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TUESDAY, APRIL 26, 1988.

TERRITORIES HEARING

WITNESSES

MARK S. HAYWARD, DEPUTY ASSISTANT SECRETARY, TERRITORIAL AND

INTERNATIONAL AFFAIRS DAVID H. HEGGESTAD, BUDGET DIRECTOR NANCY L. BOONE, DIRECTOR, TERRITORIAL LIAISON ANTHONY L. ITTEILAG, DIRECTOR OF BUDGET, DEPARTMENT OF THE INTERIOR Mr. MURTHA. The committee will come to order.

We will first hear from the Deputy Assistant Secretary for Territorial and International Affairs, Mr. Hayward.

INTRODUCTION OF OTIA OFFICIALS Mr. HAYWARD. Good morning, Mr. Chairman. How are you today?

Mr. MURTHA. Mr. Hayward, how are you this morning? Mr. HAYWARD. Very well. Mr. Chairman, I believe that my statement has been made a part of the record. With your permission, I would like to highlight the statement.

Mr. MURTHA. If you will introduce your colleagues here for me.

Mr. HAYWARD. Yes, sir. To my extreme left is Larry Morgan who is the Director of Legislative and Public Affairs for the Office of Territorial and International Affairs; Mr. Dave Heggestad, who is the Director of Budget of OTIA; and Ms. Nancy Boone, who is the Director of Territorial Liaison.

Mr. MURTHA. All right.

Mr. HAYWARD. Mr. Chairman, I am pleased to be here before you today to discuss the President's Fiscal Year 1989 budget for the Office of Territorial and International Affairs. We are proposing a total budget of $323.4 million, a decrease of $191.5 million from the 1988 level. Of the total, $109.2 million is new budget authority; the balance of $214.2 million represents permanent indefinite appropriations.

Much of the decrease in Fiscal Year 1989 is due to the assumption that the Compact of Free Association for the Republic of Palau will enter into effect during fiscal year 1988.

ADMINISTRATION OF TERRITORIES Financial assistance for the U.S. territories is provided through the administration of territories account. The proposed Fiscal Year 1989 budget for the administration of territories is $71.5 million, a decrease of $6.8 million from Fiscal Year 1988.

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GUAM ASSISTANCE Under the administration of territories account, we are request ing $1.7 million for capital improvements in Guam. The funding will complete the expansion of the Ordot landfill which is vital to Guam's environment and future economic growth. We are also re questing $1.5 million for Guam Power Authority loan assistance, and in this regard, we are pleased by the recent action of the Guam legislature to repeal earlier legislation that had placed the loan in technical default by intruding on the independence of the public utilities commission.

AMERICAN SAMOA ASSISTANCE

For American Samoa we are requesting $21.8 million. This includes $20.8 million in operational support, a funding level that is consistent with that which was provided the past two years. We are also proposing $1 million for capital grants for American Samoa to improve the water system.

VIRGIN ISLANDS ASSISTANCE

For the Virgin Islands, we are proposing $1.1 million for repair and renovation of the water systems on both St. Thomas and St. Croix.

NORTHERN MARIANA ISLANDS ASSISTANCE The proposed funding of $40.2 million for the CNMI is in accordance with the negotiated schedule of payments that were enacted by Congress in Public Law 99-396. Under the agreement, the De partment has agreed thus far to a conditional release of $44 million for specific capital development projects. In March the commonwealth hired a contractor to complete the seven year comprehensive capital improvement plan, and we are anxious to review the plan and will provide copies to the Committee, along with our comments when the plan is available. And we expect that to be available sometime before September 1.

TECHNICAL ASSISTANCE FUNDING For technical assistance funding, we are requesting $2.2 million. This program has been extremely successful. We initially had concentrated on the installation of financial management systems, but the focus of the program is now shifting to economic development projects, revenue enhancement and also public safety.

OTIA SALARIES AND EXPENSES For OTIA we are requesting a base budget of $3 million for salaries and expenses. We have maintained a consistent staffing level for the past five years. Increased costs during the period have been associated with staffing and maintenance of field offices in each of the United States territories and Federal pay raises.

TRUST TERRITORY OF THE PACIFIC ISLANDS

Our budget request for the trust territory appropriation is $2.8 million. This will fund a negotiated settlement for land use claims

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filed by landowners in the former trust territory. No funds are requested for the government operations or for capital improvement projects.

Our proposed trust territory budget for Fiscal Year 1989 is predicated on the assumption that the Compact for the Republic of Palau will be put into effect during Fiscal Year 1988. As you are aware, Compact implementation for Palau requires a Congressional resolution. Thus far only the Senate has taken action to implement the Compact for free association for Palau.

We sincerely hope that the Palau Compact can be implemented on a timely basis, and we believe, as does the Republic of Palau, that Compact implementation is the most viable solution to Palau's current financial condition and political problems.

COMPACT OF FREE ASSOCIATION Regarding the Compact of Free Association, the proposed Fiscal Year 1989 budget for this account includes third-year Compact funding for the Federated States of Micronesia and the Republic of the Marshall Islands, and second-year Compact funding for the Republic of Palau. The total funding for Fiscal Year 1989 is $179.1 million. Of this, $144.2 million is permanent indefinite authority that was appropriated in Fiscal Year 1986.

The new budget authority that we are requesting is $34.9 million which includes $27 million for the Federated States of Micronesia and the Republic of the Marshalls, and $7.7 million for the Republic of Palau. These funds will be used to pay for a variety of Federal programs and services that were extended and guaranteed to the freely associated states.

Mr. Chairman, that concludes the summary of my remarks, and I would be more than happy to answer any questions the Chair may have.

[The statement of Mark S. Hayward follows:)

STATEMENT OF MARK S. HAYWARD, DEPUTY ASSISTANT SECRETARY OF THE INTERIOR FOR TERRITORIAL AND INTERNATIONAL AFFAIRS, BEFORE THE HOUSE COMMITTEE ON APPROPRIATIONS, SUBCOMMITTEE

ON INTERIOR AND RELATED AGENCIES

April 26, 1988

Mr. Chairman and Members of the Subcommittee. I am very pleased to be here today to discuss the President's fiscal year 1989 budget for Territorial and International Affairs.

Budget Overview

For Eiscal year 1989, we are proposing a total budget of $323.4 million, a decrease of $191.5 million from the estimated fiscal year 1988 level. of the total, $109.2 million is new budget authority. The balance of $214.2 million represents permanent and indefinite appropriations for the Compacts of Free Association and tax coverovers to Guam and the U.S. Virgin Islands. Much of the decrease in fiscal year 1989 is due to an assumption that the compact of free Association for the Republic of Palau will enter into effect during fiscal year 1988. First-year funding for the Palau Compact is significantly higher due to large initial payments for an investment account, for capital expenditures, and for a major obligation to build a road system. These three items total $129 million plus adjustments for inflation. If the Palau Compacts cannot be implemented until fiscal year 1989, the budget and outlay estimates for 1989 will have to be increased significantly. Of course, fiscal year 1988 estimates would be adjusted downward.

Administration of Territories

Financial assistance for the u.s. territories is provided through the Administration of Territories appropriation. This appropriation also includes salaries and expenses for the office of Territorial and International Affairs and funding for the Technical Assistance Program. The proposed fiscal year 1989 budget for the Administration of Territories is $71.5 million, a decrease of $6.8 million from the fiscal year 1988 appropriation. The proposed budget will meet all statutory requirements and provides a limited amount of discretionary funding to assist in critical infrastructure development in the u.s. territocies, technical assistance, and operational support for the American Samoa Government.

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