you very much. I gather then that you do
plan to use the guaranteed loan program, and I am sorry if we
misread your testimony.
Mr. Minthorn. We have one application that is pending we
haven't implemented.
Mr. Osborne. OK. Thank you very much.
Mrs. Christensen, anything further?
Mr. Faleomavaega?
Mr. Faleomavaega. Thank you, Mr. Chairman.
I thank the members of our panel for their fine testimony.
What an irony, Mr. Chairman. As I recall, years ago there was
an Indian tribe that wanted to borrow money to start a casino
operation, and none of the lenders in the community were
willing to give them the money. So this Indian tribe had to go
to a foreign investor to give them backup capital to start
their operation.
Well, this Indian tribe happens to be the Pequot Indian
Tribe, whom I have had the privilege of visiting in
Connecticut, now currently has the largest casino operation in
the world, I think, grossing well over $600 million a year. And
you know what, Mr. Chairman? Now everybody--lending
institutions are jumping up to say, hey, borrow money from us.
I mean, this is the kind of attitude that our country has had,
especially from the private sector, even giving the Indians a
chance to do this kind of a commercial development.
Mr. Chairman, I am going to propose an amendment in our
bill when it comes before the full Committee, and this is maybe
a novel idea, Mr. Chairman.
The fact that there is somewhere between 2 billion to $10
billion that we can't even figure out how much we owe in Indian
Trust Funds, the fact that the money is there--it is not the
question of whether or not there is no money. The money is
there, but we just couldn't calculate exactly how much. And
perhaps maybe $2 billion could be given to be part of this
trust--I mean, this guaranteed loan program. So that this is
exactly the kind of thing that this gentleman is advocating.
This thing has been in the books for 27 years, and the fact
that there is money there, not taking away the integrity of the
funds of who is really owed the money, but at least we could
use the money for the benefit of our first Americans who really
want to develop their commercial activities and be part of the
private sector.
I really believe that this bill is excellent, and I
sincerely hope--I am going to develop this novel idea, Mr.
Chairman, and definitely look forward to the full Committee
hearing for a markup on this. And I want to thank our good
friends and Wells Fargo for giving our first Americans a sense
of trust, that they can be responsible for borrowing money to
conduct their business activities. I really appreciate that.
Thank you, Mr. Chairman.
Mr. Osborne. Thank you very much.
And thank you, gentlemen, for being here today. Appreciate
your testimony.
Mr. Osborne. And, with that, we will move on to panel five
for consideration of H.R. 24O8. That would be Roger Trudel,
Assistant Secretary of Indian Affairs--or, rather, Chairman of
the Santee Sioux Tribe; Robert Cournoyer, Tribal Vice Chair,
Yankton Sioux Tribe; and Michael Lawson, senior associate,
Morgan, Angel & Associates.
While they are getting seated, I will just mention that
H.R. 2408 is a bill that is intended to provide equitable
compensation to the Yankton Sioux Tribe of South Dakota and the
Santee Sioux Tribe of Nebraska for the loss of value of certain
lands, Yankton Sioux Tribe and Santee Sioux Tribe Equitable
Compensation Act. And as has been mentioned some dams were
built, some land was taken, and this is to compensate for that
land.
So, we appreciate all of you being here today, and we will
start out with your testimony, Mr. Trudel.
Mr. Faleomavaega. Would the Chairman yield?
Mr. Osborne. Yes, sir.
Mr. Faleomavaega. Mr. Chairman, I want to offer my
apologies for not having the time to listen to our witnesses,
but I have got a very important meeting. It means the life or
the death of my tuna industry if I don't attend this meeting
with the most able Chairman of the Ways and Means Committee,
Mr. Bill Thomas. But I want to offer again my commendation and
special thanks to you, Mr. Chairman, for chairing these
hearings and these important bills that are now before our
Committee for consideration.
And, again, my apologies to our witnesses that I won't be
able to listen to their testimony.
Mr. Osborne. Well, thank you for being here as long as you
have been.
Mr. Faleomavaega. Thank you, Mr. Chairman.
Mr. Osborne. All right. Mr. Trudel.
STATEMENT OF ROGER TRUDEL, CHAIRMAN, SANTEE SIOUX TRIBE
Mr. Trudel. Thank you, Congressman Osborne, and also
Chairman, today, I guess, Chairman of the Committee.
Mr. Osborne. Chairman for the day.
Mr. Trudel. Chairman for the day.
I have submitted written testimony on 2408, and just to
maybe share a little history of the Santee Sioux Tribe for the
record, the Santee Sioux Tribe is originally from Minnesota.
The State of Minnesota was our traditional lands, as well as
western Wisconsin, north central and northeastern Iowa, and
southeastern South Dakota.
In 1862, we had a conflict with the U.S. Government and was
relocated to the State of--actually, to Crow Creek, South
Dakota, first and then to Nebraska in about 1863, 1864. We had
400-some men that were sentenced to hang at Mankato, Minnesota,
and President Lincoln commuted the sentence of all but 38 of
them. And so 38 of our relatives were hung at Mankato on
December 26th, 1862. And as my good friends, the Winnebagos, I
always like to remind them that we helped to get them kicked
out of Minnesota, too. So, we have a Winnebago relative with us
today that is doing an internship here with Congressman
Bereuter.
Anyway, when the dam, Gavins Point Dam, was put in in the
early 1950's, the tribe lost approximately 400-some acres, not
counting Niobrara River. With Niobrara Island, I think it was a
total of about 1,000, 1,007 acres. There was some compensation
at that time, but clearly not properly executed. And so this
bill that your office, Congressman, yourself and your staff
have assisted us with, you know, would bring equity to the
Santee Sioux Tribe.
The Santee Sioux Tribe is one of the more economically
depressed areas in Nebraska, northeastern Nebraska. Our
unemployment rate runs anywhere from 50 to 70 percent depending
on what time of the year it is. We have a number of health
disparities, a number of education disparities, and definitely
a number of economic disparities. And we think this
compensation claim would assist the tribe in long-term economic
development, invested wisely. There is a plan that would be
submitted to the Interior Department on how the funds would be
utilized.
We do hope that the Committee will seriously consider the
needs of the Santee Sioux Tribe when this goes to full
Committee. We respectfully request that--you know, that the
funds would be available as soon as possible.
With that, Mr. Chairman, I believe I would end my verbal
testimony.
[The prepared statement of Mr. Trudel follows:]
Statement of Roger D. Trudel, Chairman of the Santee Sioux Tribe of
Nebraska on H.R. 2408
Mr. Chairman and members of the House Resources Committee, I am
Chairman Roger Trudel of the Santee Sioux Tribe of Nebraska. The Santee
Indian Reservation is located in northeast Nebraska and the Missouri
River borders our reservation's northern boundary.
I am pleased to appear before this committee to provide some views
from the perspective of the Santee Sioux tribe in support of H.R. 2408
and appreciate the Committee's consideration of this bill. Our tribe
has worked closely with Congressman Tom Osborne, along with the entire
Nebraska congressional delegation in both chambers of Congress to
advance this legislation through the 107th Congress. We are grateful
for their support on this matter, as well as the support of the South
Dakota delegation on behalf of our brothers at the Yankton Sioux Tribe.
I also want to commend the work of all the congressional staff who have
worked so hard to get this legislation before this Committee today.
The Santee Sioux Reservation was established as a permanent home
for remnants of six Santee Sioux bands driven out of Minnesota
following what is known as the ``Sioux Uprising of 1862.'' Our
reservation was established by Executive Order signed by President
Andrew Johnson on February 27, 1866.
In 1944, the Congress enacted the Flood Control Act (58 Stat. 887),
which authorized implementation of the Pick-Sloan Project for water
management and hydroelectric power development in the Missouri River
Basin. This plan included the construction of five main-stem dams along
the Missouri River. Project purposes included flood control downstream,
navigation, irrigation, the generation of hydropower, the provision of
improved water supplies, and enhanced recreation. The U.S. Army Corps
of Engineers, which constructed and operate the dams, estimates the
projects' overall contribution to the national economy averages
approximately $1.3 billion. The Gavins Point dam, which is the subject
of my testimony, is erected between Yankton County, South Dakota and
Knox County, Nebraska and is the farthest downstream and smallest of
the six Missouri River dams.
The Gavins Point project inundated 1007.22 acres of land within the
Santee Sioux Indian Reservation. This represents nearly fifteen percent
(15%) of the reservations total land base. Of that acreage, over half
was valuable cropland.
The Santee Sioux lands taken for the Gavins Point project were
located just below the main settlement area of the Indian village of
Santee. The bottomland was used by our tribal members for hunting,
shelters for livestock, and the trees for lumber and fuel. The
bottomlands provided a variety of plants used for ceremonial and
medicinal purposes. The land taken also included productive agriculture
land and pastureland. The Gavins Point project flooded a tribal farm
which included cattle and hog confinement buildings, grazing land, and
fields that were used for growing hay, oats and corn. That of course is
now history; the tribal land taken is now underwater and unusable for
any form of economic development or subsistence use. As a small tribe
with a minimal land base, those lands taken by the floodwaters of the
Gavins Point dam are a great loss to us and, to date, the Federal
government has done nothing to address what the Santee Sioux Tribe
feels was an unjust taking of tribal lands.
Neither the Flood Control Act of 1944, nor any subsequent acts of
Congress, specifically authorized the U.S. Army Corps of Engineers or
the Bureau of Reclamation to condemn Santee Sioux tribal land for the
Pick-Sloan projects. Nevertheless, our land was condemned and taken
from us in the U.S. District Court. These condemnation proceedings
resulted in compensation for our lands that was far less in value than
that of other Missouri River tribes whose lands were taken by acts of
Congress. The Court did not compensate the Tribe for its indirect
damages, but merely provided payment for the appraised value of the
land. Moreover, it was several years between the time the land was
appraised and when the Tribe actually received any payment stemming
from the Court's compensation order. The initial settlement did not
take into account the inflation of property values within that period
of time.
The lands affected by the Pick-Sloan program were, by and large,
Indian lands. The damage to each reservation was unique, depending on
the acreage lost, the number of tribal members living in the impacted
areas, and the value of the resources located on those lands. However,
the result was the same at each reservation tribal communities and
their economies were damaged or completely destroyed by the dam
projects with little to no regard of the Federal government.
In May of 1985, the Secretary of the Interior established the Joint
Tribal Advisory Committee (JTAC) to assess the impacts of the Garrison
and Oahe Dams on the Three Affiliated Tribes and the Standing Rock
Sioux Tribe. Based on the findings and recommendations of JTAC,
Congress enacted legislation to equitably compensate those tribes for
their losses from Pick-Sloan.
In 1992, the Congress enacted legislation acknowledging that the
U.S. government did not justly compensate the tribes at Fort Berthold
(Three Affiliated) and Standing Rock when it acquired their lands and
that the tribes were entitled to additional compensation. (Pub. L. 102-
575, title XXXV, the Three Affiliated Sioux Tribes and Standing Rock
Sioux Tribes Equitable Compensation Act, which provided development
trust funds for these two reservations).
In 1996, the Congress again acknowledged that the Indian tribes
were not adequately compensated for their losses under the Pick-Sloan
Project in passing Pub. L. 104-223, the Crow Creek Sioux Tribe
Infrastructure Development Trust Fund Act, which provides for a
development trust fund for the Crow Creek tribe for losses due to the
construction of the Ft. Randall and Big Bend dams. Then again, in 1997,
Congress passed Pub. L. 105-132, the Lower Brule Sioux Tribe
Infrastructure Development Trust Fund Act, which also provided a
development trust fund for the Lower Brule Sioux Tribe for similar
losses.
These four recovery funds were financed by an allocation of 25
percent of the annual gross revenues collected by the Western Area
Power Administration (WAPA) from the sale of hydroelectric power
generated by the Pick-Sloan dams. The funds were established pursuant
to the determination of the General Accounting Office (GAO) that impact
to the tribes at the time of the land takings was significant, and the
Congressional finding that ``the United States Government did not
justly compensate [the] tribes when it acquired those lands.'' The
105th Congress also considered legislation that would have established
a Recovery Fund of $290 million for the Cheyenne River Sioux Tribe of
South Dakota, which lost approximately 104,000 acres to the Oahe Dam
project.
The Fort Berthold, Cheyenne River, Standing Rock, Crow Creek and
Lower Brule tribes all received initial settlements from Congress
between 1948 and 1962 that included payment for direct property
damages, severance damages (including the cost of relocation and
reestablishment of affected tribal members) and rehabilitation for
their entire reservations. In providing funds for rehabilitation,
Congress recognized that the tribes as a whole and not just the tribal
members within the taking areas were negatively affected by the loss of
the bottomland environment and reservation infrastructure. Accordingly,
congressional settlements with the five tribes between 1948 and 1962
provided compensation for severance damages and rehabilitation that
averaged 458 percent more than was paid for direct damages. The
additional payment to the Standing Rock and Crow Creek Sioux Tribes was
over 630 percent more than the amount awarded to them for direct
damages.
The Yankton and Santee Sioux Tribes were never provided the
opportunity to receive compensation from Congress for their direct
damages. Instead, as mentioned above, they received settlements for the
appraised value of their property through condemnation proceedings in
U.S. District Court. In 1954 Congress provided supplementary
compensation to the Yankton Sioux for severance damages. This payment
was distributed to some but not all of the tribal families affected
nine years after their properties were condemned. In 1960, the Bureau
of Indian Affairs conducted a comparative study of the experiences of
six reservations impacted by Pick-Sloan dams. This investigation found
that the average total damage payment per family within the taking area
at Yankton was $5,605, whereas the payment averaged $16,680 on the
other five reservations (Fort Berthold, Standing Rock, Cheyenne River,
Crow Creek, and Lower Brule).
The Santee Sioux also received payment for severance damages from
the U.S. District Court in 1958. However, the additional severance
compensation awarded the Yankton and Santee Sioux did not reflect the
fact that their takings involved a greater proportion of agricultural
land. Neither did it account for the inflation of property values
between the time of taking and the time of settlement. The total
compensation for the Yankton Sioux also failed to take into
consideration the fact that the White Swan community was destroyed,
dispersed and never replaced, whereas communities flooded on the other
reservations impacted by Pick-Sloan projects were relocated and
reestablished on higher ground. In addition, neither the Yankton nor
the Santee Sioux was provided funds for rehabilitation, even though a
large proportion of tribal members residing outside the taking area on
both tribes' reservations were also impacted by the dam projects.
By the enactment of these various development trust fund acts,
Congress has established a strong precedent for settling tribal land
takings claims by providing additional and equitable compensation in
the form of development trust funds. However, Congress cannot declare a
value on the loss of tribal tradition and cultural life along a free
flowing river. So therefore, we must look to the cost of what can be
measured. The tribe lost a total of 1,007.22 acres to the Gavins Point
dam and reservoir. H.R. 2408 correctly identifies the Santee Sioux
Tribe's loss of 593.10 acres near Santee village and appreciates the
provision of $4,789,010 in compensation as a development trust fund for
that taking. However, we also claim a loss of 414.12 acres on Niobrara
Island, which was also taken under the Gavins Point Dam project.
This additional loss of land is identified in Tribal histories as
well as the April 1999 report titled: ``Historical Analysis of the
Impact of Missouri River Pick-Sloan Dam Projects on the Yankton and
Santee Sioux Indian Tribes,'' prepared for the Bureau of Reclamation by
Dr. Michael L. Lawson of the Washington, DC based public policy firm of
Morgan Angel & Associates. In addition to the funding called for under
H.R. 2408, the Tribe also requests that Congress establish a recovery
fund of $3,343,828 for compensation of the 414.12 lost acreage of
Niobrara Island. These valuations are based on the per-acre amount
established by the Lower Brule Recovery Fund plus an additional
percentage for unpaid severance damages and/or rehabilitation.
The Santee Sioux Tribe, in conjunction with the Yankton Sioux
Tribe, would also request Congress to provide supplementary
compensation totaling $42,456,581 for their Pick-Sloan damages. Based
on the precedent of recovery funds established for the other four
tribes, we also seek the establishment of a separate Recovery Fund for
each of our Tribes to be funded by allocation of a proportion of the
gross receipts deposited by the WAPA in the U.S. Treasury
To this end, I feel that the Santee settlement claim and request is
minimal in comparison to the others settlements passed under prior
Congresses. Again, we appreciate the level of compensation H.R. 2408
calls for, and consider it a good beginning to our being fully
compensated for the unjust takings of tribal lands during the era of
the Pick-Sloan projects. With the sponsorship of identical legislation
(S. 434) in the United States Senate by majority leader Tom Daschle, we
anticipate bi-partisan support in both chambers of Congress as well as
eventual passage and Presidential enactment of this legislation this
year.
I have also attached a resolution from the National Congress of
American Indians, representing the voice of over 250 federally
recognized tribes in the United States in support of this legislation,
which I request be placed in the Congressional Record along with this
written statement.
In conclusion, I again want to thank Rep. Osborne for sponsoring
this legislation and the House Resources Committee for granting me this
opportunity to present testimony on its behalf. Currently, unemployment
rates are devastatingly high on my reservation, with little to no
economic development opportunities available, due in large part to a
lack of tribal finances to generate a sustainable economic base. The
socio-economic needs of the Santee Sioux Tribe are great and passage of
this legislation is critically important to the Tribe's goal of
reversing decades of abject poverty. Therefore, I respectfully request
this Committee to quickly pass this legislation and report H.R. 2408 to
the House floor for further consideration.
[An attachment to Mr. Trudel's statement follows:]
THE NATIONAL CONGRESS OF AMERICAN INDIANS--RESOLUTION #BIS-02-030
Title: Support for H.R. 2408 / S. 434, the Yankton Sioux Tribe and
Santee Sioux Tribe Equitable Compensation Act
WHEREAS, we, the members of the National Congress of American Indians
of the United States, invoking the divine blessing of the Creator upon
our efforts and purposes, in order to preserve for ourselves and our
descendants the inherent sovereign rights of our Indian nations, rights
secured under Indian treaties and agreements with the United States,
and all other rights and benefits to which we are entitled under the
laws and Constitution of the United States, to enlighten the public
toward a better understanding of the Indian people, to preserve Indian
cultural values, and otherwise promote the health, safety and welfare
of the Indian people, do hereby establish and submit the following
resolution; and
WHEREAS, the National Congress of American Indians (NCAI) was
established in 1944 and is the oldest and largest national organization
of American Indian and Alaska Native tribal governments; and
WHEREAS, by carrying out the Pick-Sloan Missouri River Basin program
approved by Congress under the Flood Control Act during the first half
of the 20th Century to promote the general economic development of the
United States by providing for irrigation above Sioux City, Iowa to
protect urban and rural areas from devastating floods of the Missouri
River, vast lands of the Yankton Sioux and Santee Sioux reservations
along the Missouri River basin were forever lost; and
WHEREAS, these fertile, wooded bottom lands that were home to the
Yankton and Santee Sioux Tribes, which would have been ideal for
farming and agricultural use, were buried under billions of gallons of
water impounded for the Fort Randall and Gavins Point projects as part
of the Pick-Sloan program; and
WHEREAS, the Fort Randall project (including the Fort Randall Dam and
Reservoir) overlies the western boundary of the Yankton Sioux Tribe
Indian Reservation and the Gavins Point project (including the Gavins
Point Dam and Reservoir) overlies the eastern boundary of the Santee
Sioux Tribe; and
WHEREAS, the two projects greatly contribute to the economy of the
United States by generating a substantial amount of hydropower and
impounding a substantial quantity of water, yet the reservations of the
Yankton Sioux Tribe and the Santee Sioux Tribe remain undeveloped; and
WHEREAS, the United States Army Corps of Engineers took the Indian
lands used for the Fort Randall and Gavins Point projects by
condemnation proceedings; and
WHEREAS, the Federal Government did not give the Yankton Sioux Tribe
and the Santee Sioux Tribe an opportunity to receive compensation for
direct damages from the Pick-Sloan program, even though the Federal
Government gave Indian reservations upstream from the reservations of
those Indian tribes such an opportunity; and
WHEREAS, the Yankton Sioux Tribe and the Santee Sioux Tribe did not
receive just compensation for the taking of productive agricultural
Indian lands through the condemnation; and
WHEREAS, the settlement agreement that the United States entered into
with the Yankton Sioux Tribe and the Santee Sioux Tribe to provide
compensation for the taking by condemnation did not take into account
the increase in property values over the years between the date of
taking and the date of settlement; and
WHEREAS, in addition to the financial compensation provided under the
settlement agreements, H.R. 2408 and S. 434, introduced in the United
States House of Representatives by Congressman Tom Osborne (R-3-NE) and
in the United States Senate by Senator Tom Daschle (D-SD) call for the
Yankton Sioux Tribe to receive an aggregate amount equal to $23,023,743
for the loss value of 2,851.40 acres of Indian land taken for the Fort
Randall Dam and Reservoir of the Pick-Sloan program and call for the
Santee Sioux Tribe to receive an aggregate amount equal to $4,789,010
for the loss value of 593.10 acres of Indian land located near the
Santee village.
NOW THEREFORE BE IT RESOLVED that the National Congress of American
Indians (NCAI) does hereby call upon the United States Congress to pass
H.R. 2408 and for the U.S. Senate to pass S. 434, and thereby agree to
a single legislative bill in the 107th Congress to be sent to the
President for enactment.
BE IT FURTHER RESOLVED that the NCAI requests that if such legislation
be sent to the President for enactment, that President Bush sign such
legislation into law, thereby compensating the Yankton Sioux and Santee
Sioux Tribes for such unjust takings of Indian lands.
BE IT FINALLY RESOLVED that this resolution shall be the policy of NCAI
until it is withdrawn or modified by subsequent resolution.
CERTIFICATION
The foregoing resolution was adopted at the 2002 Mid-Year Session of
the National Congress of American Indians, held at the Bismarck Civic
Center, in Bismarck, North Dakota on June 16-19, 2002 with a quorum
present.
Tex Hall, President
ATTEST:
Colleen Cawston, Recording Secretary
Adopted by the General Assembly during the 2002 Mid-Year Session of the
National Congress of American Indians, held at the Bismarck Civic
Center, in Bismarck, North Dakota on June 16-19, 2002.
______
Mr. Osborne. You will be the only panelist on the next
bill; so if you would care to give your testimony on H.R. 4938
at this time, we would certainly accept it. Or would you rather
wait until later?
Mr. Trudel. As long as I am close to the mike, I will do it
now.
Mr. Osborne. There you go.
Mr. UTrudel. Again, thank you, Chairman. The bill would
provide for a rural study, rural water study on the
reservation. The reservation is 12 by 17 miles in dimensions.
Within the boundaries of the reservation, we have the Santee
Community, which is the growth center of the Santee
Reservation. Approximately 600-some people live in that
community, tribal members and other Indian people, as well as
some non-Indian people. And then we have a community of Lindy,
Nebraska, which is within our boundaries. And I am not sure
what Lindy's population is; I think somewhere around maybe 40
or 50 people on a good day.
And our plan, or what we envision as a rural water system
is we have a number of non-Indian farmers that also reside
within those 12-by-17-mile dimensions that we all share bad
water. The cost of putting in an average well I think runs
right now--and, of course, this is old information--somewhere
around $9,000 to put an individual well in just to have bad
water.
So, we were hoping, with your assistance and with this
bill, that, you know, the study could be conducted that it
would be feasible to have a rural water system on the Santee
Sioux Indian Reservation.
There are also other communities in the--adjacent to the
reservation that are interested in seeing this project go
through and hope that somehow that they could benefit from
this, and that is the Niobrara Community and Center Community,
Center being the county seat of the county. Our reservation
does run up to the main--First Street in Center.
All have wished us good luck in bringing this bill to
fruition. We believe the water is a major cause of the bad
health of the people. As I mentioned before, we do have some
health disparities. Good water is a blessing, I guess, you
know, and unfortunately we are not blessed with good water. We
believe that this study could bring good water to everybody on
the reservation, regardless of whether they are tribal members
or non-Indian members, residing within the boundaries of the
reservation.
We do believe that good water would help attract some
economic development to the area, some commercial interests,
and allow for further housing. We are restricted in where we
can locate housing now, so that is why so many people live in
the community of Santee as opposed to other areas of the
reservation is because of the water situation.
Again, we believe, as I said earlier, that good water is
key to good health, and water to the Indian people is sacred.
And, just for the record, I guess I want to close with this
part, just saying that earlier a comment was made that you
might be Lakota. We are hoping that maybe you are Dakota. We
have three dialects, and we are the D, the D dialect.
Mr. Osborne. I will be whatever you want, Roger.
Mr. Trudel. Thank you.
[The statement of Mr. Trudel follows:]
Statement of Roger D. Trudel, Chairman of the Santee Sioux Tribe of
Nebraska on H.R. 4938
Good afternoon Mr. Chairman, and members of the House Resources
Committee. I am Chairman Roger Trudel of the Santee Sioux Tribe of
Nebraska, here today to present testimony in support of H.R. 4938, a
bill that directs the Department of Interior's Bureau of Reclamation,
to conduct a feasibility study on the development of a water supply
system for the municipal, rural and industrial use of the Santee Sioux
Tribe. I am pleased to be offered this opportunity to appear before
this committee to provide some views from the perspective of the Santee
Sioux tribe in support of H.R. 4938 and appreciate the Committee's
consideration of this bill. Our tribe has worked closely with
Congressman Tom Osborne, along with the entire Nebraska congressional
delegation in both chambers of Congress to advance this legislation
through the 107th Congress. We are grateful for their support on this
matter. I also want to commend the work of all the congressional staff
who have worked so hard to get this legislation before this Committee
today.
The reservation for the Santee Sioux Tribe was established via
Executive Order in the mid-19th Century as a permanent home to the
Eastern, or Santee division of the great Sioux nation, with our
majority population historically affiliated with the Mdewakanton and
Wahpekute peoples of the northern great plains. The Tribal governing
body consists of an elected 12-member Tribal Council, representing
nearly 2,500 enrolled members, with over 500 of those members, along
with numerous other Sioux tribal members of Lakota, Dakota and Nakota
decent, living on the Santee reservation in northern Nebraska along the
banks of the Missouri River.
In 1944, the Congress enacted the Flood Control Act (58 Stat. 887),
which authorized implementation of the Pick-Sloan Project for water
management and hydroelectric power development in the Missouri River
Basin. This plan included the construction of five main-stem dams along
the Missouri River, including the Gavins Point dam erected between
Yankton County, South Dakota and Knox County, Nebraska, the farthest
downstream and smallest of the six Missouri River dams. The Gavins
Point project inundated 1007.22 acres of land within the Santee Sioux
Indian Reservation. This represents nearly fifteen percent (15%) of the
reservations total land base. The Santee Sioux lands taken for the
Gavins Point project were located just below the main settlement area
of the Indian village of Santee.
The bottomland was used by our tribal members for hunting, shelters
for livestock, and the trees for lumber and fuel. The bottomlands
provided a variety of plants used for ceremonial and medicinal
purposes. The land taken also included productive agriculture land and
pastureland. The Gavins Point project flooded a tribal farm, which
included cattle and hog confinement buildings, grazing land, and fields
that were used for growing oats, corn and alfalfa hay. That of course
is now history; the tribal land taken is now underwater and unusable
for any form of economic development or subsistence use. As a small
tribe with a minimal land base, those lands taken by the floodwaters of
the Gavins Point dam are a great loss to us and, to date, the Federal
government has done nothing to address what the Santee Sioux Tribe
feels was an unjust taking of tribal lands. Moreover, the Tribe has
suffered significant negative impacts to the reservation's ground water
quality and water delivery system infrastructure stemming from the
flooding of the Tribe's agricultural lands since the erection of the
Gavins Point Dam. To date, the federal government has done nothing to
reverse these negative impacts.
Over the years, the Tribe has attempted to develop a sustainable
economy through the creation of light industry, gaming, agriculture and
other revenue-generating projects. However, the majority of investors
interested in such projects quickly identify the lack of an adequate
municipal infrastructure, including water delivery systems, electrical
generation facilities, waste water treatment facilities and other
municipalities on the reservation that most other areas of the state
take for granted. This historical lack of municipal services have led
to the demise of several revenue generating activities on the Tribe's
lands that are critical in the overall development of a sustainable
economy for the Santee Sioux Tribe.
I wish to share with you just a quick overview of the socio-
economic detriments the individuals and families of the Santee Sioux
reservation are currently experiencing because of our Tribe's inability
to generate economic development interests on our reservation. The
health status of residents within the Santee service area are some of
the worst in the state, if not the entire nation. Unemployment runs as
high as seventy-five percent (75%), especially in the winter months.
The abject poverty that the lack of jobs for our labor forces creates,
along with the absence of various community services that the federal
government fails to provide as part of their treaty obligations and
trust responsibilities to us, have taken a destructive toll on our
families, with the most suffrage occurring within our child and elder
populations. Conditions such as substandard housing, poor water
quality, crowded living conditions and inadequate nutrition programs
affect the vast majority of our members. Injuries, violence, infant
diseases and mortality rates, diabetes, cardiovascular disease, cancer,
alcoholism, drug abuse, high school dropout rates, teen pregnancy and
suicide run rampant throughout our communities, far exceeding the
highest, or lowest, apex indicators of the general U.S. population,
depending on which is worst scale of measure.
In general, the overall quality of life of our people is disastrous
and directly correlated to conditions adversely affected by the
deprivation of programs, services and lack of a healthy economy within
the Tribe's service area. The socio-economic environment must be
improved immediately if the statistical health and well being of the
Santee Sioux people is to improve. I feel that the implementation of
the water quality and delivery system study as called for under H.R.
4938 is a step in that direction.
I also wish to share with the Committee some of the economic
development goals the Tribe has previously implemented, with limited
success, as well as those goals that the Tribe continues to try and
successfully develop. To date, the Santee Sioux Tribe has established a
housing authority, a community facility center, a medical center, a
utilities and resources commission, a recreation/vehicle park, a
preschool and K-12 school, a community college, an industrial park, a
3,500-acre tribal ranch and a yet to be profitable class II casino
operation. Many of these entities are operated under various federally
subsidized program funds and a few small grant awards. However, success
of these operations could be dramatically improved with additional
federal support, both monetary and programmatic, improved relations
with state and local governments, and an overall increase in basic
economic conditions on the reservation.
Targeted areas of development include the expansion of the Tribe's
health service program, an established legal infrastructure including a
tribal law enforcement division and tribal court, the establishment of
self-sufficient utilities infrastructures and resources management,
improved tribal schools and education programs, expanded recreation and
tourism facilities, alternative housing, an improved and expanded
industrial park, and increased farming/ranching activities. By
improving the economic tools to create sustainable development of the
Santee reservation, the Tribe believes that more jobs for tribal and
non-tribal members will be generated, along with an increase in the
mean average income of the reservation population. In addition,
increased jobs and salaries of those employed will best serve the
Tribe's goals of reversing the litany of socio-economic detriments that
our Indian people face on the Santee reservation today.
In conclusion, I again want to thank Rep. Osborne for sponsoring
this legislation and the House Resources Committee for granting me this
opportunity to present testimony on its behalf. The socio-economic
needs of the Santee Sioux Tribe are great and passage of this
legislation is critically important to the Tribe's goal establishing a
sustainable reservation economy. Respectfully, I urge this Committee to
quickly pass this legislation and report H.R. 4938 to the floor of the
U.S. House of Representatives for further consideration. In addition, I
urge this Congress to pass this bill, request their colleagues in the
United States Senate do the same and them urge the President of the
United States to enact this legislation this year. This concludes my
statement for the record and I look forward to any questions you may
have.
______
Mr. Osborne. Mr. Cournoyer.
STATEMENT OF ROBERT COURNOYER, TRIBAL VICE CHAIR, YANKTON SIOUX
TRIBE
Mr. Cournoyer. Thank you, Mr. Chairman, and members of the
Committee, for the opportunity to speak on behalf of the
Yankton Sioux Tribe. We are the Ihanktonwan Dakota Nation of
South Dakota. We are located in the southeastern corner of
South Dakota. I am the vice chairman of the Yankton Sioux
Tribe, and today I have in the audience Miss Madonna Archambo,
she is our chairwoman; And our tribal secretary, Ms. Rose Cook.
In addition to Mr. Lawson and Mr. Trudel's testimony, we
are here on behalf of the Missouri River Pick-Sloan Program and
its impact on the Indian tribes. We will be offering testimony
before the Committee on behalf of the Yankton Sioux Tribe. Dr.
Lawson has done extensive research on the tribe's claim which
serves as a basis for this legislation, H.R. 2408.
First, let me express my sincere appreciation for the
Committee's consideration of this bill. We have been working
for several years now to relieve some of the past harm our
tribe has suffered and bring equity to a settlement that was
due our tribe as a result of the construction of the Fort
Randall Dam on the Missouri River. Unfortunately, after
hearings and markups in both the Senate and House, we ran out
of time in 106th Congress to enact this legislation. We
continue to have full support for this legislation from the
South Dakota and Nebraska delegation.
I am honored here today to speak for the Yankton Sioux
Tribe in support of this legislation. I would like to request
that the full text of my testimony be submitted for the record,
and I will summarize a few important points regarding H.R.
2408.
Mr. Osborne. Without objection.
Mr. Cournoyer. As with the case of several other dams built
on the Missouri River, the construction of the Fort Randall Dam
and the reservoir on the Missouri River destroyed an important
part of the Yankton Sioux Tribe's traditional way of life. The
Missouri River bottom lands were rich with game and plants used
for our traditional foods. The plants were used for ceremonial
purposes and medicinal purposes. The trees in the bottom lands
were used for lumber and fuel. We not only lost tribal lands
when the bottom lands were flooded, but much of our traditional
way of life was taken from us at that time.
Due to location of lands in southeastern South Dakota, our
tribe lost acres and acres of rich, productive agricultural
land, 3,260 acres total, due to construction of Fort Randall
Dam and reservoir.
In addition to the loss of our traditional ways of life and
agricultural land, the community of White Swan was forced to be
abandoned. It was the practice of the United States at that
time to move Indian communities flooded by dam construction to
higher ground and reestablish, but our tribal community of
White Swan was not relocated. The families were disbursed
elsewhere, and the community was never replaced. This was and
still is a great loss to many of our people.
My tribe and the Santee Sioux Tribe did not have the same
opportunity to negotiate and obtain settlements by acts of
Congress as other Missouri River tribes did. Our lands were
taken by quick condemnation proceedings in district court. As a
result, my tribe and the Santee Sioux Tribe have suffered
greater inequities in the initial settlements of taken lands.
Congress has enacted equitable compensation legislation for
five other upstream Missouri River tribes whose losses were
similar to ours. The first was enacted in 1992 during the 103rd
Congress to the most recent in 2000, during the 106th Congress,
with trust funds ranging from 27.5 million to, I think--I
believe Cheyenne River received $290 million.
Our bill is based on solid precedent and similar
legislation. We are here today to seek the same consideration.
The Yankton Sioux Tribe and Santee Sioux Tribes are two of the
last remaining Missouri River Tribes that seek equitable
consideration for the taking of our lands for the construction
of these dams and reservoirs under the Pick-Sloan Act of the
1950's.
Like previous equitable compensation bills, our bill will
provide the tribe an annual interest payment derived from a $23
million trust fund established to compensate the tribe for its
loss and bring some equity to the issue of the Pick-Sloan
taking. The interest income will assist the tribe with its
economic development needs and help strengthen cultural and
social programs. This in turn will assist the tribe's move
toward greater self-determination in tribal affairs.
This bill directs our tribal council to develop a detailed
plan as to how the interest payments will be used, and we have
begun that process. Our tribal plan will include programs that
will benefit all tribal members, our elders, and our young
people. Most importantly, our tribal elders who have suffered
firsthand support this bill. It will help heal some of the
wounds our elders have experienced.
Mr. Osborne. Thank you, Mr. Cournoyer. Your time has
expired. And, so we appreciate your testimony.
[The prepared statement of Mr. Cournoyer follows:]
Statement of Robert Cournoyer, Tribal Vice Chair, Yankton Sioux Tribe,
Marty, South Dakota
Mr. Chairman and members of the Indian Affairs Committee, my name
is Robert Cournoyer, and I serve as the elected vice tribal Chair of
the Yankton Sioux Tribe. Our land is located in southeastern South
Dakota. The Missouri River borders the reservation's southern boundary.
On behalf of the Yankton Sioux tribal membership, I would like to
express my appreciation to you and the committee members for
consideration of H.R. 2408, the Yankton Sioux Tribe and Santee Sioux
Tribe of Nebraska Equitable Compensation Act. The Yankton tribe,
through its representatives, has worked closely with Congressman
Osborne's office and Congressman John Thune's office on this bill. We
are grateful for their support and their staffs' guidance during this
process.
BACKGROUND
Our reservation was established by the Treaty of 1858 which
provided our people with 430,405 acres of land along the Missouri
River. As time passed our reservation was diminished by the Act of
August 15, 1894, which opened up our reservation to non-Indian
settlement. By the 1950's, when the Fort Randall dam was constructed,
only 44,938 acres of Indian land remained in federal trust status.
In 1944, the United States Congress enacted the Flood Control Act
which authorized the construction of five dams along the Missouri River
known as the Pick-Sloan Program. The primary purpose of the dams and
reservoirs was flood control downstream. Other purposes were
navigation, hydropower generation, providing water supplies, and
recreation.
The impact of the Pick-Sloan program was devastating to all the
Missouri River tribes including the Yankton Sioux Tribe. The Fort
Randall dam and reservoir inundated a large portion of the Yankton
Sioux reservations bottom lands and rich productive agricultural lands.
The Fort Randall project flooded 2,851 acres of Indian trust land
within the Yankton Sioux reservation and required the relocation and
resettlement of at least 20 families which was approximately 8 percent
of the resident tribal population. Over the past fifty years, the tribe
lost an additional 408 acres to stream bank erosion.
The Missouri River bottom lands provided a traditional way of life
for the Yankton Sioux that is now virtually lost. The bottom lands
provided an abundance of game and plants for traditional food, plants
for ceremonial and medicinal purposes, and plenty of trees for lumber
and fuel. In addition to the loss of the bottom lands, the tribe lost
acres and acres of productive agricultural land.
INUNDATION OF THE COMMUNITY OF WHITE SWAN
The waters of the Missouri River completely inundated the
traditional and self-sustaining community of White Swan, one of the
tribe's major settlement areas. The White Swan families raised various
livestock which took shelter in the timbered bottom lands or out
buildings. The White Swan families sold surplus milk and eggs in the
towns of Lake Andes or Wagner. The money received was generally used to
purchase needed staples that were not cultivated from the rich soil in
and around the community of White Swan. The community was very close
knit and the families helped each other in many ways.
While it was the practice of the United States to relocate flooded
Indian communities flooded by the Pick-Sloan program to higher ground,
the community of White Swan was not relocated or reestablished
elsewhere. The White Swan families were simply dispersed elsewhere and
the community was never replaced.
CONDEMNATION PROCEEDINGS
Neither the Flood Control Act of 1944 nor any subsequent acts of
congress specifically authorized the U. S. Army Corps of Engineers or
the Bureau of Reclamation to condemn Sioux tribal land for Pick-Sloan
projects. Unfortunately, the condemnation of Yankton Sioux tribal land
was not challenged for a host of reasons.
The condemnation proceedings in U.S. District Court resulted in
settlements that did not provide adequate compensation to the Yankton
Sioux Tribe. The tribe did not receive compensation for direct damages
but rather a compensation for the appraised value of their property.
The condemnation proceedings did not take into account the large
proportion of productive agricultural land. Further, the settlement did
not account for the inflation of property values between the time of
taking and the time of settlement which was several years later. The
average settlement payment on other Indian reservations whose land was
taken by acts of congress was approximately $16,680 per family
according to research documents, while the Yankton Sioux Tribe received
$5,605 per family as a settlement for the land taken by the United
States.
THE IMPORTANCE OF H.R. 2408 TO THE YANKTON SIOUX TRIBE
H.R. 2408 provides that the Yankton Sioux Tribe, as compensation
for past inequities, will receive annual interest payments from a $23
million trust fund account in the U.S. Treasury. These funds will be
used by the tribe for programs outlined in a tribal plan that will be
developed by the tribal council with approval from the tribal
membership. The funds will be used to promote greatly needed economic
development on our Indian lands. The funds will be utilized to build
and improve our infrastructure. And the funds will be used to further
education, health, recreation and the social welfare needs of our
people.
The precedent is well established. Congress enacted equitable
compensation settlement acts for the Standing Rock Sioux Tribe, Three
Affiliated Tribes, Crow Creek Sioux Tribe and the Lower Brule Sioux
Tribe. The 106th Congress passed legislation to equitably compensate
the Cheyenne River Sioux Tribe for its taken land. The funding amount
for the individual tribes vary due to the unique losses of each tribe.
However, the funding mechanism is the same in all act and bills. Each
act and bill provides a trust fund with the interest paid to the tribe
to be used for economic development, education, culture and social
programs.
CONCLUSION
The Yankton Sioux Tribe, through its Business and Claims Committee,
has worked on this legislation for several years. H.R. 2408 has been
developed to provide equitable compensation for the taking of land and
as an equitable settlement for the tribe's losses. H.R. 2408 is based
on recent congressional precedent to provide compensation to Missouri
River tribes impacted by Pick Sloan.
Many of our tribal elders who experienced first hand the taking of
tribal land and the removal have passed on. It has been long enough for
a just and equitable resolution to the devastating impacts of the Pick-
Sloan program on our tribe.
I respectfully urge the members of this Committee to report H.R.
2408 out of the committee with a recommendation that it pass the full
House.
______
Mr. Osborne. And I guess in the interest of time we will go
on with Dr. Lawson, and then we will ask a few questions. And
so we will move on at this point. Thank you.
STATEMENT OF MICHAEL L. LAWSON, Ph.D., SENIOR ASSOCIATE,
MORGAN, ANGEL & ASSOCIATES, LLC
Mr. Lawson. Mr. Chairman and members of the Committee, I am
grateful to have the opportunity to testify today on behalf of
the Yankton Sioux Tribe and the Santee Sioux Tribe in support
of H.R. 2408.
I am an historian who first began studying the impact of
Pick-Sloan dams on the Indian tribes along the Missouri River
30 years ago when I was a graduate student at the University of
Nebraska at Omaha. I subsequently wrote a book called Dammed
Indians on the subject. Three years ago I also completed a
special study of the impact of the Fort Randall and Garrison
Dam projects on the Yankton and Santee Sioux Tribes. This study
provided a more detailed analysis of these takings than had
been included in my book.
Brevity is the hardest challenge of all for an historian,
but within the time allotted, I will try to summarize the
essential findings of this study without repeating too much of
what has already been stated to the Committee.
The Yankton and Santee Sioux were among nine tribes whose
lands were taken for Pick-Sloan projects on the Missouri River.
Between 1948 and 1962, five of these tribes received initial
settlements from Congress that included payments for direct
property damages; severance damages, including relocation
costs; and rehabilitation funds for their entire reservations.
In providing funds for rehabilitation, Congress recognized that
the tribes as a whole, and not just the tribal members within
the taking areas, were affected negatively by the loss of
bottom land environment and reservation infrastructure.
Since 1992, Congress has also enacted legislation
establishing additional recovery funds for these same five
tribes. The Yankton and Santee Sioux tribes have not been
provided the same opportunity to receive rehabilitation and
recovery compensation from Congress.
The Fort Randall Project flooded a substantial portion of
some of the best agriculture and timbered lands within the
Yankton Sioux Reservation in South Dakota and required the
relocation and resettlement of at least 20 families,
constituting approximately 8 percent of the resident tribal
population of this in the late 1940's. Many families in
addition to those who were relocated had been dependent upon
the resources of those bottom lands for their subsistence.
The Yankton Sioux Tribe and its affected tribal members
received a total of only $227,000 from the government for the
damages inflicted by the Fort Randall Project. Of this amount,
121,000 was awarded them by the U.S. District Court for direct
damages in 1950. At the urging of the Department of Interior,
and despite the objections of the Department of Justice and the
Department of the Army, Congress granted the Yankton Sioux
Tribe an additional $106,000 for severance damages in 1954.
This payment was distributed in 1956 to some, but not all, of
the tribal families affected. This was 10 years after some of
the properties had been condemned and 6 years after the last
tribal members had been evicted.
The Gavins Point Dam Project inundated approximately 8.5
percent of the total land base of the Santee Indian Reservation
in Nebraska. The tribe and at least 15 tribal members owned
land within that taking area. It is not known precisely how
many tribal members were forced to relocate because there were
many residents who were not landowners. The Santee Sioux tribes
taken from the Gavins Point Project were located just below the
main settlement area of the Indian village of Santee, and were
similar in many respects to those flooded in the White Swan
area of the Yankton Reservation. There was considerably less
timber, but enough other natural resources to help sustain the
entire reservation and their traditional way of life.
However, the impact of the taking was comparatively less
traumatic at Santee, because most of the community remained
intact, whereas the White Swan settlement was completely
flooded and dispersed. The U.S. District Court awarded the
Santee Sioux Tribe and its affected tribal members $52,000 for
their damages in 1958. This award was based on a 1955 joint
appraisal by both the Army and the Bureau of Indian Affairs.
The settlement money was not distributed, however, until 1959,
which was more than 4 years after the land had been flooded.
The members of the Yankton and Santee Sioux Tribes have yet
to receive their fair share of the multiple benefits that were
supposed to be provided by the Pick-Sloan plan, although they
have suffered a great deal as a result of its implementation.
Neither have they received rehabilitation nor recovery
compensation from Congress as have five other tribes impacted
by the Pick-Sloan projects. This legislation seeks to remedy
this inequitable situation, and I urge its passage.
This concludes my remarks, and I would be happy to answer
any questions you might have.
Mr. Osborne. Thank you very much, Dr. Lawson. We appreciate
it and appreciate your testimony.
[The prepared statement of Mr. Lawson follows:]
Statement of Michael L. Lawson, Ph.D., Senior Associate, Morgan, Angel
& Associates, L.L.C.
Mr. Chairman and members of the Resources Committee, I am grateful
to have the opportunity to testify today on behalf of the Yankton Sioux
Tribe and the Santee Sioux Tribe in support of H.R. 2408.
I am a historian and a senior associate with Morgan Angel &
Associates, a public policy consulting firm here in Washington. I first
began studying the impact of the Pick-Sloan dam projects on Indian
tribes along the Missouri River thirty years ago when I was a graduate
student at the University of Nebraska at Omaha. I wrote my doctoral
dissertation at the University of New Mexico in 1978 on the impact of
four of the Pick-Sloan mainstem dam projects on six Sioux reservations
in North and South Dakota and Nebraska. The University of Oklahoma
Press subsequently published this work as a book entitled Dammed
Indians in 1982. A second, paperback edition, with a revised preface,
was published in 1994.
In my book, I explored in detail the development of the Pick-Sloan
Plan and the negotiations that took place between the tribes and the
Federal government. I measured the physical, aesthetic, cultural, and
psychological damages the tribes suffered against the benefits they
received and concluded that the critical losses far exceeded the
minimal gains
My research has been used in part to document and support all of
the legislation that Congress has enacted since 1992 to provide
additional compensation to Missouri River tribes for the loss of
reservation resources and infrastructure caused by the Pick-Sloan dam
projects. This has included the Three Affiliated Tribes of the Fort
Berthold reservation and the Standing Rock, Lower Brule, Crow Creek and
Cheyenne River Sioux Tribes. Three years ago, I completed a special
study of the impact of the Fort Randall and Gavins Point dam projects
on the Yankton and Santee Sioux tribes. This study provided a more
detailed analysis of these takings than had been included in my book.
What follows are the essential findings from this study.
I. The Pick-Sloan Plan, the Missouri River Tribes, and Congressional
Compensation
In 1944 Congress enacted the Flood Control Act (58 Stat. 827),
which authorized implementation of the Pick-Sloan Plan for water
development in the Missouri River Basin. This plan included the
construction of five massive earthen dams along the Missouri and
incorporation of a sixth facility, the Fort Peck Dam in Montana, built
on the river in the late 1930s. The U.S. Army Corps of Engineers, which
constructed and operates the dams, estimates that the projects' overall
annual contribution to the national economy averages $1.9 billion.
Officially labeled the Missouri River Basin Development Program,
the Pick-Sloan Plan caused more damage to Indian reservation lands than
any other public works project in this nation. The six mainstem dam
projects on the Missouri inundated over 550 square miles of Indian land
and displaced more than 900 Indian families. Tributary dams impacted
other reservations.
Four of the dams constructed under the Pick-Sloan Plan (Fort
Randall, Oahe, Big Bend, and Gavins Point) flooded approximately
204,101 acres of Sioux land on the Standing Rock, Cheyenne River, Lower
Brule, Crow Creek, Yankton, and Rosebud reservations in North and South
Dakota and on the Santee Sioux reservation in Nebraska.
The Missouri River tribes were told little about the Pick-Sloan
Plan while it was being proposed, even though legal precedents, and in
some cases treaty rights, provided that tribal land could not be taken
without their consent. The portions of the Flood Control Act of 1944
that authorized the Pick-Sloan Plan did not contain any language
regarding the protection of tribal interests. Neither did it
specifically authorize the taking of Indian trust land. Although the
Bureau of Indian Affairs was fully aware of the potential impacts of
the legislation, it made no effort either to keep tribal leaders
informed or to object to the Army's proposals while they were being
debated in Congress in 1944. The Indian Bureau did not inform the
tribes of the damages they would suffer in a comprehensive way until
1949. The legislation establishing the Pick-Sloan Plan also ignored the
Indians' reserved water rights under the legal principle known as the
Winters Doctrine.
The Yankton and Santee Sioux Tribes seek an equitable settlement
for uncompensated damages based on modern precedents established by
Congress for five other Missouri River tribes impacted by Pick-Sloan.
The Three Affiliated Tribes of Fort Berthold and Standing Rock Sioux
Tribe Equitable Compensation Act of 1992 authorized capitalization of
Recovery Funds of $149,200,000 for the Three Affiliated Tribes and
$90,600,000 for the Standing Rock Sioux Tribe. The Three Affiliated
Tribes of the Fort Berthold Reservation in North Dakota lost 175,716
acres of land to the Garrison Dam project. The Standing Rock Sioux
Tribe of North Dakota lost approximately 56,000 acres to the Oahe Dam
project.
The Crow Creek Sioux Tribe Infrastructure Development Trust Act of
1996 established a $27.5 million Recovery Fund for the Crow Creek Sioux
Tribe of South Dakota. The Lower Brule Sioux Tribe of South Dakota
benefited from a $39.9 million Recovery Fund created by the Lower Brule
Sioux Tribe Development Trust Fund Act of 1997. The Crow Creek Sioux
Tribe and the Lower Brule Sioux Tribe lost 15,693 and 22,296 acres of
land respectively to the Fort Randall and Big Bend Dam projects in
South Dakota. In 2000, Congress awarded the Cheyenne River Sioux Tribe
the largest tribal recovery settlement of all in regard to Pick-Sloan
damages, $290,722,958. The Tribe lost 104,420 acres to the Oahe Dam.
The Fort Berthold, Cheyenne River, Standing Rock, Crow Creek, and
Lower Brule tribes all received initial settlements from Congress
between 1948 and 1962 (totaling $352,129,794) that included payment for
direct property damages, severance damages (including the cost of
relocation and reestablishment of affected tribal members) and
rehabilitation for their entire reservations. In providing funds for
rehabilitation, Congress recognized that the tribes as a whole and not
just the tribal members within the taking areas were affected
negatively by the loss of the bottomland environment and reservation
infrastructure. Accordingly, the initial congressional settlements with
the five tribes between 1948 and 1962 provided compensation for
severance damages and rehabilitation that averaged 458 percent more
than was paid for direct damages. The additional payment to the
Standing Rock and Crow Creek Sioux Tribes was over 630 percent more
than the amount awarded to them for direct damages.
The Yankton and Santee Sioux Tribes were not been provided with the
same opportunity to receive compensation from Congress. Instead, they
received settlements for the appraised value of their property through
condemnation proceedings in U.S. District Court.
II. The Taking of Yankton Sioux Lands for the Fort Randall Dam Project
The Fort Randall project flooded 2,851.40 acres of Indian trust
land within the Yankton Sioux Reservation and required the relocation
and resettlement of at least 20 families, constituting approximately 8
percent of the resident tribal population. Reservoir waters completely
inundated the traditional and self-sustaining community of White Swan,
one of the four major settlement areas on the reservation. On the Crow
Creek, Lower Brule, Cheyenne River, Standing Rock, and Fort Berthold
reservations, communities affected by the Pick-Sloan dams were merely
relocated to higher ground. However, the White Swan community was
completed dissolved and its residents dispersed to whatever areas
offered housing or land, including communities on other reservations.
The acreage taken consisted of some of the best agricultural and
timber lands on the reservation. Approximately one-third of the acreage
was cropland, another third was timber or brush pasture land, and the
remaining third was bottom meadow or upland pasturelands.
Many families in addition to those who were relocated had been
dependent upon the resources of these lands for their subsistence. Wood
from the bottomlands was the primary source of fuel. A variety of crops
were planted and harvested near the river. Hunting, trapping, and
fishing within the area not only provided important sources of food,
but were among the favorite recreational activities. The bottomlands
were also filled with a generous supply of wild fruit, vegetables,
herbs, and other useful plants, some of which were used for medicinal
and traditional ceremonial purposes.
The Fort Randall project also involved the relocation of at least
509 gravesites, primarily from two church cemeteries. In accordance
with Army regulations, it was the responsibility of the District
Engineer to contract with private firms for the identification,
relocation, and reburial of these remains. However, the Corps did not
do an adequate job of supervising this work. Because the Corps of
Engineers did not attempt to maintain good communications with the
Tribe regarding its construction plans, it was not made aware of other
isolated burials until it accidentally excavated two of them and dumped
the remains into the dam embankment. The Army did such a poor job of
locating and removing the burial sites that skeletal remains and
caskets continue periodically to be unearthed by the cutting action of
the Fort Randall reservoir (Lake Francis Case).
Although the actual Fort Randall damsite was partially located on
Indian land within the Yankton Sioux Reservation, the Corps of
Engineers began construction on the site without the consent of either
the Yankton Sioux Tribe or the Secretary of the Interior. The
development of access routes to the site required rights-of-way across
parcels of Indian land and the Army filed condemnation suits in U.S.
District Court to obtain this access by right of eminent domain as
early as 1946. The Army immediately filed condemnation petitions with
the Court and obtained Declarations of Taking for the needed rights-of-
way and construction sites. These declarations gave the Corps immediate
possession of the land
The Army constructed a village to house the project's construction
workers. Named Pickstown after General Lewis Pick, formulator of the
Army's Pick Plan, this townsite was located east of the dam site within
the boundaries of the Yankton Sioux Reservation. When completed,
Pickstown included over 300 duplex housing units with garages, numerous
dormitories, grade and high schools, a hospital and chapel, a theater
and indoor and outdoor recreation facilities, and retail shops. The
construction town stood in glaring contrast to the poor but proud
Yankton reservation communities where 10 percent of the housing in 1950
consisted of tents.
The condemnation takings were accomplished by April 1948 and the
Army began charging rent to tribal members who still wished to occupy
the lands taken from them. This made staying on the land impossible for
most former owners because: (1) the settlement amounts deposited by the
Army with the District Court had not been distributed; and (2) the
affected tribal members operated primarily in a subsistence economy
(described in greater detail below) in which cash was scarcely used.
These circumstances also meant that the affected tribal families were
compelled to move from their homes without benefit of having money
either to cover their moving expenses or to obtain other housing or
land elsewhere.
Neither the Yankton Sioux Tribe nor its affected tribal members
were represented by private counsel in these condemnation cases. Nor
does it appear that they made personal appearances at the hearings.
Several tribal members later told the BIA they felt there was no other
option but acceptance because they desperately needed the money to
relocate and considered any protest to be futile.
None of Yankton families impacted by the Fort Randall project were
compensated for their relocation costs at the time of taking. The Army
was not authorized to cover these expenses until 1952 when Congress
enacted a statute mandating that landowners affected by military
eminent domain takings be paid up to 25 percent of the appraised value
of their property to cover moving costs. This law was of no help to the
Yankton Sioux because it did not apply retroactively.
Moving homes and other improvements proved to be expensive and many
tribal members were not able to so because they either could not meet
the cost or were not given enough time or both. Levi Archambeau, for
example, lived with his wife and five children in a four-room house he
had been born in on land within the taking area that he leased from the
Tribe. Perhaps because he was not a landowner, the Army failed to serve
him with a proper eviction notice. In a letter to Senator Francis Case,
Archambeau claimed that that a Corps official came to his house and
advised him that if he did not move it by 9:00 A.M. the next morning
the Army would burn it down. ``They came at 4' O' Clock in the
evening,'' he wrote, ``so it was burned.''
Other families, though notified sufficiently, remained in a state
of denial until the bitter end. The Garrett Hopkins family, for
example, waited too long to salvage their house and only managed to
retain the possessions they could fit into the family automobile. The
removal also took place too late for the Army to do anything with the
house, so it had to be abandoned. The swirling waters of the new
reservoir quickly separated the house from its foundation and the
Hopkins family watched from dry land as their home floated away.
It proved difficult to buy or even lease land of the same quality
as the bottomlands that had been evacuated. Those forced to relocate
received little assistance in locating replacement homes comparable to
what they had. The majority of people moved to Lake Andes or Marty,
South Dakota. Many moved into a Lake Andes motel that had gone
bankrupt. Several leased or purchased one or two-room tract houses that
came to be called ``the Lake Andes shacks.'' One two-room house was
occupied by 14 family members. Although they eventually received some
reestablishment funds, several tribal members lived in this housing
until they died. Others only left after a tornado destroyed many of the
homes in the early 1960s.
Most of the new locations to which tribal members moved lacked the
water and timber resources of their former homes. Families previously
engaged in truck farming or the sale of wild fruit or firewood
experienced a sudden drop in income. Every family faced higher living
costs after the move because of the necessity of purchasing water and
fuel and paying rent and utility costs.
Yankton families that did not have to move also felt the economic
impact. Most of those who resided near the Missouri and its tributary
streams were dependent on these sources for their domestic water
supply. Because no provision was made for proper sewers at the
construction settlement of Pickstown (see Map, page 15), its raw sewage
was merely discharged into the Missouri. This situation made it
hazardous to use untreated river water. In addition, creation of the
Fort Randall Dam increased the amount of plankton in the Missouri,
which made its water taste bad.
An even greater proportion of Yankton tribal members was impacted
by the loss of timber resources. Almost half of the resident families
on the Yankton Sioux Reservation had depended on wood from the taking
area as a fuel source for heating and cooking. Most collected driftwood
along the river banks rather than cutting standing timber. In the
process of stabilizing the Missouri the Fort Randall Dam eliminated
most of the flow of driftwood. Yet the condemnation suits failed to
include any valuation for either the utilitarian or commercial use of
timber. The standing timber remaining on the reservation was too sparse
or inaccessible to serve as a substitute source. The BIA estimated in
1954 that the annual cost for replacement fuel sources was $15,000 or
$120 per family for the 125 families that previously depended on
driftwood or other timber from the White Swan area. Many families
outside the taking area also gathered wild fruit from the bottomlands,
particularly from Beebe Island, and hunted game in the area. Yet the
Yankton Sioux Tribe was never compensated for these losses. The value
of timber, wildlife habitat, and wild fruit products was never included
in any reestablishment compensation paid to the Yankton Sioux Tribe or
its members.
III. Previous Compensation Provided to the Yankton Sioux
The Yankton Sioux Tribe and its affected tribal members received a
total of only $227,510 from the Government for damages inflicted by the
Fort Randall project. Of this amount, $121,210 was awarded them by the
U.S. District Court for direct damages in 1950; the result of
condemnation proceedings filed by the Army that violated the precedents
of Federal law regarding the taking of tribal land. At the urging of
the Department of the Interior, and despite the objections of the
Department of Justice and the Department of the Army, Congress granted
the Yankton Sioux Tribe an additional $106,500 for severance damages in
1954. This payment was distributed in 1956 to some but not all of the
tribal families affected. This was ten years after some of their
properties had been condemned and six years after they had been
evicted.
The consensus among the Yankton Sioux is that the majority of
families were much worse off after reestablishment than they had been
before relocation. They were rapidly transformed from a subsistence to
a cash economy. In the bottomlands there were not many items families
needed to purchase. After relocation, however, many were forced for the
first time to pay rent and utility bills for water and electricity (if
they had it) or buy stove wood or heating oil from non-Indians. They
had to purchase over-the-counter medicine instead of using home cures
derived from wild plants, canned goods instead of canning their own,
and meat, dairy products, and eggs instead of producing their own. This
situation created much hardship for families not able to readily find a
way to generate income.
Relocation disrupted the lifestyle of all the families and
contributed to the dysfunction of some. Whereas White Swan tribal
members had previously enjoyed the agricultural pursuits and private
space of allotted lands, now many were crowded together in town, often
without room for even a small garden. Although the families made an
effort to continue visiting each other, they gradually lost the
cohesiveness that had characterized their former community. They were
now scattered all over the reservation, and even outside of it, and
some were farther away from churches and schools. Slowly they lost some
of the spirituality and much of the connectedness they had known at
White Swan. ``We lost more than our homes,'' observed former resident
Louie Archambeau, now 61, ``We lost our way of living, a part of our
culture. That is something we will never get back.'' The White Swan
families had to adjust to a new and less accessible environment. Once
that area was inundated, there was no other place like it within the
reservation. Most of those who managed to obtain replacement land had
less of it. They also had fewer livestock but faced greater costs for
shelter, feed, and water. The net result was a rapid decline in
agriculture on the reservation. As one former resident observed about
the White Swan era: ``There were a lot of Indian farmers back in those
days, now there are hardly any.''
Hunting has continued to be good on the reservation, but fishing
and trapping are far less prevalent. A common reaction to their forced
relocation inland among many former White Swan residents has been a
gradual aversion to fishing or even eating fish. While these people
once enjoyed free access to the fish and wildlife of the bottomlands,
hunting, fishing, and trapping are now heavily regulated by the State
of South Dakota within the taking area of the Fort Randall Reservoir
and by the Tribe within the Reservation. When one former White Swan
resident tried to gather firewood down by the reservoir, he was also
informed that those resources now belonged to the Army.
In 1960 the BIA conducted a comparative study of the experiences of
six Indian reservations, including Yankton, that were impacted by Pick-
Sloan dams on the main stem of the Missouri. This study found that the
average total damage payment received per family within the taking area
at Yankton was $5,605 whereas the payment per family averaged $16,680
on the other five reservations. The reservation with the next lowest
per family payment was Crow Creek at $10,363 while Fort Berthold
families received the highest amount at $30,962. If these funds had
been distributed on a per capita basis to all families resident on the
reservations, the Yankton families would have received $485 while
families on the other five reservations would have received an average
of approximately $8,606. Again, Fort Berthold families would have
received the most, a total of $24,184 each. This disparity between
Yankton and the other reservations reflects the fact that Yankton was
the only one of the six that did not receive additional rehabilitation
funds. The Santee Sioux reservation was not included in this BIA
analysis.
It should be kept in mind that tribes from the other five
reservations, including Fort Berthold, Standing Rock, Crow Creek, Lower
Brule, and Cheyenne River have since 1992 received additional
compensation from Congress. On the other hand, the Yankton Sioux still
faired better than families on the Santee and Rosebud reservations who
have yet to receive any legislative compensation.
In addition to taking 2,851.40 acres of Yankton Sioux land through
condemnation, the Fort Randall Dam project has also caused the erosion
of more than 400 acres of prime reservation land adjoining the east
bank of the Missouri. This riverbank erosion is a result of
fluctuations in the water level caused by the construction and
operation of the dam. However, this legislation (H.R. 2408) does not
seek compensation for these erosion losses.
IV. The Taking of Santee Sioux Lands for the Gavins Point Dam Project
In March 1952, three months before the gates of the Fort Randall
Dam were closed the Corps of Engineers began construction of the Gavins
Point Dam. The Gavins Point project straddled the boundary between
Yankton County, South Dakota and Knox County, Nebraska, four miles
above the town of Yankton, South Dakota.
The Gavins Point dam project inundated 593.10 acres of land within
the Santee Sioux Indian Reservation in Knox County, Nebraska. This lost
acreage represented approximately 8.5 percent of the reservation's
total land base of 6,951 acres. Of the total amount of Indian land
condemned by the Army, the Santee Sioux Tribe owned approximately 223
acres. Fifteen individual tribal members or their estates held the
remaining 370 acres. The taking included 24 separate tracts of land
ranging in size from 1 acre to 207.65 acres. It is not known precisely
how many tribal members were forced to relocate.
The Santee Sioux lands taken for the Gavins Point project were
located just below the main settlement area of the Indian village of
Santee, Nebraska. The bottomland environment of that area and the use
that tribal members made of it was similar in many respects to that of
White Swan. There was considerably less timber but enough other natural
resources to help sustain the entire reservation. The impact of the
taking was comparatively less traumatic at Santee because most of the
community remained intact whereas the White Swan settlement was
completely flooded and dispersed.
The Santee taking area included the old farm established by the
Santee Normal Training School to provide agricultural instruction and
experience for its students. After the school was closed in 1938, the
Tribe obtained possession of the farm. The property included a cattle
and hog barn, grazing land, and fields for growing primarily hay, oats,
and corn. At one time a boat dock was also maintained in this area.
Families who did not have their own land were permitted to live and
farm on the tribal tracts. Some families also farmed their individually
held land, raising horses and chickens as well as cattle and hogs and
growing mostly corn and potatoes. Other families lacked sufficient land
to provide for much more than a homesite and perhaps a garden plot.
The Santee village had more of a cash economy than did White Swan
but subsistence activities and trading in goods or services instead of
money were still common. For example, some women manufactured quilts
with Sioux designs that they often traded for food. Most families lived
in small frame houses that lacked electricity and plumbing and many did
not have a motor vehicle. Several families from throughout the
reservation depended upon the Missouri for their water supply. A tribal
member named Lloyd James hauled barrels of river water in a two-horse
wagon and distributed it in a wide area.
The Santee bottomlands served as a shelter and feeding ground for
many kinds of wildlife. Deer and rabbits were abundant year-round and
numerous game birds wintered there each year. The unrestricted hunting
and trapping of this game provided the Santee Sioux with an important
source of food, income, and recreation. Unlike some Sioux bands, the
Santee always fished for subsistence and fish was a part of their diet
historically. Tribal members used both lines and spears to fish and
some sold a part of their catch. Tribal members from throughout the
reservation hunted in the bottomlands and trapped beaver, mink, and
opossum.
The gathering and preserving of wild fruits and vegetables was a
traditional part of the culture of the Santee Sioux. The many herbs,
roots, turnips, strawberries, plums, chokecherries, and other edible
plants that grew in the bottomlands added variety and bulk to their
diet. These plants were eaten raw, dried and stored for winter, made
into soups, sauces, syrups, and jellies or mixed with other foods to
add flavoring. A variety of plants were also used traditionally for
ceremonial and medicinal purposes. The loss of these plants in the
Santee bottomlands greatly reduced the reservation's natural food
supply.
Unlike their Yankton neighbors to the north, the Santee Sioux were
given considerable advance warning that they might be impacted by the
Gavins Point Dam. The BIA reported as early as June 1950 that the
project would flood at least 500 acres of ``the best agricultural lands
on the reservation.'' To its credit, the Corps invited the BIA to
assist in the initial appraisal. This marked the first (and last) time
in the history of the Army's taking of Indian land for the Pick-Sloan
projects that it chose to cooperate with the BIA from the start and not
conduct a separate appraisal.
V. Previous Compensation Provided to the Santee Sioux
The available documentary record does not indicate precisely when
the affected Santee Sioux families were forced to move. The extant
documents do make it clear; however, that relocation took place long
before payment was received for the property lost. The Corps had
previously informed the BIA that the inundation of Santee lands was
imminent in July 1955, but the U.S. District Court did not award
compensation until early 1958. The Santee Sioux defendants were paid a
total of $52,000 on the basis of the Tribe's 1955 agreement with the
Corps. This meant that no allowance was made for the possible increase
in property values between the BIA's 1955 appraisal and the 1958
settlement. The settlement amounted to an average of $87.67 per acre
for the affected landowners at Santee, as compared to the total
settlement of $77.60 per acre for Yankton, including the congressional
compensation.
It is not known when the settlement money was distributed to
individual tribal landholders, but the Santee Sioux Tribe did not
receive a portion of the $17,527.90 awarded for the tribal tracts until
September 1959, more than four years after the land was flooded. The
Tribe attempted to use the money to develop recreational facilities
that could take advantage of the tourism boom on Lake Lewis and Clark.
However, the enterprise never succeeded. The BIA did not track the
social and economic status of the affected families at Santee like it
did at Yankton, Crow Creek, Lower Brule, Cheyenne River, Standing Rock,
and Fort Berthold. Therefore, little is known about their condition
after relocation. The available evidence suggests that the families
were able to find replacement homes elsewhere within the village of
Santee or at other locations on the reservation where they might have
already held an interest in land or had the opportunity to purchase or
lease other tracts. Judging from the experience of most Indian families
impacted by the Pick-Sloan projects, it is reasonable to conclude that
their situation was worse after relocation than it had been before.
The compensation awarded the Yankton and Santee Sioux did not
reflect the fact that their takings involved a greater proportion of
agricultural land. Neither did it account for the inflation of property
values between the time of taking and the time of settlement. The total
compensation for the Yankton Sioux also failed to take into
consideration the fact that the White Swan community was destroyed,
dispersed, and never replaced, whereas communities flooded on the other
reservations impacted by Pick-Sloan projects were relocated and
reestablished on higher ground. In addition, neither the Yankton nor
the Santee Sioux was provided funds for rehabilitation, even though a
large proportion of tribal members residing outside the taking area on
both tribes' reservations were also impacted by the dam projects.
VI. Conclusion: The Ultimate Cost to Benefit Ratio
The Pick-Sloan main-stem projects have now been completed for
several years. If the benefits that the Sioux tribes received from
these massive projects are to be gauged, they should first be measured
in terms of the purposes for which the dams were originally
constructed. Assuming that the $30 billion Pick-Sloan Plan was truly
designed to be beneficial to the people of the Missouri Basin, then it
should be of equal benefit to those people, both Indian and non-Indian,
who suffered the most as a result of its implementation. However, such
is not the case.
The U.S. Army Corps of Engineers and the Interior Department's
Bureau of Reclamation designed their integrated water development
program to provide flood control, irrigation, hydroelectric power,
navigation, recreation, and numerous other benefits. An evaluation of
their efforts at this juncture reveals that any measurable improvement
in the lives of the Sioux people resulting from these projects has been
slow in coming.
The Army and the Interior Department succeeded in making long
stretches of the Missouri system safe from the catastrophe of high
floods. This is particularly true in the populous region between Kansas
City and Sioux City. However, floods on the Sioux reservations were
never as serious or as frequent as those in the lower basin, and the
federal efforts have still not prevented the continuation of tributary
inundations. What tribal members are more concerned with is that, in
many places, the Corps of Engineers took far more land than was
necessary to maintain the reservoirs at their maximum pool level. Yet,
in other places the reservoir waters have infringed on land never
purchased by the federal government. The fluctuation of the undulating
waters has created a far greater hazard than any of the infrequent
floods of the past.
The stream-bank erosion caused by the reservoir waters has become a
serious problem, as demonstrated by the loss of 428 acres of
reservation land at Yankton since 1953. This erosion has led to the
gradual reduction in size and productivity of a tribal irrigation farm.
Shoreline conditions continually have been made unstable, and sediment
deposits in the water have been much greater than expected. Fluctuation
in the water levels have made it extremely difficult for the tribes to
develop fully their shoreline land and resources. The cutting action of
the water not only endangers tribal members and their livestock but has
also caused the exposure of skeletal remains from unmarked graves along
the shores. Since the Corps of Engineers did not accurately project
reservoir boundary lines prior to inundation, water now often infringes
on Indian property when at maximum pool level. Because the Army also
refused tribal requests to build fences along the boundaries, Indian
ranchers regularly suffer livestock losses, as their cattle either fall
off the eroding banks or drift into the reservoirs in search of water.
The raising of the water level by the dam projects has also caused
frequent landslides. This is particularly true in the area of the
Yankton Sioux Reservation adjacent to the Missouri River below the Fort
Randall Dam. Landslides are triggered by both stream erosion along the
banks and ground water flows through adjacent areas. The increased
water level of the river has escalated the speed and pressure of ground
water moving through the earth. The instability that stream erosion and
increased ground water causes to the banks, hills and bluffs results in
various kinds of landslides, including rockfalls, soilfalls, bedrock
slumps and glides, soil slumps, slow earthflows, and mudflows. These
landslides result in the destabilization of buildings and the gradual
loss of grazing and cropland areas and create a hazard for both human
beings and livestock.
The instability of the earth caused by the Fort Randall project
necessitated the relocation of a housing development of twenty-five
homes and the Yankton Sioux tribal office complex at Greenwood, South
Dakota. These buildings had to be moved because the shifting soil
rocked them off their foundations.
While the Pick-Sloan Plan has generally improved flood protection
in the Missouri Basin, the advantage of this fact to the Sioux has been
obscured by the present disadvantages of the reservoir projects. The
benefits of flood control are outweighed by the damages that these
people sustained in order to make these projects possible. The Indians
did not have to forfeit their lives, but they certainly suffered
greater losses from the human-caused inundations than they would have
from any natural flood in their region.
During the summer of 1993, prolonged torrential rains put the Pick-
Sloan facilities to their stiffest test yet. Record flooding was
experienced along the lower Missouri from Nebraska City, Nebraska, to
the river's mouth near St. Louis. There was also major flooding along
the tributary Big Sioux River in northwestern Iowa and southeastern
South Dakota. The Pick-Sloan mainstream reservoirs saved downstream
communities from even worse flooding by capturing much of the runoff in
Montana and the Dakotas. Yet all of Iowa and most of the counties in
North Dakota, eastern South Dakota, southeastern Nebraska, and the
upper two-thirds of Missouri suffered enough flood damage to be
included within the designated federal disaster area. Several Indian
reservations within the region were also ruled eligible for government
disaster aid, including Yankton. Although hydrologists declared that
the Great Deluge of 1993 was ``in excess of a 100-year flood,'' meaning
that there is less than a one-in a-hundred chance that a similar
disaster could happen in any given year, it caused everyone involved to
question whether any amount of engineering and construction can provide
absolute flood protection.
The Pick-Sloan dam projects have actually created flood hazards in
some areas. Near the Santee Sioux Reservation, for example, the Gavins
Point project has increased the amount of silt deposited near the mouth
of the Niobrara River. This obstructs the flow of the Niobrara and
regularly causes flooding along a seven-mile stretch of Bazile Creek
within the reservation. These inundations have impacted farms and
ranches along the creek, some of which are owned by tribal members and
others that are on tribal trust land. These tracts are gradually losing
land each year as the water level increases; some parcels have lost up
to 40 percent of their land base.
Although the Pick-Sloan power plants have definitely increased the
availability of electrical power in the Missouri Basin, they have not
been a factor in actually increasing the use of electrical power by the
Sioux tribes. The reservations lacked electrical power before
construction of the Pick-Sloan projects primarily because their
residents could not afford it rather than because it was unavailable.
To this extent the steady increase in the use of electrical power by
tribal members over the past four decades is more a result of the rise
in the general economic level of the reservations than of the increased
availability of electrical power. Affordability remained the most
important factor as far as the Sioux were concerned. As late as the
early 1980s, there were still many areas of the reservations that
lacked electrical service because it was beyond economic capability.
There is no evidence to show that Pick-Sloan provided the lower
electrical rates its proponents promised, and the Federal Government
has done little to make lower power rates available to the Sioux
tribes.
It was not until the 1980s that Congress and the executive branch
made concessions to the Missouri River Sioux tribes regarding Pick-
Sloan hydropower. For the first time the Department of Energy
acknowledged that, under Section 5 of the Flood Control Act of 1944,
the tribes qualified as preferential low-cost power customers.
Unfortunately, nearly all of this power had been allocated to non-
Indian municipalities and rural cooperatives. In 1982, however,
Congress authorized the Departments of Energy and the Interior to make
Pick-Sloan pumping power available for irrigation projects on the Lower
Brule, Standing Rock, Cheyenne River, Crow Creek, and Omaha
reservations. Irrigation projects on these tribal lands now qualify for
the preferential rate of 2.5 mills for their pivots. The catch is that
Congress did not provide for the construction of new transmission lines
to these Indian projects, and the existing lines are now owned and
controlled by Rural Electrification Administration cooperatives that
cannot afford to give the tribes a reduced delivery rate. The result is
that the tribes can pump water to their farmlands at the Pick-Sloan
rate but first must pay a premium rate to get the water to their pumps.
Despite these problems, a few Missouri River Sioux, including the
Yankton Sioux Tribe, have experienced moderate success with irrigation
projects since the1980s.
The long and heated debate over the suitability and practicality of
reclamation in the upper Missouri Basin has caused frustrating delays,
serious cutbacks, and drastic revisions in the original Pick-Sloan
irrigation plans. Consequently, the Bureau of Reclamation's two major
projects in the Dakotas, the Garrison and Oahe diversion units, were
halted by environmentalists and others who shifted their support to
alternative water development programs. In 1964 Congress deauthorized
most of the irrigation projects proposed for the Sioux reservation
lands.
The Reclamation Bureau determined that approximately 125,000 acres
of the Sioux reservations are potentially irrigable, yet it remains to
be seen if the tribes will ever be able to develop this potential.
First, there is the critical question of whether extensive irrigated
farming can ever be financially feasible for the tribes. Second, there
is the question of how much of the reservation land is actually
irrigable. In some places it has been discovered that neither the water
nor the soil was of sufficient quality to make irrigation projects
worthwhile.
Under the body of law that developed from the Winters decision of
1907, the Sioux have prior and paramount rights, for the purpose of
irrigation, to all waters that flow either through or along the
reservations. It has also been claimed that their rights include
priority use of water for any other beneficial use, either at present
or in the future. The actual extent of the Indians' reserved water
rights beyond the purposes of irrigation, however, has never been
judicially clarified.
Despite the specific requirements of the law, the federal
government has not made an effort to comply with the Winters Doctrine
in regard to the Pick-Sloan Plan, and the Sioux Tribes have not
attempted to have their rights protected through the process of
judicial appeal. Because no effort has ever been made to accurately
determine and quantify the precise water needs of the tribes, it is
likely that their rights will continue to be ignored.
The Flood Control Act of 1944, which authorized the Pick-Sloan
Plan, provided that the irrigation of tribal lands and repayment for
such projects would be ``in accordance with the laws relating to Indian
lands. The Leavitt Act of 1932 established generous policies whereby
payment of irrigation construction costs could be deferred by the
tribes over a long period according to their repayment ability. To
comply with these laws and the provisions of the Winters Doctrine, the
Bureau of Reclamation should have fully recognized the Indians' rights
and made an effort to quantify their water needs before committing any
of the water under its control to other projects. Having guaranteed the
priority of native rights, it should then have made plans to develop
irrigation wherever feasible on the reservations, without regard to
cost. Because this was not done, it is doubtful that the Sioux will
ever realize the full benefits of irrigation.
Residents of the upper Missouri Valley, including the Yankton and
Santee Sioux Tribes, did not expect any navigation benefit from Pick-
Sloan, since its primary project was the development of a navigation
channel by the Corps of Engineers from Kansas City to Sioux City.
Neither did they anticipate any difficulty in navigating the Army's
main-stem reservoirs. Yet, the nature of the clearing operations
carried out by the Corps obstructed navigation on many of the Missouri
River reservoirs by leaving trees, and sometimes buildings, standing
above or just below water surfaces. These obstacles also interfered
with recreational activities on the man-made lakes, another of the
purposes for which the dams were created.
Of all the benefits promised by Pick-Sloan, the most immediate and
successful results have been realized in the areas of outdoor
recreation and tourism. Each year millions of vacationers are drawn to
the hundreds of public access areas developed along the reservoirs for
swimming, boating, camping, and picnicking, but the primary attraction
is fishing. State and federal wildlife agents have gradually succeeded
in increasing both the number and variety of species through constant
restocking, and fishing has become exceptionally good. Businesses
catering to tourists and outdoor enthusiasts have thrived, and the
Interior Department has considered making all six main stem reservoirs
into a National Recreation Area.
Most of the Sioux tribes have been unable to share significantly in
the new prosperity of the river-based recreation boom and nearly all
still lack tribally developed recreation areas for swimming, boating,
and fishing. The Standing Rock and Crow Creek Sioux Tribes developed
tourist complexes on their reservations in the early 1970s that
eventually failed. These and several other Sioux reservations now have
moderately successful casinos that also include hotels and restaurants.
While some of these facilities have been built near the Pick-Sloan
reservoirs, they thrive on the basis of high stakes gambling and not
because of their proximity to good hunting and fishing.
The Santee Sioux Tribe intended to use the money it received from
the Gavins Point taking to purchase a small resort complex on fee land
near Lake Lewis and Clark in 1960. The complex consisted of four
cabins, a cafe, a store, and a service station. The Tribe wanted to
refurbish and expand the existing facilities. The prospects seemed
bright. The Corps of Engineers had reported that there were 1.3 million
visitors to the reservoir in 1958 and the State of Nebraska had issued
194,083 fishing licenses and 153,418 hunting licenses in the area
during the same year. However, the BIA held control over expenditure of
the money. After the Tribe filed a development plan, it waited five
months for the BIA to approve the release of an initial $10,000. Then
eight months later the BIA rejected the development plan and informed
the Tribe that the additional funding it had requested from the
agency's Revolving Credit Fund was not available. By then the
opportunity had passed. During the nearly forty years that have elapsed
since that time, the Santee Sioux Tribe have lacked the resources to
develop a similar project that might allow them to exploit the
recreational opportunities created by the Gavins Point project.
By causing the depletion of the wildlife habitat, and the
subsequent decline in good hunting, the Pick-Sloan dams have actually
reduced the favored recreational activity of Sioux tribal members.
However, the reduction in game has not prevented the trespassing of
non-Indian sportsmen on the reservations and the regulation of their
activities from becoming a serious problem. In 1993, in the case of
South Dakota v. Bourland, the U.S. Supreme Court held that Congress,
through the vehicle of Pick-Sloan settlement legislation, had abrogated
the right of the Cheyenne River Sioux Tribe to regulate hunting and
fishing by non-Indians within the taking area of the Oahe Dam project.
Although recent legislation has restored portions of taking areas and
transferred jurisdiction over recreational areas developed by the Corps
of Engineers to the Cheyenne River and Lower Brule Sioux, the Bourland
decision does not bode well for the other Missouri River tribes.
The members of the Yankton and Santee Sioux Tribes have yet to
receive, therefore, their fair share of the benefits that were supposed
to be provided by the Pick-Sloan Plan, although they suffered a great
deal as a result of its implementation. The saga of the Missouri River
dams and their impact on the Sioux and other tribes of the Northern
Plains region will continue well into the future. It will always be
impossible to ignore or excuse the abuse of Native American rights that
has characterized much of the history of Pick-Sloan. However, it is
sincerely hoped that the federal government will provide corrective
initiatives that might allow this historian to someday write a more
optimistic conclusion to the episode as it pertains to the Yankton and
Santee Sioux Tribes.
______
[An attachment to Mr. Lawson's statement follows:]
[GRAPHIC] [TIFF OMITTED] T0761.006
Mr. Osborne. I have learned a little bit from you gentleman
today. I knew a little bit before, but I know a lot more, and
we certainly understand the story that you have to tell.
I guess, first of all, Chairman Trudel, I would like to ask
you a question about the water issue up there. Given that you
do have nitrates and you do have bad water, did the dam itself,
the backing up of the water, contribute to your problem, or is
it just indigenous to the area?
Mr. Trudel. I think it is a combination of one of the
problems that we have with the dam--we met with the Corps of
Engineers, I think, approximately about 15 years ago now, and
the dam--the siltation on the dam was about 25 years ahead of
schedule at that time. I think they had a 100-year siltation
plan, and it is already into about the 50th year. So the
siltation was about 25 years ahead of schedule.
We have the Niobrara River, which feeds into the Missouri
just above our reservation boundary, and which causes a lot of
the siltation because it is an undammed and uncontrolled river,
and I think it is under the Wild Rivers Protection Act, or
whatever, now. And is a scenic river. Pardon me. And then we
have Bazile Creek, which is a tributary on the reservation that
runs completely through the reservation and empties into the
Missouri.
And where the mouth of the Bazile Creek is, the siltation
that is built there has caused a reduced flow of Bazile Creek,
which is causing the creek to spread. And that spreading
problem is--you know, it is also eating up land, but it is also
causing a rising water table in some of our rural areas.
We have a number of homes along Bazile Creek whose wells
are--as we sit here now, they are already being affected and
will probably be out of use in a very short period of time. The
nitrates have been detected in a lot of the outlying wells, and
I don't think an exact cause has been provided to us on the
reason for the high nitrate. I am thinking health service has
done some investigation into it, although I don't think we have
a report back.
I know also that the Corps of Engineers did a grid on the
siltation problem and what the damage is doing to our land, as
it is today into Bazile Creek and the homes along that area. I
know that some of the problems that we have had in recent years
is, you know, the wells were flooded out. And I know a lot of
things come with the floods, and I think maybe that is part of
the nitrate problem, is when Bazile Creek did flood, it did
flood out our main wells, and the wells were out of use for a
number of months, and we were drinking Dakota Splash for a
number of weeks there.
Mr. Osborne. Well, thank you very much.
Mr. Osborne. Just very quickly, Chairman Cournoyer, in your
testimony, you mention that condemnation of the Yankton Sioux
tribal land was not challenged for a variety of reasons. Could
you please share with the Committee what some of those reasons
were?
Mr. Cournoyer. I think at that time, according to the
history of the Yankton Sioux, we were kind of in a period where
we were under the subagency of the--we were considered a
subagency, and our fiduciary trust responsibility was taken up
by the Rosebud Agency. We were in a period where we didn't have
any formalized government at that time. But, you know, the
tribe did meet; it had an annual meeting every year in August.
So I think during that time they failed to come out and
consult with the tribe, even though we were sort of an
unincorporated tribe at that time because we were in a--I
think--believe in the 1930's they had the Indian Reorganization
Act. I am not sure if it was in 1932, but the Yankton Sioux
Tribe did not go along with the--when they came to the Indian
Reorganization Act through the history. So, we weren't
considered an IRA tribe, and we didn't have formalized tribal
government until the 1960's.
So, in essence, the BIA should have been looking out for
the trust responsibility of the tribe and came out and informed
the tribe that these were happening. But in the history of this
whole thing with the Pick-Sloan program, most tribes were not
consulted with until after the fact that they were already
building these tribes. And a lot of our people didn't
understand what was going on at the time. So we had people that
were in the White Swan community that didn't leave until the
water was lapping at their porches. They were forced to leave.
So it was--I believe that it was a letdown in trust
responsibility of the BIA at that time, since we were--did not
have formalized tribal government but, like I said, we did have
an annual meeting once a year of all the tribal members for
many, many years.
So I believe that it was a culmination of a lot of things.
But, still, I think that the BIA had the responsibility of
coming out and informing the tribe of what was going on so.
Mr. Osborne. Well, thank you. We will certainly try to
rectify it.
Mrs. Christensen, I want to thank you for staying. You have
been very kind in doing so.
Mrs. Christensen. Thank you. I know that some of our
speakers, our panelists, have traveled to come here, and I also
have some Native American heritage, so I feel that I have an
obligation to be here.
Mr. Osborne. Well, we appreciate it.
We hope you understand that there is a Resources bill on
the floor, Interior, and so a lot of the Committee members are
over there on the floor today, and that has been our problem.
And if you have no further questions, I will ask one question
of Dr. Lawson, and it should be very brief.
What percentage of the Pick-Sloan Program would you
estimate the Fort Randall and Gavin Points Projects' economic
contribution to be?
Mr. Lawson. What portion? Would you restate that?
Mr. Osborne. What percentage of the Pick-Sloan program
would you estimate the Fort Randall and Gavins Point Projects
will be in terms of economic contribution?
Mr. Lawson. I haven't--I don't have the data to make a
guess of that. You are asking what contribution the projects
were?
Mr. Osborne. Yes.
Mr. Lawson. Well, they were among--the Gavins Point was the
smallest--one of the smallest of the dams, but the Fort Randall
was certainly one of the largest, and it provides billions of
dollars a years in benefits to the whole northern plains in
terms of flood control and primarily in hydroelectric power and
also in the recreation benefits, particularly for Gavins Point
Dam, since it is the closest of the Pick-Sloan dams, close to
major population areas.
Mr. Osborne. So, in essence, the payments being made are--
in view of the economic impact are relatively small.
Mr. Lawson. They are relatively small. And certainly, you
know, now it has been almost a half century that these people
have gone without the benefits of having--you know, the
multiple benefits that were supposed to be provided by the
plan. It is--if you have a situation where they were supposed
to flood these--flood the--create these reservoirs to improve
water supplies in municipal areas--and it has throughout most
of the Missouri Basin, but you still have a situation in Santee
and at Yankton where you don't have good water sources. They
don't get a portion of the hydroelectric power. They don't
get--even for their irrigation projects. And they still have
flooding on the reservation. So they don't--there is a
negligible flood control benefit as well.
Mr. Osborne. Well, we appreciate your testimony. We
appreciate your being here today, and I can tell you that we
will do everything we can to see to it that these two bills are
passed and we have a favorable outcome.
We greatly appreciate all the witnesses' participation in
today's hearing, and this concludes the Committee's
proceedings, and thank you very much.
[Whereupon, at 5:30 p.m., the Committee was adjourned.]
[Additional statements submitted for the record follow:]
[Responses to questions submitted for the record follow:]
Statement of The Honorable Elton Gallegly, a Representative in Congress
from the State of California
Mr. Chairman, the General Accounting Office has issued a staggering
report on how the governments of the Republic of the Marshall Islands
and the Federated States of Micronesia mishandled federal dollars. U.S.
taxpayer dollars were meant to provide basic human services to the
people of these countries, such as education and housing. Instead, they
were misused, and in some cases, stolen outright. Importantly, the GAO
reported that U.S. federal agencies were unable to provide little
oversight for these programs.
The GAO studied thirteen U.S.-funded programs. Of these, nine
suffered accountability problems. Five involved theft, fraud, or abuse
of program funds.
A few examples of theft and abuse include:
$341,000 missing in Head Start funds. Program officials
admit stealing $11,500 of those funds.
the Minister of Education in the RMI used education grant
funds meant for teacher training to travel to Paris for three weeks to
attend a U.N. Conference; and ;
low income rural housing assistance funds were provided
to the FSM President and others who were clearly not economically
disadvantaged.
The vast majority of the U.S.-funded programs in the FSM and RMI
are under the jurisdiction of the Department of Interior. The
Department has said that it did not have adequate funds and authority
to provide the personnel and oversight needed to ensure taxpayer funds
were not misused. Specifically, the Department of Interior said that it
did not have the authority to withhold funds from these governments if
the funds were being misused.
Mr. Chairman, not only have valuable federal resources been
misused, the people of the RMI and FSM did not receive the basic
services they were promised. It is my hope that in the negotiations of
these compacts, we finally provide federal agencies with the authority
needed to ensure that U.S. taxpayer dollars are used for their intended
purpose.
______
Statement of Hon. Tom Osborne, a Representative in Congress from the
State of Nebraska
I am pleased that today the Committee is taking up H.R. 2408, the
Yankton and Santee Sioux Compensation Act, Today's hearing is the
culmination of many years of work on the part of the Santee Sioux
tribe, which I represent, and I am pleased that the Chairman of the
Tribe, Roger Trudell, is here today to offer testimony on both bills.
H.R. 2408 would provide long overdue compensation by establishing
two trust funds to be used by the Santee Sioux and Yankton Sioux
tribes. Specifically, this bill directs the US Treasury to deposit
about $23 million into a special trust fund account for the Yankton
Sioux and approximately $4.7 million for the Santee Sioux. The tribes
would then be allowed to draw on the interest earned from the trust
funds for economic and infrastructure development and other activities.
The tribes would also be required to adopt economic development plans
to account for the way in which these funds will be spent.
This legislation is necessary because when the Federal Government
built the dams on the upper reaches of the Missouri River under the
Pick-Sloan Missouri River Basin program, the Yankton Sioux and Santee
Sioux were not provided compensation for the taking of their land.
While the dams were designed to promote general economic development in
the region, provide for irrigation, and protect from flooding, their
construction inundated productive agricultural and pastoral lands and
the traditional homeland of the tribes. In the case of the Santee
Sioux, the Gavins Point Dam permanently flooded about 600 acres of the
tribe's land.
H.R. 2408 is not without precedent. Over the past decade, Congress
has passed three laws providing compensation to other tribes affected
by the Pick-Sloan projects. Additional tribes were compensated in 1992,
1996, and 1997. I believe it is only fair that we work to find a way to
compensate the Yankton Sioux and Santee Sioux tribes.
I am pleased that the Committee is hearing testimony on this
legislation and want to welcome members of the Santee Sioux tribe and
the Yankton Sioux tribe here today.
______
Statement of Rep. Nick Rahall, a Representative in Congress from the
State of West Virginia
Thank you Mr. Chairman. I want to welcome both negotiators from the
Republic of the Marshall Islands (RMI) and the Federated States of
Micronesia (FSM), respectively - Foreign Minister Gerald Zackios and
Senator Peter Christian. The Committee recognizes the distance you've
had to travel to represent your countries before this Committee and we
appreciate your being with us this afternoon.
I want to extend my personal condolences to Senator Christian and
to the people of the FSM. About two weeks ago, a tropical storm with
torrential rains devastated the state of Chuuk (CHOOK), causing massive
landslides. I am told that hundreds were injured, many are still
missing, and the death toll is near 50.
FEMA has been dispatched to provide emergency assistance to the
people of the FSM and other disaster teams from Hawaii, Guam, and the
Northern Marianas Islands have sent doctors and equipment. I know, as
do the people of my district, the destruction and displacement that
such downpours can cause to a community. Our prayers are with you as
your islands and people recover from this tragedy.
I see also that the U.S. is well represented here today. I welcome
you as well and I look forward to the information you will provide to
this Committee.
I also look forward to hearing testimony on amendments to the
Indian Financing Act and legislation affecting the Yankton and Santee
Sioux tribes. I must also point out that I've requested in the past and
I am requesting again that we schedule a hearing on an important piece
of legislation sponsored by Mr. Moran from Virginia, H.R. 2345 dealing
with recognizing Virginia tribes.
This afternoon, the Committee hear an update on the progress of
renegotiations of Title II of the Compacts of Free Association. For
more than a year and half, representatives from the U.S. government,
the RMI, and the FSM have been meeting to discuss the new terms of U.S.
assistance that contribute greatly to the development of these two
countries.
During this same period, Congress requested that the GAO conduct
various studies on the shortfalls and successes of the original Compact
agreement. I think GAO's work has been valuable in pointing out
weaknesses from both the FAS national governments and our own Federal
government. I believe GAO's work has helped to ensure that
Congressional concerns are addressed during the renegotiations.
It is important for our negotiators to be mindful that the
composition and attitude of this Congress is much different than when
the first Compact was enacted. It is my sense that this Congress wants
to see more accountability and greater economic growth from the RMI and
FSM.
We want to know that children are going to good schools, that
adequate health care is available to your people, and that your
workforce is educated. These are the underpinnings of a successful
economy and a prosperous country. We want this to be achieved as part
of our relationship with your nations.
I don't expect to see funding levels at the rate of the original
agreement. However, there should be thoughtful consideration that the
renegotiated assistance will not hamper the economic development that
these nations have achieved thus far.
There are also other concerns of this Committee such as the impact
of FAS citizens on the U.S. Territories of Guam and the Northern
Marianas Islands, as well as the State of Hawaii. The Compact was very
clear that it was not the intent of Congress to cause adverse
consequences to these jurisdictions. Any resolution to this issue
should include a process that can be used across the board to determine
actual impact on a State or territory.
The immigration privileges under the Compact are essential elements
to the unique relationship between the U.S. and the FAS. The RMI and
FSM are partners with us in our War on Terrorism and they understand
more safeguards need to be in place to address our security concerns.
Though the immigration provisions of the Compact are not being
renegotiated, I encourage that any changes to improve immigration
procedure be done mutually.
I imagine the continued use of the Kwajalein (KWA-JA-LIN) missile
range would be of great importance to this Administration and to the
people of the RMI. If this is the case, then I would encourage that
this be made clear by both parties. I recognize that the RMI's position
on this issue is shaped in collaboration with landowners and I trust
that the national government is making an earnest effort to represent
their interests.
Again thank you for appearing here this afternoon and I look
forward to listening to your testimony.
______
Statement of Hon. John Thune, a Representative in Congress from the
State of South Dakota
Mr. Chairman, I would like to thank you for holding this hearing to
provide compensation to the Yankton and Santee Sioux Tribes for their
loss of land in the building of the Pick Sloan water project along the
Missouri River. I would also like to thank Congressman Osborne for
introducing this important piece of legislation, of which I am proud to
be a cosponsor.
The Pick Sloan Missouri River program authorized in 1944 was
implemented to ease downstream funding of the Missouri River, offer
irrigation water for farmers and ranchers, and produce hydroelectric
power.
While the intentions of these projects proved to be fruitful for
some, it is fair to say that the Pick Sloan program has negatively
impacted the Yankton and Santee Sioux Tribes. Much of the land taken
and destroyed to create the Ft. Randall and Gavins Point Dams and
Reservoirs belonged to these tribes.
H.R. 2408 would offer monetary compensation to these tribes for
their lost and destroyed land along the Missouri River. These funds
will be held in trust by the Department of Interior and will be
released contingent upon a tribal plan. The Tribal plan will be
designed to promote economic development, infrastructure, education,
health care and social welfare for the Yankton and Santee Sioux Tribes.
These funds will be a great benefit and are very much needed. As
you know, Indian reservations are some of the poorest parts of our
country, which are in definite need of finding some source of economic
development and infrastructure to encourage and maintain that
development. Also, Indian health care and education are sorely in need
of improvement. I have made it a priority of mine to ensure that Native
Americans receive the health care they deserve and the younger
generations receive a quality education.
I would like to note that this legislation is not the first time
tribes will have been compensated for destroyed and lost land as a
result of the Pick Sloan project. In my state alone, the Standing Rock,
Lower Brule and Crow Creek Sioux Tribes have received compensation for
land taken over by the Pick Sloan project. It is now time for the
Yankton and Santee Sioux tribes to be compensated.
I would also ask this Committee to move quickly on Marking-Up this
legislation. Similar legislation to H.R. 2408 already passed this
Committee in the 106th Congress, but failed to move to the House floor.
I urge that quick action be taken on this legislation, so these tribes
receive the compensation they truly deserve.
______
Statement Submitted by Senator Christopher J. Loeak, Chairman Kwajalein
Negotiation Commission (KNC) on behalf of Kwajalein Landowners to the
Chairman
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 substantial experience in
government in the Republic of the Marshall Islands. I have been a
Senator in the Nitijela representing the Atoll of Ailinglaplap since
1985. I have also served as a Cabinet Minister from 1988 to 1997 as
Minister of Justice, Education, Social Services, and other positions.
I presently serve as Chairman of the Committee on Health,
Education, and Social Affairs in the Nitijela. 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
Resources 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 ongoing Compact renegotiations. Although compact
renegotiation discussions between the U.S. Government and the
Government of the Republic of the Marshall Islands ((RMI) have been in
progress for the past 12 months and are reportedly close to being
finalized, no opportunity has been given to the KNC to directly
participate in the deliberations. We have completed and presented to
the RMI Government, a proposal for a 50-year comprehensive lease
arrangement for Kwajalein, which we believe, takes into full account
the requirements of both the United States Government and the Kwajalein
population. We have requested the RMI Government to convey this
proposal to the U.S. Government so that its timely incorporation into
the proposed new Compact can be ensured.
We have been provided an advance copy of the testimony submitted by
the RMI for this hearing. Notwithstanding the statement in Minister
Zackios's testimony that there have been ``close consultations''
between the RMI and the KNC regarding the future of Kwajalein, there in
fact have been no meaningful discussions between us on this subject. We
have made multiple proposals to the RMI regarding a joint approach to
the Kwajalein issue, but at every instance our entreaties have been
rejected. Accordingly, we now find it necessary and advisable to open
direct channels of communication with the U.S. Congress and the
Administration on this subject in order to make known our position with
respect to our proposal for long-term U.S. access to Kwajalein as a
military base.
The Military Use and Operating Rights Agreement
The current Military Use and Operating Rights Agreement (MUORA)
governing Kwajalein expires in 2016. Any extension of the MUORA beyond
that date requires the approval of the people of Kwajalein as
stipulated by our Constitution. While we are aware of U.S. interest in
a longer, more secure land use agreement for Kwajalein (negotiator
Short has proposed to the RMI a seven year extension to the present
MUORA, tied to a 20 year option), this matter has yet to be negotiated
with the landowners. We believe that any new agreement that
contemplates the use of Kwajalein beyond 2016 must be negotiated with
full participation by the KNC, the duly chosen representatives of the
people of Kwajalein. Moreover, we find Mr. Short's proposal
unacceptable on its face.
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 will 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 traditional leaders of Kwajalein have formed an unprecedented
alliance 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.
Why Renegotiate the MUORA Now?
1. The terms need to be re-visited.
The first 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. Agreements pertaining to
Kwajalein, although not completely satisfactory, were accepted by
Kwajalein people in this context. 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).
In the past fifteen years we have learned the strengths and
weaknesses of some of these agreements and are in a better position now
to identify areas of needed improvement. We view this renewal period as
the most opportune time to rectify the injustices carried over from the
Trusteeship period and give new meaning to the long-term Free
Association relationship between the U.S. and the RMI. From this
experience we are able to propose more realistic programs to deal with
the harsh living conditions that Kwajalein people now face as a result
of their displacement to provide land to the U.S. military.
2. The need for certainty.
Some argue that the U.S. already has rights to Kwajalein until
2016. The people of Kwajalein honor that right. 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. A careful study of KNC's proposal
will reveal a well thought out and reasonable approach and a win-win
situation that is good for both the U.S and Kwajalein people. Mr.
Short's proposal perpetuates a state of uncertainty between the people
of Kwajalein and the U.S. Government that is unacceptable.
3. Kwajalein Needs New Investment
It is no secret that many in the U.S. Military believe that the
Ronald Reagan Ballistic Missile Testing Site needs new investment if it
is to support the needs of the missile defense program of the United
States. Indeed, only recently Lieutenant General Ronald Kadish, head of
the Missile Defense Agency, stated at a Pentagon briefing that
Kwajalein needs a significant upgrade. He said that the missile test
range, ``as complex as it is, and it is very complex to do these kind
of tests at intercontinental ranges, is not where it needs to be in
order to robustly test this system and make it more operationally
realistic over time. It requires a major investment to upgrade.''
Therefore, it is only logical that in determining the sufficiency
of new investment in the Kwajalein base that the U.S. consider the
terms of its access to that base. The KNC wishes for the U.S. to make
these investments, but it is only fair to all concerned that these
investments be made under a long-term arrangement for control of the
facility. Indeed, the GAO has estimated that the U.S. Government has
already invested over $ 4 billion on Kwajalein. Is it not fair to ask
that new investment be made after consideration of the long-term
arrangements for access to the facility? It is in the interests of the
United States and the people of Kwajalein that these questions are
raised and a long term plan, beyond 2016, be adopted, as these new
investments are made.
4. Alternatively, a Transition to Repatriation.
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 and
rehabilitation programs. Environmental clean up and the planting of
crops will take several 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
the Second Compact we will achieve a fair and just arrangement for the
continued use of Kwajalein. We have formulated a Proposal as a basis
for negotiations for leasing our land upon which a new MUORA can be
concluded. We are prepared to actively participate in the negotiations.
We attach particular importance to the current negotiations in view of
the fact that in the first Compact we were not accorded the opportunity
to realistically protect our interests. 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.
______
Questions for Hon. Peter Christian, Government of the Federated States
of Micronesia
1. Under the US Proposals, how would the FSM make grant proposals
to the US Government? Would there be one grant at the national level
that would then be divided out to the states or would each state submit
a grant proposal?
This issue is to be determined with the adoption of finalized
Fiscal Procedures Agreement (FPA) and certain provisions of Compact
Title II as amended. The draft FPA has been delayed and the FSM is now
awaiting the proposed text from the US negotiating team. To maintain a
distinct government-to-government relationship, the FSM anticipates
submitting a compiled grant package on an annual (or multi-year) basis
incorporating six sectors and apportionments across the five
governments.
2. The US proposal for a trust fund assumes that each nation will
deposit funds, including the ``bump-up'' Compact grants for 2002 and
2003 in the trust funds, with the RMI contributing $35 million and the
FSM $30 million. How do these funds compare to your nation's bump-up
and have these funds been set aside? (Ask both the FSM and RMI)
The FSM will receive $33,276,240 in so-called bump-up funds during
the two-year extension period. The US has set a $30 million deposit
into the Trust Fund as a ``pre-condition'' for US contributions to the
Trust Fund. Thus the $30 million requirement represents over 90 percent
of the total bump-up funds.
The FSM has expressed its commitment to deposit a significant sum
into the Trust Fund at the outset of the renewed Compact arrangements.
This contribution demonstrates a strong commitment to the concept of an
adequately funded Trust Fund and to the ultimate achievement of
financial self-reliance.
Several governments determined to use a portion of bump-up funds to
meet pressing needs during the two-year extension; at this time, the
FSM governments have made appropriations and/or firm commitments
totaling $26 million. This amount will be available for deposit early
in fiscal year 2003.
There is an ongoing effort to mobilize the remaining $4 million;
however, this will be a challenge given the pressing need for, in
particular, urgent infrastructure projects and disaster response and
recovery efforts in at least two states.
3. Does your government have a viable long-term planning process
for economic development and private sector investment? (Ask both the
FSM and RMI)
Yes, the FSM National and State governments have a coherent and
comprehensive economic policy framework in place. The current FSM
Planning Framework is policy-driven and represents an evolution from
the economic reform policies that have been in place since economic
restructuring began in 1996. It consists of policies developed in an
open, consultative, participatory manner by people from all four States
and for every sector of the economy. The policies include specific
measurable objectives and detailed strategies. The policies and
strategies were developed for two reasons: firstly, to guide the
overall operations, public investments, and policy-making of our
national and four state governments. Second, the policies and
strategies are an active response to mistakes made and lessons learned
in early years of implementing the economic assistance provisions of
the Compact.
Two additional points are worth noting: The planning framework
encourages and specifies the need to create and enact legislation to
accelerate the growth of the FSM's private sector and to improve
essential services for FSM citizens in support of a growing and
increasingly modern economy. Also, the FSM Planning Framework provides
the explicit basis for improving transparency, accountability,
monitoring, reporting, and evaluation in the policy-making and economic
management process.
4. Does your country have the technical capabilities necessary to
meet the terms of future assistance by the fall of 2003? For example,
will your country be able to implement any grant conditions that may be
applied in areas such as financial management standards or procurement?
(Ask both the FSM and RMI)
The change to renewed Compact economic assistance provisions will
present financial and technical challenges. Even while awaiting the
proposed text of the FPA, the FSM has commenced preparing for the new
requirements. New and more highly trained personnel will need to be
recruited or transferred to certain key financial management,
infrastructure planning, sectoral project monitoring, statistics, and
economic policy functions within the five governments. This process
will take time and money and the FSM will be requesting a 3-5 year
transition period to fully meet the proposed terms.
5. What is your country's timetable for reaching an agreement with
the U.S. State Department on amending the Compact and are you on track?
(Ask both the FSM and the RMI)
In the absence of secure Compact funding after September 30, 2003,
delays in negotiations and/or approval by the US Congress present a
grave danger to the economic and social stability of the FSM. The FSM
has been negotiating in good faith since 1999 and continues to support
an accelerated timetable to get mutually agreeable economic assistance
package presented to the US Congress no later than September 30, 2002.
6. We have reviewed the GAO reports that address the accountability
issue. Do you agree with their conclusions? How can we do better in the
future?
The FSM had previously addressed the issues raised by the GAO in
response to its draft reports. In the interest of a detailed response,
we would refer the chairman to the FSM responses contained in the annex
of each report.
7. As noted in the GAO reports, there have been serious shortfalls
and deficiencies in the provision of education and health services to
the people of the FSM/RMI. What concret actions have you taken and what
long-term plans do you have to address these problems?
Again, these are complex issues and we would refer to our responses
provided earlier to the GAO in connection with its findings. In brief,
however, following is a summary of some of the main points and ways in
which the FSM hopes to address shortcomings in these sectors in the
future:
The FSM concurred with the GAO's findings that health and
education infrastructure is inadequate to meet the growing needs of a
modern economy. The FSM Congress has, since 1999, dedicated fully 20
percent of all national tax revenues to health and education
infrastructure (approx. $4 million annually). This is in addition to
core funding for these two sectors.
The FSM has undertaken a Basic Social Services loan
through the Asian Development Bank for the period fiscal year 2002-
2006. This first phase of this loan focuses financial and technical
resources on improving the health and education delivery systems. The
second phase of this loan focuses on improving financing mechanisms for
the two sectors, including community support for primary schools and
primary health care systems and fee-for services and health insurance.
The loan also provides matching grant funds to improve primary school
facilities.
The overall economic policy framework has been enhanced
with sector specific summits for educations and planning workshops at
the national and state levels for health.
It is critical that Congress Members realize the proposed
grant funding is not designed to replace, or obviate the need for
continuing US federal programs in health and education. There is no
overlap or duplication involved. Were current programs to be
discontinued, grant funding at the levels currently proposed by the US
Administration would result in a virtual meltdown of the very health
and education sectors we are seeking to improve
______
Questions for Albert V. Short, U.S. Department of State
Question:
How will future funds under the renegotiated compact be withheld,
particularly in the areas of health and education? For example, if
schools in the FSM/RMI are not meeting grant conditions, what is the
process for determining the amount and timing of funds to be withheld?
Answer:
The economic provisions in Title Two of the proposed Amended
Compact and the proposed implementing agreements (in particular one on
fiscal procedures) are drafted to improve accountability and
transparency and give the United States remedies for noncompliance with
the terms and conditions attached to U.S. assistance, including
withholding assistance.
We should note that funds would only be withheld if no other
remedies would be sufficient to fix the problem. We expect to set goals
and objectives, consult in advance with the RMI and FSM governments
with regard to plans for expenditure of U.S. grant funds provided under
the Amended Compact, and then work cooperatively to achieve those
goals. Priority will be given to assistance to the Health Care and
Education sectors. Any withholding of funds will only take place after
extensive consultation with the respective governments. The withholding
of funds would also be limited to the grant in question and could be
restored when compliance is achieved.
Question:
What areas of disagreement, if any, exist at this point between the
U.S. government and the governments of the FSM and the RMI regarding
the proposed U.S. level and structure of assistance, or proposed
accountability measures?
Answer:
Regarding the structure of assistance, the U.S. and the FAS have
reached ad referendum agreement on a twenty-year grant regime and
establishment of trust funds. Further, the funding will be targeted to
funding key sectors: health, education, infrastructure, environment,
private sector development and capacity building.
We believe our funding proposals are adequate, and the FSM and RMI
representatives have provided their views in their prepared statements
and testimony.
Both sides have agreed ad referendum to increased accountability,
monitoring and disbursal standards, although we are still discussing
the details regarding how these requirements will be implemented and
consolidated.
Regarding annual financial assistance, the U.S. has proposed annual
assistance for 20 years that is only few million dollars below the FSM
and RMI requests, but close to what the U. S. provided in the last year
of the current Compact. At the same time, the U.S. is proposing
substantial annual payments over the 20 years into a trust fund that
would generate substantial support for the FSM and RMI after FY-2023
when the annual grant payments come to an end.
Question:
As you know, timing is critical since funding for the FAS will end
at end of fiscal year 03 unless an amended compact is approved and
acted on by the Congress. The Committee is concerned that we do not
have a final agreement to review before us today. What is your time
line for finishing the negotiations between the U.S. and the Freely
Associated States?
Answer:
The Administration's goal is to initial the Amended Compact package
(including amendments to all four titles of the Compact, a fiscal
procedures agreement, and trust fund agreement) by the end of August.
We believe this is a reasonable goal and we can achieve it. Additional
subsidiary agreements such as the telecommunications and other service
agreements will follow.
Question:
Do the RMI and FSM have the ability to satisfactorily comply with
the fiscal procedures submitted to you by the Department of Interior?
(Ask State and Interior)
Answer:
We believe the FAS have the talent and systemic capabilities to
provide the requisite financial management and oversight. To assist in
ramping up the fiscal procedures system, we plan to initiate a dry run
of the process several months before the beginning of FY-2004, the
start of the Amended Compact period. This 'dry run' will entail visits
and technical consultations by both sides.
Question:
The U.S. proposals for trust funds assume that each nation will
deposit funds, including the ``bump-up'' Compact grants for 2002 and
2003 in the trust funds, with the RMI contributing $35 million and the
FSM $30 million. How do these funds compare to each nation's bump-up
and have these funds been set aside?
Answer:
These initial trust fund contributions are comparable to the so-
called ``bump-up amounts.'' They are based on ability to contribute
rather than the bump-up per se. Both FAS have agreed in concept to the
up-front contributions.
In order to help finance urgent requirements for hospital and
airport runway projects, the RMI has requested that their contribution
of $35 million be phased in, with $25 million in the first year of the
Compact and $5 million following in each of the next two years. The
U.S. has agreed ad referendum to this formulation.
The FSM has agreed to a $30 million contribution. To address FSM's
concerns, the U.S. adjusted the FSM's base grant, leaving it unchanged
in the first three years of the Amended Compact, to permit the FSM to
make its trust fund contribution in the first year (FY-2004).
______
Questions for Susan S. Westin, GAO
1. Question: Do you believe the U.S. proposals sufficiently address
GAO's past recommendations regarding increased accountability over
future Compact assistance to the FSM and the RMI?
Answer: The U.S. proposals address many key GAO recommendations by
requiring, for example, that assistance be provided through specific
grants with grant terms and conditions and allowing funds to be
withheld for noncompliance with those terms and conditions. However, it
is not possible at this point to determine how well proposal
accountability measures could prove to be, given that many
accountability details will be contained in separate agreements that
remain in draft form or have not yet been released. Further,
appropriate oversight resources must be made available, and government
commitment to enforcing accountability provisions is necessary.
Additionally, it is important to remember that the negotiations have
not been finalized and that neither Compact country has yet agreed to
U.S.-proposed accountability provisions.
2. Question: Based on GAO's past work, what do you believe are the
defense or strategic issues that the U.S. government should be
considering as it negotiates new Compact assistance with the FSM and
the RMI?
Answer: The key U.S. defense interest in the region is access to
Kwajalein Atoll in the RMI. From a strategic standpoint, the Department
of Defense views the two countries as defense obligations (the U.S.
government agreed under the Compact to defend the two countries from
attack or threat of attack), not as defense assets. It is worth
remembering that, unlike economic assistance, key U.S. defense rights
under the Compact, such as strategic denial (the U.S. right to prevent
access to the islands and their territorial waters by other countries)
and access to Kwajalein Atoll, will not expire in 2003.
3. Question: To what extent do the current U.S. proposals to extend
Compact economic assistance differ from the terms of the original
Compact?
Answer: Unlike the original Compact, the current U.S. proposals
emphasize sector grants, require specific grants terms and conditions,
allow for the withholding of funds, call for greater administrative
efforts on the part of all three governments, and include an ``exit
strategy'' in that the U.S. government will no longer provide funding
to the two countries at the end of 20 years (though it will still have
a role to play in spending oversight).
Regarding fiscal year 2004 economic assistance in the current U.S.
proposals, the FSM would receive roughly 7 percent less in grants than
it would have if the previous compact were extended at the same level
of assistance. The RMI would receive roughly 17 percent more in grants.
By fiscal year 2023, both countries would receive less money in grants
relative to previous compact levels due to the decremented grant
contribution. However, in addition to grants, the current proposals
provide for U.S. contributions to each country's trust fund such that
annual assistance would exceed previous compact levels.
______
Questions for Gerald M. Zackios, Republic of the Marshall Islands
1. Does your government have a viable long-term planning process
for economic development and private sector investment? (Asked to both
FSM and RMI)
In the past, the RMI Government used its Office of Planning and
Statistics to help prepare the 5-year development plans mandated by the
current Compact. However, these plans proved ineffectual and there was
little follow-up in their implementation by the RMI and the USG. Also,
there was a noted gap between planning and policy making. In addition,
the Asian Development Bank has helped to provide some medium term
finance and economic strategy development. However, this was mainly
done with the help of external consultants.
Now, we are much advanced in putting in place two key components
for viable long-term planning that, we hope, will compliment what we
are negotiating for the next term of Title II. The first component is
an Economic Policy, Planning and Statistics Office (EPPSO). The EPPSO
is linked to the President's Office. It will take several existing
units, such as the Office of Planning and Statistics and the Compact
Negotiation Office, and streamline their activity into one unit. It
will link the policy and development activities of each ministry and
help to coordinate economic strategy formulation and monitor
implementation. EPPSO will also provide necessary information inputs,
such as statistics, to other Government units and the donor community,
and will serve as the RMI secretariat for the RMI-U.S. Joint Economic
Review Board that we have proposed in the new Title II.
The second component is the establishment of a Medium Term Budget
and Investment Framework (MTBIF). The MTBIF is really a hybrid of our
former budget system with a new, more performance-oriented and medium
term budget system that is directly linked to our overall and sector
goals and objectives. This system is currently being put in place and
is partially being applied for fiscal year 2003. The initial Framework
is for 2001-2005 and will be adjusted annually on a rolling basis.
However, the implementation of such a system, consisting of retraining
our financial managers throughout the Government, strengthening our
economic policy making capabilities, and installing new finance and
other information systems, takes time. We hope that the United States
is a partner and a supporter of our effort so we have a system that
serves both our countries'' needs. Although we appreciate outside
criticism, we think it'll be more constructive if this is followed up
with ways to address the problems. As I have stated in my testimony,
the RMI is committed to improve the accountability of all of the RMI's
funds, not only Compact funds. We are also committed to improving the
performance and returns on our investments.
A further example of our increased emphasis on medium term economic
and finance strategy formulation is our recent preparation of an
Infrastructure Development and Maintenance Plan. We have taken a more
realistic look at our infrastructure construction and maintenance needs
within the limits of our expected funding from the Compact and other
sources. We are currently putting in place the mechanisms to implement
and monitor this plan.
I would especially like to thank the Asian Development Bank and
Office of Insular Affairs/DOI for their technical assistance to
implement the above. I must note while we appreciate the assistance,
our interest is to have these systems and processes done internally
with trained Marshallese. We are currently on the road to accomplish
this interest.
2. Does your government envision renegotiating Title II of the
Compact after expiration of the new 20-year term?
Mr. Chairman, I honestly do not feel comfortable in predicting
where all of us will be in 20 years time, how our country will develop,
how our relationship will develop, and what will happen in our region.
If you were to ask me this same question in 1986 when the Compact
became effective, could anyone have predicted the fall of the Berlin
Wall, the end of the Cold War, and the confrontation with a global
terror network?
The goal of our Government and each Marshallese is not to rely on
U.S. grant assistance for generations to come. We do have a goal and an
interest in providing for our own needs. While we have this goal, we do
feel that our citizens should be compensated for resources provided to
others, such as access to our land. This is a basic tenet of economic
and business law.
Our concern in 20 years time is two fold. First, while I have
stated that we are supportive of the trust fund concept, we do not
believe that the success of our future generations and the RMI-U.S.
relationship should be solely based on a trust fund that is contingent
on market mechanisms. I would be dishonest and irresponsible to accept
the USG offer at this time and say that the amounts provided over the
next twenty years will replace USG base grant funding at that time. The
current situation within the U.S. financial markets bears this
assertion all too timely and realistically. While we can forecast and
analyze ad infinitum, can your government provide my government and our
people with the assurance that the trust fund amount will be
sufficient? If the trust fund does not provide the expected
distribution, then what recourse does the RMI have?
Thus, Mr. Chairman, we are struggling with the Administration to
have language in the proposed Trust Fund Agreement for periodic reviews
of the trust fund to insure that it is meeting the Title II objectives
of the United States and the RMI and, that if it is not, both sides
will consider the necessary remedies. Mr. Chairman, just as the U.S. is
imposing restrictions and control on the Title II funding and receiving
reassurances, it is only fair that the RMI receive the reassurance that
the trust fund provides the necessary funding in 2024 and beyond.
Secondly, I cannot predict what U.S. programs and services will be
necessary over the next 20 years and post 2023. We, meaning my
Government, and the U.S. Administration and Congress, must realize that
we are an island nation with limited resources. No matter how much the
USG or others invests in the RMI, we will still have limited natural
and human resources and we will still be a remote destination. Thus,
some U.S. programs and services may still be applicable. In a country
of 50,000 individuals you must keep in mind that we are taking on the
responsibilities of a full national government. Can we replicate the
needed services provided by other countries in a cost effective and
efficient manner? To a certain extent, yes. However, we must keep in
mind that most island nations in the Pacific (and in the Caribbean)
have links to larger countries that provide programs and services that
the island nations do not have the resources to provide. If you look at
the Pacific Island map, you can easily see these linkages. Australia,
New Zealand, the UK, France, Japan and others still play an economic
role in most Pacific Island nations as does the USG play a significant
role in its commonwealth and territories. We should not be without such
a relationship post 2023.
Finally, we seriously hope that the United States does not see the
Title II being negotiated as an ``exit strategy'' and the abandonment
of a friend and ally to be left to its own limited resources. While we
feel we have made some progress in the past 15 years and will achieve
greater progress in the next 20 years, we hope the United States is a
friend and ally who will stand with us as we stand with you.
3. Does your country have the technical capabilities necessary to
meet the terms of future assistance by the fall of 2003? For example,
will your country be able to implement any grant conditions that may be
applied in areas such as financial management standards or procurement?
(Ask both the RMI and FSM)
As stated in the answer to your first question, we are working
diligently in strengthening our economic strategy formulation unit
(EPPSO) and capabilities as well as reforming our finance
administration and budget systems. We have taken steps as of this time
in reference to implementing the MTBIF and are now working with
specific ministries (mainly the Ministry of Education and the Ministry
of Health our two largest ministries) in implementing the part of the
MTBIF that links sector financing with performance-oriented
measurement. We hope to have the system in place by fall 2003.
We also hope to have the cooperation of the USG in working hand-in-
hand to insure that the system being put in place goes hand-in-hand
with the Fiscal Procedures Agreement that is currently being
negotiated. As mentioned, the Asian Development Bank and the Department
of Interior are providing technical assistance to meet these needs and
we are making a substantial investment on our own.
We do hope that the United States understands that implementing
such a new financial administration and accounting system, budget
process and performance orientation will take several years to
implement (at least 3 years). Such reform takes time even in the United
States. We ask for your patience and future assistance as we make the
necessary reforms.
4. Aside from the U.S. lease payments for Kwajalein, do you know
the total amount of U.S. dollars that come into the RMI economy because
the location of the U.S. base is in your country? (If DAS Brookes is
not asked)
The U.S. Army Kwajalein Atoll (USAKA) defense installation is a
significant contributor to our local economy it is estimated to be
around 25% of our annual GDP. In terms of dollar amounts, USAKA
contractors employ about 1400 Marshallese with a payroll of
approximately $17 million per annum. This is out of a total national
workforce of approximately 6500 people. In addition, the RMI collects
about $2-3 million at a 5% rate in annual income tax revenues from the
U.S. citizen employees of USAKA contractors. The USAKA command also
provides humanitarian assistance, community out-reach programs, and
excess military equipment that are valued at more than half a million
dollars a year.
5. The U.S. proposal for a trust fund assumes that each nation will
deposit funds, including the ``bump-up'' Compact grants for 2002 and
2003 in the trust funds, with the RMI contributing $35 million and the
FSM $30 million. How do these funds compare to your nations bump-up and
have these funds been set aside? (Ask both FSM and RMI)
Our Government has established a Marshall Islands Intergenerational
Trust Fund (MIITF) prior to our Compact negotiations and has set aside
$18.5 this fiscal year and we hope to set aside $16.5 million in fiscal
year 2003. While most of these funds are from what we consider the
capital portion of the fiscal year 2002 and fiscal year 2003 Compact
funding, the amount is supplemented by our own funds as well as loan
funds from the Asian Development Bank.
We are committed to contributing the $35 million in 2004. However,
Mr. Chairman, as identified in my testimony and above, the RMI has
taken the funds away from potential investment in the development and
maintenance of our infrastructure. We have also shored-up our financial
stability by paying off past investments and liabilities. Thus, with
our keen interest to provide for future generations, we have not had
the funds to invest in critical infrastructure projects and two
projects have surfaced which we cannot delay any longer. The projects
are for the resurfacing of the Majuro international airport and the
reconstruction and refurbishment of the main hospital in Majuro. My
Government has the choice to either: 1) dip into the trust fund set-
aside ($16.5 million) for fiscal year 2003; or 2) find financial
assistance for these two projects, such as from the United States. To
maintain our commitment to the trust fund, we hope that the United
States would supplement our investments in these two projects.
The Federal Aviation Administration informed us of the urgency of
the resurfacing of the Majuro international airport earlier this year.
We have tried to work with the FAA to find joint remedies but so far to
no avail. The FAA has stated that the longer the resurfacing is
delayed, the conditions will continue to deteriorate and may cause the
termination of flights to and from Majuro. Mr. Chairman, it is not
difficult to imagine what the closing of the airport will do to Majuro,
our travel and commercial hub. Such an action will make our already
remote island community more remote. The closing of the airport will
not only reverberate throughout the RMI but also will negatively impact
flights to/from the USAKA defense installation and to other flights
westward and eastward to/from the Federated States of Micronesia, Guam,
the CNMI and Palau. The FAA has estimated the resurfacing at about $10
million. We are able to contribute $2 million of our own funds; thus,
we are seeking $8 million in financial assistance.
The Majuro hospital is the primary health care facility in the RMI.
It has been in need of upgrading and refurbishment for some time. We
have tried to do what we can with our own funding. The Japanese
Government has provided a feasibility study for the project and will
provide part of the project financing. We will also invest in the
project; however, we still have a shortfall of $6-7 million.
Thus, Mr. Chairman, we have a current financing need of $14-15
million. If the United States can provide this funding assistance, we
can commit to the $35 million contribution to the trust fund. If the
United States does not help in this regard, then we will have no choice
but to take the funding from our fiscal year 2003 trust fund set-aside
amount and will not be able to commit to a $35 million initial
contribution. If we do have to resort to this action, which we are very
reluctant, then our trust fund will be in jeopardy and will be unable
to come close to supplanting the Title II base grant in 2024.
6. What is your country's timetable for reaching an agreement with
the U.S. State Department on amending the Compact and are you on track?
(Ask both the FSM and RMI)
Mr. Chairman we are negotiating in the spirit of concluding an
agreement as soon as possible. We have really started from scratch only
having received rough drafts of Title II language and an initial
financial offer early this year. We have only recently received rough
drafts of the Fiscal Procedures Agreement and the Trust Fund Agreement.
We are responding and negotiating in good faith, as, I believe, our
U.S. counterparts will agree.
We must keep in mind that what the Administration has proposed so
far is a substantial change to the current Title II and its subsidiary
agreements. As an example, Mr. Chairman, the Title II language is
totally different along with the make-up and allocation of the
financial assistance; the Fiscal Procedures Agreement instills
planning, reporting and other requirements that are still being
formulated and adjusted by the Administration as well as being
negotiated with us; and there is the entirely new trust fund component.
In addition, subsidiary agreements for specific U.S. programs and
services are substantially different. For instance, the U.S. Postal
Services wants to apply international rates and procedures. The
Administration wants to replace FEMA with the USAID Office of U.S.
Foreign Disaster Assistance a change we are not in favor as exemplified
by a recent natural disaster in Chuuk State of the FSM.
In brief, while we would like to conclude negotiations soonest, we
do not have the resources of the State and Interior Departments to
respond so quickly. We also must not rush through the negotiations and
pick up the pieces later. The Title II we are negotiating will not only
impact Marshallese over the next 20 years but our citizens for
generations to come.
At times, Mr. Chairman, I feel we are losing sight of the forest
while viewing with a magnifying glass the trees. We do have a question
of what the Unite States wants to see as its relationship and
commitment to the RMI over the next 20 years? And, more importantly,
what will be the relationship beyond 2023? We have not seen a clear
answer to either question. It seems that the answers are for us to
interpret or to read the tea leaves. In addition, Mr. Chairman, given
our unique characteristics of a Freely Associated State, we wonder what
is the United States'' true view of such a status and what it intends
now and in the future?
Last, Mr. Chairman, we do believe that if the Administration
adhered to the intent of these negotiations, that is concentrate on
Title II and the related subsidiary agreements, we would be much closer
to a conclusion. However, we have been sidetracked by other issues
brought up by the United States, such as immigration. The right of
Marshallese to enter, live, work, and study in the United States as
enshrined in the Compact is a core component of the relationship of
``free association'' itself. Without these rights, Mr. Chairman, my
Government would question whether there is a relationship of ``free
association'' under the framework of the Compact.
The Administration has tabled major and substantive amendments to
these essential non-expiring provisions that would, if adopted, greatly
diminish the rights of Marshallese to live, work and study in the
United States. Nonetheless, my Government is attempting to engage the
Administration in dealing with certain aspects of their immigration
proposal in areas such as passport security and other immigration
issues that would not impair fundamental rights under Section 141 of
the Compact. We believe that these can be addressed without resorting
to amending the substantive provisions of the Compact itself, and in
fact have offered to meet and address these issues in such a manner
over the course of the last several months. We are aware of the post 9-
11 security needs and concerns of the United States and are more than
willing to work with the Administration to address these issues. As we
are presently actively engaged with the Administration on immigration
issues, we are hopeful that a mutually acceptable agreement can be
reached, however, I would point out that having to engage the
Administration on this issue at this time also poses a major
distraction to concluding a new Title II.
Finally, Mr. Chairman, I must report to you that the proposals
tabled by the Administration during these negotiations go well beyond
new Titles II and III, or even the non-expiring immigration provisions
in Title I. Rather the administration has tabled proposals to amend the
ENTIRE Compact, starting from the Preamble through the last provision
of Title IV.
Mr. Chairman, you earlier asked if it was my Government's intention
to renegotiate the provisions of Title II after the expiration of the
new twenty-year term. What my Government clearly did not intend was to
engage in negotiations of the entire Compact at this time, and yet this
is precisely what the Administration has proposed despite the fact that
these provisions do not expire. While amending the entire Compact may
be a fascinating intellectual exercise for lawyers, it is neither
necessary nor appropriate, particularly in the context of our present
negotiations concerning essential economic and security and defense
provisions that will expire on September 30, 2003. If my Government
were to consider amendments to the entire Compact, we would have most
certainly included amendments to the Section 177 Agreement concerning
settlement and compensation for claims resulting from the U.S. Nuclear
Testing Program in the Marshall Islands.
The point is that our governments have institutions and mechanisms
that have been put in place over the course of the last sixteen years
to deal with other Compact issues including provisions to amend the
Compact itself. My Government is dedicated to working with the
Administration on negotiating and concluding an agreement for a new
Title II package to submit to the Congress, and believe that if both
governments remain focused in this effort, a new agreement can be
concluded in a timely manner.
However, if the Administration continues to insist on negotiating
matters and issues outside of the scope of these negotiations
concerning non-expiring provisions of the Compact, I cannot promise we
will be able to conclude agreements concerning the expiring economic
and security and defense provisions of the Compact within the specified
time frame.